City Sav. Bank of Bridgeport v. Lawler

• Decision Date: 24 May 1972
• Citation: 302 A.2d 252,163 Conn. 149
• Court: Connecticut Supreme Court
• Parties: , 72-2 USTC P 9757 CITY SAVINGS BANK OF BRIDGEPORT v. Raymond LAWLER et al.

Page 252

302 A.2d 252

163 Conn. 149, 72-2 USTC P 9757

CITY SAVINGS BANK OF BRIDGEPORT v. Raymond LAWLER et al.

Supreme Court of Connecticut.

May 24, 1972.

Millard Kaufman, Bridgeport, for appellant (named defendant).

Carleton D. Powell, of the Virginia bar, with whom were Stewart H. James, U.S. Atty. and Richard L. Winter, Chief Asst. U.S. Atty., Bridgeport, for appellant (defendant The United States of America).

Robert J. Berta, with whom was Morris B. Canning, Bridgeport, for appellee (plaintiff).

Before HOUSE, C.J., and RYAN, SHAPIRO, LOISELLE and FITZ GERALD JJ.

HOUSE, Chief Justice.

This appeal, taken by the defendant Raymond Lawler, hereinafter referred to as Raymond, is from a judgment of strict foreclosure of a mortgage. His sole assignment of error is that the court 'erred in ordering a strict foreclosure, but not in vacating the liens of defendant, United States of America, as incumbrances on the real estate being foreclosed.' The liens are for internal revenue taxes claimed to be owed by Danny Lawler, hereinafter referred to as Danny, who is the brother of Raymond and was a cosigner of the mortgage note secured by the mortgage deed from Raymond. The liens were filed five years after the mortgage deed from Raymond was recorded. The defendant Raymond contends that there is error on the face of the record and no finding was requested from or filed by the trial court.

The judgment recites that all the parties appeared except the defendant Danny who was defaulted for nonappearance. On motion of the plaintiff, all the defendants were defaulted for failure to disclose a defense but the default against the United States was subsequently opened and the United States filed an answer asserting the priority of its liens and praying that the court adjudicate the equities of the parties to be action and that if the premises were sold that they be sold free and clear of all liens and incumbrances save the right of redemption vested in the United States of America by statute and the proceeds derived from the sale be applied to the payment of liens of the various parties in accordance with their respective priorities. Although the plaintiff in its complaint sought foreclosure by sale, the defendant Raymond moved for strict foreclosure. The judgment noted that the court heard the parties on their motions, that it found that the tax liens were filed over five years after the mortgage, at time when Raymond was the record owner of the mortgaged premises and that there was no evidence that the conveyance from Danny to Raymond was in fraud of creditors. The plaintiff's motion for foreclosure by sale was denied and Raymond's motion for strict foreclosure was granted. The judgment set a law day for Raymond, the following day as the law day for the United States and subsequent law days for other defendants except Danny for whom no law day was assigned because, the judgment recites, 'he has no interest whatever in the premises herein foreclosed and hence no right of redemption.' The judgment also decreed that on the payment of the debt and costs by any incumbrancer, after all subsequent parties in interest had been foreclosed, 'the title to said property shall vest absolutely in such incumbrancer making such payment, subject to such unpaid incumbrances, if any, as precede him.'

In the absence of a finding, the record on this appeal consists only of the complaint, the answer filed by the United States, the motions made at the trial and the judgment. Gitlitz v. Davis, 146 Conn. 280, 281, 150 A.2d 213.

The defendant Raymond has urged us to consider several statements contained in the judgment as indicative of an adjudication by the court that the liens of the United States were invalid. ¹ Not only are those statements which resemble findings inappropriate for a judgment but a close examination of them indicates that they add little support to his claim. The fact that the tax liens against Danny were filed after his conveyance to Raymond and that no evidence of fraud was produced by any party is not equivalent to a finding that the liens were invalid. Furthermore, the statements of the court printed in the appendix to the brief of the United States clearly indicate that the court took no position on the question of the validity of the government liens 'because I dont' have sufficient evidence before me, to determine the validity of the lien.'

In the limited perspective of the defendant Raymond's sole assignment of error, in the absence of any finding, and especially a finding as to the value of the equity, it is clear that there would, on the face of the record, be no apparent error without recourse to Raymond's stated reason for appeal and the claims advanced by the other parties. The judgment of strict foreclosure was, at least in form, proper and permissible under the holding of such cases as New Milford Savings Bank v. Lederer, 112 Conn. 447, 451, 152 A. 709. The limited record does disclose, however, that the United States was a party defendant in the foreclosure action, judgment was for strict foreclosure, the defendant's stated reason for appeal was 'the refusal of the Court to find that the tax liens of the United States are not an incumbrance on the real estate being foreclosed,' and the judgment did purport to vest absolute title in a redeeming incumbrancer, fixing a law day for the United States. There are thus raised problems in the troublesome and complicated area of federal-state jurisdiction and the sovereign immunity of the United States from suit without its consent. More particularly, the problem is one concerning the validity and effect of federal tax liens on property which is the subject of a mortgage foreclosure action in a state court. For an exhaustive treatment of the general subject, see the three articles by Professor William T. Plumb, Jr., in 77 Yale Law Journal at pages 228, 605 and 1104, entitled 'Federal Liens and Priorities-Agenda for the Next Decade.'

Before the trial court and in its brief on this appeal, the United States has stressed the provisions of a portion of 28 U.S.C. § 2410, which authorizes the joinder of the United States as a party to a foreclosure action in a state court. Section 2410 (Sup.1966) states, in part: '(c) A judgment or decree in such action or suit shall have the same effect respecting the discharge of the property from the mortgage or other lien held by the United States as may be provided with respect to such matters by the local law of the place where the court is situated. However, an action to foreclose a mortgage or other lien, naming the United States as a party under this section, must seek judicial sale. A sale to satisfy a lien inferior to one of the United States shall be made subject to and without disturbing the lien of the United States, unless the United States consents that the property may be sold free of its lien and the proceeds divided as the parties may be entitled. Where a sale of real estate is made to satisfy a lien prior to that of the United States, the United States shall have one year from the date of sale within which to redeem, except that with respect to a lien arising under the internal revenue laws the period shall be 120 days or the period allowable for redemption under State law, whichever is longer.' Absent a statute of this nature, it is axiomatic that under the general rule of sovereign immunity the United States could not be properly joined in a mortgage foreclosure action in a state court since, as the sovereign, it is immune from suit unless that immunity is specifically waived. Larson v. Domestic & Foreign Commerce Corporation, 337 U.S. 682, 69 S.Ct. 1457, 93 L.Ed. 1628, rehearing denied, 338 U.S. 840, 70 S.Ct. 31, 94 L.Ed. 514. Thus, in determining the status of the United States as a party to a foreclosure action in a Connecticut court, we are, in general, bound by federal law and, more specifically here, by the provisions of 28 U.S.C. § 2410. It is the claim of the United States that it ceased to be a party to this foreclosure action once the trial court, on motion by the defendant Raymond, ordered that there be strict foreclosure.

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. 'Foreclosure is peculiarly an equitable action.' Hartford Federal Savings & Loan Assn. v. Lenczyk, 153 Conn. 457, 463, 217 A.2d 694, 697. 'The foreclosure 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, 397: General Statutes § 49-24. Since 28 U.S.C. § 2410(c) may be read to restrict the trial court's exercise of discretion in certain foreclosure proceedings, the import of that federal e...