CIT Small Bus Lending Corp v. Sayers et al

Filing 91

RULING granting 47 Motion for Summary Judgment, as to liability on the Mortgage and Security Agreement. The court directs the parties to confer, and to attempt to agree, on appropriate foreclosure procedures, and to file their suggested future course of action before October 15, 2014. Signed by Judge Janet C. Hall on 9/25/2014. (Malone, P.)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
CIT SMALL BUSINESS LENDING
CORPORATION,
Plaintiff,

:
:
:
:
v.
:
:
CARL R. SAYERS, SUZANNE P. SAYERS,:
CONNECTICUT DEPARTMENT OF
:
REVENUE SERVICES, and JOHN DOE
:
Nos. 1-100.
:
Defendants.
:

CIVIL ACTION NO.
3:13-CV-886 (JCH)

SEPTEMBER 25, 2014

RULING RE: PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT (Doc. No. 47)
I.

INTRODUCTION
Before the court is the Motion for Summary Judgment filed by the plaintiff, CIT

Small Business Lending Corporation (“CIT”), (“Pl.’s Mot. Summ. J.”) (Doc. No. 47),
seeking foreclosure on a mortgage it gave defendants. Defendants Carl R. Sayers and
Suzanne P. Sayers (the “Sayers” or the “Borrowers”) have filed an Opposition thereto
(“Defs.’ Mem. Opp’n”) (Doc. No. 60).
CIT, in its Complaint (“Compl.”) (Doc. No. 1), alleges two claims: (1) a default
under a commercial business note (the “Note”) and mortgage (the “Mortgage”) and (2) a
demand under a security agreement (the “Security Agreement”), against the Sayers.
Compl. at 7-10. The Sayers raise four special defenses to their liability for the mortgage
foreclosure: (1) statute of frauds and defective loan documents; (2) unclean hands; (3)
fraudulent inducement; and (4) breach of covenant of good faith and fair dealing.
Answer (Doc. No. 26) at 4-5; Defs.’ Mem. Opp’n at 3-11.
CIT has submitted a Memorandum in Support of its Motion for Summary
Judgment (“Pl.’s Mem. Supp.”) (Doc. No. 49), a Local Rule 56(a)(1) Statement (“Pl.’s

1

L.R. 56(a)(1) St.”) (Doc. No. 48), and supporting documents, including copies of the
Loan Agreement, Note, Mortgage, Security Agreement, Demand for Payment letter, and
an affidavit by Elizabeth Mull, the attorney-in-fact for CIT and an Assistant Vice
President at CIT Bank. See Pl.’s L.R. 56(a)(1) St., Ex. Nos. 1, 3-6. The Sayers have
submitted an Opposition to Plaintiff’s Motion for Summary Judgment with Incorporated
Memorandum of Law, a Local Rule 56(a)(2) Statement (“Defs.’ L.R. 56(a)(2) St.”) (Doc.
No. 61), and an Affidavit of defendant Carl Sayers (“Sayers Aff.”) (Doc. No. 59-1).1
For the reasons set forth below, the court GRANTS CIT’s Motion for Summary
Judgment as to liability on the Mortgage and Security Agreement (Doc. No. 47) (“Pl.’s
Mot. Summ. J.”).
II.

STANDARD OF REVIEW
A motion for summary judgment may be granted only when there are no issues

of material fact in dispute and the moving party is therefore entitled to judgment as a
matter of law. See Fed. R. Civ. P. Rule 56(a); In re Dana Corp., 574 F.3d 129, 151 (2d
Cir. 2009). The burden is on the moving party to establish that there are no genuine
issues of material fact in dispute and that it is entitled to judgment as a matter of law.
White v. ABCO Eng’g Corp., 221 F.3d 293, 300 (2d Cir. 2000). Once the moving party
has met its burden, the non-moving party must present evidence that would allow a
reasonable jury to find in its favor in order to defeat the motion for summary judgment.
Graham v. Long Island R.R., 230 F.3d 34, 38 (2d Cir. 2000).
When reviewing the record, the court resolves all ambiguities and draws all
permissible factual inferences in favor of the party against whom summary judgment is

1

Defendant Suzanne Sayers has not submitted an affidavit.

2

sought, which, in this case, is the defendants. Loeffler v. Staten Island Univ. Hosp., 582
F.3d 268, 274 (2d Cir. 2009). If there is any evidence in the record on a material issue
from which a reasonable inference could be drawn in favor of the non-moving party,
summary judgment is inappropriate. Sec. Ins. Co. of Hartford v. Old Dominion Freight
Line Inc., 391 F.3d 77, 83 (2d Cir. 2004). However, the existence of a mere “scintilla” of
evidence supporting the defendants’ position – in this case, their special defenses – is
insufficient to defeat a motion for summary judgment. Harvey v. Homebound Mortg.,
Inc., 547 F.3d 158, 163 (2d Cir. 2008).
III.

STATEMENT OF FACTS2
On or about July 27, 2006, CIT obtained an approval from the United States

Small Business Administration (the “SBA”) to guarantee 75.00% of a loan in the amount
of $1,830,000 (the “Authorization”), an amount which CIT then lent to the Sayers. The
first page of the Authorization provides, in bold-face type and capital letters, that the
Guarantee Fee is $48,968.75. See Pl.’s L.R. 56(a)(1) St., Ex. No. 1.
On July 31, 2006, the Sayers executed a Loan Agreement with CIT. See Pl.’s
L.R. 56(a)(1) St., Ex. No. 2. See Defs.’ L.R. 56(a)(2) St. ¶ 7; see also Sayers Aff. ¶ 4.
This Loan Agreement states that, “[s]ubject to the terms and conditions of the
Authorization,” among other conditions, CIT agrees to make the Loan to the Sayers.
Pl.’s L.R. 56(a)(1) St., Ex. No. 2 at 19. Both Carl and Suzanne Sayers initialed on a line
to the left of the following statement: “Borrower[s] certify that: 1. Receipt of
Authorization – Borrower and Operating Company have received a copy of the

2

Unless otherwise noted, these facts are undisputed in the parties’ respective Local Rule
56(a) filings. See Doc. Nos. 48 and 61.

3

Authorization for this Loan . . .” Pl.’s L.R. 56(a)(1) St., Ex. No. 2 at 21.3 This
Authorization refers to the document executed between CIT and the SBA which
describes the Guarantee Fee to be in the amount of $48,968.75, as discussed above.
The Sayers dispute that all fees, including the Guarantee Fee, were accurately
disclosed to them by CIT prior to closing. In his Affidavit, Carl Sayers states:
[a]t the time of the closing, I was prepared to pay between $30,000 and
$40,000 in closing costs. However, the closing costs (including the
working capital; Guarant[ee] Fee; legal fees; and soft costs incurred by
Gorman, Enright & Butler, P.C.; and Frank J. Corigliano, Esq.) amounted
to $117,411.12. . . . This amount was never discussed with me prior to
closing.
Sayers Aff. ¶ 11. Mr. Sayers goes on to state:
[t]hough the Guarant[ee] Fee was presented to me as a fee that would
provide security to the SBA that a certain portion of the loan is guaranteed
in the event of future defaults, there is no evidence showing that amount
had any legitimate security function or was even received by SBA.
Sayers Aff. ¶ 14.
Also on July 31, 2006, the Sayers executed a Small Business Administration
Note in favor of CIT for the principal amount of $1,830,000.000 (the “Note”). See Pl.’s
L.R. 56(a)(1) St., Ex. No. 3; Defs.’ L.R. 56(a)(2) St. ¶ 11; Sayers Aff. ¶ 4. To secure the
Note, the Sayers executed: (i) a mortgage in favor of CIT for the property located at 7,
9, and 13 Miry Brook Road, Danbury, Connecticut, 06810 (the “Mortgage” and the

3

The Sayers object to CIT’s proposed material fact which states: “The Borrowers
indicated each warranty and/or representation that they were certifying by placing their initials next to
each such warranty and/or representation.” Pl.’s L.R. 56(a)(1) St. ¶ 10. The Sayers dispute this material
fact by arguing that such a statement is a “legal interpretation and not a factual finding.” See Defs.’ L.R.
56(a)(2) St. ¶ 10. The court is not persuaded by the Sayers’ argument. Bold-type language found at the
top of the same page indicates: “INSTRUCTIONS: INDICATE THE PARAGRAPHS BEING CERTIFIED
TO BY HAVING THE BORROWER INITIAL NEXT TO THE APPROPRIATE PARAGRAPHS, PRIOR TO
SIGNING.” Pl.’s L.R. 56(a)(1) St., Ex. No. 2. The Sayers do not contest that the initials are theirs and do
not provide any other evidence that in any way contradicts CIT’s statement of material fact.

4

“Mortgaged Property”),4 and (ii) a Security Agreement in favor of CIT (“Security
Agreement”). See Pl.’s L.R. 56(a)(1) St., Ex. Nos. 4 and 5; Sayers Aff. ¶ 5. The Sayers
dispute that the Mortgage was notarized in New York by Frank J. Corigliano, although
Mr. Corigliano’s State of New York notary stamp appears on the Mortgage document.
See Pl.’s L.R. 56(a)(1) St., Ex. No. 4 at 36. The Sayers also dispute that the Security
Agreement was signed by Mr. Corigliano in New York. See Pl.’s L.R. 56(a)(1) St., Ex.
No. 5 at 47. The Sayers assert that both documents were signed and notarized in
Connecticut, not New York. See Sayers Aff. ¶ 8.
CIT asserts that, as part of the loan’s closing, CIT prepared a Settlement Sheet,
which set forth the fees associated with the closing, including the Guarantee Fee. See
Pl.’s L.R. 56(a)(1) St. ¶ 20 & Ex. No. 6; Mull Aff. ¶ 10. Carl Sayers acknowledges that
he was provided with the Settlement Sheet, but states that he “did not receive [it] before
the closing,” and that “[a]ny signature acknowledging receipt of the Settlement Sheet
that Plaintiff purport[s] to be mine is invalid and unauthorized.” Sayers Aff. ¶ 6.
The parties also dispute whether or not a forbearance agreement between CIT
and the Sayers was duly executed. CIT asserts that, on January 13, 2011, the Sayers
entered into a Forbearance Agreement with CIT which waived all of their affirmative
defenses to payment of the Loan, but Mr. Sayers “den[ies] ever signing the
Forbearance Agreement and dispute[s] that [the signature] is [his] valid, legal

4

The Sayers argue that the mortgage documents are defective because the mortgaged
property is vague and, therefore, “defectively described.” Defs.’ Mem. Opp’n at 2, 6. The Sayers’
Memorandum and Affidavit contain no statement regarding the accuracy of the property’s address as
listed on the mortgage; indeed, the Sayers fail to address whether this listed address is accurate. See
generally Sayers Aff; Defs.’ Mem. Opp’n. As such, there is no meaningful factual dispute with regard to
the accuracy of the property’s address.

5

signature.” Sayers Aff. ¶ 10. Given these disputed facts, the court has not considered
the legal effect of the Forbearance Agreement in this Ruling.
A letter dated December 17, 2012, entitled “Demand for Payment,” was sent to
the Sayers notifying them that, due to their failure to remit payments since October 1,
2012, CIT demanded payment of the Loan in full by December 31, 2012. Pl.’s L.R.
56(a)(1) St. ¶ 25; Mull Aff. ¶¶ 12, 13. The Sayers failed to make the payment as
demanded. Mull Aff. ¶ 14; Pl.’s L.R. 56(a)(1) St. ¶ 27; Defs.’ L.R. 56(a)(2) St. ¶ 27. CIT
commenced this foreclosure action on June 19, 2013.
IV.

DISCUSSION
A.

CIT Has Established a Prima Facie Case for a Mortgage Foreclosure

In its Complaint, CIT alleges that the Sayers entered into a valid Note, agreed to
pay all sums when due pursuant to the terms of that Note, have failed to honor their
obligations, and are therefore in default for failure to pay. Compl. ¶¶ 28, 29. CIT seeks
a judgment as to the liability of the Sayers as against CIT under the Mortgage and
Security Agreement.5
1.

Applicable Law

Connecticut follows the “title theory” of mortgages, which provides that the
mortgagee holds legal title and the mortgagor holds equitable title to the property. See
Barclays Bank of New York v. Ivler, 20 Conn. App. 163, 166 (1989); see also Stein v.

5

In its Complaint, CIT “seeks a judgment of foreclosure against the Sayers as mortgagors
under the Mortgage and an order directing the sale of Mortgage[d] Property.” Compl. ¶ 31. In their
Memorandum of Law accompanying their Motion for Summary Judgment, CIT asks the court to “enter
summary judgment as to liability in favor of the Plaintiff and conduct an inquest to determine the mortgage
debt, enter a judgment of strict foreclosure and set law days.” Pl.’s Mem. Supp. at 20. The court does
not decide whether this foreclosure should proceed through the strict foreclosure or foreclosure by sale
process at this juncture because there is an insufficient record to determine if strict foreclosure is
appropriate.

6

Hillebrand, 240 Conn. 35, 43 n.7 (1997); Conference Ctr. Ltd. v. TRC, 189 Conn. 212,
218 (1983). The mortgagors, the Sayers in this case, hold an equity of redemption,
which provides them the right to redeem the legal title of the Mortgaged Property on the
performance of certain conditions. Barclays Bank of New York v. Ivler, 20 Conn. App.
at 166. “Generally, foreclosure means to cut off the equity of redemption, the equitable
owner's right to redeem the property.” Nat’l City Mortg. Co. v. Stoecker, 92 Conn. App.
787, 793 (2006) (quoting Madison Hills Ltd. Partnership II v. Madison Hills, Inc., 35
Conn. App. 81, 90 (1994)).
“In a mortgage foreclosure action, [t]o make out its prima facie case, [the
foreclosing party] [has] to prove by a preponderance of the evidence that it [is] the
owner of the note and mortgage and that [the mortgagor has] defaulted on the note.”
Franklin Credit Mgmt. Corp. v. Nicholas, 73 Conn. App. 830, 838 (2002) (internal
quotations omitted). “[A] court may properly grant summary judgment as to liability in a
foreclosure action if the complaint and supporting affidavits establish an undisputed
prima facie case and the defendant fails to assert any legally sufficient special defense.”
GMAC Mortg., LLC v. Ford, 144 Conn. App. 165, 176 (2013).
2.

Application

The Sayers do not contest that CIT is the owner of the Note and Mortgage nor do
they contest that they defaulted on the Note by failing to make required payments.
Indeed, the Sayers concede that CIT has met its prima facie case and that the court
must only decide whether one of their special defenses applies. See Defs.’ Mem. Opp’n
at 3. CIT Small Business Lending Corporation is listed as the Lender, Mortgagor, or
Secured Party in the Note, Mortgage, and Security Agreement. See Pl.’s L.R. 56(a)(1)

7

St., Ex. Nos. 3-5. The court concludes that CIT has sufficiently demonstrated that there
are no genuine issues of material fact as to the ownership of the Note, Mortgage, or
Security Agreement and that, likewise, there are no facts that dispute the Sayers’
default on the Note. As such, CIT has made its prima facie case for mortgage
foreclosure under Connecticut law and has proven the Sayers’ liability as to the Security
Agreement.
B.

Defendants’ Special Defenses Are Inadequate as a Matter of Law

The Sayers have raised four special defenses: statute of frauds and defective
loan documents; unclean hands; fraudulent inducement; and breach of covenant of
good faith and fair dealing.
1.

Applicable Law

“When a complaint and supporting affidavits establish an undisputed prima facie
case for a foreclosure action, a court must only determine whether [a] special defense is
legally sufficient before granting summary judgment.” Bank of New York v. Conway, 50
Conn. Supp. 189, 195 (2006) (quoting LaSalle Nat’l Bank v. Shook, No. 549266, 2000
WL 1022852, at *2 (Conn. Super. Ct. July 13, 2000) (internal quotations omitted)).
The purpose of a special defense is to plead facts that are consistent with
the allegations of the complaint but demonstrate, nonetheless, that the
plaintiff has no cause of action. . . . A valid special defense at law to a
foreclosure proceeding must be legally sufficient and address the making,
validity or enforcement of the mortgage, the note or both. . . . Where the
plaintiff's conduct is inequitable, a court may withhold foreclosure on
equitable considerations and principles.
Fidelity Bank v. Krenisky, 72 Conn. App. 700, 705 (2002) (quoting LaSalle Nat’l Bank v.
Freshfield Meadows, LLC, 69 Conn. App. 824, 833 (2002) (internal quotations omitted)).
“[S]pecial defenses which are not limited to the making, validity or enforcement of the

8

note or mortgage fail to assert any connection with the subject matter of the foreclosure
action and as such do not arise out of the same transaction as the foreclosure action.”
E. Savings Bank, FSB v. Mara, No. CV054006305, 2006 WL 1738326, at *2 (Conn.
Super. Ct. June 5, 2006); accord, Bank of New York v. Conway, 50 Conn. Supp. 189,
196 (2006).
2.

Statute of Frauds and Defective Loan Documents

In their first special defense, the Sayers argue that the Connecticut Statute of
Frauds requires all conveyances of real property be attested to by two witnesses, that
the notarial acknowledgement is inaccurate, and that “the Mortgage, Note, and Security
Agreement are defective on their face due to the vague description of the subject
property.” Defs.’ Mem. Opp’n at 4-6. CIT acknowledges that the Mortgage was only
signed by one witness and, “for the purpose of this motion, CIT would concede that the
acknowledgement is defective.” Pl.’s Mem. Supp. at 11. However, CIT argues that
Conn. Gen. Stat. § 47-36aa(a) (the “validating statute”) cures the witness and notary
defects as a matter of law. The court agrees.
Both the notarial defect and the failure to have two witnesses sign the Mortgage
can be cured by the validating statute and do not invalidate the Mortgage in a
foreclosure proceeding if the validating statute applies. See Ingomar Ltd. P’ship v.
Packer, No. CV020467401, 2007 WL 1675846, at *7 (Conn. Supp. Ct. May 23, 2007)
(holding that, in a mortgage foreclosure action, an improper notarial acknowledgement
can be validated under Conn. Gen. Stat. § 47-36aa(a)); Thirteen, LLC v. Carney, No.
CV085025071S, 2010 WL 2822376, at *4 (Conn. Supp. Ct. April 7, 2010) (holding that
the validating statute applied to cure a failure to have two witnesses attest to a

9

mortgage in a foreclosure action when defendants failed to establish that a notice of lis
pendens was recorded within two years of the recording of the deed). Conn. Gen. Stat.
§ 47-36aa(a) (“Conveyancing defects”) states:
Any deed, mortgage . . . or other instrument made for the purpose of
conveying, leasing, mortgaging or affecting any interest in real property in
this state recorded after January 1, 1997, which instrument contains any
one or more of the following defects or omissions is as valid as if it had
been executed without the defect or omission unless an action challenging
the validity of that instrument is commenced and a notice of lis pendens is
recorded in the land records of the town or towns where the instrument is
recorded within two years after the instrument is recorded: (1) The
instrument contains a defective acknowledgment or no acknowledgement;
(2) The instrument is attested by one witness only or by no witnesses.
Even assuming that the Mortgage was filed a year after it was executed, the
Sayers would have had to bring an action and file a notice of lis pendens in 2009 in
order to avoid the application of the validating statute. Here, the validating statute’s
provisions pertaining to defective or no notarial acknowledgement and one witness’s
signature apply to the Mortgage, because it was executed on July 31, 2006, and there is
no argument or evidence that the Sayers have brought an action challenging the validity
of the assignment or filed a notice of lis pendens.
The Sayers’ argument that the validating statute is inapplicable when there are
“allegations of forgery or fraud, as in the instant action” is unpersuasive due to the
Sayers’ failure to proffer any evidence of forgery or fraud relating to the notarial
acknowledgement or witness’ signature on the Note, Mortgage, or Security Agreement.
See Defs.’ Mem. Opp’n at 5. The Sayers assert that “documents were executed
fraudulently . . . [and] material terms were misstated,” id., but fail to discuss which
documents or terms were fraudulent or misstated and how such statements would
prevent the operation of the validating statute by citing and applying pertinent

10

Connecticut case law. Instead, the Sayers cite three paragraphs of Carl Sayers’
Affidavit at the end of the sentence containing the above quote. These paragraphs of
Carl Sayers’ Affidavit refer to allegations of falsified signatures on the Forbearance
Agreement and the alleged failure of CIT to provide the Settlement Sheet to the Sayers
prior to the Mortgage’s closing. Because the Sayers do not cite Connecticut law for the
proposition that the validating statute does not apply when a subsequent Forbearance
Agreement is forged or when a Settlement Sheet is not provided prior to closing, and
the court has not found case law to support such conclusions, the court rejects these
arguments.
The Sayers also erroneously state that the “[p]laintiff merely refers to various
instruments filed with the Danbury Town Clerk’s Office” to describe the property subject
to the Mortgage. Defs.’ Mem. Opp’n at 5. While the Mortgage does cite a map
prepared for the Estate of Senta Sayers that is filed with the Danbury Town Clerk’s
Office, the same page of the Mortgage lists the property’s address as “7, 9 & 13 Miry
Brook Road, Danbury, Connecticut.” Pl.’s L.R. 56(a)(1) St., Ex. No. 4. Even if the
Mortgage referred to a filed map without an accompanying address, Connecticut’s
validating statute considers this to be an “insubstantial defect,” making the Mortgage
“valid as if had been executed without the defect or omission.” See Conn. Gen. Stat.
§ 47-36aa(b)(3).
Based on the foregoing, the court grants CIT summary judgment on the Sayers’
First Special Defense.

11

3.

Unclean Hands

“It is a fundamental principle of equity jurisprudence that for a complainant to
show that he is entitled to the benefit of equity he must establish that he comes into
court with clean hands. . . . The clean hands doctrine is applied not for the protection of
the parties but for the protection of the court. . . . It is applied not by way of punishment
but on considerations that make for the advancement of right and justice.” Eldridge v.
Eldridge, 244 Conn. 523, 536 (1998) (internal quotations omitted). “The doctrine of
unclean hands expresses the principle that where a plaintiff seeks equitable relief, he
must show that his conduct has been fair, equitable and honest as to the particular
controversy in issue. . . . Unless the plaintiff's conduct is of such a character as to be
condemned and pronounced wrongful by honest and fair-minded people, the doctrine of
unclean hands does not apply.” Thompson v. Orcutt, 257 Conn. 301, 310 (2001)
(quoting Bauer v. Waste Mgmt. of Conn., Inc., 239 Conn. 515, 525 (1996)). The
defense of unclean hands can be applied in a mortgage case when the plaintiff requires
“the aid of [any] illegal transaction to make out his case.” Id. at 311. “In other words,
the unclean hands defense is proper if the plaintiff would not be able to bring the action
but for its improper conduct.” LaSalle Bank Nat’l Ass’n v. Bardales, No. CV085007137,
2009 WL 1312509, at *7 (Conn. Super. Ct. April 14, 2009) (citing Thompson v. Orcutt,
257 Conn. at 313-14).
The Sayers argue that “[p]laintiff’s forgery of [d]efendants’ signatures on the
Forbearance Agreement and disclosure of closing costs only after [d]efendants had
already signed the loan documents amounts to unclean hands.” Defs.’ Mem. Opp’n at
8. The court has assumed the facts in favor of the Sayers, the non-moving party in this

12

summary judgment motion and, as such, has rejected the Forbearance Agreement,
because Carl Sayers has attested that his signature on the document was falsified. See
Sayers Aff. ¶ 10. As such, the court rejects CIT’s argument that the waiver of defenses
provision, as found in the Forbearance Agreement, is applicable in deciding this Motion.
This renders the Sayers’ argument that CIT received the advantage of the waiver of
defenses provision moot.
As to the closing costs issue, the Sayers assert that CIT’s,
disclosure of the true amount of closing costs to [d]efendants only after
they had agreed to the loan documents financially benefited the
individuals involved in the loan process . . . as well as CIT as a whole
entity, particularly because [d]efendants would not have agreed to the loan
had they known the true extent of the closing costs.
Defs.’ Mem. Opp’n at 8. In Carl Sayers’ Affidavit, he states that, “[a]t the time of closing,
[he] was prepared to pay between $30,000 and $40,000 in closing costs” and that “[t]he
amount of $117,411.12 is far above what I expected to be charged in closing costs.”
Sayers Aff. ¶ 11. This higher amount included, according to Mr. Sayers, “working
capital; Guarant[ee] Fee; legal fee; and soft costs incurred by Gorman, Enright & Butler,
P.C.; and Frank J. Corigliano, Esq.” Sayers Aff. ¶ 11. While Carl Sayers goes on to
state that the $117,411.12 sum “was never discussed with [him] prior to closing,” 6 he
admits that “the Guarant[ee] Fee was presented to [him] as a fee that would provide
security to the SBA.” Sayers Aff. ¶ 14.

6

The court notes that the Sayers do not assert that CIT violated any federal or state
disclosure requirements.

13

The Settlement Sheet, which Carl Sayers states that he received only after the
closing,7 is not a list of closing costs, but rather a list of the all of the disbursements
made with loan proceeds, as evinced by the text describing the document and by the
total listed amounts summing to $1,830,000.00, the exact amount the Sayers borrowed.
See Pl.’s L.R. 56(a)(1) St. at 50-51. The payees and amounts are as follows:

Name of Payee

Date

Amount of Payment

Purpose

Newell Funding LLC
Carl R. Sayers and
Suzanne P. Sayers
CIT SBLC

7/31/2006

$

Payoff of Notes payable

7/31/2006
7/31/2006

$
$

20,000.00
48,969.008

7/31/2006

$

32,411.12

7/31/2006

$

6,116.75

Soft Costs

7/31/2006

$
$

9,914.25
1,830,000.00

Soft Costs

Carl R. Sayers and
Suzanne P. Sayers
Gorman, Enright &
Butler, P.C.
Frank J. Corigliano,
Esq., Trustee
TOTAL

1,712,588.88

Working Capital
SBA Guaranty Fee
Reimbursement for
portion of legal fees
incurred re: parent's
estate/claims

To arrive at the amount of $117,411.12, which the Sayers claim are “closing
costs,” one must add all amounts not paid to Newell Funding LLC, including the two line
items that were paid to the Sayers themselves in the amounts, respectively, of
$20,000.00, for working capital, and $32,411.12, for legal fees incurred for a parent’s
estate. The court can find no precedent – and the Sayers cite no support – for their
assertion that their calculation of “closing costs” should include payments made directly

7

See Sayers Aff. ¶ 6.

8

The court notes that this amount, $48,969.00, differs by $0.25 from the $48,968.75
amount disclosed by CIT in the Authorization. See Pl.’s L.R. 56(a)(1) St., Ex. No. 1.

14

to the Sayers for working capital and for legal fees incurred in a transaction which has
no expressed relationship to the Note, Mortgage or Security Agreement. Indeed, other
Connecticut courts have separated closing costs from amounts paid directly to
defendants or have not included any amounts paid to defendants in discussing what
constitutes “closing costs” in foreclosure actions. See, e.g., Cheshire Mortg. Service,
Inc. v. Montes, 223 Conn. 80, 103, n.29 (1992) (“We thus conclude that the principal
amount of the loan was $39,150 which included $27,070.05 to pay off the November,
1987 loan, $2,451.33 in closing costs and $9,628.62 paid directly to the defendants.”);
Deutsche Bank Nat’l Trust Co. v. Belizaire, No. FSTCV065002704S, 2011 WL 3586487,
at *24 (Conn. Supp. Ct. July 13, 2011) (“The total of these closing costs paid . . . is as
follows: Mortgage [b]roker [o]ther . . . ; [t]itle search and title insurance . . . ; [f]ees to
[l]ender . . . ; [f]ees for title examination and settlement or closing . . . ; [n]otary fee . . . ;
and [d]oc storage . . . .”).
Without including the amounts paid to the Sayers themselves, the “closing costs”
total $65,000, which still includes the Guarantee Fee of $48,969.00 that Carl Sayers
acknowledges was “presented to him.”9 Sayers Aff. ¶ 14. Given that the Sayers do not
dispute that they initialed next to a line affirming that they received a copy of the
Authorization, which clearly contained a description of the amount of the Guarantee
Fee, CIT’s failure to provide the Settlement Sheet at the closing does not defeat
summary judgment on the Sayers’ unclean hands special defense. Further, the amount
of closing costs, even including the Guarantee Fee, is $65,000, which is much closer to

9

The Sayers provide no evidence that the Guarantee Fee was not presented to them prior
to the closing, but rather assert, in the form of Carl Sayers’s Affidavit, that the Settlement Sheet, which
they argue provides an “itemization of closing costs,” was provided to them after the closing.

15

the estimate of “between $30,000 and $40,000 in closing costs” that Carl Sayers affirms
he was anticipating and much less than the $117,411.12, which figure the Sayers assert
as the basis for their unclean hands special defense. Without the Guarantee Fee, the
closing costs are $16,031, an insufficient amount to maintain an unclean hands special
defense based on the Sayers’ own expectation of closing costs. Based on the
foregoing, the court grants CIT summary judgment on the Sayers’ Second Special
Defense.
4.

Fraudulent Inducement

“Fraud is an equitable defense to a foreclosure action. Fraud involves deception
practiced in order to induce another to act to her detriment, and which causes that
detrimental action. . . . Actions of agents of a lender may also give rise to a defense of
fraud. . . . However, a court, generally, will not invalidate a mortgage agreement against
the lender unless [it] in some way participated in or knew of the fraud.” FV-1, Inc. v.
Forgey, No. CV075002447, 2008 WL 2375835, at *3 (Conn. Supp. Ct. May 22, 2008).
“The four essential elements of fraud are (1) that a false representation of fact was
made; (2) that the party making the representation knew it to be false; (3) that the
representation was made to induce action by the other party; and (4) that the other party
did so act to her detriment.” Chase Manhattan Mortg. Corp. v. Machado, 83 Conn. App.
183, 188 (2004) (citing Carr v. Fleet Bank, 73 Conn. App. 593, 595 (2002)).10

10

The Sayers argue that they “intend to bring a claim for fraudulent inducement to sign the
loan documents,” not fraudulent misrepresentation, as they assert CIT incorrectly argued in its
Memorandum of Law in Support of Summary Judgment. However, CIT correctly stated that, “the Sayers .
. . allege that they were fraudulently induced to sign the loan documents.” Pl.’s Mem. Supp. at 12;
Answer ¶ 41.

16

“Because specific acts must be pleaded, the mere allegation that a fraud has
been perpetrated is insufficient.” Id. Where the defendants in a foreclosure action have
alleged that the plaintiff was a participant in the fraud, courts have permitted the special
defense of fraudulent inducement. FV-1, Inc. v. Forgey, 2008 WL 2375835 at *3 ; U.S.
Bank Nat’l Ass'n. v. Reynoso, No. CV0705004312, 2008 WL 3307124, at *1 (Conn.
Supp. Ct. July 17, 2008). “However, in cases where the defendant failed to allege that
the plaintiff was either aware of, or a participant in, a fraudulent loan transaction, courts
have stricken fraudulent inducement special defenses.” PHH Mortgage Corp. v. Traylor,
No. 0705004315, 2008 WL 5156457, at *3 (Conn. Super. Ct. November 13, 2008).
“The general rule is that where a person of mature years and who can read and
write, signs or accepts a formal written contract affecting his pecuniary interests, it is
[that person's] duty to read it and notice of its contents will be imputed to [that person] if
he negligently fails to do so; but this rule is subject to qualifications, including
intervention of fraud or artifice, or mistake not due to negligence, and applies only if
nothing has been said or done to mislead the person sought to be charged or to put a
[person] of reasonable business prudence off . . . guard in the matter.” First Charter
Nat’l Bank v. Ross, 29 Conn. App. 667, 671 (1992) (citing Ursini v. Goldman, 118 Conn.
554, 562 (1934)).
In their Memorandum in Opposition to Plaintiff’s Motion for Summary Judgment,
the Sayers argue that “the false statement consisted of a misrepresentation of the
amount of closing charges that would be applied.” Defs.’ Mem. Opp’n at 9. To support
this statement, the Sayers cite the forty-first paragraph of their Answer, which states:
Defendants were fraudulently induced to sign the loan documents. Plaintiff
falsely misrepresented the closing charges and failed to disclose conflicts

17

of interest between it and Defendants’ then counsel in order to induce
Defendants to enter into a loan transaction with Plaintiff. Plaintiff’s actions
did induce Defendants to enter into the purported loan transaction.
Answer ¶ 41.
Outside of this bare reference, which refers to two different bases, the Sayers do
not argue that the failure to disclose a conflict of interest provides a basis for their
fraudulent inducement claim in their Memorandum in Opposition. CIT challenged this
basis for a fraudulent inducement claim in their Memorandum of Law in Support of
Summary Judgment.11 See Pl.’s Mem. Supp. at 15-16. Thus, the Sayers knew that the
failure to disclose a conflict of interest was a challenged basis for their fraudulent
inducement claim and nevertheless chose not to address it. As such, the court
considers the Sayers to have abandoned this theory of fraudulent inducement.12 Cf.
Jackson v. Fed. Exp., 12-1475-CV, 2014 WL 4412333, at *5 (2d Cir. Sept. 9, 2014) (“[A]
partial opposition may imply an abandonment of some claims or defenses. Generally,
but perhaps not always, a partial response reflects a decision by a party's attorney to
pursue some claims or defenses and to abandon others.”).
The Sayers cite no evidence, outside of the bare assertions contained in their
Answer, to support their contention that there is a genuine issue of material fact as to
whether there was a false misrepresentation made concerning the amount of closing

11

The only false statement the Sayers argue in their Memorandum in Opposition,
“consist[s] of a misrepresentation of the amount of closing charges that would be applied.” Defs.’ Mem.
Opp’n at 9.
12

The court does consider the conflict of interest issue in its analysis of the Sayers’ Breach
of Covenant of Good Faith and Fair Dealing defense.

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costs.13 In opposing a summary judgment motion, when plaintiff has challenged
defendants’ factual allegations with documentary evidence, as has occurred in this
case, “[m]ere assertions of fact . . . are insufficient to establish the existence of a
material fact.” Wells Fargo Bank, N.A. v. Strong, 149 Conn. App. 384, 397 (2014)
(citation omitted). Based on the foregoing, the court grants CIT summary judgment on
the Sayers’ Third Special Defense.
5.

Breach of Covenant of Good Faith and Fair Dealing

“Good faith performance or enforcement of a contract emphasizes faithfulness to
an agreed common purpose and consistency with the justified expectations of the other
party . . . . Essentially it is a rule of construction designed to fulfill the reasonable
expectations of the contracting parties as they presumably intended. The principle,
therefore, cannot be applied to achieve a result contrary to the clearly expressed terms
of a contract, unless, possibly, those terms are contrary to public policy.” Magnan v.
Anaconda Industries, Inc., 193 Conn. 558, 567 (1984) (internal citations and quotations
omitted).
The Sayers assert that CIT breached the covenant of good faith and fair dealing
by failing to disclose the conflict of interest between CIT’s employee and the Sayers’
counsel. Answer ¶ 39. In support of this claim, the Sayers point to Carl Sayers’s

13

Further, the first element of fraudulent inducement – that a false representation of fact
was made – is not supported by any of Carl Sayers’s affirmations. In contrast, Carl Sayers’s Affidavit
states that the alleged closing costs of $117,411.12 were “never discussed with me prior to closing.”
Sayers Aff. ¶ 11. Rather than connoting a false representation, this language indicates a failure to make
a representation of accurate closing costs. The Sayers cite no case law to support a fraudulent
inducement claim for such a failure to act in this situation, and they fail to provide any other context
regarding CIT’s failure to disclose closing costs that would create an issue of material fact with regard to
the first element of the fraudulent inducement claim. In other words, “concealment of facts supports a
cause of action for fraud only if the non-disclosing party has a duty to disclose.” Remington Rand Corp.
v. Amsterdam-Rotterdam Bank, N.V., 68 F.3d 1478, 1483 (2d Cir. 1995). CIT had no such duty. See
infra Part IV.B.5.

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Affidavit, which states that, “[b]efore the closing, CIT failed to disclose that its Senior
Regional Account Manager was related to Defendants’ then-counsel” and that “[h]ad
[Carl] known of the improper relationship between my then-counsel and CIT, [he] would
not have entered into a contract with CIT.” Sayers Aff. ¶¶ 15-16. The Sayers argue that
CIT had a duty to disclose this alleged conflict of interest “where the parties enjoy a
fiduciary relationship . . . [or] . . . where one party possesses superior knowledge, not
readily available to the other, and knows that the other is acting on the basis of
mistaken knowledge.” Aaron Ferer & Sons Ltd. v. Chase Manhattan Bank, N.A., 731
F.2d 112, 123 (2d Cir. 1984) (citations omitted).
While the Sayers acknowledge that there is generally no fiduciary relationship
between a lendor and a lendee, Defs.’ Mem. Opp’n at 10, they point out that “[a] bank,
as a mortgagee lender, may be the fiduciary of the mortgagor borrower when the bank
becomes the borrower's financial advisor.” Southbridge Associates, LLC v. Garofalo, 53
Conn. App. 11, 18 (1999) (citation omitted). However, the Sayers have provided no
evidence that CIT served as their financial advisor.
The Sayers also argue that “[p]laintiff was in possession of superior knowledge
that [p]laintiff’s Senior Regional Account Manager was related to [d]efendants’ thencounsel” and that this knowledge “was not readily available to [d]efendants.” 14 Defs.’
Mem. Opp’n at 10. This statement is, likewise, unsupported. Carl Sayers’s Affidavit
merely recites that CIT failed to disclose the conflict; it does not provide evidence that

14

Given that the Sayers’ counsel is one of the people upon which this purported conflict of
interest is founded, it strains credulity that CIT was in possession of superior knowledge, particularly
because there is no evidence that the other party constituting the conflict of interest was involved in this
Mortgage transaction whatsoever. However, for the purposes of this Ruling, the court does not reach
whether knowledge by the Sayers’ attorney of a conflict is sufficient to prevent a claim for breach of the
covenant of good faith and fair dealing in this instance.

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would create a genuine issue of material fact regarding CIT’s supposed superior
knowledge. It lacks even an assertion that the Senior Regional Account Manager was
in any way directly or indirectly involved with this Note or Mortgage transaction. Based
on the foregoing, the court grants CIT summary judgment on the Sayers’ Fourth Special
Defense.
V.

CONCLUSION
For the foregoing reasons, the plaintiff’s Motion for Summary Judgment (Doc.

No. 47) is GRANTED as to liability on the Mortgage and Security Agreement. The court
directs the parties to confer, and to attempt to agree, on appropriate foreclosure
procedures, and to file their suggested future course of action before October 15, 2014.
SO ORDERED.
Dated at New Haven, Connecticut this September 25, 2014.

/s/ Janet C. Hall
Janet C. Hall
United States District Judge

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