Equity One, Inc. v. Shivers

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 EQUITY ONE, INC. v. THOMAS J. SHIVERS
(AC 30600)
Beach, Robinson and Mihalakos, Js.*
Submitted on briefs November 12, 2013—officially released June 10, 2014

(Appeal from Superior Court, judicial district of
Tolland, Sferrazza, J.)
 J. Hanson Guest and Jeremy Baver filed a brief for
the appellant (defendant).
Robert J. Wichowski and David F. Borrino filed a
brief for the appellant (plaintiff).
 Opinion

BEACH, J. This case comes to us on remand from
our Supreme Court. We previously remanded the case
to the trial court for an evidentiary hearing to determine
whether the plaintiff, Equity One, Inc., had standing.
Equity One, Inc. v. Shivers, 125 Conn. App. 201, 9 A.3d
379 (2010). Our Supreme Court reversed our decision
and determined that the trial court properly found that
the plaintiff had standing to bring the action. Equity
One, Inc. v. Shivers, 310 Conn. 119, 74 A.3d 1225 (2013).
Our Supreme Court remanded the case to us with direc-
tion to address the defendant’s remaining claim, that
action had been taken in the trial court in violation of the
automatic bankruptcy stay. Id., 125 n.2. The defendant,
Thomas J. Shivers, claims on appeal that the trial court
improperly rendered judgment in violation of the stay.1
We reverse in part the judgment of the trial court and
remand the case for further proceedings.
The following facts and procedural history, as set
forth in Equity One, Inc. v. Shivers, supra, 310 Conn.
119, are relevant: ‘‘On November 28, 2006, the defendant
executed a promissory note in favor of ResMAE Mort-
gage Corporation in the principal amount of $201,600.
That note was secured by a mortgage deed on property
located at 27 Mountain Street in the town of Vernon,
which the defendant also executed on November 28,
2006, and delivered to Mortgage Electronic Registration
Systems, Inc. (MERS), as nominee for ResMAE Mort-
gage Corporation.2 On June 27, 2007, the plaintiff com-
menced this action, seeking to foreclose on the
mortgage. The plaintiff alleged that, because the defen-
dant had failed to make payments as required by the
note, the plaintiff, as the holder of the note and mort-
gage, had elected to declare the entire balance of the
note due and payable and to foreclose on the mortgage.
‘‘On July 19, 2007, the plaintiff filed a motion for
default for the defendant’s failure to file a responsive
pleading and a motion for a judgment of strict foreclo-
sure. On July 23, 2007, the court granted the plaintiff’s
motion for default. On September 24, 2007, the court
rendered judgment of foreclosure by sale, with a sale
date of January 5, 2008. The sale date was extended
twice: the first time it was extended to May 3, 2008,
at the request of the plaintiff; the second time it was
extended to May 10, 2008, at the request of the commit-
tee appointed to conduct the sale. The May 10, 2008
foreclosure sale did not go forward because the defen-
dant filed a bankruptcy petition on May 8, 2008.
‘‘[Thereafter, on October 9, 2008, the automatic stay
that had been imposed following the defendant’s bank-
ruptcy filing was lifted.] After the bankruptcy stay was
lifted, the plaintiff filed a motion to reopen and to reen-
ter the judgment on November 7, 2008. On November 21,
2008, the defendant filed an objection to the foreclosure,
asserting that he was no longer in default and . . .
that the plaintiff did not have standing to foreclose the
mortgage. . . . On November 24, 2008, the court . . .
heard argument from the parties [on] the motion to
reopen and to reenter the judgment. At the conclusion
of that hearing, the court . . . rendered judgment of
strict foreclosure with the law days commencing on
January 12, 2009.’’ (Internal quotation marks omitted.)
Id., 122–23.
On appeal to this court, the defendant claimed, inter
alia, that the trial court erred in failing to conduct an
evidentiary hearing to ascertain whether the court had
subject matter jurisdiction after the defendant raised
the issue of the plaintiff’s standing. This court reversed
the judgment of the trial court and remanded the case
for an evidentiary hearing on the issue of standing.
Equity One, Inc. v. Shivers, supra, 125 Conn. App. 201.
Our Supreme Court reversed that decision and deter-
mined that the trial court had properly found that the
plaintiff had standing. Equity One, Inc. v. Shivers,
supra, 310 Conn. 136. Our Supreme Court remanded
the case to us for consideration of the defendant’s
remaining claim. Id., 137.
The defendant claims that the automatic stay provi-
sions of 11 U.S.C. § 362 (a) (5) were triggered when he
filed a bankruptcy petition on May 8, 2008, and that the
stay was in effect through December 9, 2008, when
the bankruptcy case was dismissed. He argues that all
actions taken by the trial court and all pleadings filed
by the parties during that time frame were void. Such
actions and pleadings include the following: (1) the
plaintiff’s motion to award committee fees and
expenses filed on May 13, 2008; (2) the trial court’s
granting on May 27, 2008, of the plaintiff’s motion to
award committee fees and expenses; (3) the plaintiff’s
motion to open judgment filed on November 7, 2008;
(4) the defendant’s objection to the plaintiff’s motion
to open judgment filed on November 21, 2008, and the
defendant’s motion to compel filed on November 21,
2008; (5) the plaintiff’s military affidavit filed on Novem-
ber 24, 2008; and (6) the court’s judgment of strict
foreclosure on November 24, 2008. The defendant posits
that, although the Bankruptcy Court granted a termina-
tion of the stay on October 8, 2008, the termination of
stay did not apply to the plaintiff because the termina-
tion was granted only with respect to JP Morgan Acqui-
sition Corp. (JP Morgan) ‘‘and/or its successors and
assigns,’’ and the plaintiff was not a successor or assign
with respect to JP Morgan. We agree with the defen-
dant’s claim only as to the proceedings regarding the
motion for committee fees and expenses.3
The automatic stay provision in bankruptcy proceed-
ings, 11 U.S.C. § 362 (a), provides in relevant part that
the filing of a bankruptcy petition with the Bankruptcy
Court ‘‘operates as a stay, applicable to all entities, of—
(1) the commencement or continuation . . . of a judi-
cial, administrative, or other action or proceeding
against the debtor that was or could have been com-
menced before the commencement of the [bankruptcy
case], or to recover a claim against the debtor that arose
before the commencement of [the bankruptcy case]
. . . (5) any act to create, perfect, or enforce against
property of the debtor any lien to the extent that such
lien secures a claim that arose before the commence-
ment of the [bankruptcy case].’’ 11 U.S.C. § 362 (a) (1)
and (5). ‘‘The automatic stay provision in . . . 11 U.S.C.
§ 362 . . . stays any and all postpetition filing. Any fil-
ing constitutes a judicial act directed toward the dispo-
sition of the case in violation of the automatic stay.
. . . The stay of [§] 362 is extremely broad in scope
and . . . should apply to almost any type of formal
or informal action against the debtor or the [debtor’s]
property . . . .’’ (Citations omitted; footnote omitted;
internal quotation marks omitted.) Krondes v. O’Boy,
69 Conn. App. 802, 808, 796 A.2d 625 (2002). The Bank-
ruptcy Court has the power to grant relief from the
automatic stay. See 11 U.S.C. § 362 (d) through (g).
We nonetheless must consider actions that occurred
between May 8, 2008, and October 8, 2008, while the
stay was in effect as to this foreclosure action. The
committee’s motion to award committee fees and
expenses was filed on May 13, 2008, and the trial court’s
granting of the motion occurred on May 27, 2008.4 The
committee of sale, in its May 13, 2008 motion, requested
that the court approve the expenses and fees requested
pursuant to General Statutes § 49-25. Section 49-25 pro-
vides in relevant part: ‘‘[I]f for any reason the [foreclo-
sure by] sale does not take place, the expense of the
sale and appraisal or appraisals shall be paid by the
plaintiff and be taxed with the costs of the case.’’
(Emphasis added.) ‘‘Committee fees are a component
of the expense of the sale. . . . It is clear from the
language of § 49-25 that it is the plaintiff, and not the
defendant, that is liable for the expense of an aborted
sale, which may then be taxed as part of the plaintiff’s
costs.’’ (Citation omitted; emphasis omitted; internal
quotation marks omitted.) Norwalk v. Farrell, 80 Conn.
App. 399, 408, 835 A.2d 117 (2003).
The first inquiry is whether the committee’s motion
for fees and expenses directly affected the defendant
debtor. It did not. The automatic stay provision provides
that the filing of a bankruptcy petition operates as a
stay ‘‘of . . . the commencement or continuation . . .
of a judicial, administrative, or other action or proceed-
ing against the debtor.’’5 (Emphasis added.) 11 U.S.C.
§ 362 (a) (1).
‘‘Generally, the filing of a bankruptcy petition does
not stay actions against nondebtors. . . . Nondebtors
seeking protection of an automatic stay must move for
the extension of the stay in the Bankruptcy Court.’’
(Citation omitted.) Krondes v. O’Boy, supra, 69 Conn.
App. 809; see also In re Metal Center, 31 B.R. 458, 462
(Bankr. D. Conn. 1983) (‘‘[t]he plain language of [§] 362
. . . clearly and repeatedly refers to actions against
the debtor; it nowhere purports to encompass other
related interparty claims’’); Murnane Associates, Inc.
v. Harrison Garage Parking Corp., 217 App. Div. 2d
1003, 630 N.Y.S.2d 187 (1995) (automatic stay did not
apply to suit against nondebtors, where debtor under
no obligation to indemnify nondebtor); 3 Collier on
Bankruptcy § 362.03 [3] [d], p. 362-17 (15th Ed. Rev.
2010) (‘‘[t]he stay of litigation [as a result of the filing
of a bankruptcy action] does not protect nondebtor
parties . . .’’). Therefore, strictly and narrowly speak-
ing, because the defendant was not a party to the com-
mittee’s motion, neither the filing of the motion nor
the court’s ruling on the motion constituted in itself a
‘‘continuation . . . of a judicial action or proceeding
against the debtor.’’
The inquiry does not end, however, with the determi-
nation that the motion for fees and expenses did not
directly affect the defendant debtor. Courts have
extended the application of automatic stay to nondebt-
ors in ‘‘unusual circumstances’’ where doing so would
further the purpose behind the stay. In re Jefferson
County, 491 B.R. 277 (Bankr. N.D. Ala. 2013). Courts
have extended the stay to nondebtors when ‘‘there is
such identity between the debtor and the third-party
defendant that the debtor may be said to be the real
party defendant and that a judgment against the third-
party defendant will in effect be a judgment or finding
against the debtor.’’ A.H. Robins Co. v. Piccinin, 788
F.2d 994, 999 (4th Cir.), cert. denied, 479 U.S. 876, 107
S. Ct. 251, 93 L. Ed. 2d 177 (1986); see also Queenie,
Ltd. v. Nygard International, 321 F.3d 282, 287–88 (2d
Cir. 2003) (‘‘[t]he automatic stay can apply to non-debt-
ors, but normally does so only when a claim against the
non-debtor will have an immediate adverse economic
consequence for the debtor’s estate [such as] . . .
actions where there is such identity between the debtor
and the third-party defendant that the debtor may be
said to be the real party defendant’’ [citations omitted;
internal quotation marks omitted]).
‘‘[C]ourts have recognized that [such] an identity of
interest exists between a debtor and a third party non-
debtor when a right to indemnification exists.’’ In re
North Star Contracting Corp., 125 B.R. 368, 370 (Bankr.
S.D.N.Y. 1991); see also A.H. Robins Co. v. Piccinin,
supra, 788 F.2d 999. Courts have interpreted the exten-
sion of the stay regarding indemnification to include
situations ‘‘[w]here . . . a debtor and a nondebtor are
so bound by statute or contract that the liability of the
nondebtor is imputed to the debtor by operation of law
. . . [and] the Congressional intent to provide relief to
debtors would be frustrated by permitting indirectly
what is expressly prohibited in the [Bankruptcy] Code.’’
In re Metal Center, supra, 31 B.R. 462; see also A.H.
Robins Co., Inc. v. Piccinin, supra, 999 (in order for
Bankruptcy Court to properly stay proceedings against
nonbankrupt co-defendant unusual circumstances such
that ‘‘the debtor may be said to be the real party defen-
dant and that a judgment against the third-party defen-
dant will in effect be a judgment or finding against
the debtor’’).
In the present case, the defendant in effect was obli-
gated by statute to indemnify the plaintiff. As previously
noted, § 49-25 provides: ‘‘[I]f for any reason the [foreclo-
sure by] sale does not take place, the expense of the
sale and appraisal or appraisals shall be paid by the
plaintiff and be taxed with the costs of the case. . . .’’
(Emphasis added.) ‘‘Even in cases where a sale does
not occur and there are, therefore, no sale proceeds
from which the committee may be paid, a committee
of sale has expended money, time and effort in per-
forming its duties. . . . Absent fraud or fault on the
part of a committee of sale, the committee should be
compensated for its efforts and reimbursed for its
expenses associated with those acts in furtherance of
its obligations, whether or not such acts eventually cul-
minate in a completed sale. . . . If not for § 49-25, there
would be no source from which the committee could
recoup such fees and expenses. The statute appropri-
ately requires that the plaintiff serve as the source from
which the committee may recoup its fees and expenses
because it is the plaintiff who has called on the court
to provide a remedy for collecting on liens by way of
foreclosure. The plaintiff may, in turn, seek to recoup
the expenses it has incurred as a result of the services
provided by the committee by taxing those expenses
as costs in a bill of costs, which it may file pursuant
to Practice Book § 18-5.’’ (Citation omitted; internal
quotation marks omitted.) Norwalk v. Farrell, supra,
80 Conn. App. 408–409. Practice Book § 18-5 provides
in relevant part: ‘‘(a) Costs may be taxed by the clerk
in civil cases fourteen days after the filing of a written
bill of costs provided that no objection is filed. . . .’’
Because the stay in the present case was applicable to
the motion for committee fees, the action regarding
that motion is void.6
The judgment is reversed only with respect to the
granting of the plaintiff’s motion for committee fees.
The judgment is affirmed in all other respects and the
case is remanded for the purpose of setting new law
days and for further proceedings according to law.
In this opinion the other judges concurred.
* The listing of judges reflects their seniority status on this court as of
the date that this case was submitted.
1
The defendant also argues that the trial court erred in not permitting
him to ‘‘explore its claims and defenses against the plaintiff and its co-
conspirator.’’ From the defendant’s sparsely briefed claim, it appears that
he claims that the court, after entering a judgment of strict foreclosure on
November 24, 2008, erred in denying his motion for a continuance and/or
motion to extend the law date. The defendant, who was self-represented at
the time, asked for a continuance. The court explained that it had already
entered a judgment of strict foreclosure and was about to set a law date.
The defendant responded: ‘‘I’d ask for an extended law date. I believe there’s
violations of RESPA and truth and lending. . . . I’d like time to look into
that more.’’
A trial court has broad discretion in ruling on motions for continuance
and in setting law days. See Cote v. Machabee, 87 Conn. App. 627, 633, 866
A.2d 639 (2005) (abuse of discretion standard applied to trial court’s rulings
on motion for continuance); Busca v. Nicotra Corporation, 213 Conn. 264,
267, 567 A.2d 377 (1989) (‘‘[T]he discretion exercised by the court in fixing
the law day in a foreclosure is a legal discretion. Its exercise will not be
interfered with on appeal to this court except in a case of manifest abuse
and when injustice appears to have been done.’’ [Internal quotation marks
omitted.]) On the basis of the record before us we do not conclude that the
court abused its discretion in denying a continuance or in denying a request
for an extended law date to permit the defendant to explore possible
defenses, when the court had already entered a judgment of foreclosure
and where there is no indication in the file that the defendant ever filed an
answer and special defenses. See Practice Book § 10-50.
2
‘‘As one court has explained, MERS does not originate, lend, service, or
invest in home mortgage loans. Instead, MERS acts as the nominal mortgagee
for the loans owned by its members. The MERS system is designed to allow
its members, which include originators, lenders, servicers, and investors,
to assign home mortgage loans without having to record each transfer in
the local land recording offices where the real estate securing the mortgage
is located. . . .
‘‘The benefit of naming MERS as the nominal mortgagee of record is that
when the member transfers an interest in a mortgage loan to another MERS
member, MERS privately tracks the assignment within its system but remains
the mortgagee of record. According to MERS, this system saves lenders
time and money, and reduces paperwork, by eliminating the need to prepare
and record assignments when trading loans. . . .
‘‘If, on the other hand, a MERS member transfers an interest in a mortgage
loan to a non-MERS member, MERS no longer acts as the mortgagee of
record and an assignment of the security instrument to the non-MERS
member is drafted, executed, and typically recorded in the local land
recording office.’’ (Internal quotation marks omitted.) Equity One, Inc. v.
Shivers, supra, 310 Conn. 122 n.1.
3
On October 9, 2008, the Bankruptcy Court, on the presumption that JP
Morgan was the party prosecuting this foreclosure action, granted JP Mor-
gan’s motion to lift the stay with respect to the foreclosure action. The
Bankruptcy Court terminated the stay ‘‘to permit JP Morgan . . . and/or
its successors and assigns to commence and/or continue to prosecute to
resolution a foreclosure action against the Debtor’s interest in real property
known as 27 Mountain Street, Vernon Rockville.’’ The relationship between
the plaintiff and JP Morgan is not entirely clear from the materials in the
file. Apparently the original security interest was granted by the defendant
to MERS, which then assigned the mortgage to the plaintiff. The defendant
averred in a court pleading that the plaintiff ‘‘sold my mortgage to SPS,’’
which in turn is represented by the defendant to be the servicer for JP
Morgan. If this is so, the plaintiff is a predecessor in interest to the mortgage
rather than a successor.
Although the Bankruptcy Court’s lifting of the stay did not, by a literal
application of its terms, appear to apply to JP Morgan’s predecessors, the
obvious and unavoidable intent was to terminate the stay as to entities in
the chain of title and to allow this foreclosure action to proceed; there
similarly is no dispute that the release applied to the property which was
the subject of this action.
The defendant’s objection to the motion for judgment of strict foreclosure,
filed on November 21, 2008, did not claim that the plaintiff had not obtained
relief from the stay. The trial court, during argument on the plaintiff’s motion
to open the judgment of foreclosure on November 24, 2008, noted the
termination of the stay and, without objection, acted as if the termination
of stay applied to the case before it. In the circumstances, we find it unavoid-
ably clear that the Bankruptcy Court’s action effectively terminated the stay
so that the foreclosure action in question could lawfully proceed.
4
This court ordered supplemental briefing on the following issues: ‘‘Did
the committee’s motion for fees/expenses filed on May 13, 2008, and/or
the court’s granting of the motion on May 27, 2008, violate the automatic
bankruptcy stay, and, if so, were such actions void? [and] Even if the actions
were void, did the parties have the ability to address the issue of committee
fees and expenses subsequent to the stay such that any error was harmless?’’
5
‘‘The notes of the Committee of the Judiciary recognize the debtor only
as the beneficiary of the stay [under § 362]. ‘The automatic stay is one of
the fundamental debtor protections provided by the bankruptcy laws. It
gives the debtor a breathing spell from its creditors. It stops all collection
efforts, all harassment, and all foreclosure actions. It permits the debtor to
attempt a repayment or reorganization plan, or simply to be relieved of the
financial pressures that drove him into bankruptcy.’ See: S. Rep. No. 95-
989, 95th Cong., 2d Sess. 54–55 (1978), reprinted in U.S. Code Cong. &
Admin. News, 1978, pp. 5787, 5840–5841.
‘‘ ‘The automatic stay also provides creditor protection. Without it, certain
creditors would be able to pursue their own remedies against the debtor’s
property. Those who first acted would obtain payment of the claims in
preference to and to the detriment of other creditors. Bankruptcy is designed
to provide an orderly liquidation procedure under which all creditors are
treated equally. A race of diligence by creditors for the debtor’s assets
prevents that.’ See: H.R. Rep. No. 95-595, 95th Cong. 2d Sess. 349 (1978),
reprinted in U.S. Code Cong. & Admin. News, 1978, p. 6297.’’ Williford v.
Armstrong World Industries, Inc., 715 F.2d 124, 127 (4th Cir. 1983).
6
There is a remaining question as to whether any action regarding the
committee’s motion during the pendency of the stay was harmless. The
parties were requested to address the issue in supplemental briefing. We
are unable to discern from the present record whether the defendant has
in fact incurred any loss or liability from action on the motion. The parties
may revisit the question of payment for committee fees on remand.
In any event, the defendant has suggested in his supplemental brief that
he is entitled to certain damages for fees, expenses, additional costs and
‘‘distract[ion] . . . from focusing on the restructuring of his affairs.’’ On
the record before us, it is difficult to discern any such cost or inconvenience.