Fidelity Trust Co. v. Irick

Borden, J. The state of Connecticut, a defendant in this foreclosure action, appeals from the judgment of strict foreclosure rendered by the trial court. The state claims that the court abused its discretion by refusing to order a foreclosure by sale. We find no error. The following facts are undisputed. The plaintiff commenced this action to foreclose its first mortgage on residential real estate owned by the named defendant, Betty Irick. The amount of the plaintiffs mortgage debt, including costs and fees, was approximately $74,600. The state was named as a defendant by virtue of its second mortgage held by the state department of income maintenance to secure grants of public assistance. The amount of the state’s mortgage debt was approximately $25,000. The plaintiff also named itself as a defendant by virtue of an attachment in the amount of $12,000 which it had filed against the sub [55] ject property arising from another debt due to it from the named defendant. This attachment was subsequent in right to the second mortgage held by the state. In addition, there were unpaid real estate taxes on the property in the approximate amount of $5000. The total amount of the liens against the property, therefore, was approximately $116,600. After all of the defendants were defaulted, the plaintiff moved for judgment, and the state moved for a foreclosure by sale. At the hearing, the plaintiffs appraiser valued the property at $96,750. The state does not challenge that valuation. The expenses estimated for a foreclosure by sale were $7000. The court denied the state’s motion for foreclosure by sale and rendered a judgment of strict foreclosure. The state thereafter moved to open the judgment, again seeking a foreclosure by sale. The court denied the state’s motion. This appeal followed. The state claims that the court abused its discretion in denying the motions for foreclosure by sale. The gist of the state’s argument is that, regardless of whether the total liens and estimated expenses of a sale exceed the value of the property, it is manifestly unjust for a first mortgagor to acquire property by strict foreclosure where the value of the property substantially exceeds the amount of the first mortgage debt, and where a sale is sought by a subsequent lienor who would realize something towards its debt from a sale. We disagree. “In Connecticut, the law is well settled that whether a mortgage is to be foreclosed by sale or by strict foreclosure is a matter within the sound discretion of the trial court. General Statutes § 49-24; City Savings Bank v. Lawler, 163 Conn. 149, 155, 302 A.2d 252 (1972); Hartford Federal Savings & Loan Assn. v. Lenczyk, 153 Conn. 457, 463, 217 A.2d 694 (1966). ‘The fore [56] closure of a mortgage by sale is not a matter of right, but rests in the discretion of the court before which the foreclosure proceedings are pending.’ Bradford Realty Corporation v. Beetz, 108 Conn. 26, 31, 142 A. 395 (1928).” Hartford Federal Savings & Loan Assn. v. Tucker, 196 Conn. 172, 184, 491 A.2d 1084, cert. denied, 474 U.S. 920, 106 S. Ct. 250, 88 L. Ed. 2d 258 (1985). In this case, the total amount of the liens against the property exceeded its value by approximately $19,850. An additional $7000 in sale expenses, moreover, was likely to be incurred. The court was clearly entitled to consider the entire picture, including the anticipated sale expenses, in exercising its discretion, and to render a judgment of strict foreclosure in order to avoid what in this case would amount to the economic waste of a foreclosure by sale. See American Bank of Connecticut v. Eagle Construction Co., 10 Conn. App. 251, 255, 522 A.2d 835 (1987); Spera v. Audiotape Corporation, 1 Conn App. 629, 633, 474 A.2d 481 (1984). “Having determined the fair market value of the property] and the amount of the [liens], the trial court concluded that strict foreclosure was necessary. There was no abuse of discretion.” Hartford Federal Savings & Loan Assn. v. Tucker, supra. The state’s argument, and that of the dissent, would convert the discretionary determination of the trial court into a right of a subsequent lienor to require a foreclosure by sale, as long as the lienor could establish that a sale was likely to yield more than the debt underlying the mortgage being foreclosed. This would be contrary to our well settled law. Id. Indeed, if this case constituted an abuse of discretion, we would be hard pressed to envisage another in which the trial court would be justified in declining to order a foreclosure by sale requested by a second mortgagee. [57] The state’s argument also runs directly counter to General Statutes § 49-31 which provides: “In any action to foreclose a mortgage or lien on any land in which the state, or any officer or agent thereof, claims to have an interest subordinate to that of the party seeking the foreclosure, the state, or such officer or agent, as the case may be, may be made a party defendant, and such interest may be foreclosed in the same manner and with the same effect as if such interest were held by an individual, except that no judgment may be rendered against the state or any officer or agent for money or costs of suit.” (Emphasis added.) Although at oral argument in this court the state specifically disclaimed any special status, in effect it seeks precisely such a status by its reliance, in the trial court and in its brief in this court, on the claim that it cannot redeem under a strict foreclosure because the legislature has not appropriated funds for such a purpose. This reliance simply ignores the purpose of General Statutes § 49-31. Unlike the clear policy of General Statutes § 49-31, which is to treat the state no better or worse than an individual lienor, federal law mandates that, when the United States government has a lien on property being foreclosed, absent its consent the lien cannot be extinguished by a strict foreclosure. 28 U.S.C. § 2410 (c); City Savings Bank v. Lawler, supra, 154. In contrast, our law denies such special status to the state. To accept the state’s argument in this case would be to thwart the policy expressed by General Statutes § 49-31. The state’s remedy, if any, is to alter its own legislatively declared public policy; it is not for the judiciary to do so. Implicit in the argument of the state, and of the dissent, is the notion that if a subsequent lienor does not have the ability, even by its own choice, to arrange financing in order to exercise its right to redeem pursuant to a judgment of strict foreclosure, it is entitled to a foreclosure by sale. We know of no such legal prin [58] ciple giving rights to impecunious or noncreditworthy lienors greater than to those who may be able to exercise their redemption rights. Nor do the loose dicta of the cases on which the state relies; City Savings Bank v. Lawler, supra, 158; New Haven Bank v. Jackson, 119 Conn. 451, 455, 177 A. 387 (1935); Staples v. Hendrick, 89 Conn. 100, 106, 93 A. 5 (1915); support the establishment of such a principle. There is no error. In this opinion Daly, J., concurred.