Karen L. Gladu et al. v. BAC LP (2010)

MEMORANDUM OF DECISION

The plaintiffs, Karen and John Gladu, move for summary judgment on the first and second counts of the second, amended complaint, which count seek a writ of audita querela and an equitable setting aside of a foreclosure judgment in another case denoted as Countrywide Home Loans Serving LP v. Gladu, d.n. TTD CV 08-5003744.

Summary judgment shall be granted if the pleadings and documentary proof submitted demonstrate that no genuine dispute as to material facts exists and that the movant is entitled to judgment as a matter of law.  Practice Book § 17-49.

The uncontroverted facts are that on June 21, 2007, Countrywide Home Loans Servicing LP lent money to the plaintiffs which loan was secured by a mortgage placed on their residence.   Countrywide later became BAC Home Loan Servicing, LP, and in this decision the court refers to both entities as the lender.

On November 2008, the plaintiffs experienced financial difficulties and missed mortgage payments.   On November 15, 2008, the lender commenced the foreclosure action cited above.   A judgment of strict foreclosure entered on April 13, 2009, with a law day of June 8, 2009.   Throughout this time period, the plaintiffs and the lender were actively negotiating a possible loan modification.

On June 11, 2009, the judgment was opened, at the lender's request, for the purpose of resetting the law day to August 31, 2009.   By July 15, 2009, a loan modification was worked out, and the Gladus, on July 24, 2009, executed a written loan modification agreement and sent it to the lender in accordance with the lender's instructions.   The lender received the properly executed agreement on July 28, 2009.

For whatever cause, the lender failed to notify its attorney in the foreclosure case that it had agreed to modify the loan, that the delinquency under the terms of the former loan no longer existed, and that the foreclosure action ought to be withdrawn.   Instead, on August 31, 2009, the lender's counsel moved to reopen the judgment and reset the law day for January 4, 2010, which motion was granted on August 31, 2009.

The plaintiffs in the present case, believing that the loan modification agreement resolved the foreclosure matter, took no action, and the law days commencing on January 4, 2010, expired without redemption.   On January 20, 2010, the lender recorded a certificate of foreclosure on the land records and conveyed the property to Federal National Mortgage Association (FNMA) on January 26, 2010.

On February 4, 2010, FNMA served the plaintiffs with a notice to quit and began eviction proceedings through a summary process action denoted Federal National Mortgage Association v. Gladu, TTD CV10-4012672.   Throughout the foreclosure proceedings, the plaintiffs were unrepresented, but once they were served with eviction documents they retained counsel who appeared in that matter on February 24, 2010.   In the summary process case, the plaintiff filed an answer on March 4, 2010, wherein they denied that their rights in the residence had been terminated and asserted a special defense that the foreclosure judgment, as modified on August 31, 2009, was obtained through fraud.

Also, counsel for the plaintiff attempted to reopen the foreclosure judgment, by a motion filed on February 25, 2010, which motion alleged that the foreclosure judgment “was entered by error or fraud ․” On April 23, 2010, the court denied the motion to reopen the judgment based on the preclusive effect of General Statutes § 49-15 which states that “no such judgment shall be opened after the title has become absolute in any encumbrancer.”

On May 4, 2010, the plaintiffs commenced the present action which is, in part, an independent, collateral attack on the foreclosure judgment of August 31, 2010, in CV 08-5003744.   As noted above, the first and second counts of the amended complaint seek a writ of audita querela and equitable relief in the form of setting aside the foreclosure judgment.

In its reply brief, objecting to the plaintiffs' motion for summary judgment, the lender and FNMA expressly have withdrawn any opposition to the motion except on the sole ground of a proposed special defense of laches.   Therefore, the granting or denying of this motion for summary judgment depends simply on whether there exists a genuine controversy regarding a fact material to the proposed special defense of laches.   It should be noted that these defendants have never filed an answer so that no details of this special defense are alleged.

Laches is a special defense which, if established, “bars a plaintiff from seeking equitable relief.”  R.F. Daddario v. Shelansky, 123 Conn.App. 725, 737 (2010).   The proponent of this special defense must prove two components, namely inexcusable delay and prejudice.  Id. Consequently, the mere lapse of time fails to establish the defense of laches.  Id.

The defendants point out case law which indicates that seldom is the defense of laches resolvable through summary judgment.   However, if “the subordinate facts ․ make ․ a conclusion inevitable,” then the issue of laches becomes a matter of law.  Id. The court concludes that the uncontroverted facts of the present case negate laches as a matter of law.

Upon receipt of the properly executed loan modification agreement, the lender bore the responsibility to notify its own counsel that the litigation had been rendered moot and to direct counsel to withdraw the foreclosure action.   No lapse of time can be attributed to the plaintiffs until they became aware that the lender was deficient in this regard.

In her uncontradicted affidavit, Karen Gladu avers that the first time they learned that the lender had allowed the foreclosure to proceed was when a representative of FNMA came to their home on January 8, 2010, and informed them of that fact.   Thus, the plaintiffs were ignorant of the lender's delinquency until after title had vested in the lender upon the running of the final law day on January 5, 2010.

Having received this disconcerting news, the plaintiffs phoned the lender and were told to contact the lender's attorney.   The plaintiffs left three phone messages with the lender's attorney on January 19, 22, and 23, 2010, but the lender's attorney never returned the plaintiffs' phone calls.

Within days, on February 4, 2010, the summary process action began.   As mentioned above, the plaintiffs retained counsel who quickly raised the impropriety of the lender's pursuit of a foreclosure judgment after a loan modification occurred.   On February 25, 2010, counsel for the plaintiffs also moved to reopen the foreclosure judgment on the same basis.   When that effort failed because of § 49-15, the plaintiffs promptly instituted the present suit based on the holding of Hoey v. Investor's Mortgage & Guaranty Co., 118 Conn. 226 (1934).

In that case, the plaintiff claimed that the lender had promised, in exchange for partial payment, to forestall a foreclosure action which had been commenced.   Based on that agreement, the plaintiff never defended herself in that action, and title vested in the foreclosing lender.   The plaintiff tried to open the foreclosure judgment, but the trial court held that a predecessor statute to § 49-15 precluded opening judgment once title vested.   Our Supreme Court held that “[t]he trial court's conclusion to that effect was correct and unavoidable.”  Id., 230.

However, the Supreme court also recognized that the owner of the equity could file an independent action for equitable relief to accomplish the goal of vitiating the effect of the foreclosure judgment.  “Courts of equity may grant relief from the operation of a judgment when to enforce it is against conscience, and where the appellant had no opportunity to make defense, or was prevented from so doing by accident, or the fraud of improper management of the opposite party, and without fault on his own part,” Id.

Based on the undisputed facts of the present case the court holds, as a matter of law, that no inexcusable delay occurred on the part of the plaintiffs which could support a special defense of laches, assuming the defendants eventually interpose such a defense.   The plaintiffs reacted by retaining counsel to contest the eviction, to attempt to reopen the foreclosure judgment, and to initiate the present collateral action, all within two months of learning that the lender had permitted the foreclosure judgment to enter despite the properly executed loan modification agreement.   The defendants cannot posit blame on the plaintiffs for the lender's failure to notify its counsel of that agreement.

Summary judgment is granted in favor of the plaintiffs as to the first and second counts of the second, amended complaint.

Sferrazza, J.

Sferrazza, Samuel J., J.