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Rockstone Capital, LLC v. Sanzo

Supreme Court of Connecticut

July 16, 2019

ROCKSTONE CAPITAL, LLC
v.
JOHN SANZO ET AL.

          Argued January 15, 2019

         Procedural History

         Action to foreclose judgment liens on certain real property owned by the named defendant et al., and for other relief, brought to the Superior Court in the judicial district of Fairfield and tried to the court, Hon. Richard P. Gilardi, judge trial referee, who, exercising the powers of the Superior Court, rendered judgment in part for the plaintiff, from which the plaintiff appealed and the named defendant et al. cross appealed to the Appellate Court, DiPentima, C. J., and Beach and Bishop, Js., which reversed the trial court's judgment and remanded the case for further proceedings; thereafter, the named defendant et al., on the granting of certification, appealed to this court. Affirmed in part; appeal dismissed in part.

          Matthew K. Beatman, with whom, on the brief, was John L. Cesaroni, for the appellants (named defendant et al.).

          Houston Putnam Lowry, with whom, on the brief, was Dale M. Clayton, for the appellee (plaintiff).

          David Lavery and Loraine Martinez filed a brief for the Connecticut Fair Housing Center as amicus curiae.

          Robinson, C. J., and Palmer, McDonald, D'Auria, Mullins, Kahn and Ecker, Js.

          OPINION

          D'AURIA, J.

         If a creditor forecloses on a debtor's home, the debtor might be entitled to keep a portion of the home's value, whatever the amount of the debt. This debtor protection, known as the homestead exemption, is available when the creditor forecloses on a judgment lien, but not on a consensual lien. See General Statutes § 52-352b (t).[1] In this case, the plaintiff, Rockstone Capital, LLC (Rockstone), held judgment liens against the defendants John Sanzo and Maria Sanzo.[2] The parties later agreed to a consensual lien in the form of a mortgage to secure the debt. Now, the Sanzos have defaulted on the mortgage payments, and Rockstone seeks to foreclose on the mortgage. The primary issue on appeal is whether the Sanzos are entitled to the homestead exemption. We conclude they are not.

         The trial court found the following facts, as stipulated by the parties and contained in exhibits submitted to the court. The Sanzos' primary residence is in Monroe and most recently was valued at $500, 000. In 2000, Fleet National Bank (Fleet) secured a judgment against them for about $100, 000. To secure the debt, it recorded judgment liens on the Monroe property. Fleet later assigned its interests in the judgment and judgment liens to Rockstone.

         In 2008, Rockstone initiated this action to foreclose on the judgment liens because the Sanzos had defaulted. The parties, however, entered into a forbearance agreement that halted the action. Under the agreement, the Sanzos were to make regular payments on the amount outstanding on the judgment liens and additional interest, costs, and fees, and to grant Rockstone a mortgage on the Monroe property securing these obligations. In exchange, Rockstone agreed to refrain from pursuing this foreclosure action for as long as the Sanzos made their payments. The parties stipulated that they were represented by counsel and that their agreement was a commercial agreement.

         The record also reflects the following procedural history. In 2014, Rockstone resumed this action, filing a motion to foreclose on the judgment liens because the Sanzos had defaulted on their obligations under the forbearance agreement. The Sanzos objected to the motion and invoked the homestead exemption. In response, Rockstone amended its complaint to seek foreclosure on the mortgage, instead of on the judgment liens. The Sanzos filed an answer, including a special defense that claimed the mortgage was a de facto waiver of the homestead exemption, which was contrary to public policy.

         The action was submitted to the trial court on stipulations and exhibits submitted by the parties. Following an initial decision that the parties agreed was improper, [3]the court issued a corrected memorandum of decision. In it, the court acknowledged that the Sanzos had ‘‘voluntarily enabled [Rockstone] to seek recovery without the homestead exemption's applicability'' and that ‘‘the homestead exemption would ordinarily not be applicable to a mortgage created by a voluntary agreement such as the one at hand.'' But based on the ‘‘unique procedural history'' of the case, in which ‘‘the progression of this action has been to get around the homestead exemption, '' the court decided that the exemption should apply nonetheless. It held that the forbearance agreement was void as against public policy and therefore denied Rockstone's claim to foreclose on the mortgage. It also rendered judgment for Rockstone on the judgment liens, subject to the homestead exemption, even though Rockstone had amended its complaint to withdraw its claim regarding the judgment liens. The court did not determine the amount of debt, manner of foreclosure or law days for the judgment lien foreclosure.

         Rockstone appealed and the Sanzos cross appealed to the Appellate Court. Rockstone appealed from the denial of its request to foreclose on the mortgage, and the Sanzos cross appealed from the judgment on the judgment liens. Because the trial court had not determined the amount of debt, manner of foreclosure or law days for the judgment lien foreclosure, the Appellate Court ordered a hearing to determine whether it should dismiss the appeals for lack of a final judgment. Following that hearing, the Appellate Court ordered the trial court to articulate its ruling and, after receiving the articulation, ordered the parties to address the final judgment question in their merits briefs to that court.

         The Appellate Court concluded thatit had jurisdiction over Rockstone's appeal because the trial court's denial of Rockstone's claim to foreclose on the mortgage constituted a final judgment. Rockstone Capital, LLC v. Sanzo, 175 Conn.App. 770, 778, 171 A.3d 77 (2017). It reversed the judgment of the trial court on the merits of Rockstone's appeal, holding that the homestead exemption did not apply to a consensual lien such as a mortgage. Id., 784. The Appellate Court also concluded that it had jurisdiction over the Sanzos' cross appeal because, although it was not based on a final judgment, it was inextricably intertwined with Rockstone's appeal, which was based on a final judgment. Id., 786. Finally, it reversed the judgment of the trial court on the merits of the cross appeal because Rockstone's operative complaint had not sought foreclosure on the judgment liens. Id., 788-89.

         The Sanzos petitioned this court for certification to appeal, which we granted, limited to the following issues: ‘‘1. Did the Appellate Court properly conclude that the appeal and cross appeal were taken from a final judgment of the trial court? 2. If the answer to the first question is yes, did the Appellate Court properly conclude that the plaintiff's post judgment mortgage encumbering the same property and the same debt as the plaintiff's judgment liens was a consensual lien, and not a de facto waiver of the homestead exemption; see General Statutes § 52-352b (t); that would be void as a matter of public policy?'' Rockstone Capital, LLC v. Sanzo, 327 Conn. 968, 173 A.3d 391 (2017). We affirm the judgment of the Appellate Court with respect to its conclusions that the appeal was taken from a final ...


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