By Joseph R. Dunaj, Esq.

Bendett &McHugh PC *

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

On August 30, 2022, the Connecticut Appellate Court issued its opinion in the case of Lending Home Funding Corporation v. REI Holdings, LLC, 214 Conn. App. 703, 2022 WL 3712640 (2022). In the opinion, the Appellate Court clarifies the rules of practice that govern the appellate stay and how those rules interact with and affect the law days set in a judgment of strict foreclosure. The opinion serves as a reminder to foreclosing plaintiffs to thoroughly review the court file to ensure that all stays have expired, so that valid title is obtained after a foreclosure.

 In the case, the plaintiff sought to foreclose a mortgage on property in South Windsor, CT. On January 28, 2019, the trial court entered a judgment of strict foreclosure in favor of the plaintiff and set the first law day for May 20, 2019. On May 15, 2019, one of the defendants, REI Holdings, LLC (REI) filed a motion to open judgment, claiming that the appraised value for the property was too low. On May 20, 2019, the trial court denied the motion, and sua sponte extended the first law day until June 24, 2019. On June 10, 2019, REI filed a motion to reargue the denial of the motion to open. The motion to reargue was timely filed within the appeal period from the denial of the motion to open. On July 3, 2019, the trial court denied the motion to reargue, sending notice on July 5, 2019. The trial court did not extend the law days sua sponte, nor did any party file a motion asking to set new law days. The plaintiff subsequently recorded a certificate of foreclosure, evidencing the transfer of title, and then conveyed the property via a quitclaim deed to a third party that was not a part of the foreclosure case.

On December 7, 2020, another defendant in the case, Traditions Oil Group, LLC (Traditions Oil), filed a motion to open judgment. In its motion, Traditions Oil claimed that because REI had filed a timely motion to reargue within the appeal period, that it continued the appellate stay until the motion to reargue was decided, which rendered the June 24, 2019 law day ineffective. Therefore, title did not vest in the plaintiff. The trial court denied the motion to open and a subsequent motion to reargue, concluding that it lacked jurisdiction to adjudicate the motion to open because title had vested in the plaintiff in 2019. Traditions Oil then took an appeal.

The Appellate Court engaged in a discussion of the interplay between Connecticut Practice Book §§ 63-1 and 61-11, governing appeal periods and the appellate stay respectively, and how certain motions may extend the stay. Generally speaking, the rules of practice set a 20-day period from the entry of a judgment to file an appeal. During that period, there is an automatic stay on proceedings to enforce or carry out the judgment, and, if an appeal is filed, the stay remains in existence until the appeal is resolved. However, if during the appeal period, a party files a motion that would render the judgment ineffective (including a motion to open or a motion to reargue), then the appeal period and the appellate stay continue until the motion is decided. These rules apply to both the entry of a judgment, as well as to a court’s denial of a motion to open judgment.

The Appellate Court noted that, in the context of strict foreclosures, if a law day is scheduled while an appellate stay is in effect, then the law day is ineffective. Continental Capital Corp. v. Lazarte, 57 Conn. App. 271, 749 A.2d 646 (2000).  The Appellate Court also noted that the Connecticut Supreme Court, in reliance on the precursor to Practice Book § 63-1©, had previously ruled that a motion to open a judgment, filed within an appeal period, continues the appellate stay until the motion to open is decided, and thus the law days will be ineffective. Farmer & Mechanics Savings Bank v. Sullivan, 216 Conn. 341, 579 A.2d 1054 (1990). The Appellate Court also noted that Practice Book § 63-1© specifically lists both motions to reargue and motions to open judgment as motions that would render a judgment ineffective.

Given this background, and as applied to the facts in the case, the Appellate Court held that REI’s timely filing of a motion to reargue on June 10, 2019, continued the appellate stay from the denial of REI’s prior motion to open, and, because the motion to reargue was not decided until July 3, 2019, the June 24, 2019 law day was ineffective. Therefore, title never vested in the plaintiff. The Appellate Court reversed the decision of the trial court and remanded the case back to the trial court for further proceedings.

The Appellate Court’s opinion provides much needed clarification and guidance in the adjudication of post-judgment matters in foreclosure cases. A critical factor in determining whether the trial court has jurisdiction to open a judgment is whether title has vested or not. And, as noted in the case, the effectiveness of the law days can depend on whether motions are filed or not, and whether such motions are timely filed. Familiarity with the interaction between the appellate stay and scheduled law days can shape how a plaintiff responds to post-judgment motions filed by defendants. For instance, the Appellate Court noted that Practice Book § 11-11, which governs motions to reargue, specifically incorporates Practice Book § 63-1. Presumably, if a defendant files a motion to reargue that does not comply with the provisions of Practice Book § 11-11, then an otherwise timely motion to reargue would not extend the appellate stay.

The Appellate Court’s opinion should also serve as a frightening reminder to all foreclosing plaintiffs and counsel to be diligent to ensure the validity of the title obtained through the foreclosure.  Although the Appellate Court briefly mentioned that the plaintiff had conveyed its interest to a third party, the Court does not opine at all as to the validity of that third party’s title. Foreclosing plaintiffs and counsel should review their case file with a fine-tooth comb to be absolutely sure that title has properly vested, and thus avoid potential litigation after the property is sold at REO.

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