JPMorgan Chase Bank, Nat'l Ass'n v. Essaghof

336 Conn. 633

249 A.3d 327

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION

v.Roger ESSAGHOF et al.

SC 20090

Supreme Court of Connecticut.

Argued October 21, 2019

Officially released August 20, 2020^*

Ridgely Whitmore Brown, for the appellants (named defendant et al.).

Brian D. Rich, Hartford, for the appellee (plaintiff).

Jeffrey Gentes, John L. Pottenger, Jr., New Haven, and Serena Candelaria, Adrian Gonzalez, Amy Hausmann, Natasha Khan and Srinath Reddy Kethireddy, law student interns, filed a brief for the Housing Clinic of the Jerome N. Frank Legal Services Organization as amicus curiae.

Robinson, C. J., and Palmer, McDonald, D'Auria, Kahn, Ecker and Vertefeuille, Js.^**

McDONALD, J.

In this certified appeal, we must decide whether a trial court may order a mortgagor to reimburse a mortgagee for the mortgagee's ongoing advancements of property taxes and insurance premiums during the pendency of an appeal from a judgment of strict foreclosure. The defendants Roger Essaghof and Katherine Marr-Essaghof¹ appeal from the judgment of the Appellate Court affirming the trial court's order requiring that the defendants reimburse the plaintiff, JPMorgan Chase Bank, National Association, for property tax and insurance premium payments advanced by the plaintiff during the pendency of this appeal. The defendants' principal claim is that the Appellate Court incorrectly concluded that the trial court's order was a valid exercise of its equitable authority. We conclude that the trial court abused its discretion because the relief it ordered is inconsistent with the remedial scheme available to a mortgagee in a strict foreclosure. Accordingly, we reverse the judgment of the Appellate Court insofar as it upheld the trial court's order directing the defendants to reimburse the plaintiff for property taxes and insurance premiums. We affirm the Appellate Court's judgment in all other respects.

The following undisputed facts and procedural history are relevant to our resolution of this appeal. In May, 2006, the defendants executed an adjustable rate promissory note in favor of Washington Mutual Bank, F.A.; see footnote 1 of this opinion; in the original, principal amount of $1.92 million. JPMorgan Chase Bank, National Assn. v. Essaghof , 177 Conn. App. 144, 146–47, 171 A.3d 494 (2017). The loan was secured by a mortgage deed, executed by both defendants, on residential property located in Weston. See id., at 147, 171 A.3d 494. Approximately two years later, the defendants executed a loan modification and defaulted on the loan shortly thereafter by failing to make payments. Id., at 148–49, 171 A.3d 494. In September, 2008, the plaintiff acquired Washington Mutual and its assets, including the defendants' loan. Id., at 149, 171 A.3d 494.

The plaintiff commenced this foreclosure action in March, 2009. Id. In November, 2015, after a seven day bench trial, the court rendered a judgment of strict foreclosure in favor of the plaintiff. See id., at 149–50, 171 A.3d 494. The court found that the total debt was more than $3.2 million while the fair market value of the property was $1.65 million and set the law days. The defendants timely appealed to the Appellate Court, claiming that the trial court erred in rejecting two of their special defenses; see id., at 146, 151, 171 A.3d 494 ; and the automatic appellate stay went into effect pursuant to Practice Book § 61-11 (a).

In early 2016, with the appeal pending and the defendants still living at the property, the plaintiff moved for the trial court to terminate the appellate stay under Practice Book § 61-11 (d) or, in the alternative, to invoke its equitable authority and order the defendants to reimburse the plaintiff for future property taxes and insurance premiums that the plaintiff would advance during the pendency of the appeal. Id., at 150 and n.4, 171 A.3d 494. On February 23, 2016, the court denied the motion to terminate the stay but granted the requested equitable relief. Id. The court reasoned that, between March, 2010, and January, 2016, the plaintiff had paid more than $330,000 in property taxes and insurance premiums to protect both its security interest in the property and the priority of its mortgage loan. The court noted that the tax and insurance payments, however, had always been the defendants' responsibility and would continue to be—regardless of the outcome of the pending foreclosure appeal. It further noted that the defendants' obligation to pay the taxes and insurance premiums was not contested in the foreclosure litigation, and the obligation could neither affect nor be affected by the outcome of the appeal. At a hearing on the plaintiff's motion, the trial court explained: "[I]t's not fair that the [defendants] can live in this house and not pay the real estate taxes that they're obligated to [pay] when they win this appeal. It's not fair that they live in this house and not pay the insurance on the house that they're living in. When they win the appeal, they have to pay it." The court further explained: "It's not fair that he has to have his obligations that are his when he wins the appeal or he loses the appeal be paid by somebody else. Where do we get that as a law? How can I stand for that? How can I allow that to happen?"

The court's order applied prospectively. That is, it did not require the defendants to pay the insurance premiums and real estate taxes that had accrued from the time of default; it only required the defendants to reimburse the plaintiff for real estate taxes that it paid in January, 2016, and, on an ongoing basis, for all future property tax and insurance payments until the end of the litigation. The court established the following payment and reimbursement arrangement: the plaintiff would pay the real estate taxes and insurance premiums and submit proof of payment to the defendants. The defendants would then have thirty days to reimburse the plaintiff. If the defendants did not comply, the plaintiff could seek sanctions against either or both defendants, including, but not limited to, a finding of contempt. At the hearing, the court acknowledged that it could not hold the defendants in contempt if they were unable to pay but suggested that, if they did have the ability to pay, the court could jail the defendants as an incentive to do so. The defendants subsequently amended their pending appeal in the Appellate Court to challenge the February 23, 2016 order on the ground that it was an abuse of discretion because it carried the threat of imprisonment for failure to pay a debt, the "equivalent to the re-creation of [a] debtors' prison." (Internal quotation marks omitted.) JPMorgan Chase Bank, National Assn. v. Essaghof , supra, 177 Conn. App. at 150, 160, 171 A.3d 494.

The Appellate Court rejected each of the defendants' claims related to the special defenses and affirmed the trial court's judgment of strict foreclosure. Id., at 146, 151, 163, 171 A.3d 494. That court also held that the trial court's order relating to tax and insurance premium reimbursements was not an abuse of discretion.

Id., at 162, 171 A.3d 494. The Appellate Court reasoned that the trial court's payment order was a matter of the court's broad equitable discretion, and it could not "conceive of any abuse of discretion on the part of the trial court ... in determining that a balancing of the equities justified ordering the defendants to pay for expenses that they would have been required to pay no matter the outcome of this case." (Footnote omitted.) Id.

We thereafter granted the defendants' petition for certification to appeal, limited to the following issue: "Did the Appellate Court properly affirm the judgment of the trial court ordering the defendants to reimburse the plaintiff for property taxes and homeowners insurance premiums in violation of the provisions of General Statutes § 49-14 pertaining to deficiency proceedings?" JPMorgan Chase Bank, National Assn. v. Essaghof , 328 Conn. 915, 180 A.3d 962 (2018).

Although we granted the defendants' petition limited to the one issue, on appeal, the defendants raise two claims: (1) the Appellate Court improperly affirmed the trial court's order to reimburse the plaintiff for taxes and insurance premiums because, in a strict foreclosure, a trial court may award money damages only in a deficiency judgment pursuant to § 49-14 ; and (2) this court should vacate the judgment in its entirety and order a new trial before a different judge because certain statements the trial court made at a hearing on February 8, 2016, call into question the trial court's impartiality, requiring its disqualification under rule 2.11 of the Code of Judicial Conduct.² We agree with the defendants that the trial court's order constituted an abuse of discretion because it does not fit within the remedial scheme available to a mortgagee in a strict foreclosure. We decline to consider the merits of the defendants' second claim because the defendants did not raise the disqualification issue before the trial court or the Appellate Court, and because it is outside the scope of the certified question. Accordingly, we reverse in part the judgment of the Appellate Court.

I

We first consider whether the trial court's order requiring the defendants to reimburse the plaintiff for tax and insurance premium advancements was a valid exercise of the court's equitable authority. The defendants argue that, although a court generally has broad equitable discretion in a foreclosure proceeding, monetary payments are legal, not equitable, relief and must be awarded only in accordance with the procedure for deficiency judgments set forth in § 49-14. The plaintiff disagrees and contends that the trial court's order was a valid exercise of the court's equitable authority.

This court reviews the exercise of a trial court's equitable powers for an abuse of discretion. See, e.g., Presidential Village, LLC v. Phillips , 325 Conn. 394, 407, 158 A.3d 772 (2017) ; see also MTGLQ Investors,...