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City of Stamford v. Rahman

Court of Appeals of Connecticut

February 26, 2019

CITY OF STAMFORD
v.
ISMAT RAHMAN ET AL.

          Argued October 23, 2018

         Procedural History

         Action to foreclose a blight lien on certain of the named defendant's real property, and for other relief, brought to the Superior Court in the judicial district of Stamford-Norwalk, where the named defendant et al. were defaulted for failure to appear and the defendant Countrywide Home Loans, Inc., et al. were defaulted for failure to plead; thereafter, the court, Mintz, J., granted the plaintiff's motion for a judgment of foreclosure by sale and rendered judgment thereon; subsequently, Bank of America, N.A., was substituted as a defendant; thereafter, the court, Truglia, J., rejected the motion for a supplemental judgment filed by the defendant Bank of America, N.A.; subsequently, the court, Truglia, J., granted the motion for reconsideration filed by the defendant Bank of America, N.A., granted the motion for a supplemental judgment and rendered a supplemental judgment for the defendant Bank of America, N.A.; thereafter, the court, Tierney, J., granted the motions to open the supplemental judgment and for a supplemental judgment filed by the defendant Wells Fargo Bank, National Association, and rendered a supplemental judgment for the defendant Wells Fargo Bank, National Association, from which the defendant Bank of America, N.A., appealed to this court. Reversed; judgment directed.

          Gerald L. Garlick, for the appellant (defendant Bank of America, N.A.).

          Patrick T. Uiterwyk, for the appellee (defendant Wells Fargo Bank, National Association).

          Alvord, Elgo and Bright, Js.

          OPINION

          ALVORD, J.

         The defendant Bank of America, N.A. (Bank of America), appeals from the judgment of the trial court opening the supplemental judgment that had been rendered in its favor and, thereafter, rendering a supplemental judgment in favor of the defendant Wells Fargo Bank, National Association (Wells Fargo), in the amount of $348, 097.16.[1] On appeal, Bank of America claims that the court erred in granting Wells Fargo's motion to open the supplemental judgment more than four months after it was rendered on the basis of fraud committed by a homeowner in securing multiple mortgages years before this action to foreclose a blight lien commenced. We agree that the court erred and reverse the judgment of the trial court.[2]

         The following facts, as found by the trial court or as stipulated to by the parties, [3] and procedural history are relevant to this appeal. On October 29, 2007, the defendant Ismat Rahman acquired title to property located at 150 Doolittle Road in Stamford for a purchase price of $780, 000. He executed a promissory note in favor of World Savings Bank, in the principal amount of $624, 000. To secure the note, Rahman executed a mortgage in favor of World Savings Bank (Wells Fargo mortgage), [4] which was recorded in the Stamford land records in volume 9187 at page 347.

         Approximately six months later, on April 8, 2008, Rahman executed a promissory note in favor of Countrywide Home Loans Servicing, LP, in the principal amount of $417, 000, which note was secured with a mortgage on the property (Bank of America mortgage).[5]The Bank of America mortgage was recorded in volume 9318 at page 259 of the Stamford land records. Less than one month later, on May 2, 2008, Rahman executed a promissory note in favor of Washington Mutual Bank in the principal amount of $500, 000, which note was secured with a mortgage on the property (JPMorgan Chase mortgage).[6] The JPMorgan Chase mortgage was recorded in volume 9346 at page 260 of the Stamford land records.

         At the closing of the Bank of America mortgage, Rahman presented a document titled ‘‘Satisfaction of Mortgage'' purportedly executed by Mortgage Electronic Registrations System, Inc., as nominee for World Savings Bank (satisfaction). The satisfaction was fraudulent and was never recorded on the Stamford land records. Rahman also presented the satisfaction at the closing of the JPMorgan Chase mortgage.

         The defendant JPMorgan Chase Bank, National Association, filed a claim against its title insurance policy issued by the defendant Chicago Title Insurance Company, now known as Fidelity National Title Group, arising out of Rahman's presentation of the fraudulent satisfaction at the time of acquiring the JPMorgan Chase mortgage. Chicago Title Insurance Company, in turn, instituted a fraud action against Rahman and, on March 17, 2011, obtained judgment in its favor in the amount of $627, 730.67 plus 6 percent per annum postjudgment interest. See Chicago Title Ins. Co. v. Rahman, Superior Court, judicial district of Stamford-Norwalk, Docket No. CV-10-5013365-S (March 17, 2011). A judgment lien was recorded in the Stamford land records at volume 10193 at page 257 as to the property. Bank of America was neither a party to, nor had any knowledge of, the fraud action against Rahman.

         Prior to this foreclosure action, three other foreclosure actions were commenced with respect to the property. The first was commenced on November 4, 2008, by Wells Fargo's predecessor, which withdrew the actiononMarch4, 2010. See Wachovia Mortgage, FSB v. Rahman, Superior Court, judicial district of Stamford-Norwalk, Docket No. CV-08-5009298-S. The second was commenced on January 13, 2009, by JPMorgan Chase Bank, National Association, and was dismissed by the court on October 8, 2010, pursuant to Practice Book § 14-3, governing dismissal for lack of diligence. See JPMorgan Chase Bank, National Assn. v. Rahman, Superior Court, judicial district of Stamford-Norwalk, Docket No. CV-09-5010015-S (October 8, 2010). Wells Fargo's predecessor also commenced a third foreclosure action in 2009. Bank of America appeared in that action and filed an answer and special defense, dated May 5, 2010, based on the satisfaction, which it attached to its pleading.[7]

         On August 14, 2012, the plaintiff commenced the present action by way of a one count complaint seeking foreclosure of a blight lien held by the plaintiff and recorded in the Stamford land records. The complaint also named other defendants, including Wells Fargo, and alleged that these defendants may claim an interest in the property. See footnote 1 of this opinion. On October 23, 2012, the plaintiff filed a motion for default against Wells Fargo for failure to appear, which was granted by the clerk of the court on November 7, 2012. On February 19, 2013, the court rendered judgment of foreclosure by sale. The court found the total debt and attorney's fees due the plaintiff to be $28, 618.75 and the fair market value of the property to be $410, 000. The court set a sale date for May 4, 2013, and the property was sold for $400, 000. On July 29, 2013, the plaintiff filed a motion for determination of priorities and supplemental judgment and subsequently filed a revised motion, which the court granted.[8] The remaining proceeds from the sale, in the amount of $348, 097.16, were paid to the clerk of the court.

         On February 6, 2014, Bank of America filed a motion for a supplemental judgment in which it claimed that the amount owed to it exceeded the remaining sale proceeds. It therefore requested a supplemental judgment disbursing the remaining sale proceeds to it. Bank of America argued that Wells Fargo had been defaulted for failure to appear and had not filed an affidavit of debt by which the court could determine what, if any, amount remained owed to Wells Fargo. It further argued that Wells Fargo had commenced a prior foreclosure proceeding, in which Bank of America appeared and asserted a special defense, that Wells Fargo had received payment in full and that the Wells Fargo mortgage had been released by the satisfaction. Bank of America argued that after it filed a request for production seeking documents related to payment and release of the Wells Fargo mortgage, Wells Fargo withdrew its prior foreclosure complaint without having produced any such documents.

         The court rejected Bank of America's motion for a supplemental judgment, stating that it needed ‘‘verification of release of the Wells Fargo mortgage that was filed on the land records prior to [the Bank of America mortgage].'' On April 1, 2014, Bank of America filed a motion for reconsideration, in which it acknowledged that the satisfaction was never recorded on the land records. It argued, however, that in the event the court were to deny Bank of America's motion, ‘‘the net proceeds from the sale of this property will be held indefinitely by the court, without any indication that any money is still owed under the Wells Fargo mortgage.'' On April 17, 2014, the court reconsidered its decision and granted Bank of America's motion for a supplemental judgment, ordering the clerk of the court, following the expiration of the twenty day appeal period, to disburse to Bank of America $348, 097.16, the amount of the sale proceeds remaining with the clerk.

         More than three years later, on June 2, 2017, counsel for Wells Fargo filed an appearance and a motion to open the supplemental judgment, arguing that the judgment had been procured by fraud or mutual mistake. Wells Fargo contended that Rahman's fraud in forging the satisfaction provided the court with authority to open the judgment after the four month period set forth in General Statutes § 52-212a. Wells Fargo did not contend that Bank of America, itself, had engaged in fraud but, rather, claimed that Bank of America had ‘‘unknowingly perpetuated [Rahman's] conduct when seeking the supplemental judgment.'' Wells Fargo requested that the supplemental judgment be opened and the remaining proceeds from the foreclosure sale be paid to Wells Fargo. Bank of America filed an objection, in which it argued, inter alia, that the supplemental judgment had not been procured by fraud because the court had been made aware that the satisfaction was never recorded and, thus, that Wells Fargo's mortgage had not been released from the land records.

         On August 30, 2017, Bank of America and Wells Fargo appeared before the court for a hearing on the motion to open.[9] The parties subsequently submitted supplemental briefing concerning the legal standard applicable to a motion to open a judgment on the basis of fraud.[10] On September 22, 2017, the court issued a memorandum of decision in which it granted Wells Fargo's motion to open the supplemental judgment and its motion for a supplemental judgment.

         The court first found that Wells Fargo sufficiently had established fraud to invoke the exception to the four month limitation on opening or setting aside a judgment pursuant to § 52-212a. Applying the factors set forth in Varley v.Varley, 180 Conn. 1, 3-4, 428 A.2d 317 (1980); see footnote 10 of this opinion; the court found that there was no laches or unreasonable delay on the part of Wells Fargo. The court stated: ‘‘Due to the massive and continuing fraud perpetrated on three separate banks, that had the banks scrambling to protect their own interests, it is understandable to this court that considerable delay and confusion presented itself before ...


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