by James Pocklington, Esq.
McCalla Raymer Leibert Pierce, LLC
USFN Member (AL, CA, CT, FL, GA, IL, MS, NV, NJ, NY, OR, TX, WA)

Two years ago, I had the pleasure to write about JPMorgan Chase Bank, N.A. v. Essaghof, 177 Conn. App. 144 (Oct. 10, 2017) (article can be found here) and how lenders in Connecticut may be able to rely on Essaghof to attempt to minimize the carrying costs of a property facing substantial litigation.

Unfortunately, Connecticut’s Supreme Court vehemently disagreed (JPMorgan Chase Bank, N.A. v. Essaghof SC 20090, released August 20, 2020).  Where the Appellate Court found that “we cannot conceive of any abuse of discretion on the part of the trial court”, the Supreme Court reversed.  While the Supreme Court did acknowledge the broad discretion in equity that the trial court may exercise, the Court felt that the trial judge went too far.  The Court, addressing the in rem aspect of foreclosure under Connecticut law, found that an order in personam, even one sounding in equity, that required monetary payments by a defendant, is outside the scope of the foreclosure action.

Going back to M’Ewen v. Welles, 1 Root [Conn.] 202, 203, (1790) the court “enunciated that ‘if the mortgagee chooses to take the land and to make it his own absolutely, whereby the mortgagor is totally divested of his equity of redemption, the debt is thereby paid and discharged: And if it eventually proves insufficient to raise the sum due, it is the mortgagee’s own fault, and at his risk.”  The Court went on to discuss the series of legislative efforts beginning in the 1830’s to create a statutory vehicle to address this risk- the mortgagee’s right to a judgment of deficiency when the property’s value is exceeded by the debt.

The Court, after application of the current versions of these statutory remedies, limited any in personam recovery through a strict foreclosure to those permitted by the express statutory vehicles.  Any other in personam order wherein the Defendant mortgagor was required to pay monies to the Plaintiff mortgagee exceeds same and is thus improper. 

In the application of the framed distinction between in rem and in personam only through deficiency to the fact of the case, the Court went into substantial detail regarding the practical instruction of the trial court (Plaintiff mortgagee to pay the taxes per its standard practice, and Defendant mortgagor to pay monetary reimbursement to the Plaintiff), even pointing out the threat by the trial court re: contempt and incarceration.  While the Court took substantial issue with this scheme, it remains possible that different, practical process by the trial court limited to the in rem aspects could have accomplished the trial court’s intentions.

In effect, the Connecticut Supreme Court’s ruling makes it clear that any sort of preemptive equitable remedy must be carefully tailored to avoid running afoul of the statutory scheme and requesting impermissible in personam relief. Where the prior trial and Appellate decision gave broad remedies, the Supreme Court has limited the, but not completely… foreclosed… the possibility of equitable relief provided such is directed solely at the in rem nature of foreclosure in Connecticut.

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October 2020 e-Update