Karen L. Gladu et al. v. BAC LP (2011)

MEMORANDUM OF DECISION

The plaintiffs, Karen and John Gladu, apply for an award of attorneys fees following the court's granting of their motion for summary judgment as to the first and second counts of the complaint.   These counts pertain to defendant BAC Home Loans Servicing, LP, (BAC), and the Federal National Mortgage Association (FNMA) and seek relief via audita querela and equity from the enforcement of a foreclosure judgment entered in a case denoted as TTD–CV08–5003744.

Summary judgment was entered as to these two counts on November 18, 2010.   Several other counts remain pending against these and other defendants.

The Gladus contend that they are entitled to reasonable attorneys fees associated with these two counts as well as those fees generated to defend against the underlying foreclosure action and a related eviction action.   A chronology of the litigation history among these parties is as follows.

On November 15, 2008, a predecessor plaintiff commenced the foreclosure case against the Gladus with respect to a note and mortgage encumbering their residence.   On April 13, 2009, a judgment of strict foreclosure entered which established a first law day June 8, 2009.   Because the primary parties in that case were in negotiations, the judgment was opened and modified to reset the first law day to August 31, 2009.   On July 14, 2009, before passage of that law day, the Gladus entered into a loan modification agreement with BAC. However, BAC failed to notify its attorney in the foreclosure case of this development.

Apparently acting under the misapprehension that negotiations were still ongoing, BAC's counsel moved to reopen the judgment and extend the law day to January 4, 2010.   The Gladus believed that the foreclosure case had been resolved and undertook no further action with respect to that proceeding.   The law days lapsed without redemption, and, on January 20, 2010, BAC recorded a certificate of foreclosure on the land records.   BAC then conveyed the residence to FNMA on January 26, 2010

On February 24, 2010, FNMA served the Gladus with a notice to quit and later filed a summary process action in a case denoted as TTD–CV 10–4012672.   In response, the Gladus retained counsel who defended them in the eviction case and also attempted to open the foreclosure judgment.   The summary process case was eventually withdrawn by FNMA without consideration.

The motion to reopen the foreclosure judgment was denied on April 23, 2010, because title had vested in BAC and the preclusive effect of General Statutes § 49–15 which dictates that “no such judgment shall be opened after the title has become absolute in any encumbrancer.”   See Hoey v. Investor's Mortgage & Guaranty Co., 118 Conn. 226, 230 (1934).

On May 4, 2010, the Gladus initiated the present, independent action which, as to the first and second counts, collaterally attacks the foreclosure judgment of August 31, 2010.   See Hoey v. Investor's Mortgage & Guaranty Co., supra.   After summary judgment was granted as to these counts, there remains for adjudication counts asserting violations of the Connecticut Credit Collection Practices Act, the federal Real Estate Settlement Procedures Act, and the Connecticut Unfair Trade Practices Act (CUTPA), as well as claims of fraud, negligence, intentional and negligent infliction of emotional distress, and a quiet title count.   These counts seek compensatory damages, punitive damages, attorneys fees, injunctive relief, prejudgment interest, and a reconveyance of the residence to the Gladus.

The Gladus base their motion for attorneys fees as to the first and second counts, which were resolved by summary judgment in their favor, solely on the authority of General Statutes § 42–150bb.  Section 42–150bb provides that if a contract involving a consumer affords a commercial party the right to collect attorneys fees then the consumer is afforded a comparable right by law if the consumer “successfully prosecutes or defends an action or a counterclaim based upon the contract ․”

The Gladus argue that the favorable outcome on the audita querela and equitable relief counts amounts to a successful defense to the foreclosure and eviction actions based upon the loan modification agreement of July 14, 2009.   Clause 6 of the modification agreement incorporated by reference section 7(E) of the original note and section 22 of the mortgage deed, which provisions permit the lender to obtain attorneys fees generated in the event of default.   The Gladus maintain, therefore, that they are entitled to seek attorneys fees by virtue of § 42–150bb.

BAC and FNMA counter that the audita querela and equitable relief counts are not actions or counterclaims based on contract.   The court agrees with this position.

It must be noted that the loan modification agreement is silent as to the then pending foreclosure case and the judgment rendered in that case.   The modification agreement lacks any express provision obligating the lender to vacate the foreclosure judgment and/or to withdraw the foreclosure action and/or to extend the law day.   The core of the audita querela and equitable relief claims is based on fraud or neglect rather than enforcement of any term of the modification agreement.

It is true that the modification agreement forms the backdrop against which the fraud and/or negligence claims of the audita querela and equitable relief counts were measured, but that circumstance fails to convert these counts to breach of contract claims.   Clearly, once the new repayment schedule was entered into by BAC and the Gladus, the Gladus justifiably relied on that new schedule to maintain ownership and possession of their home, and BAC ought to have promptly notified its counsel of the modification.   Equity will regard as done that which ought to have been done.  Thompson v. Orcutt, 70 Conn.App. 427, 439 (2002).   But an action premised on these equitable considerations is not one based on a breach of contract.

The Appellate Court has held that it is the legal nature of the particular claim rather than the factual circumstances surrounding that claim which determines whether § 42–150bb authorizes an award of attorneys fees.   Gardner Heights Health Care v. Korolyshun, 117 Conn.App. 745, 747 (2009).   In that case, a surety contract existed to guaranty the performance of a conservator.   The conservator prevailed against a claim that he breached his fiduciary duties, and he sought attorneys fees based on § 42–150bb.   Because the action against the conservator was a tort claim rather than a breach of contract, § 42–150bb was inapplicable.  Id., 747.   This was so despite the existence of a contract to ensure the conservator's performance of those duties.

Also, in Anderson v. Latimer Point Management Corp., 208 Conn. 256 (1988), our Supreme Court rejected a claim for attorneys fees under § 42–150bb where a lease agreement created the relationship between the parties.   Even though the sublessee prevailed against a counterclaim filed by the lessor on an issue regarding the maintenance of the demised property, the trial court's denial of attorneys fees under § 42–150bb was upheld because the counterclaim issues “were decided on the basis of the inadequate bylaws [regarding vegetation] and not on considerations involving the sublease.”  Id., 266.

A negligence or intentional tort action may arise where the duty of care or other essential elements of a tort exist because of a contractual relationship.   For example, the status of an invitee may stem from a contractual arrangement, which status gives rise to a certain level of care owed to the invitee by the possessor of land.   But that fact would not convert a slip and fall negligence claim to a contract claim supporting an award of attorneys fees under § 42–150bb.

The court observes that, in the present case, the Gladus may be able to receive compensation for the attorneys fees expended in the foreclosure and eviction proceedings as a component of damages under other counts which remain pending, e.g. the CUTPA and fraud counts.   In order to succeed in that endeavor, the Gladus will have to prove those damages at trial, however, rather than though a motion such as the one sub judice.

The motion for attorneys fees under § 42–150bb, with respect to the audita querela and equitable relief counts, is denied.

Sferrazza, J.

Sferrazza, Samuel J., J.