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Connecticut State Court Interprets Interplay between Connecticut General Statute § 49-15(b) and Bankruptcy Code § 362(c)(4)(A)

Posted By USFN, Tuesday, March 13, 2018
Updated: Monday, March 12, 2018

March 13, 2018

by Linda J. St. Pierre
McCalla Raymer Leibert Pierce, LLC – USFN Member (Connecticut, Florida, Georgia, Illinois)

In a recent case, the court was asked to decide whether Connecticut General Statute § 49-15(b) automatically reopens the law day in a judgment of strict foreclosure when: (1) an owner files a petition for relief under the bankruptcy code after entry of a judgment, but before the law day passes; and (2) there is no automatic stay in effect under 11 U.S.C. § 362. [U.S. Bank, as Trustee for the BS Arm Trust, Mortgage Pass-Through Certificates, Series 2005-1 v. Morawska (Conn. Super. Ct. 2018)].

State Statute
Connecticut General Statute § 49-15(b) provides in relevant part “Upon the filing of a bankruptcy petition by a mortgagor under Title 11 of the United States Code, any judgment against the mortgagor foreclosing the title to real estate by strict foreclosure shall be opened automatically without action by any party or the court, provided, the provisions of such judgment, other than the establishment of law days, shall not be set aside under this subsection, provided no such judgment shall be opened after the title has become absolute in any encumbrancer or the mortgagee, or any person claiming under such encumbrancer or mortgage.”

Background – Multiple Bankruptcy Filings
During the pendency of the underlying foreclosure action, the owner of the property filed bankruptcy four times. The last bankruptcy she filed was within one year of her two prior bankruptcy filings, which were both dismissed within that one-year period. Pursuant to 11 U.S.C. § 362(c)(4)(A) and (B), “if a single or joint case is filed by or against a debtor who is an individual under this title, and if 2 or more single or joint cases of the debtor were pending within the previous year but were dismissed, other than a case refiled under a chapter other than chapter 7 after dismissal under section 707(b), the stay under (a) shall not go into effect upon the filing of the later case ….” By virtue of § 362(c)(4)(A), the later-filed bankruptcy by the owner did not implement the automatic stay. As a result, the plaintiff moved for an order affirming that title had vested in the plaintiff absolutely.

Court’s Analysis
The court granted the plaintiff’s motion deeming title vested. In its analysis, the court raised three points. First, it noted that a literal and narrow reading of § 49-15(b) conflicts with the expressed intent of state and federal law. Second, a narrow, conservative construction of § 49-15(b) does not address the problem of repeated bad-faith bankruptcy filings in foreclosure actions identified by both state and federal law. Third, as a matter of statutory construction, the first sentence of § 49-15(b), standing alone, requires resetting of the law days after any filing of a bankruptcy petition before the law days have run. However, the last sentence (which must be read in conjunction with the first sentence) states that in order to move forward with resetting the law days, a mortgagor must file an affidavit affirming that the “automatic stay authorized pursuant to 11 U.S.C. § 362” has been terminated. The first sentence, therefore, contemplates that law days must be reset due to operation of an automatic stay. Thus, if no automatic stay comes into play, the law day will pass.

Author’s Note: Connecticut is a judicial state. Author’s firm represented the plaintiff in the case summarized in this article.


© Copyright 2018 USFN and McCalla Raymer Leibert Pierce, LLC. All rights reserved.
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