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Connecticut Supreme Court Clarifies Appellate Stays

Posted By USFN, Wednesday, February 22, 2017
Updated: Friday, February 17, 2017

February 22, 2017

by Jeffrey M. Knickerbocker
Bendett & McHugh, P.C. – USFN Member (Connecticut, Maine, Vermont)

In a foreclosure case dating back to 1989, the Connecticut Supreme Court has ruled that a trial court must reset law days if an appeal is filed within twenty days of the granting of a motion that would alter or affect a final judgment. [A “Law Day” in Connecticut is a day which the owner of the equity of redemption would have to redeem the property by paying the judgment debt. If the owner does not redeem, title to the property will pass to the foreclosing plaintiff by operation of law at the conclusion of court business on the last law day.]

In Connecticut National Mortgage Company v. Knudsen, 323 Conn 684, __ A.3d __ (Dec. 13, 2016), a judgment of foreclosure had been granted the bank in 1994. The judgment was subsequently opened and modified several times over the years. On June 8, 2015 the trial court rendered a new judgment of strict foreclosure and set a new law day of August 4, 2015.

On June 17, 2015, the borrower sought to reopen the new judgment and to then be allowed to file a motion to vacate that judgment; this was denied by the trial court on June 18, 2015. On June 26, 2015, the borrower appealed (within the requisite appeal periods triggered by both the new judgment and the denial of the borrower’s subsequent motion).

Automatic Stay of Execution
In Connecticut there exists an automatic stay of execution of any final judgment to allow for a twenty-day appeal period. On January 13, 2016 the appellate court had dismissed the appeal with no further action — but both the bank and the borrower argued (and agreed) that the matter should have been sent back to the trial court to reset law days as the vesting of title was stayed due to the appeal period. The Connecticut Supreme Court agreed with the parties, finding that the appellate court erred in dismissing the appeal and not directing the matter back to the trial court for a resetting of law days.

The Connecticut Supreme Court determined that the June 8, 2016 decision (in which the court granted, rather than denied, the bank’s motion to reset the law days) started a new appeal period, which differed from the prior expired appeal periods in the case. Notably, when a motion is granted — as occurred here — instead of denied, the provisions of Practice Book § 61-11 do not apply. Practice Book § 61-11(g) states, in relevant part: “In any action for foreclosure in which the owner of the equity has filed, and the court has denied [emphasis added], at least two prior motions to open or other similar motion, no automatic stay shall arise upon the court’s denial of any subsequent contested motion by that party, unless the party certifies under oath … that the motion was filed for good cause arising after the court’s ruling on the party’s most recent motion. ... There shall be no automatic appellate stay in the event that the court grants the motion to terminate the stay and, if necessary, sets new law dates. There shall be no automatic stay pending a motion for review of an order terminating a stay under this subsection.”

Accordingly, when the borrower timely appealed the judgment, and the dates set for the commencement of the law day passed before the appellate court dismissed the appeal, the vesting of title was stayed pursuant to Practice Book § 61-4. Specifically, the Connecticut Supreme Court found, “The June 8, 2015 judgment triggered an automatic stay because it was an appealable final judgment, and the defendant’s filing of this appeal within twenty days of that judgment continued the stay ‘until the final determination of [this appeal].’ Practice Book § 61-11 (a).” Knudsen, at 689.

As noted in Knudsen, “Prior to [the effective date of Practice Book § 61-11 (g)], a defendant in a foreclosure action could employ consecutive motions to open the judgment in tandem with Practice Book §§ 61-11 and 61-4 “‘to create almost the perfect perpetual motion machine.”’ Citigroup Global Markets Realty Corp. v. Christiansen, 163 Conn. App. 635, 639, 137 A.3d 76 (Mar. 8, 2016).” Knudsen serves to clarify the Christiansen decision, stating that Connecticut Practice Book § 61-11 (g) “was enacted to put a stop to the ‘perpetual motion machine’ and accompanying appellate litigation generated when a defendant files serial motions to open a judgment of strict foreclosure and, each time a motion to open is denied, files a new appeal from the judgment denying the motion to open.”

The difference in Knudsen is that the borrower had a new appeal period when the court granted, and did not deny, the bank’s motion to open judgment and reset the law days on June 8, 2015. As a result, upon dismissal of the appeal on January 13, 2016, the appellate court was obligated to remand the case to the trial court to reset the law day that had passed, because the vesting of title was precluded due to the appellate stay for the applicable appeal period.

The Take-Away
The Knudsen decision illustrates how fact-specific each case can be. Without a careful review of the timeline in this case, a plaintiff could have put the property in real-estate owned (REO), only later to find that the property was not marketable because title had not properly vested in the plaintiff.

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