Argent Mortgage v. Gerald Scully, Jr. et al. (2012)

MEMORANDUM OF DECISION RE MOTION TO DISMISS COUNTERCLAIM

The present foreclosure complaint was originally filed on December 7, 2005, by Argent Mortgage Company, LLC (Argent) against Gerald Scully and three entities with encumbrances subsequent in right to Argent's mortgage, including Regency Towers Condominium Association (Regency).¹  The complaint alleged that on or about March 19, 2004, Scully executed and delivered a note for $105,300 to Argent.   The note was secured by a mortgage on property owned by Scully, located at 30 Woodland Street, Unit 3H, Hartford (the property).   After Scully failed to make the required payments, Argent elected to accelerate the sums due and commence foreclosure.   The complaint listed Regency as having both an interest superior and inferior in priority to Argent's mortgage.

Strict foreclosure was originally entered by the court, Satter, J., on October 10, 2006, and law days were set, but a series of appeals and a bankruptcy filed by Scully continually stayed the proceedings.   On January 8, 2009, Regency filed a “Counterclaim, Cross–Claim and Third–Party Complaint” (counterclaim) to foreclose its lien on the property.²  On June 8, 2009, Judge Satter granted a May 26, 2009 motion to substitute U.S. Bank as the plaintiff.³  On January 8, 2010, U.S. Bank moved to strike Regency's counterclaim but the motion was denied by the court, Satter, J., on January 26, 2010.   Strict foreclosure was again granted by the court, Aurigemma, J., on February 8, 2010, and law days were set for April 4 through April 8, 2010.   None of the parties redeemed on their designated law days.

U.S. Bank filed a motion to dismiss Regency's counterclaim on the ground that the court lacks subject matter jurisdiction to grant relief on the counterclaim because title has vested in U.S. Bank. Regency has filed an objection to the motion to dismiss.

“A motion to dismiss ․ properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court.”  Bacon Construction Co. v. Dept. of Public Works, 294 Conn. 695, 706, 987 A.2d 348 (2010).  “[A] motion to dismiss is the proper procedural vehicle to raise a claim that the court lacks subject matter jurisdiction over the action.”   Bellman v. West Hartford, 96 Conn.App. 387, 392, 900 A.2d 82 (2006).   “Mootness ․ implicates subject matter jurisdiction, which imposes a duty on the court to dismiss a case if the court can no longer grant practical relief to the parties.”  Curley v. Kaiser, 112 Conn.App. 213, 229, 962 A.2d 167 (2009).

U.S. Bank argues that the judgment of strict foreclosure and the passing of the law days vested title to the property in U.S. Bank and stripped the court of jurisdiction to render any relief to Regency.   According to U.S. Bank, the procedural posture of this case is unique and there exists no similar case law, however the situation is analogous to the opening of a judgment pursuant to General Statues § 49–15.⁴  U.S. Bank argues that just as a court lacks jurisdiction to open a judgment after title has vested, the court lacks jurisdiction over Regency's counterclaim.   Further, U.S. Bank asserts the counterclaim would resuscitate the equities of Scully and the other encumbrancers named in the counterclaim, which is precisely what prevents a court from being able to open a judgment after title has vested.   U.S. Bank argues that Regency is only able to foreclose its interest in a separate action.

Regency maintains that a counterclaim is an independent action that survives withdrawal and, by extension, survives judgment on the original complaint as well.   Regency argues that the procedural manner in which a foreclosure is brought does not affect whether the court has jurisdiction to grant the foreclosing party relief.   It further counters that there is no case law supporting U.S. Bank's assertion that the counterclaim would resuscitate the redemption rights of those parties whose interests have already been foreclosed.

“Because courts are established to resolve actual controversies, before a claimed controversy is entitled to a resolution on the merits it must be justiciable.”  Valvo v. Freedom of Information Commission, 294 Conn. 534, 540, 985 A.2d 1052 (2010).  “The test for determining mootness is whether a judgment, if rendered, would have any practical legal effect upon an existing controversy.   Thus, the central question in a mootness analysis is whether a change in the circumstances that prevailed at the beginning of the litigation has forestalled the prospect for meaningful, practical, or effective relief.   The mere fact that there are difficulties in formulating a remedy in an otherwise living case does not evidence the absence of a case or controversy, nor will a case be considered moot where, although the court cannot grant the specific relief originally requested by the plaintiff, the plaintiff still has a stake in the outcome of the proceedings for which effective relief can be provided.”  Statewide Grievance Committee v. Burton, 282 Conn. 1, 13–14, 917 A.2d 966 (2007).

“Generally, foreclosure means to cut off the equity of redemption, the equitable owner's right to redeem the property ․ A decree of strict foreclosure finds the amount due under the mortgage, orders its payment within a designated time and provides that should such payment not be made, the debtor's right and equity of redemption will be forever barred and foreclosed.   Most significantly, the effect of strict foreclosure is to vest title to the real property absolutely in the mortgagee and to do so without any sale of the property.   A judgment of strict foreclosure, when it becomes absolute and all rights of redemption are cut off, constitutes an appropriation of the mortgaged property to satisfy the mortgage debt.”  Ocwen Federal Bank, FSB v. Charles, 95 Conn.App. 315, 323, 898 A.2d 197, cert. denied, 279 Conn. 909, 902 A.2d 1069 (2006).   The title that vests is subject to any superior encumbrances.   See Maresca v. DeMatteo, 6 Conn.App. 691, 158, 506 A.2d 1096 (1986).

“Where a foreclosure decree has become absolute by the passing of the law days, the outstanding rights of redemption have been cut off and the title has become unconditional in the [redeeming encumbrancer] ․ The mortgagor has no remaining title or interest which he may convey ․ Provided that this vesting has occurred pursuant to an authorized exercise of jurisdiction by the trial court ․ it is not within the power of appellate courts to resuscitate the mortgagor's right of redemption or otherwise to disturb the absolute title of the redeeming encumbrancer.”  Barclays Bank of New York v. Ivler, 20 Conn.App. 163, 166–67, 565 A.2d 252, cert. denied, 213 Conn. 809, 568 A.2d 792 (1989).  “[T]he legislature's purpose in barring courts from opening a judgment ․ was ․ to prohibit the mortgagor from subsequent challenges to the enforceability of the mortgagee's property rights.”  New Milford Savings Bank v. Jajer, 244 Conn. 251, 260, 708 A.2d 1378 (1998).

“Section 47–258, which is a part of the [Common Interest Ownership Act] establishes a lien with a split priority ․ In derogation of the common-law rule that first in time is first in right, § 47–258(b) establishes a priority for common charges and a superpriority for the common expense assessments ․ which would have become due in the absence of acceleration during the six months immediately preceding institution of an action to enforce ․ the association's lien ․ The split priority establishes a superpriority for up to six months of common charges and attorneys fees and costs prior to first and second mortgages and taxes, and establishes a recording lien for the remainder of the common charges that is prior to many other liens.   Thus, the statute provides an owners' association with a speedy mechanism by which it can secure up to six months of unpaid common charges, as well as attorneys fees and costs incurred in such a pursuit.”  Linden Condominium Assn., Inc. v. McKenna, 247 Conn. 575, 584–85, 726 A.2d 502 (1999).  “The [condominium] association's lien may be foreclosed in like manner as a mortgage on real property.”  General Statutes § 47–258(j).

In the present case, title in the property vested in U.S. Bank, subject to any senior encumbrances, on April 8, 2010 when none of the defendants redeemed the property.   Regency's recording lien for the remainder of the common charges, which was subsequent to U.S. Bank's mortgage, was extinguished when Regency did not redeem.   Its superpriority lien pursuant to § 47–258, however, was not foreclosed because it was prior in right to U.S. Bank's mortgage.   As a result, the title that vested in U.S. Bank on April 8, 2010 was subject to Regency's superpriority lien.

The court retains jurisdiction over the counterclaim to the extent that it requests foreclosure of Regency's superpriority lien.   A court is without jurisdiction to open a judgment for a debtor because the debtor's right of redemption has been foreclosed and the court, therefore, cannot provide the debtor with any practical relief.   In the present case, however, Regency is not asking the court to revive a foreclosed right of redemption because its superpriority lien was never extinguished.   Regency's counterclaim does not challenge the title that vested in U.S. Bank as a result of the strict foreclosure on April 8, 2010;  it merely seeks to foreclose a separate existing lien.   As a result, the law governing motions to open foreclosure judgments is inapplicable.

Additionally, there is no case law to support U.S. Bank's assertion that allowing Regency to foreclose its lien pursuant to its counterclaim would revive the interests of the extinguished parties.   The interests can only be revived by the opening of the judgment, which as previously discussed is not required.   Finally, a case is moot only if the court is unable to provide the party with the requested remedy.   As noted by U.S. Bank in its memorandum, Regency could file a separate suit to foreclose its lien.   Whether a cause of action is brought as part of a counterclaim or a separate complaint does not affect the court's ability to provide a party with a remedy.   The claim, therefore, is not moot because a controversy for which the court can provide practical relief exists between Regency and U.S. Bank.

For the foregoing reasons, the court finds that it does have jurisdiction over Regency's counterclaim and the motion to dismiss is hereby denied.

Robaina, J.

FOOTNOTES

FN1. The two other subsequent encumbrances named as defendants in the complaint were American General Financial Services, Inc. and Franklin Trust Federal Credit Union f/k/a Central Connecticut Teachers Federal Credit Union..  FN1. The two other subsequent encumbrances named as defendants in the complaint were American General Financial Services, Inc. and Franklin Trust Federal Credit Union f/k/a Central Connecticut Teachers Federal Credit Union.

FN2. On that same date, Regency also filed a motion to cite Linda Fitzgerald and American Express Centurion Bank as third-party defendants who had interests in the property subsequent in right to Regency's lien.   The motion was granted by Judge Satter on January 26, 2010..  FN2. On that same date, Regency also filed a motion to cite Linda Fitzgerald and American Express Centurion Bank as third-party defendants who had interests in the property subsequent in right to Regency's lien.   The motion was granted by Judge Satter on January 26, 2010.

FN3. The full name of the substitute plaintiff is U.S. Bank National Association, as trustee, successor in interest to Wachovia Bank, N.A., as trustee for Chase Funding Loan Acquisition Trust, Mortgage Loan Asset–Backed Certificates, Series 2004–AQ1 for Chase CFLAT 2004–AQ1.   The substitute plaintiff will be referred to as U.S. Bank..  FN3. The full name of the substitute plaintiff is U.S. Bank National Association, as trustee, successor in interest to Wachovia Bank, N.A., as trustee for Chase Funding Loan Acquisition Trust, Mortgage Loan Asset–Backed Certificates, Series 2004–AQ1 for Chase CFLAT 2004–AQ1.   The substitute plaintiff will be referred to as U.S. Bank.

FN4. General Statutes § 49–15 provides in relevant part:  “Any judgment foreclosing the title to real estate by strict foreclosure may, at the discretion of the court rendering the judgment ․ be opened and modified ․ provided no such judgment shall be opened after the title has become absolute in any encumbrancer ․”.  FN4. General Statutes § 49–15 provides in relevant part:  “Any judgment foreclosing the title to real estate by strict foreclosure may, at the discretion of the court rendering the judgment ․ be opened and modified ․ provided no such judgment shall be opened after the title has become absolute in any encumbrancer ․”

Robaina, Antonio C., J.