Webster Bank v. Zak

• Decision Date: 13 August 2002
• Docket Number: (AC 20906)
• Court: Connecticut Court of Appeals
• Parties: WEBSTER BANK v. JOANNA v. ZAK ET AL.

71 Conn. App. 550

802 A.2d 916

WEBSTER BANK v. JOANNA v. ZAK ET AL.

(AC 20906)

Appellate Court of Connecticut.

Argued May 30, 2002.

Officially released August 13, 2002.

Foti, Mihalakos and Daly, Js. Kerry M. Wisser, with whom was Nathan A. Schatz, for the appellant (defendant MFR of East Hampton, LLC).

Jeffrey T. Beatty, with whom, on the brief, was Richard J. Beatty, for the appellee (substitute plaintiff EMC Mortgage Corporation).

Opinion

FOTI, J.

This appeal in a foreclosure action returns to this court on remand from our Supreme Court. Webster Bank v. Zak, 259 Conn. 766, 792 A.2d 66 (2002).¹ The defendant MFR of East Hampton, LLC (MFR), appeals from the trial court's judgment of foreclosure, claiming that the court improperly concluded that a prior judgment conclusively established the principal amount of debt owed by MFR to the substitute plaintiff, EMC Mortgage Corporation (EMC). The central issue in this appeal is whether it was improper for the court to determine that EMC's amended complaint did not vacate the entire previous judgment, which would have resulted in opening the pleadings as to all issues, including liability and the amount of debt. We affirm the judgment of the trial court. Our Supreme Court set forth the facts and procedural history of this case in Webster Bank v. Zak, supra, 259 Conn. 766. "On July 16, 1997, the plaintiff, Webster Bank (bank), brought an action seeking to foreclose a mortgage on three parcels of land in Clinton, of which the named defendant, Joanna V. Zak (Zak), was the titleholder of record.² On November 24, 1997, the trial court, Arena, J., rendered a judgment of foreclosure by sale. After determining the amount of the debt due on the note and the costs associated with the foreclosure action, the court scheduled the sale date for July 18, 1998.

"The bank subsequently assigned its interest in the note and mortgage to EMC .... Thereafter, EMC moved to substitute itself as the plaintiff in the foreclosure action and Zak moved to extend the foreclosure sale date. On July 13, 1998, the trial court granted both motions. The court also opened the November 24, 1997 judgment and rendered a new judgment of foreclosure by sale with a sale date of September 19, 1998.

"On September 17, 1998, Zak filed in the United States Bankruptcy Court for the District of Connecticut for protection under chapter 13 of the United States Bankruptcy Code, which was later converted to a chapter 7 bankruptcy. See 11 U.S.C. § 101 et seq. The filing of the bankruptcy petition stayed the trial court proceedings, and the foreclosure sale did not occur as scheduled. Thereafter, EMC filed in the Bankruptcy Court a motion for relief from the bankruptcy stay. On January 5, 1999, the Bankruptcy Court granted EMC's motion for relief from the stay on the condition that Tracy M. Saxe, the trustee of Zak's bankruptcy estate, be cited in as a party defendant in the foreclosure action. EMC subsequently moved in the trial court to open the judgment of foreclosure and to amend the complaint to cite in Saxe as a party defendant. On February 8, 1999, the trial court opened the judgment and granted EMC's motion to file an amended complaint. EMC subsequently filed an amended complaint naming Saxe as a party defendant.

"On March 31, 1999, Zak conveyed all of her right, title and interest, including her equity of redemption, in the foreclosed property to MFR by quitclaim deed. Saxe was not a signatory to the deed. Thereafter, MFR moved to be cited in as a party defendant, pursuant to General Statutes § 52-107 and Practice Book § 9-6, claiming that it was `the record titleholder of the property that is the subject of the foreclosure, and any judgment of foreclosure will necessarily affect it by foreclosing out its interest as the titleholder ....'<sup>3</sup> MFR furnished a copy of the quitclaim deed in support of its motion. On May 4, 1999, without objection from EMC or Saxe, the trial court granted MFR's motion. EMC subsequently filed a second amended complaint in which it named MFR as a party defendant, stating: `By her Quitclaim Deed dated March 31, 1999, and recorded April 1, 1999 ... on the Clinton Land Records, [Zak] conveyed her interest in the mortgaged premises to [MFR].' MFR is the only defendant involved in this... appeal.

"MFR filed an answer and special defense to EMC's second amended complaint. In its special defense, MFR claimed that EMC's failure to provide the appropriate notice of default pursuant to the requirements of the mortgage agreement barred it from instituting foreclosure proceedings. No other party filed a pleading in response to EMC's second amended complaint.

"On October 8, 1999, EMC filed a motion for summary judgment. EMC claimed that MFR was bound by the trial court's November 24, 1997 judgment as Zak's successor in interest, and was precluded, therefore, from asserting new defenses to liability that Zak had not asserted prior to that judgment. Similarly, EMC contended that MFR was bound by the amount of the mortgage debt as determined by the trial court in connection with that judgment. MFR opposed the motion for summary judgment as to both the issue of liability and the amount of the debt. On February 8, 2000, the trial court granted summary judgment on the issue of liability, and scheduled a hearing on the amount of the debt for May 31, 2000.

"At that hearing, EMC claimed that the trial court should calculate the amount by adding to the debt established at the November 24, 1997 judgment the per diem interest that had accrued on that debt since that date. MFR contended, in response, that EMC's second amended complaint citing in MFR opened the pleadings and, thereby allowed MFR to assert new defenses to liability, as well as to contest the amount of the debt established by the trial court's November 24, 1997 judgment. Therefore, MFR claimed, the court should hear evidence regarding the amount of the debt. "In its memorandum of decision, dated June 5, 2000, the trial court determined that `each opening of the original judgment of foreclosure, dated November [24], 1997, was for a limited purpose: on July 13, 1998, to substitute EMC as successor plaintiff to [the bank]; on July [13], 1998, to set a new sale date of September 19, 1998; on February 8, 199 [9], to cite in [Saxe] as trustee of the bankruptcy estate of [Zak].' It further determined that `[n]othing in the record indicates that the judgment of foreclosure by sale was ever vacated.' The court concluded `that the debt established by the judgment of November [24], 1997, is [therefore] the controlling debt in this [foreclosure] action....' [T]he trial court rendered a judgment of foreclosure by sale, and calculated the amount of the debt using the amount of the debt established at the November 24, 1997 judgment and adding the per diem interest that had accrued since that date." Webster Bank v. Zak, supra, 259 Conn. 768-72. MFR appeals from that judgment.

MFR claims that the court improperly held that EMC's second amended complaint did not open and vacate the entire November 24, 1997 judgment. Stated otherwise, MFR claims that the "new complaint gives all parties the opportunity to start the case anew for all purposes," and that the court's decision is contrary to established procedural rules and violative of due process. We disagree.

We first set forth the legal principles that govern our resolution of that issue. We review the court's decision not to open the pleadings as to all issues under an abuse of discretion standard. Townsley v. Townsley, 37 Conn. App. 100, 104, 654 A.2d 1261 (1995); see Wagner v. Clark Equipment Co., 259 Conn. 114, 128, 788 A.2d 83 (2002). Further, "`[a] foreclosure action constitutes an equitable proceeding.... In an equitable proceeding, the trial court may examine all relevant factors to ensure that complete justice is done.... The determination of what equity requires in a particular case, the balancing of the equities, is a matter for the discretion of the trial court.' ... This court must make every reasonable presumption in favor of the trial court's decision when reviewing a claim of abuse of discretion. Yanow v. Teal Industries, Inc., 196 Conn. 579, 583, 494 A.2d 573 (1985)." (Citation omitted.) People's Bank v. Letendre, 57 Conn. App. 645, 646, 749 A.2d 1227 (2000); see 1 B. Holden & J. Daly, Connecticut Evidence (2d Ed. 1988) § 35, pp. 159-60. "Our review of the trial court's exercise of legal discretion is limited to the question of whether the trial court correctly applied the law and could reasonably have reached the conclusion that it did." People's Bank v. Letendre, supra, 646.

Because MFR relies on the second amended complaint as the vehicle for opening the November 24, 1997 judgment as to all issues in the case, including liability and the amount of debt, we focus our attention on that complaint and its attendant circumstances.

Following its acceptance of the quitclaim deed from Zak, MFR moved to be cited in as an additional party defendant. The court properly granted MFR's motion. In response, the court ordered EMC to amend its complaint by naming MFR as a party defendant. To satisfy the court's order, EMC filed a motion requesting leave to do so. The motion specifically stated its limited purpose as "adding MFR ... as a party defendant." MFR's motion to be cited in predicated the court's order for EMC to amend its complaint. In other words, but for MFR's motion to be cited in, EMC never would have had to file the second amended complaint. The filing of the second amended complaint, therefore, was compulsory in nature and not voluntary.

MFR, nevertheless, argues that the filing itself resulted in the opening of the judgment, as if the court never had rendered judgment, thereby allowing MFR to challenge its liability and debt under EMC's note and mortgage. In support of its argument in that regard, MFR relies on Practice Book § 10-61 in conjunction with Clover Farms, Inc....