Court Opinion

ID: 6215973
Source: CourtListenerOpinion
Date Created: 2022-02-08 17:02:33.052069+00
Date Added: 2024-06-11T08:57:07.027373
License: Public Domain

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  U.S. BANK, NATIONAL ASSOCIATION, TRUSTEE
           v. MARGIT MADISON ET AL.
                   (SC 20493)
                 Robinson, C. J., and McDonald, D’Auria,
                      Mullins, Kahn and Ecker, Js.

                                  Syllabus

The defendant appealed from the judgment of strict foreclosure rendered
   by the trial court following the termination of a stay in the defendant’s
   bankruptcy case. The trial court had ruled that the defendant lacked
   standing to raise a defense in the foreclosure action that she failed to
   identify as an asset of the estate in the schedule of assets that she
   filed in her bankruptcy case, which was being adjudicated while the
   foreclosure action was pending. The Appellate Court agreed with the
   trial court’s ruling and affirmed the judgment of strict foreclosure. The
   defendant, on the granting of certification, appealed to this court, claim-
   ing that the Appellate Court improperly treated a defense to a foreclosure
   action as being the same as claims and counterclaims, which, under the
   United States Bankruptcy Code, are property of the bankruptcy estate
   that must be disclosed. Held that the defendant’s appeal was dismissed
   on the ground that certification was improvidently granted, this court
   having determined, after examining the record and considering the par-
   ties’ briefs and arguments, that there was no useful purpose in answering
   the certified question, the practical import of which was not apparent:
   the defendant’s claim on appeal failed to characterize the Appellate
   Court’s holding properly and to address the applicable legal issues, the
   parties’ focus on whether the case law regarding nondisclosed claims
   and counterclaims in bankruptcy actions applied to nondisclosed
   defenses provided no useful guidance to this court on how to address
   the issues that arose from the Appellate Court’s decision, and the parties
   failed to address whether a defense to a foreclosure proceeding is prop-
   erty under Connecticut law, whether the Appellate Court correctly con-
   cluded that, to the extent such a defense was not property, the defen-
   dant’s failure to disclose constituted a misrepresentation of the
   property’s value, and what remedy should follow from such a misrepre-
   sentation; moreover, because it dismissed the defendant’s appeal, this
   court took no position as to the correctness of the Appellate Court’s deci-
   sion.
     Argued October 18, 2021—officially released January 18, 2022*

                            Procedural History

   Action to foreclose a mortgage on certain real prop-
erty owned by the named defendant, and for other relief,
brought to the Superior Court in the judicial district of
New Haven, where the defendant Eric Demander, Jr.,
was defaulted for failure to appear; thereafter, the court,
Spader, J., granted the plaintiff’s motion for summary
judgment as to liability; subsequently, the court granted
the plaintiff’s motion for judgment of strict foreclosure
and rendered judgment thereon; thereafter, following
the termination of the named defendant’s bankruptcy
stay, the court, Hon. Anthony V. Avallone, judge trial
referee, granted the plaintiff’s motion to reenter the
judgment and, exercising the powers of the Superior
Court, rendered judgment of strict foreclosure, from
which the named defendant appealed to the Appellate
Court, Keller, Elgo and Bright, Js., which affirmed the
trial court’s judgment, and the named defendant, on the
granting of certification, appealed to this court. Appeal
dismissed.
  Earle Giovanniello, for the appellant (named defen-
dant).
  Karl S. Myers, pro hac vice, with whom was Christa
A. Menge, for the appellee (plaintiff).
                          Opinion

   D’AURIA, J. The named defendant, Margit Madison
(defendant), appeals, upon our grant of her petition for
certification,1 from the judgment of the Appellate Court
affirming the trial court’s latest judgment of strict fore-
closure in favor of the plaintiff, U.S. Bank, National
Association, as Trustee for MASTR Adjustable Rate
Mortgage Trust 2007-1, Mortgage Pass-Through Certifi-
cates, Series 2007-1. The trial court had reentered judg-
ment of strict foreclosure following the termination of
the defendant’s bankruptcy stay. In this court, the defen-
dant challenges the Appellate Court’s conclusion that
the trial court properly ruled that she lacked standing
in this foreclosure action to raise a defense that she
had failed to identify as an asset of the bankruptcy
estate in the schedule of assets she filed in her chapter
7 bankruptcy case, adjudicated while the foreclosure
case was pending. The defendant argues more specifi-
cally that the Appellate Court improperly treated a
defense to a foreclosure action as the same as claims
and counterclaims, which constitute property of the
estate under the United States Bankruptcy Code and,
thus, must be disclosed.
   After examining the entire record on appeal and con-
sidering the briefs and oral arguments of the parties,
we have determined that the appeal in this case should
be dismissed on the ground that certification was
improvidently granted. Essentially, we can see no useful
purpose in answering the certified question, which the
practical import of answering is not apparent to us.
Specifically, the claim on appeal not only fails to charac-
terize the Appellate Court’s holding properly but also
fails to address the applicable legal issues. Contrary to
the defendant’s argument, the Appellate Court did not
hold that a defense is equivalent to a claim or counter-
claim and that it thus constitutes property of the estate
that must be disclosed during a bankruptcy proceeding
or otherwise remains property of the estate, thereby
depriving the debtor of standing postbankruptcy. See
Assn. Resources, Inc. v. Wall, 298 Conn. 145, 164–65,
2 A.3d 873 (2010) (discussing this rule in relation to
nondisclosed claims). Although the Appellate Court dis-
cussed that issue, it ultimately held that the defendant’s
failure to disclose either in schedule A/B or schedule
D that she disputed the plaintiff’s claim, which was
secured by the real property at issue, constituted a
misrepresentation of the value of the real property:
namely, that the defendant had no equity in the real
property, a defense that clearly was an asset she was
required to disclose. U.S. Bank, National Assn. v. Madi-
son, 196 Conn. App. 267, 275–78, 229 A.3d 1104 (2020).
The Appellate Court reasoned that to allow her to now
raise this defense to the foreclosure action ‘‘would
encourage selective disclosure by debtors and create
an end run around the carefully crafted bankruptcy
system, whereby a defendant could recoup an asset,
the value of which inaccurately was disclosed to the
trustee.’’ Id., 278.
   Before this court, the parties do not address the
Appellate Court’s analysis. Rather, both parties focus
on whether the case law regarding nondisclosed claims
and counterclaims in bankruptcy actions applies to non-
disclosed defenses. As a result, the parties provide no
useful guidance to this court on how to address the
various issues that arise from the Appellate Court’s
decision. Most prominent, the scope of what constitutes
property for Bankruptcy Court purposes is governed
by state law. See, e.g., In re Croft, 737 F.3d 372, 374 (5th
Cir. 2013 (‘‘a debtor’s property rights are determined
by state law, while federal bankruptcy law applies to
establish the extent to which those rights are property
of the estate’’). The parties fail to address whether, even
if a defense does not fall within the scope of a claim
or counterclaim; see Folger Adam Security, Inc. v.
DeMatteis/MacGregor JV, 209 F.3d 252, 260 (3d Cir.
2000); EMC Mortgage Corp. v. Atkinson, 175 Ohio App.
3d 571, 575–76, 888 N.E.2d 456 (2008); a defense to a
foreclosure proceeding is property under Connecticut
law and thus constitutes property of the estate under the
Bankruptcy Code that must be disclosed or otherwise
remains property of the estate, depriving the defendant
of standing to raise the defense in the foreclosure
action. There is very limited case law from other juris-
dictions on this issue, and what law exists is not consis-
tent and does not provide detailed analysis. Compare
In re Gainesville Venture, Ltd., 159 B.R. 810, 811
(Bankr. S.D. Ohio 1993) (holding that, in chapter 11
bankruptcy, where the debtor was limited partnership,
‘‘any causes of action or defenses’’ belonging to limited
partnership were property of estate pursuant to 11
U.S.C. § 541), with In re Larkin, 468 B.R. 431, 435–36
(Bankr. S.D. Fla. 2012) (debtor’s defenses to foreclosure
were not estate property that trustee could settle or
waive).
   To the extent that such a defense is not property,
the parties also fail to address whether the Appellate
Court correctly concluded that the defendant’s failure
to disclose that she disputed the plaintiff’s claim,
secured by the real property at issue, constituted a
misrepresentation of the real property’s value, and, if
so, what remedy should properly follow from such a
misrepresentation. Our research indicates that this
issue appears to arise infrequently, although a few
courts have held that a debtor’s failure to disclose that
a claim secured by property is disputed may constitute a
misrepresentation of the property’s value if the defense
may affect the value or equity of the property. See
Financial Federal Credit, Inc. v. Smith, Docket No.
CIV.A. H-04-4293, 2005 WL 2121556, *5 (S.D. Tex. August
31, 2005); Wells Fargo Bank, N.A. v. Cavaliere, Docket
No. 19-P-329, 2020 WL 5823807, *2 (Mass. App. October
1, 2020) (decision without published opinion, 98 Mass.
App. 1111, 155 N.E.3d 764). Cases we have identified are
inconsistent on this point, however, and have provided
limited analysis regarding what remedy to apply in such
cases, with some courts holding that a debtor lacks
standing to raise any defense; MidFirst Bank v. Brooks,
Docket No. 2008-UP-196, 2008 WL 9841165, *3 (S.C.
App. March 20, 2008); and other courts holding that
various equitable doctrines, such as judicial estoppel
or res judicata, bar the debtor from attempting to alter
the value of disclosed property postbankruptcy. See,
e.g., Bone v. Taco Bell of America, LLC, 956 F. Supp.
2d 872, 880–86 (W.D. Tenn. 2013); Caplener v. U.S.
National Bank of Oregon, 317 Or. 506, 519–20, 857 P.2d
830 (1993); cf. Thompson v. Orcutt, 257 Conn. 301,
310–18, 777 A.2d 670 (2001) (discussing application in
foreclosure proceeding of unclean hands doctrine in
connection with alleged bankruptcy fraud). As a result,
it is unclear—and the parties have not addressed
whether the trial court in the present case properly held
that the defendant lacked standing to raise a defense
in this foreclosure action—whether both the trial court
and the Appellate Court reached the right result, barring
the defense, but pursuant to the wrong doctrine, or
whether some other outcome may have been appro-
priate under the applicable legal principles.
   Perhaps in a future case that raises these issues, we
will have an opportunity to clarify this area of the law.
We can discern no useful purpose in reviewing this case
further, however. In light of this, we dismiss this appeal
and ‘‘take no position as to the correctness of the Appel-
late Court’s opinion.’’ State v. Carter, 320 Conn. 564,
567, 132 A.3d 729 (2016).
   The appeal is dismissed.
   In this opinion the other justices concurred.
  * January 18, 2022, the date that this decision was released as a slip
opinion, is the operative date for all substantive and procedural purposes.
  1
    We granted the defendant’s petition for certification to appeal, limited
to the following issue: ‘‘Did the Appellate Court correctly conclude that the
defendant did not have standing in a foreclosure action to raise a defense
that she had failed to identify as an asset of the bankruptcy estate in the
schedule of assets filed in her chapter 7 bankruptcy case adjudicated while
the foreclosure case was pending?’’ U.S. Bank National Assn. v. Madison,
335 Conn. 941, 237 A.3d 2 (2020).