by Joseph Dunaj, Esq.
McCalla Raymer Leibert Pierce, LLP
USFN Member (AL, CA, CT, FL, GA, IL, MS, NV, NJ, NY, OR, WA)

The Connecticut Supreme Court recently issued an opinion affirming the ability of defendants to open a judgment of strict foreclosure on equitable grounds, even after title has vested to the foreclosing Plaintiff. Although the decision will most likely give rise to an increased amount of litigation in foreclosure cases, the Supreme Court’s opinion provides foreclosing plaintiffs a rudimentary framework to assess such arguments and defend against such arguments.

In US Bank NA v Rothermel, SC 20463, 2021 Conn. LEXIS 173, the Supreme Court addressed the ability of a trial court to consider equitable arguments after title has vested to a foreclosing plaintiff, and of the ability of the Appellate Court to address appeals from those decisions. In general, Conn. Gen. Stat. § 49-15 allows a trial court to open a judgment of strict foreclosure for cause shown, but it prohibits opening a judgment once title has vested absolutely in an encumbrancer. However, there is a limited line of cases that support the notion that a trial court, sitting in equity, may open a judgment after vesting in certain rare and exceptional circumstances. The case law, however, has been limited and has not provided direction as to the limits of such equitable claims.

In Rothermel, the trial court rendered a judgment of strict foreclosure and set law days. The court then, over a period of five years, extended the law days after multiple motions to open, some filed by the plaintiff, and some filed by the defendant. The court set the law day ultimately for March 12, 2019, with title to vest to the plaintiff on March 13, 2019. The defendant filed a motion to open judgment on March 13, 2019, after title vested, claiming that she was misled by correspondence from the mortgage servicer, and that she believed the law day would be extended again due to ongoing loss mitigation discussions.

The trial court conducted an evidentiary hearing and, after briefing, determined that the defendant failed to present any evidence that would warrant opening of the judgment. The trial court noted that although the mortgage servicer had extended the law day multiple times in the past, and the loss mitigation correspondence had erroneously referred to the law day as a sale date, the defendant was not misled as to the nature of the law day. She was also represented by counsel, had filed her own motions to open in the past, and she could have easily filed a motion to open judgment before her law day expired. The defendant appealed the decision to the Appellate Court, but the Appellate Court summarily dismissed the appeal as moot because the law days had run, without adjudicating the underlying merits of the appeal. The defendant then petitioned the Supreme Court, which was granted.

The Supreme Court ultimately determined that the Appellate Court was incorrect in dismissing the appeal as moot, but the trial court was correct in denying the motion to open judgment. The Supreme Court upheld the prior case law that a trial court has continuing jurisdiction to open a judgment of strict foreclosure, despite the limitations of Conn. Gen. Stat. § 49-15, in certain rare and exceptional circumstances, where a defendant has presented a colorable equitable claim that, if factually supported, would provide practical relief. The Appellate Court retained jurisdiction to consider the appeal because the claim presented was a colorable equitable claim. However, the Supreme Court affirmed that the trial court’s decision was correct, finding that the facts presented did not support the defendant’s equitable claim, and that the trial court properly denied the Motion.

It is likely that the Supreme Court’s decision will serve to increase litigation by foreclosure defendants after plaintiffs have taken title. However, being mindful of the Supreme Court’s opinion, a foreclosing plaintiff can utilize the opinion’s analysis in defending against such litigation. The Supreme Court, in anticipation of potential litigation in other cases, stressed in Footnotes 11 & 15 that although the development of what constitutes a colorable equitable claim in a given case is best left to the discretion of a trial court, such claims must be rare and exceptional, and based on a particularized set of facts. In addition, the trial court and Appellate Court may still dismiss such cases as moot, provided that the defendant has had the chance to respond.

When faced with a post-vesting motion, a plaintiff should always preliminarily invoke § 49-15 and argue that the trial court lacks authority to open the judgment. Then, a plaintiff should analyze and attack the legal and factual merits of a defendant’s claim: whether the defendant has presented a proper factual basis, whether the defendant’s claim is equitable in nature, whether a defendant’s claim is rare and exceptional, and whether there are any aggravating factors that militate against opening a judgment. If an appeal is filed, a plaintiff should immediately move to dismiss on mootness grounds, and also seek dismissal on frivolousness grounds, arguing that the defendant does not present a colorable equitable claim. By taking this approach, a foreclosing plaintiff should hopefully be able to succeed in a quick enough manner so that eviction and REO efforts are not delayed, and litigation costs are kept to a minimum.

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August 2021 e-Update