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ZEK Scores Appellate Victory on Matter of First Impression in Connecticut

By Pierre-Yves Kolakowski & Annabelle Machado-Costa | March 25, 2021

Led by Pierre-Yves Kolakowski, ZEK recently won a decisive victory on behalf of its client by the decision of the Connecticut Appellate Court in U.S. Bank, N.A. v. Moncho, 203 Conn. App. 28 (2021). The Appellate Court’s decision affirmed ZEK’s prior victory after a full trial before the Connecticut Superior Court.

Following the trial court’s entry of a judgment of strict foreclosure in favor of ZEK’s client (the plaintiff-lender), defendant-borrowers filed an appeal claiming, among other things, that: (1) plaintiff lacked standing based on the existence of multiple unaffixed note allonges and unrecorded releases; (2) the notice of acceleration by the lender’s servicer, and not the plaintiff itself, was improper, and; (3) the trial court committed error by admitting the payment records of a prior loan servicer into evidence.

Under Connecticut’s rules concerning standing to foreclose, the presentation of a properly endorsed note creates the presumption that plaintiff is the note’s owner with standing to maintain a legal action to enforce it. Defendants attempted to rebut that presumption by pointing to multiple allonges in the loan file. Relying on the language of the Uniform Commercial Code, however, the Appellate Court (as a matter of first impression in Connecticut) held that only allonges affixed to the note operate to effectively endorse the note and thus the mere presence of un-affixed allonges does not call a plaintiff’s standing into question.

The Appellate Court also held that a mortgage servicer is authorized to issue a notice of acceleration, and such notice properly satisfies the required contractual condition precedent despite not being delivered by the foreclosing plaintiff.

Lastly, based on a recent decision by the Connecticut Supreme Court, the Appellate Court held that testimony elicited from the current mortgage servicer regarding a prior servicer’s duty to transfer accurate servicing records, coupled with the comprehensive boarding process employed by the new servicer to ensure the accuracy of the records, sufficiently supported admission of the prior servicer’s documents under the business records exception to the hearsay rule.

This important decision clarifies the role and authority of mortgage servicers in performing servicing functions and will eliminate potential defenses based on circumstances common to servicing transfers.

The appeal was argued by Pierre-Yves Kolakowski with assistance from Annabelle Machado-Costa.

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Pierre-Yves Kolakowski is the managing partner of ZEK’s Connecticut office and regularly represents major banks, financial institutions and mortgage servicers in prosecuting commercial and contested residential foreclosures and in defending various lender liability claims. Pierre’s practice also includes litigating and advising ZEK’s clients with respect to general business and commercial issues, including finance and commercial disputes arising under the Uniform Commercial Code.

Annabelle Machado-Costa is an associate in ZEK’s Connecticut office. Annabelle’s practice focuses on representing banks and lending institutions regarding foreclosures, real estate financing, real estate transactions, and licensing matters.