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On November 5, 2025, the United States Bankruptcy Court for the District of Connecticut New Haven Division issued a decision in In re Booker, 25-30902 (AMN), finding acts to obtain possession of real property are not stayed by a debtor’s bankruptcy filing when state law classifies those acts as in rem or quasi in rem.
The debtor was a former owner of the property that was foreclosed upon by the lender. Title to the property vested in the former lender following the final judgment of foreclosure and a summary process action was initiated against the former owners and other occupants to obtain possession of the property. The lender obtained a judgment of possession and an execution for possession was issued. However, prior to the scheduled lockout date, the debtor filed a Chapter 7 bankruptcy petition. The state marshal subsequently canceled the lockout due to the bankruptcy filing.
The lender filed a motion in the bankruptcy court seeking an order confirming the debtor’s bankruptcy filing did not create an automatic stay preventing the lender from proceeding with the execution of possession.
The bankruptcy court found the automatic stay pursuant to 11 U.S.C. §362(a) did not arise upon the filing of the bankruptcy case because the debtor had no interest in the property. The court further held the stay provided in §362(a) did not bar the continued prosecution of the eviction order against the debtor, or any other action by the lender to evict any present or hypothetical future debtor residing in the property.
The bankruptcy court began its analysis by determining the debtor had no legal or equitable interest in the property, as the debtor’s right to possession had been terminated by the summary process judgment. As a result, 11 U.S.C. §362(a)(3), which stays any act to obtain possession of property of the bankruptcy estate, was not applicable and did not create a stay. The court reasoned the property could not be property of the bankruptcy estate when title had already vested in a third party.
The court further opined the stays provided for in 11 U.S.C. §§362(a) (1) and (a)(2), which are applicable to actions against the debtor or property of the estate, were not applicable as to the enforcement of an eviction judgment or ejectment action following a foreclosure as these actions are in rem or quasi in rem proceedings under Connecticut state law.
Connecticut’s summary process proceedings are in rem in nature. "The ultimate issue in a summary process action is the right to possession … and the relief available in summary process actions is possession of the premises." Centrix Management Co., LLC v. Valencia, 145 Conn. App. 682, 691, 76 A.3d 694 (2013). (Emphasis in original). A summary process plaintiff can only seek possession of the premises, and a judgment of possession does not impose any personal liability.
The bankruptcy court held that because the debtor did not have a legal or equitable interest in the property and the lender sought only possession of the property, not payment of a debt, no stay was created under 11 U.S.C. §362(a) that prevented the lender from taking actions to enforce the judgment or execution of possession. In reaching this conclusion, the bankruptcy court relied on the 9th Circuit decision In re Perl, 811 F.3d 1120, 1130 (9th Cir. 2016). In Perl, the 9th Circuit held that a third party who purchased property at a mortgage foreclosure sale in California and who thereafter obtained an unlawful detainer judgment of immediate possession against the debtor before the bankruptcy filing, did not violate the automatic stay by evicting the debtor after the bankruptcy filing. The court reasoned that even though the debtor was physically possessing the property, the debtor "had been divested of all legal and equitable possessory rights that would otherwise be protected by the automatic stay." Id at 1130. The court also found that the sheriff’s lockout did not violate the automatic stay because no legal or equitable interests in the property remained to become part of the bankruptcy estate. Id.
The facts in Booker are substantially similar to those in Perl, and the Connecticut bankruptcy court entered an order that the automatic stay of 11 U.S.C. § 362(a) did not prevent the lender from proceeding with the eviction action.
USFN Member (AL, CA, CT, FL, GA,
IL, KY, MS, NV, NJ, NY, OH, OR, PA, TX, WA)
The
Connecticut Appellate Court recently issued its long-awaited decision in U.S.
Bank N.A. v. Israel Melcon, et al (234 Conn. App. 667). The factual
situation giving rise to Melcon was an issue of first impression for the
Connecticut courts and had the possibility to redefine Connecticut foreclosure
judgment procedure.
As the
reader may be aware, under Connecticut’s Strict Foreclosure process, the court
enters a judgment, selects dates that act as the last chance of a borrower and
subsequent encumbrancers to resolve the action (called the Law Day or Law Days),
and title vests automatically in the foreclosing Plaintiff the following business
day. Significant litigation has occurred over the years regarding this process
and various court rules, particularly timelines to appeal either the
foreclosure judgment or court action on later requests to postpone a vesting.
This gave rise to what is now known
as the “three-strike-rule,” which provides that after denial of two extension
requests, there is no further appeal periods without specific action by the movant. In practice, this leads courts to automatically extend a vesting,
even on the denial of the first and second motion, as title cannot vest during
an appeal period.
Melcon asked the question
“What happens when the court doesn’t?”
In Melcon, judgment entered on August 29, 2022, with title to vest May 3, 2023
(after various delays). On May 1, 2023, defendants moved to extend, which the
court denied that day; without extending the Law Days or issuing an articulation
explaining its reasoning. After subsequent motion practice, the trial court
took the position that the Law Days were tolled, and that while title did not
vest on May 3, 2023, due to the appeal period from the denial, it later vested
on May 24, 2023. In so doing, the trial court attempted to create a new way of
handling denied Motions and to not need to specify the new Law Days. The trial
court felt that, under a tolling theory, title had vested absolutely, that it
was stripped of jurisdiction, and defendants had no further recourse. They
appealed.
The Appellate Court ordered
further articulation from the trial court, which laid out the trial court’s
novel tolling theory. Argument was held on January 15, 2025. Over the following
eight months, the Appellate Court occasionally dropped the briefest mention in
other decisions, using the word tolling (which to this point, was not part of
Connecticut foreclosure jargon). Ultimately the decision was released on August
26, 2025, and the trial court was found to have erred.
Central to the Appellate Court
decision was the concept of notice. The Appellate Court was challenged by the
idea of an automatic tolling resulting in parties, especially unsophisticated
homeowners, not knowing the exact date of their Law Day and when vesting would
occur. The Appellate Court left open the door for the possibility of later
changes to the rules that permitted automatic reset with a footnote that “We
observe that the Rules Committee of the Superior Court remains free to amend
the text of the relevant rules as it deems appropriate” but focused most of its
attention on the equitable nature of foreclosures and the need to ensure notice
and transparency.
Ultimately, the Appellate Court
landed on the soundbite that “We cannot endorse any result that permits a law
day to pass silently” and remanded the matter to the trial court for further
proceedings. While this effectively killed the tolling theory as used by the
trial court, it asked important procedural questions that will likely find
foothold in other cases in the future.
From a Connecticut practitioner
perspective, the reliance on proper notice as the tipping point for the
Appellate Court cannot be understated. For those trial courts that separate
action on the motion and the new Law Days, or those courts where the notice of
the new dates are delayed, Melcon presents a chilling warning. For those
attorneys who see a judge deny a postponement request and choose not to set new
dates, Melcon is a call to action to have a date set as
soon as possible, and proper notice sent.
USFN Member
(AL, CA, CT, FL, GA, IL, KY, MS, NV, NJ, NY, OH, OR, PA, TX, WA)
In one of its first opinions discussing so-called Zombie
Mortgages, Aspen Properties Group, LLC v. Roberts-Joachim, the
Connecticut Appellate Court has ruled in favor of the foreclosing lender on a
defense of abandonment brought by the borrower.
Plaintiff, Aspen, brought suit seeking foreclosure of a 2006
second mortgage stemming from a 2012 default, with the action not commenced
until 2020. At the time, Connecticut did not have a Statute of Limitations for
mortgage foreclosure actions[1]and defendants in the state have attempted
various defenses in efforts to prevent what they see to be inequitable or
improper foreclosures.
In Roberts-Joachim, the borrower, through her counsel
from the Connecticut Fair Housing Center, attempted to raise a defense of
abandonment. She alleged that, as she had been the subject of a prior
foreclosure action brought by her first mortgage holder, and as the second had
not participated, it had abandoned its mortgage. That action, brought in 2013,
went to judgment but was eventually resolved through a loan modification and
the action was withdrawn. One of Aspen’s predecessors in interest was properly named
in that action, but did not appear or participate.
Aspen eventually accelerated and brought its action, which
proceeded to a trial on the sole contested issue of whether Aspen’s predecessor
had abandoned the second mortgage by not participating in the first mortgage’s
prior foreclosure. The trial court rendered judgment for the lender as it determined
that simply not appearing did not evidence an intent to abandon the second
mortgage as there was no equity at the time, and that the abandonment claim was
not carried. No evidence was provided as to the predecessor lender at trial and
the trial court declined to infer an intent to abandon.
Much of the following appeal turned on the specific facts as
found by the trial court, with the appellate court finding no reason to
disagree with any of the rulings of the trial court.Most importantly, the appellate court adopted
the trial court analysis of the distinction between the debt and the lien,
which provides some insight as to available arguments in similar situations.
First, the court reasoned that the
sporadic mailing of demand letters … did not necessarily constitute an intent
to abandon the mortgage because PNC had decided to ‘‘charge off’’ the home
equity line of credit on its books as an accounting measure. … Of course,
PNC’s determination that the loan should be classified as a bad debt does not
necessarily mean that it also abandoned the mortgage, which realistically was
perhaps the only remaining means to recover the sums it had loaned to the
defendant. In other words, the court concluded that there was a reasonable
explanation for the dearth of demand letters other than an intent to abandon
the mortgage altogether.
While certainly not controlling (abandonment being a very
fact-based defense in Connecticut), the argument that acknowledging a bad debt
does not necessarily mean abandoning a lien is a potentially compelling
argument, and one that lenders encountering challenges to second mortgages may
do well to heed. This is potentially useful in any judicial state where a
foreclosing senior is required to name the junior, and the junior took no
action because, at the time, there was no equity in the property to justify
same.
While the appellate court did not create a blanket rule
against abandonment defenses to zombie mortgage foreclosures, Aspen provides
a solid roadmap for how to address such claims at the trial court level and
have the decision survive appellate review.
[1] Public
Act 25-46, signed June 10, 2025, creates a first-of-its kind for the state
foreclosure Statute of Limitations effective with actions brought on or after
January 1, 2026.
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.
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.
USFN Member (AL, CA, CT, FL, GA, IL, KY, MS, NV, NJ, NY,
OH, OR, TC, WA)
The United States Bankruptcy Court for the District of
Connecticut in the Chapter 7 case of In re Elaine M. Cole (Case#
21-21071) held on April 15, 2022, that Connecticut’s Amended Homestead
Exemption applies retroactively, thus allowing a Chapter 7 debtor to claim the
increased $250,000.00 exemption against claims that arose prior to the
effective date of the change in the statute.
Introduction:
Under Connecticut state law, a debtor may claim a homestead
exemption in property that is owner occupied and used as a primary
residence.See Conn. Gen. Stat.
§52-352a(5)On July 12, 2021, Governor
Ned Lamont signed Public Act 21-161 (“Act”) into law that amended Connecticut’s
homestead exemption by repealing the prior version of the statute, renumbering
its provisions, and increasing the exemption from $75,000.00 to $250,000.00
effective October 1, 2021.See Conn.
Gen. Stat. §52-352(b)(21) (“Amended Homestead Exemption”).
Factual Background:
On November 22, 2021, Elaine M. Cole (“debtor”) filed a
petition under Chapter 7 (Case# 21-21071) wherein the debtor claimed the
Amended Homestead Exemption of $250,000.00 on her claimed residential property
located in Mystic, CT (“Property”).On December
2, 2021, by further amendment on December 27, 2021, the Chapter 7 trustee filed
an objection to the debtor’s homestead exemption claiming that although the
Chapter 7 case was filed after the amendment of the homestead exemption, the debtor
was ineligible to claim the increased exemption because the debtor’s unsecured
creditor claims arose prior to the effective date in the change of the statute.The trustee further claimed that the property
was not the debtor’s residence at the time of the Chapter 7 filing.Lastly, the trustee argued applying the
Amended Homestead Exemption would violate the United States Constitution,
Article 1 §10 (the Contracts Clause).
Court’s Analysis and Ruling:
The court first turned to whether the p0roperty was the debtor’s
residence at the time of her Chapter 7 filing because if the answer was yes,
then the trustee’s objection to the debtor’s Amended Homestead Exemption must
be sustained which ends the court’s inquiry.If the answer is no, then the court must determine whether the Amended
Homestead Exemption applies retroactively.
After conducting an analysis of the facts and testimony
surrounding the residential status of the property at the time of the debtor’s
petition filing, the court found the trustee had failed to satisfy his burden
in demonstrating the debtor’s property was not the residence of the debtor at
the time of her petition filing. With
that affirmative answer, the court then proceeded to determine whether the
Amended Homestead Exemption applied retroactively, thus enabling the debtor the
benefit of the increased exemption.
In its second analysis, the court conducted an in-depth
review and analysis of Connecticut’s original 1993 enactment of the homestead
exemption (“Original Homestead Exemption”) against the Amended Homestead
Exemption.The court noted that while the
1993 Act that passed the Original Homestead Exemption expressly provided within
Clause 3 of that statute, “This act shall take effective October 1, 1993, and
shall be applicable to any lien for any obligation or claim arising on or after
that date,” the court noted the Amended Homestead Exemption made no clause reference
to its applicability. The court further cited David v. Forman Sch., 54
Conn. APP. 841, 853-54 (1999) (citing State v. Magnano, 204 Conn. 259,
284 (1987) “Whether to apply a statute retroactively or prospectively depends
on the intent of the legislature in enacting the statute.” The court further cited
several Connecticut decisions surrounding the applicability of the Original
Homestead Exemption. Ultimately, the court stated that unlike the original Act
that enacted the Original Homestead Exemption, which expressly limited its
applicability “to any lien for any obligation or claim arising on or after [its
effective] date,” the 2021 Amended Homestead Exemption contained no clause addressing
whether it applies to pre-enactment debts. The court stated it would refrain
from reading an anti-retroactivity provision into the 2021 Act given there was
no clear expression of legislative intent to the contrary.
Lastly, in response to the trustee’s argument that applying
the Amended Homestead Exemption would violate the United States Constitution,
Article 1 §10 (the Contracts Clause), the court further stated that the Amended
Homestead Exemption “while allegedly modifying the expectations of the parties,
does not substantially interfere with the parties’ reasonable expectations
under a contract……and does no more to the parties’ expectations than if the debtor
took a second mortgage out on the property, thereby significantly reducing the
amount of equity available to creditors.”
The decision in this case arguably impairs the rights of
those creditors who held liens prior to the enactment of the Amended Homestead
Exemption.Those creditors would have
assumed they were entitled to any equity over and above the existing $75,000.00
homestead exemption only to now realize that they are only entitled to any
equity over and above the new $250,000.00 exemption.
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