TD Bank, N.A. v. J and M Holdings, LLC
The modification of a loan agreement relates to the validity and enforcement of the mortgage and note and, thus, is a facially valid special defense in a foreclosure action. The defendants, J & M Holdings, LLC, Debra Hall and Pierce Hall, appealed from the judgment of foreclosure by sale rendered for the plaintiff, TD Bank, N.A. The defendants claimed that the court erred in striking certain special defenses and in granting the plaintiff's motion for summary judgment. The Appellate Court reversed the judgment. The trial court erred in granting the plaintiff's motion to strike the defendants' fifth special defense of modification alleging the following facts. An entity related to the defendant, J & M Holdings, called M & J Holdings, LLC, sold certain property in New London worth well in excess of $800,000 to PJL Realty, LLC for $800,000. This was because the plaintiff promised to modify the loans at issue in this foreclosure proceeding if M & J sold the property and provided the plaintiff with the net proceeds. The plaintiff accepted the net proceeds of the sale, $687,637.17, but did not modify the loans secured by the mortgage at issue in this case. The special defense further alleged that the defendants were beneficiaries of the agreement between the plaintiff and the related entity. The Appellate Court concluded that the alleged resulting modification of the loan agreement relates to the validity and enforcement of the mortgage and note and, thus, is a facially valid special defense. If a valid subsequent agreement purporting to modify the original loan agreement was, in fact, entered into, then the original loan agreement may no longer be enforceable to the extent that it was contractually modified. This scenario affects the validity and enforcement of the original loan agreement. Contrary to the plaintiff's claim, the alleged loan modification agreement was not made by parties with no connection to the note at issue. Because the fifth special defense alleged a legally sufficient defense, the trial court erred in granting the motion to strike this special defense alone. Summary judgment as to liability was improper because the court did not consider the stricken fifth special defense in granting the motion. The court improperly rendered judgment of foreclosure by sale. The matter was remanded.