JPMorgan Chase Bank, National Assn. v. Essaghof
171 A.3d 494
Conn. App. Ct.2017Background
- Defendants Roger Essaghof and Katherine Marr-Essaghof executed a $1,920,000 adjustable‑rate note (May 11, 2006) that permitted monthly interest resets tied to the Federal Reserve H.15 monthly yield index and allowed negative amortization up to a 110% cap.
- Monthly payments were initially $7,736.90 but were insufficient to cover interest, so principal grew toward the $2,112,000 cap; Washington Mutual (WM) met with Roger (an experienced investor) in spring 2008 about modifying the loan.
- WM told the defendants that interest rates were rising and recommended a fixed‑rate modification; defendants executed a modification (June 24, 2008) converting the loan to a fixed 6.625% rate with monthly payments of $11,280.12; shortly thereafter defendants defaulted.
- JPMorgan Chase acquired WM’s assets and commenced foreclosure in 2009; after a bench trial the trial court found JPMorgan the holder, the defendants in default, and entered a judgment of strict foreclosure (debt stated $3,210,145.12).
- Defendants asserted special defenses: fraudulent inducement (WM misrepresented rising rates, concealed motive to eliminate negative‑amortization loans, pressured signing without counsel) and unclean hands; trial court rejected these factual claims and defenses.
- While appeal was pending, trial court ordered defendants to reimburse plaintiff for property taxes and homeowners insurance paid by the plaintiff during the appeal; defendants appealed that order as well.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fraudulent inducement (modification) | WM accurately told defendants rates were rising in the months before modification; no fraud proven | WM misrepresented rate trend (rates were generally declining) and hid an ulterior corporate motive to convert negative‑amortization loans | Court: No clear error — rates rose March–June 2008; defendants failed to prove ulterior motive or coercion; fraud defense fails |
| Unclean hands | Equitable defense lacks factual predicate because no misconduct shown | WM engaged in willful misconduct (same facts as fraud claim) warranting clean‑hands bar | Court: Denied — same allegations failed; no basis to apply clean‑hands doctrine |
| Trial court credibility findings | Credibility findings supported by record (Roger an experienced investor; court reviewed index) | Argues trial court miscredited witnesses and expert | Court: Affirmed — factfinder entitled to accept/reject evidence, no basis to overturn |
| Equitable order requiring defendants to reimburse taxes/insurance during appeal | Order is equitable: defendants remain liable for taxes/insurance regardless of appeal result; prevents windfall to defendants | Order improperly creates additional debt; equivalent to debtor’s‑prison concern; no authority to order such payments | Court: No abuse of discretion — balancing equities justified reimbursing plaintiff for taxes/insurance paid during pendency |
Key Cases Cited
- Bank of America, N.A. v. Aubut, 167 Conn. App. 347 (equitable discretion in foreclosure; fraud as special defense)
- Jo‑Ann Stores, Inc. v. Property Operating Co., LLC, 91 Conn. App. 179 (standard for clearly erroneous factual review)
- In re Jeisean M., 270 Conn. 382 (presumption in favor of trial court fact findings on appeal)
- 19 Perry Street, LLC v. Unionville Water Co., 294 Conn. 611 (appellate review of equitable discretion and when reversal is warranted)
- Farmers & Mechanics Savings Bank v. Sullivan, 216 Conn. 341 (avoid forfeiture or windfall in foreclosure equity jurisdiction)
- Monetary Funding Group, Inc. v. Pluchino, 87 Conn. App. 401 (application of unclean hands doctrine)