Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—Conn. App.: Defaulting borrowers’ CUTPA counterclaim against lender fails, (Dec 11, 2013)

By Linda O’Brien, J.D., LL.M.

Fraud, unconscionable conduct and deceptive practices defenses brought by defaulting borrowers in a mortgage finance company’s foreclosure action were properly rejected because the borrowers did not raise a genuine issue of material fact, a Connecticut appellate court has ruled (CitiMortgage, Inc. v. Coolbeth, to be published December 17, 2013, DiPentima, A.). Thus, a trial court did not err in granting the mortgage finance company’s motion for summary judgment.

Terry and Cheryl Coolbeth obtained a mortgage loan on their home from CitiMortgage, Inc. through a mortgage broker, New Milford Mortgage Company. Later, CitiMortgage filed suit to foreclose on the property.

The Coolbeths responded by raising two special defenses: fraud by the mortgage company and/or its agents and unconscionable conduct. The Coolbeth also filed a counterclaim alleging a violation of the Connecticut Unfair Trade Practices Act (CUTPA). Specifically, the Coolbeths alleged that the interest rate they paid at closing was significantly higher that initially represented by the mortgage broker; the mortgage company paid the broker a premium for selling the Coolbeths a higher interest rate than they were actually qualified for; and the mortgage company failed to inform the Coolbeths that their Citibank credit card accounts would be canceled after requiring them to pay off the balances at closing. The trial court determined that CitiMortgage established a prima facie case for mortgage foreclosure as the Coolbeths did not contest that they defaulted on the mortgage and note. The trial court also granted Citimortgage’s motion for summary judgment, finding that the Coolbeths failed to raise a genuine issue of material fact with respect to the existence of an agency relationship between CitiMortgage, the mortgage broker, and Citibank.

A violation of the CUTPA may be established by showing either an actual deceptive practice or a practice amounting to a violation of public policy, although it is not necessary to prove an intent to deceive in order to prevail.

In support of its motion for summary judgment, Citimortgage produced an affidavit which expressly disavowed the existence of any agency relationship between Citimortgage, the mortgage broker of handled the Coolbeth’s loan, and Citibank. The affidavit also stated that Citimortgage was a separate and distinct entity from Citibank and did not take any action regarding the Coolbeth’s credit card accounts. CitiMortgage also submitted the mortgage broker’s Secretary of State corporate filing that showed no affiliation with Citimortgage and the Coolbeth’s admission that they sought out the services of the mortgage broker to arrange for their loan. On the basis of the evidence, the appellate court found that CitiMortgage demonstrated an absence of a genuine issue of material fact with respect to the claimed agency relationship.

The only evidence produced by the Coolbeths - Terry’s affidavit containing unsubstantiated assertions and the closing HUD-1 settlement statement - were insufficient to support a claim for fraud, unconscionable conduct, or a violation of the CUTPA. Additionally, the Coolbeths failed to produce to any evidence that the broker premium was an inducement to sell them a higher interest rate or that their credit score would have qualified them for a loan at a lower interest rate. Due to the lack of admissible evidence, the court concluded that the Coolbeths failed to meet their burden that a genuine issue of material fact existed to overcome the motion for summary judgment.

The case is No. AC 35050.

Attorneys: Donald E. Frechette (Edwards Wildman Palmer LLP) for CitiMortgage, Inc. Michael S. McKenna (Sienkiewicz & McKenna, PC) for Terry L. Coolbeth and Cheryl Coolbeth.

Companies: CitiMortgage, Inc.

Cases: StateUnfairTradePractices ConnecticutNews