June & July Connecticut Appellate Update and Wrap Up – Banking and Financial Institution Services
Summer (and the heat) is officially here and Connecticut’s appellate courts are, as usual, being asked to rule upon the propriety of a variety of Superior Court judgments and orders that can impact the banking and financial services industry. A brief summary of the most salient decisions is set forth below:
Rockstone Capital, LLC v. Sanzo – This matter was decided by the Supreme Court and relates to the ability of a judgment lienholder to foreclose on the underlying judgment liens with implications to the judgment debtor’s homestead exemption provided by law. However, in this matter, the judgment lienholder and judgment debtors entered into a forbearance agreement which provided for payments to be made AND was secured by a mortgage deed encumbering the same property as the judgment liens. The Appellate Court had previously reversed the Superior Court’s denial of entry of foreclosure on the mortgage deed. The Supreme Court granted certification and affirmed the Appellate Court’s decision regarding the reversal of the trial court’s denial of foreclosure because the homestead exemption does not apply to consensual liens by its terms. The Supreme Court, after analyzing the facts of the forbearance and mortgage deed, concluded that the mortgage was given for consideration and was not contrary to public policy regarding the homestead exemption because it encompassed additional sums due to the holder and was consensual. As a result the Appellate Court’s reversal of the trial court’s denial of entry of foreclosure was affirmed.
Flagstar Bank, FSB v. Kepple, et al. – Kepple was an Appellate Court matter which involved an appeal of the entry of a judgment of foreclosure by sale where the Superior Court had previously denied a motion to dismiss claiming a lack of standing. In consideration of the claim, the Appellate Court relied on well-known requirements for standing in mortgage foreclosure actions and the presumption that a holder is the owner of the underlying note under Connecticut law. In its review of the defendants’ claims that the trial court erred, the Court found that the borrowers had failed to rebut the presumption of ownership of the promissory note and, further, that some of the documents the borrowers attempted to introduce to show that the loan’s investor was the property party to foreclose were inadmissible hearsay. As a result of the defendants’ multiple highlighted failures on appeal (including failing to challenge the denial of the motion to dismiss previously adjudicated) the judgment of foreclosure was affirmed.
U.S. Bank, National Association v. Fitzpatrick, et al. – This matter, from the Appellate Court, also relates to standing in foreclosure actions. The facts of the action are relatively unique and involve a prior foreclosure action; a voided allonge; blank endorsement; and a gap of approximately 6 years between the date of default and commencement of the second foreclosure action. To sum it up, the borrowers asserted numerous special defenses in response to the foreclosure, including laches, which were overcome by motion for summary judgment by the foreclosing mortgagee. The mortgagee also overcame a motion to dismiss for lack of standing based on a voided allonge to the note because the note had previously been endorsed in blank rendering it a bearer instrument. After consideration of the claims presented, the Court rejected each of them based on the legal standards governing standing to foreclose by a party in possession of a bearer instrument and that the defendant failed to raise any genuine issue of material fact in opposition to the entry of summary judgment based on credible, admissible evidence as it was his burden to do. As a result, the judgment as affirmed and the case remanded to permit the trial court to reset the sale date.
Deutsche Bank National Trust Company v. Ponger – This matter also comes from the Appellate Court and revolves around a claim that the condition precedent to foreclosure of notice of default was not complied with by the mortgagee in advance of the institution of the foreclosure action. Here, the underlying action was tried to the court and a judgment of strict foreclosure was entered. The defendant, one of two joint owners and obligors under the loan documents, claimed the notice of default failed because it was directed to a joint owner/ obligor who no longer resided at the subject property. The trial court rejected the defense based on precedent which permits imposition of the “notice to one is notice to all” standard regarding joint owners or obligors. Notably, the Court does not address the incorporation of this standard (which is contained within the FNMA/ FHLMC standard mortgages) as a contractual term but rather decided the claim on existing precedent which holds that a notice given to one co-owner or obligor is proper as to all. The Appellate Court affirmed the entry of the judgment and remanded the case for new law days.
For questions relative to these matters or to discuss how SGL can assist in your business or litigation requirements, please feel free to contact any of the attorneys in the Banking and Financial Institution Services practice group: