The Connecticut Appellate Court has (finally) recently weighed in on the topic of whether or not a claimed defense of a violation of the Connecticut Unfair Trade Practices Act (“CUTPA”) constitutes a legally sufficient special defense to a foreclosure action in Connecticut.  Put simply, the result of this case is that CUTPA is not a legally sufficient special defense to foreclosure. In reaching this decision, the Court outlined that the intent of the Act is to permit claims for violation of its provisions and was not meant not to shield parties from liability on existing claims by opposing parties who are alleged to have violated its terms.

In Bank of America, N.A. v. Aubut, the defendants challenged the Superior Court’s order granting summary judgment in favor of the Plaintiff over their two asserted special defenses, one of which alleged a violation of CUTPA based on a series of allegations related to the underlying making of the loan and various assertions made by the originating lender.  With respect to the claimed defense sounding in a violation of CUTPA, the Court stated, “[t]he parties have not drawn our attention to any appellate authority with respect to the issue of whether, in a foreclosure action, a party may assert a CUTPA violation as a special defense, and we are unaware of any such authority. Although it appears from our research that some trial courts in this state have permitted a CUTPA violation to be pleaded as a special defense in foreclosure actions, other trial courts have concluded to the contrary.”

The Court further distinguished the purpose of CUTPA as a private cause of action extended to any party who encountered actions in trade or commerce that violated its terms.  Regarding CUTPA, the Court bluntly held, “[i]t is clear from our case law that, generally, a legally valid special defense in a foreclosure action, insofar as it relates to the making, validity, or enforcement of the loan, note and mortgage, is a means of asserting that a party who has commenced a foreclosure action may not prevail. Thus, a special defense operates as a shield, to defeat a cause of action, and not as a sword, to seek a judicial remedy for a wrong. Against this backdrop, we readily conclude that a CUTPA violation may not be asserted as a special defense. In reaching this conclusion, we are mindful that, by its express terms, CUTPA provides a cause of action for its violation, but it does not expressly provide a defense by invalidating, or otherwise rendering unenforceable, agreements that are the product of unfair trade practices.”

Thus, a special defense operates as a shield, to defeat a cause of action, and not as a sword, to seek a judicial remedy for a wrong.

Although the Court did reverse both the entry of summary judgment and the subsequent judgment of strict foreclosure based on the defendants’ first pleaded defense, the importance of the decision as it relates to CUTPA being used as a defense to foreclosure cannot be overstated.  As the Court itself pointed out in its opinion, there has long been a split of authority in the Connecticut Superior Courts regarding the usage of CUTPA as a defense to foreclosure which has, until now, remained unresolved at the appellate level.