By Joseph R. Dunaj, Esq.

Bendett & McHugh, PC *

USFN Member (CT, ME, MA, NH, RI, VT)

The Connecticut Appellate Court has issued an opinion clarifying what issues can be raised post-foreclosure in the case of Lendinghome Marketplace, LLC v Traditions Oil Group, LLC, 209 Conn. App. 862, 2022 WL 88875 (2022).  It is the Appellate Court’s first opinion applying the Connecticut Supreme Court’s opinion of U.S. Bank National Association v. Rothermel, 339 Conn. 366, 260 A.3d 1187 (2021).  In Rothermel, the Connecticut Supreme Court held that a trial court does have limited authority to open a judgment of strict foreclosure after title has vested in an encumbrancer, notwithstanding the clear language of Connecticut General Statutes § 49-15, but only in certain rare and exceptional circumstances.

That case involved whether a moving defendant presented what the court found to be a colorable equitable claim based on a particularized set of factual allegations.

In this new opinion, the Appellate Court not only reaffirms the limitations on a trial court’s authority to open a judgment of strict foreclosure after vesting, but also provides some much-needed additional guidance to litigants and trial courts to assess and adjudicate potential claims that may arise after title has vested in a plaintiff pursuant to Connecticut’s strict foreclosure schema.

In Lendinghome, the foreclosing plaintiff had commenced a prior foreclosure action, and, after the case concluded, the plaintiff discovered that ownership of the property had transferred to an unrelated Limited Liability Company (LLC) just prior to the first foreclosure.  The plaintiff commenced a second foreclosure case under Connecticut General Statutes § 49-30, which is Connecticut’s statute allowing for the ratification of a foreclosure when there has been an omitted party.  The plaintiff named the LLC owner as a party and served the LLC with process pursuant to Connecticut’s long arm statute.  The defendant was defaulted for failing to appear and a judgment of strict foreclosure entered.  The plaintiff sent notice of the judgment, via first class and certified mail, to the primary business address in New York, pursuant to Connecticut practice, as reflected on the records in the office of the Connecticut Secretary of the State. 

A year after title had vested in the plaintiff pursuant to the foreclosure, and after the property had been sold to a bona fide third party, the LLC filed a motion to open the judgment.  In the motion, which was supported by an affidavit, the defendant contended that it had not received any notice of the judgment, and that the plaintiff had intentionally misrepresented to the trial court that notice was properly sent.  The trial court, without oral argument or an evidentiary hearing, denied the motion to open, finding that the property had been sold, and that the plaintiff had complied with the statutory requirements of service and notice.

On appeal, the Appellate Court affirmed the decision of the trial court, finding that the circumstances alleged, in both the motion and the affidavit attached, did not raise the type of rare and exceptional circumstances as laid out in Rothermel, which were required to open the judgment.  The defendant did not raise any argument that it was not served with process or that the default was improper, and there was no nefarious conduct on the part of the plaintiff in the record.  The Court noted that title to the property had already passed to a nonparty purchaser, and the defendant’s challenge to the content of the notice of judgment was immaterial.  Finally, the Appellate Court noted that the defendant had contributed to its not receiving notice because it failed to update its mailing address with the Secretary of the State.

For a number of reasons, the Appellate Court’s opinion is highly supportive to any party objecting to a post-vesting motion.  First, the decision reaffirms the prior case law that a trial court may only open a judgment of strict foreclosure in rare and exceptional circumstances.  Second, the analysis in the decision provides context for some of the determining factors as to what could be a rare and exceptional circumstance: the length of time since title vested, whether the property has since been sold to a third party, whether there’s any egregious conduct on the part of the plaintiff, whether the plaintiff has complied with all appropriate statutes and rules, whether the defendant had notice of the case, and whether the defendant’s own negligence or inattention resulted in the loss of title.  Third, the decision supports the notion that a trial court is not necessarily required to provide an evidentiary hearing on a post-vesting motion to open judgment.  Finally, the decision affirms that the onus on opening the judgment is upon the moving defendant, inclusive of alleging (not just showing) that the defendant has a colorable equitable claim based on a particularized set of facts.

As Connecticut offers an ever-changing landscape for foreclosing plaintiffs, the Lendinghome decision is a helpful one that provides additional certainty for plaintiffs that have completed foreclosures in Connecticut.

Copyright @2022

USFN e-Update - February 2022