Citimortgage, Inc. v. Rey
92 A.3d 278
Conn. App. Ct.2014Background
- CitiMortgage sued Rey in 2008 to foreclose a residential mortgage, alleging default on the note; Rey applied for court-sponsored foreclosure mediation and a stay under § 49-31f.
- Parties executed a Stipulated Special Forbearance Agreement during mediation requiring three payments and further financial submissions; mediator filed a final report indicating settlement contingent on performance.
- Rey made the three forbearance payments and resumed note payments per her account; later CitiMortgage moved to reclaim its foreclosure motion and pursued foreclosure.
- Rey answered, asserted special defenses (waiver, unclean hands, breach of good faith) and filed a five-count counterclaim alleging breach of the forbearance agreement, negligence, negligent infliction of emotional distress, breach of covenant of good faith and fair dealing, and CUTPA violations.
- Trial court struck all counts, reasoning counterclaims must attack the making, validity, or enforcement of the note or mortgage; court entered judgment for plaintiff. Rey appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether counterclaims in foreclosure must directly attack the making, validity, or enforcement of the note/mortgage | Counterclaims unrelated to making/validity/enforcement are not properly part of foreclosure and should be stricken | Counterclaims arising from a forbearance agreement reached in the foreclosure process are transactionally related and permissible under Practice Book §10-10 | The court held Practice Book §10-10 (the transaction test) governs counterclaims; they need only arise from the same transaction and need not directly attack making/validity/enforcement |
| Whether Rey’s counterclaims satisfy the transaction test | Plaintiff: Rey’s claims arise from the forbearance agreement and thus do not relate to the subject mortgage/note | Rey: Forbearance agreement was entered into during litigation regarding the same mortgage and thus is sufficiently related; plaintiff itself invoked the agreement when pursuing foreclosure | Court held Rey’s counterclaims sufficiently relate to enforcement of the mortgage via the forbearance agreement and meet the transaction test |
| Whether trial court should have applied a discretionary transaction-test analysis | Plaintiff: deference to trial court’s discretion in applying transaction test | Rey: appellate review should be plenary because the trial court used the wrong legal test (making/validity/enforcement standard) | Court concluded trial court applied incorrect legal standard; appellate review is plenary on that legal question |
| Whether public policy/judicial economy permit counterclaims for breach of a court-mediated forbearance agreement | Plaintiff: allowing such claims could expand foreclosure litigation scope | Rey: Allowing remedies preserves mediation program integrity and prevents unilateral lender violations without consequences | Court held public policy and judicial economy support permitting such counterclaims; reversing and remanding for further proceedings |
Key Cases Cited
- Morgera v. Chiappardi, 74 Conn. App. 442 (counterclaim met transaction test where adequate nexus existed to induce making of note and mortgage)
- Mechanics Savings Bank v. Townley Corp., 38 Conn. App. 571 (counterclaims based on transactions separate from subject mortgage may be stricken)
- Southbridge Associates, LLC v. Garofalo, 53 Conn. App. 11 (counterclaims and defenses must arise from same transaction as foreclosure complaint)
- JP Morgan Chase Bank, Trustee v. Rodrigues, 109 Conn. App. 125 (counterclaims alleging post-closing conduct or extrinsic agreements were not transactionally related and were stricken)
- South Windsor Cemetery Assn., Inc. v. Lindquist, 114 Conn. App. 540 (transaction test focuses on overlap of facts/law and avoidance of duplicative litigation)
- Wallingford v. Glen Valley Associates, Inc., 190 Conn. 158 (transaction test is pragmatic; cross-claims disallowed when they thwart judicial economy)