U.S. Bank, Nat'l Ass'n v. Madison

• Decision Date: 03 March 2020
• Docket Number: AC 42228
• Citation: 229 A.3d 1104,196 Conn.App. 267
• Court: Connecticut Court of Appeals
• Parties: U.S. BANK, NATIONAL ASSOCIATION, Trustee v. Margit MADISON et al.

196 Conn.App. 267

229 A.3d 1104

U.S. BANK, NATIONAL ASSOCIATION, Trustee

v.Margit MADISON et al.

AC 42228

Appellate Court of Connecticut.

Argued October 11, 2019

Officially released March 3, 2020

Earle Giovanniello, New Haven, for the appellant (named defendant).

Matthew B. Johnson, for the appellee (plaintiff).

Keller, Elgo and Bright, Js.

BRIGHT, J.

The defendant Margit Madison¹ appeals from the judgment of strict foreclosure rendered by the trial court in favor of the plaintiff, U.S. Bank, National Association, as Trustee for MASTR Adjustable Rate Mortgages Trust 2007-1, Mortgage Pass-Through Certificates, Series 2007-1, following the termination of the defendant's bankruptcy stay. On appeal, the defendant claims that the court erred by concluding that she lacked standing to object to the plaintiff's motion to reenter the judgment of strict foreclosure. We affirm the judgment of the trial court.

The following facts and procedural history are relevant to our resolution of this appeal. On April 18, 2017, the plaintiff commenced a foreclosure action by service of process on the defendant and Eric Demander, Jr.² The plaintiff alleged in its complaint that, on October 11, 2006, Eric S. Demander, who is now deceased, executed a mortgage in favor of Mortgage Electronic Registration Systems, Inc. (MERS), as nominee for American Brokers Conduit, which secured a debt evidenced by a $268,000 promissory note executed on the same date and made payable to American Brokers Conduit.³ To secure the note, Eric S. Demander mortgaged to MERS the premises known as 124 Seymour Road in Woodbridge (property). On September 26, 2016, MERS assigned the mortgage to the plaintiff, which, at all times since then, was the party entitled to collect the debt

and to enforce the mortgage.⁴ The plaintiff further alleged that the defendant was the owner of record of the property by virtue of a certificate of devise dated February 22, 2010, and recorded in the Woodbridge land records on March 5, 2010. The plaintiff alleged that the note and mortgage were in default due to nonpayment of monthly installments of principal and interest due on March 1, 2016, and every month thereafter. The plaintiff thus declared the entire balance of the note due and payable and sought the remedy of foreclosure of the mortgage.

After the defendant filed an answer denying the essential allegations of the plaintiff's complaint, the plaintiff moved for summary judgment as to liability against the defendant. On January 16, 2018, the court granted the plaintiff's motion. The plaintiff then moved for a judgment of strict foreclosure, which the court granted on February 26, 2018. The defendant did not file an opposition to either motion. The court determined that the debt owed to the plaintiff was $333,155.40 and that the fair market value of the property was $326,000, and it set the law days to begin on June 4, 2018. On May 24, 2018, the defendant, pursuant to Practice Book § 14-1, filed notice of her pending chapter 7 bankruptcy petition.

In the schedule of creditors the defendant filed in the bankruptcy proceeding before the United States Bankruptcy Court for the District of Connecticut, the defendant listed the plaintiff as having a claim of $334,138.20, secured by the property, which she valued at $326,000. She did not identify the plaintiff's claim as contingent, unliquidated, or disputed. She also represented that none of the plaintiff's claim was unsecured. On July 11, 2018, the bankruptcy trustee of the defendant's estate, George I. Roumeliotis, reported: "I have

neither received any property nor paid any money on account of this estate; that I have made a diligent inquiry into the financial affairs of the debtor(s) and the location of the property belonging to the estate; and that there is no property available for distribution from the estate over and above that exempted by law. Pursuant to [ Rule 5009 of the Federal Rules of Bankruptcy Procedure ], I hereby certify that the estate of the above-named debtor(s) has been fully administered. I request that I be discharged from any further duties as trustee." The Bankruptcy Court granted the discharge on August 29, 2018, and closed the case on September 5, 2018.

After the law days originally set by the court passed during the pendency of the defendant's bankruptcy proceedings, the plaintiff filed a motion to reenter the judgment after termination of the bankruptcy stay on September 20, 2018. In its motion, the plaintiff requested that the court (1) make new findings as to the debt and fair market value of the property, (2) reenter the judgment of strict foreclosure, (3) set new law days, and (4) award the plaintiff additional attorney's fees and applicable filing fees. The defendant filed an objection to the plaintiff's motion on October 4, 2018, arguing that she was not authorized to execute the subject note and mortgage to MERS because Eric S. Demander did not validly execute the power of attorney that ostensibly appointed her as his attorney-in-fact. Accordingly, the defendant maintained that the improperly executed power of attorney rendered the note and mortgage nugatory. The court overruled the defendant's objection, concluding that the defendant lacked standing to raise that defense. After granting the plaintiff's motion, the court, on October 9, 2018, rendered a judgment of strict foreclosure.⁵ This appeal followed. Additional facts will be set forth as necessary.

We begin by setting forth the relevant standard of review. "The issue of standing implicates the trial court's subject matter jurisdiction and therefore presents a threshold issue for our determination.... Standing is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless he [or she] has, in an individual or representative capacity, some real interest in the cause of action, or a legal or equitable right, title or interest in the subject matter of the controversy.... When standing is put in issue, the question is whether the person whose standing is challenged is a proper party to request an adjudication of the issue .... Because a determination regarding the trial court's subject matter jurisdiction raises a question of law, [the standard of] review is plenary." (Citation omitted; internal quotation marks omitted.) Jenzack Partners, LLC v. Stoneridge Associates, LLC , 183 Conn. App. 128, 134–35, 192 A.3d 455 (2018), rev'd in part on other grounds, 334 Conn. 374, 222 A.3d 950 (2020).

The plaintiff maintains that the defendant lacks standing to pursue her defense to the plaintiff's interest in the property because she failed to identify the defense as an asset of the bankruptcy estate. In other words, the plaintiff contends that the defendant's failure to notify the bankruptcy trustee that the mortgage on the property may be invalid due to the alleged improper power of attorney precludes her from raising that defense after the discharge of the bankruptcy estate. Conversely, the defendant argues that she has standing to object to the plaintiff's motion because her defense to the foreclosure of the mortgage was not an asset of the bankruptcy estate. We agree with the plaintiff.

"As noted by our Supreme Court, the integrity of the bankruptcy system depends on full and honest disclosure by debtors of all their assets. The courts will not permit a debtor to obtain relief from the [B]ankruptcy [C]ourt by representing that no claims exist and then

subsequently to assert those claims for his own benefit in a separate proceeding." (Internal quotation marks omitted.) Manning v. Feltman , 149 Conn. App. 224, 235, 91 A.3d 466 (2014).

"The act of filing a bankruptcy petition transfers a debtor's assets to the bankruptcy estate, and these assets remain assets of the bankruptcy estate unless returned to the debtor by the operation of law.... [I]t is a basic tenet of bankruptcy law ... that all assets of the debtor, including all [prepetition ] causes of action belonging to the debtor , are assets of the bankruptcy estate that must be scheduled for the benefit of creditors .... [A]n asset must be properly scheduled in order to pass to the debtor through abandonment under 11 U.S.C. § 554 (c).⁶ ...

"[W]here a debtor fails to list a claim as an asset on a bankruptcy petition, the debtor is without legal capacity to pursue the claim on his or her own behalf [postdischarge].... This is so regardless of whether the failure to schedule causes of action is innocent." (Citations omitted; emphasis added; footnote added; internal quotation marks omitted.) Beck & Beck, LLC v. Costello , 178 Conn. App. 112, 117–18, 174 A.3d 227, cert. denied, 327 Conn. 1000, 176 A.3d 555 (2018).

In Beck & Beck, LLC , the defendant filed a chapter 7 bankruptcy petition after the trial court rendered a judgment in favor of the plaintiff in the amount of $750 for unpaid legal fees. Id., at 115, 174 A.3d 227. In his voluntary bankruptcy petition, the defendant included the $750 judgment owed to the plaintiff as an unsecured nonpriority

claim. Id. However, on his schedule B—personal property form, the defendant did not list any contingent claims or counterclaims as assets of the estate.⁷ Id. He failed to do so despite the fact that he had asserted, and still was litigating, counterclaims against the plaintiff and cross claims against the plaintiff's principal.⁸ Id. After the defendant's filing, the bankruptcy trustee determined that there was no property available for distribution from the estate and requested a discharge. Id. The bankruptcy court granted the defendant's discharge and closed the case. Id.

When the defendant then pursued his counterclaims and cross claims pursuant to this court's remand order; see footnote 8 of this opinion; the trial court dismissed the claims, concluding that the defendant lacked standing to raise them.

Beck & Beck, LLC v. Costello , supra, 178 Conn. App. 112, 174 A.3d 227. The defendant appealed and ...