Eichman v. J & J Bldg. Co., Inc.

• Decision Date: 13 November 1990
• Docket Number: No. 14022,14022
• Citation: 216 Conn. 443,582 A.2d 182
• Court: Connecticut Supreme Court
• Parties: Gladys Barbara EICHMAN v. J & J BUILDING COMPANY, INC., et al.

Page 182

582 A.2d 182

216 Conn. 443

Gladys Barbara EICHMAN v. J & J BUILDING COMPANY, INC., et al.

No. 14022.

Supreme Court of Connecticut.

Argued Sept. 26, 1990.

Decided Nov. 13, 1990.

William C. Franklin, Litchfield, for appellant (plaintiff).

Eugene A. Marconi, Torrington, for appellees (named defendant, et al.).

Before PETERS, C.J., and CALLAHAN, COVELLO, HULL and BORDEN, JJ.

BORDEN, Justice.

The principal issue in this appeal is whether General Statutes § 49-14 ¹ places an affirmative duty on the trial court to determine the fair market value of real property in a deficiency judgment proceeding, when the court determines that the parties presented no credible evidence to establish that value. The plaintiff moved for a deficiency judgment following the strict foreclosure of a mortgage that secured a promissory note of the defendants. ² The court denied the motion for a deficiency judgment because it found none of the evidence regarding the value of the mortgaged property to be credible. Based on that finding, the court concluded that the plaintiff had not met her burden of proof. From that ruling, the plaintiff appealed to the Appellate Court, and, pursuant to Practice Book § 4023, we transferred the appeal to this court. We hold that implicit in General Statutes § 49-14 is the requirement that the party seeking a deficiency judgment satisfy her burden of proof regarding the fair market value of the property as of the date title vests in her. We therefore affirm the judgment of the trial court.

The following facts are undisputed. On May 25, 1982, the defendants executed a promissory note in favor of the plaintiff in the principal amount of $30,000, with interest payable at the rate of 16 percent per annum. As security, two of the defendants mortgaged to the plaintiff an undeveloped lot located in Litchfield. ³

In September, 1988, the plaintiff instituted mortgage foreclosure proceedings against the defendants. On August 14, 1989, the court, Pickett, J., rendered a judgment of strict foreclosure and established the amount of the debt at $47,802.93, including attorney's fees and costs. The law days for the defendants and the subsequent lienor; General Statutes § 49-19; ⁴ were set as September 25 and 26, 1989, respectively. Since no one redeemed, title to the property vested in the plaintiff on September 27, 1989.

On October 2, 1989, the plaintiff moved for a deficiency judgment pursuant to § 49-14 and Practice Book § 528. ⁵ On January 22, 1990, after several continuances requested by the parties, the trial court, Moraghan, J., heard the motion for a deficiency judgment.

At the beginning of the hearing, the parties stipulated that the only issue before the court was the value of the property that was the subject of the mortgage. Additionally, the parties stipulated that $51,297.60, representing the original amount of the debt plus accrued interest, was the appropriate figure to be used to determine if a deficiency judgment was warranted.

The plaintiff and the defendants presented the testimony of two appraisers to establish the fair market value of the property. Both the plaintiff's expert witness, Arthur Oles, ⁶ and the defendants' expert witness, Fletcher Waldron, ⁷ used the comparable sales approach to determine the fair market value of the property. Oles valued the property at $31,000, while Waldron valued it at $60,000. Both experts were cross-examined as to the appropriateness of their valuations of the subject property. During the cross-examination of Oles, he testified that the assessed value of the property for tax purposes was $42,480, representing 70 percent of a purported fair market value of $61,200.

The court, in an oral ruling from the bench, found that neither the experts' testimony nor the evidence regarding the assessed value was credible. It ruled, therefore, that the plaintiff had not satisfied her burden of proof to establish the value of the property, and denied the motion for a deficiency judgment. This appeal followed. In a subsequent, written supplemental memorandum of decision, the court reiterated its inability to find a fair market value of the property from the evidence presented and its conclusion that, accordingly, the plaintiff had failed to meet her burden of proof.

The plaintiff claims that: (1) the court was required by General Statutes § 49-14 to determine the fair market value of the property involved in the deficiency judgment hearing; (2) the court improperly considered matters outside the record, which directly caused the court's determination that the expert testimony was not credible; and (3) the court's refusal to determine the value of the property in question was arbitrary, capricious and unsupported by the facts of the case. The plaintiff's third claim is simply a variation on the theme elaborated under her first claim. We therefore consider them together. We disagree with the plaintiff's first claim as restated, but agree with her second claim. We conclude, however, that the court's improper consideration of matters outside the record was harmless.

I

The plaintiff first claims that General Statutes § 49-14 imposed a duty on the trial court to determine a value for the property that was the subject of a deficiency judgment hearing. The plaintiff does not claim that the court's factual finding, determining that the testimony of the expert witnesses was not credible, was clearly erroneous. Instead, the plaintiff argues that the court had an affirmative duty, as a matter of law under the language of § 49-14, to set a value for the property, regardless of whether credible evidence upon which to base this determination was presented at the hearing. This claim is without merit.

"[A] judgment of strict foreclosure extinguishes all rights of the foreclosing mortgagee on the underlying note, except those enforceable through the use of the deficiency judgment procedure delineated in General Statutes § 49-14." First Bank v. Simpson, 199 Conn. 368, 370, 507 A.2d 997 (1986); General Statutes § 49-1. ⁸ Section 49-14(a) provides in pertinent part that "any party to a mortgage foreclosure may file a motion seeking a deficiency judgment." At the hearing on the motion, "the court shall hear the evidence, establish a valuation for the mortgaged property and shall render judgment for the plaintiff for the difference, if any, between such valuation and the plaintiff's claim." General Statutes § 49-14(a). "Such a deficiency judgment, in light of § 49-1, is, therefore, the only available means of satisfying a mortgage debt when the security is inadequate to make the foreclosing plaintiff whole." First Bank v. Simpson, supra, at 371, 507 A.2d 997; Simsbury Bank & Trust Co. v. Ray Carlson Lumber Co., 154 Conn. 216, 219, 224 A.2d 544 (1966). "The value of the premises on the date that title becomes vested in the mortgagee determines whether the mortgagee is entitled to a deficiency judgment." Di Diego v. Zarro, 19 Conn.App. 291, 294, 562 A.2d 555 (1989).

The language at issue in this appeal provides that the trial court "shall hear evidence, establish a valuation for the mortgaged property and shall render judgment for the plaintiff for the difference, if any, between such valuation and the plaintiff's claim." (Emphasis added.) General Statutes § 49-14. The plaintiff contends that, because the legislature used the word "shall," the statute is mandatory in nature, and the court improperly declined to establish the value of the property. Contrary to the plaintiff's argument, however, although "shall" has often been held to be mandatory; see Farricielli v. Personnel Appeals Board, 186 Conn. 198, 202-203, 440 A.2d 286 (1982); its use in this section does not mandate that the court must determine a value for a piece of property when the plaintiff has not satisfied her burden of proof by providing credible evidence.

In determining whether the use of the word "shall" is mandatory or directory, the test is "whether the prescribed mode of action is of the essence of the thing to be accomplished." Vartuli v. Sotire, 192 Conn. 353, 360, 472 A.2d 336 (1984); see also LeConche v. Elligers, 215 Conn. 701, 710, 579 A.2d 1 (1990). "That test must be applied with reference to the purpose of the statute." LeConche v. Elligers, supra. The plaintiff contends that the "essence" of § 49-14 is the requirement that the court determine the actual value of the real property involved, and that if this requirement is within the court's discretion, the plaintiff's right to a deficiency judgment would be subject to the whim of the court. We disagree.

" '[T]he plain object [of the deficiency judgment statute] is to require a mortgage creditor, who appropriates the property in part payment only of his debt, to apply the actual value of the security to the debt before collecting any claimed deficiency'...." People's Holding Co. v. Bray, 118 Conn. 568, 571, 173 A. 233 (1934), quoting Staples v. Hendrick, 89 Conn. 100, 103, 93 A. 5 (1915); Maresca v. DeMatteo, 6 Conn.App. 691, 694, 506 A.2d 1096 (1986). Implicit in the purpose of the statute is the initial prerequisite that the plaintiff provide the court with sufficient evidence to demonstrate that she is entitled to a deficiency judgment. Indeed, this court has held, in a deficiency judgment proceeding, that "the trier may not decide an issue which is wholly unsupported by the evidence." New Haven Savings Bank v. West Haven Sound Development, 190 Conn. 60, 71-72, 459 A.2d 999 (1983).

The plaintiff's claim, at its roots, is that the trial court had a mandatory duty to arrive at some determination of value of the property despite the lack of any credible evidence upon which to determine that value. Relying on the authority of the court to arrive at a compromise figure between those offered by expert witnesses; see New Haven Savings Bank v. West Haven Sound Development, supra, at 70, 459 A.2d 999; Whitney Center, Inc. v. Hamden, 4...