Central Bank for Sav. v. Heggelund

• Citation: 579 A.2d 598,23 Conn.App. 266
• Decision Date: 18 September 1990
• Docket Number: No. 8619,8619
• Court: Appellate Court of Connecticut
• Parties: CENTRAL BANK FOR SAVINGS v. Joseph Stan HEGGELUND et al.

Page 598

579 A.2d 598

23 Conn.App. 266

CENTRAL BANK FOR SAVINGS v. Joseph Stan HEGGELUND et al.

No. 8619.

Appellate Court of Connecticut.

Argued June 14, 1990.

Decided Sept. 18, 1990.

Bruce A. Fontanella, with whom, on the brief, was Linda J. Ness, Meriden, for appellant (plaintiff).

Henry D. Marcus, Hartford, for appellee (named defendant).

Before SPALLONE, DALY and NORCOTT, JJ.

SPALLONE, Judge.

The plaintiff, Central Bank for Savings, appeals from the judgment of the trial court denying its motion for a deficiency judgment and sustaining the defendant Joseph Heggelund's objection thereto. We reverse the judgment of the trial court.

Central Bank held the first and second mortgages on Heggelund's condominium apartment in Hartford. The first mortgage was in the principal amount of $96,000; the second, $100,000. Upon Heggelund's default, the bank commenced its foreclosure action in December, 1988, moving for the strict foreclosure of the second mortgage. A subsequent encumbrancer, however, Hyman Stollman, moved for a foreclosure by sale.

At the foreclosure hearing, the court found the value of the mortgaged premises to be $300,000. Because the total debt encumbrancing the property was approximately $231,000, there seemed to be substantial equity to be realized. The court, therefore, denied Central Bank's motion for strict foreclosure and granted Stollman's motion and rendered a judgment of foreclosure by sale. The court-appointed appraisers subsequently valued the premises at $235,000.

On July 22, 1989, the court-appointed committee sold the property to Central Bank, the only bidder at the auction sale, for the sum of $50,000. The bank then sought the court's approval of the sale. Heggelund objected, protesting that approval of the sale would leave him vulnerable to a deficiency judgment. Thereafter, the court denied Heggelund's request for another public auction sale and granted the bank's motion for approval of the sale at $50,000. The property was transferred to the bank subject to its first mortgage of approximately $106,000 in principal and interest.

On October 6, 1989, the bank moved for a deficiency judgment in the amount of $72,746.22, representing the difference between the sale price and Heggelund's obligation, including the debt principal, interest, committee and appraisal fees and sales expenses. Heggelund objected, arguing that the motion for a deficiency judgment was untimely and inequitable. The trial court found the bank's motion to have been timely filed ¹ but, nevertheless, denied the bank's motion for a deficiency judgment and sustained Heggelund's objection thereto. This appeal followed.

The court stated two grounds for its refusal to grant a deficiency judgment: (1) that no deficiency existed because, pursuant to General Statutes § 49-28, Heggelund was entitled to a credit on his debt equal to one half of the estimated property value unrealized in the sale, and (2) that the bank received the equitable equivalent of a strict foreclosure after which no deficiency judgment may be awarded. Central Bank claims on appeal that neither ground is appropriate in these circumstances, and we agree.

General Statutes § 49-28 ² provides the criteria for determining when a deficiency judgment may be obtained after a foreclosure by sale and for calculating the amount of such judgment. If the property has been sold for less than the appraised value, the unpaid portion of the debt must be reduced by one half of the difference between the appraised value and the sales price before any deficiency may be obtained. "It is just and equitable that the party who asks and obtains an order of sale in place of a decree of strict foreclosure ... if he seeks a deficiency judgment should bear a part of the value sacrificed by the forced sale." Cronin v. Gager-Crawford Co., 128 Conn. 688, 691-92, 25 A.2d 652 (1942). The burden sharing formula applies, however, only to those parties who moved for the foreclosure by sale. Id., at 691, 25 A.2d 652.

After the property sale brought unexpectedly low proceeds, the bank's only option for satisfying the debt was to move for a deficiency judgment. By reducing the debt by the statutory credit formula, the court here overlooked the express words of § 49-28 limiting this provision to "the party or parties upon whose motion the sale was ordered." The bank here was not the party who moved for the foreclosure by sale. Central Bank, rather, moved for a strict foreclosure and the court denied this motion in favor of Stollman's motion for foreclosure by sale. As a nonmoving party, the bank may not be forced "to bear a moiety of any shrinkage in the appraised value resulting from such a sale." North End Bank & Trust Co. v. Mandell, 113 Conn. 241, 244-45, 155 A. 80 (1931). The court, therefore, incorrectly held the bank to be a party subject to the statutory penalty and incorrectly determined that no deficiency was due.

The court also refused to render a deficiency judgment on equitable grounds. In fairness to Heggelund, the court determined that the bank should not both acquire the property for a nominal amount plus its own prior encumbrance and also secure satisfaction of the debt. The court decided that because, after the public auction, the bank was in the same position in which it would have been following a...