F.D.I.C. v. Hillcrest Associates

• Decision Date: 16 May 1995
• Docket Number: No. 15084,15084
• Citation: 659 A.2d 138,233 Conn. 153
• Court: Connecticut Supreme Court
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION v. HILLCREST ASSOCIATES et al.

Page 138

659 A.2d 138

233 Conn. 153

FEDERAL DEPOSIT INSURANCE CORPORATION v. HILLCREST ASSOCIATES et al.

No. 15084.

Supreme Court of Connecticut.

Argued March 14, 1995.

Decided May 16, 1995.

Robert E. Pace, with whom was Cynthia A. Jaworski, Hartford, for appellant (substitute plaintiff F.D.I.C.).

Michael J. Mannion, Danbury, for appellees (defendants).

Before PETERS, C.J., and BORDEN, BERDON, NORCOTT and PALMER, JJ.

BORDEN, Associate Justice.

The dispositive question in this case is whether the thirty day time limitation contained in General Statutes § 49-14(a) ¹ is subject matter jurisdictional. This and another question ² come to us upon certification by the United States Court of Appeals for the Second Circuit (Court of Appeals) pursuant to General Statutes § 51-199a and Practice Book § 4168. ³ Federal Deposit Ins Corp. v. Hillcrest Associates, 6 F.3d 1 (1994). We conclude that the thirty day time limitation contained in § 49-14(a) is not subject matter jurisdictional.

The record certified by the Court of Appeals provides the following facts and procedural history. The named defendant, Hillcrest Associates (Hillcrest), is a Connecticut general partnership involved in real estate ventures. The individual defendants were general partners of Hillcrest, ⁴ and the other defendant is People's Bank (People's), a lienholder on the property involved in this case. On October 1, 1987, Hillcrest, in order to secure a promissory note in the principal amount of $1,600,000, granted a mortgage on property located in New Britain to CityTrust, a Connecticut bank. The individual defendants personally guaranteed the note. In January, 1991, CityTrust brought this action in the Superior Court against the defendants, seeking a strict foreclosure and a deficiency judgment. In addition, CityTrust brought a separate action against the individual defendants in their capacity as guarantors of the note, in connection with which CityTrust secured prejudgment remedies against the individual defendants.

Subsequently, CityTrust became insolvent and the Federal Deposit Insurance Corporation (FDIC) was appointed as the receiver of CityTrust under the Federal Deposit Insurance Act and state law. In September, 1991, pursuant to federal law, the FDIC removed the foreclosure action and the action on the note to the United States District Court for the District of Connecticut. At that time, the FDIC was substituted for CityTrust as the plaintiff and the actions were consolidated. Magistrate Judge F. Owen Eagan granted the motion of the FDIC for default against the defendants for failure to plead, and District Judge Ellen B. Burns endorsed Magistrate Judge Eagan's order.

Thereafter, the FDIC moved for a judgment of strict foreclosure, and Magistrate Judge Eagan held a hearing on the motion on August 26, 1992. At that hearing, the defendants consented to a judgment of strict foreclosure, but asked to reserve the issues of the amount of the debt, the attorney's fees and the value of the property for a hearing on a motion for a deficiency judgment. The defendants also requested an early law day in order to stop the accrual of interest on the debt. The FDIC agreed to an early law day, but requested more time before title vested in it because it wanted to complete an environmental assessment of the property before making the final decision regarding whether to complete the foreclosure by taking title to the property.

Magistrate Judge Eagan set law days of September 28, 1992, for the defendants, and September 29, 1992, for People's. Pursuant to the agreement of the parties, the magistrate judge further ordered that, for purposes of a deficiency judgment, the value of the property would be set as of September 30, 1992. He also ordered, however, that title would vest in the FDIC on November 1, 1992, and that any motion for a deficiency judgment would have to be filed within thirty days of November 1, 1992.

From the viewpoint of the FDIC, the period between September 29, 1992, the last law day, and November 1, 1992, the date Magistrate Judge Eagan ordered the vesting of title, was to afford the FDIC an opportunity to complete an environmental assessment of the property. The FDIC stated to Magistrate Judge Eagan that if the FDIC decided that "the property is so polluted that we're not going to take it back," it would request permission of the court to open the judgment of strict foreclosure, presumably withdraw the foreclosure action and pursue the individual defendants solely on the note. The magistrate judge indicated, and the FDIC agreed, that any request by the FDIC to open the judgment of strict foreclosure between the last law day and November 1, 1992, would be subject to the discretion of the court and that "I don't want you to think you've got a guarantee from the court" that such a motion would be granted. The defendants, however, questioned whether "once title is vested ... the court can unvest" it, and stated that "[under] state procedure title vests ... after the law date is gone. Whether that can be changed by order, I don't know."

Upon the request of the magistrate judge, the FDIC drafted a judgment incorporating his rulings. The defendants' counsel reviewed a draft of the order and, in addition to other suggestions, commented that the reference in the draft to the filing of a motion for a deficiency judgment might not belong in a judgment of strict foreclosure. Thereafter, the magistrate judge approved, retroactive to August 26, 1992, a final draft of the judgment that incorporated some of the defendants' other suggestions. The judgment specified the dates for the law days, for the setting of the value of the property, for the vesting of title in the FDIC and for the filing of a motion for a deficiency judgment as specified above. The parties had no objections, and on October 5, 1992, the District Court endorsed the judgment.

More specifically, the judgment ordered a strict foreclosure of the mortgage in favor of the FDIC. The judgment also recited the amount of the debt, real estate taxes, and attorney's fees, but "for the purpose of entering this judgment of strict foreclosure and the establishment of law days only. The defendants have reserved the right to question the calculation of the debt, the rate or rates of interest applied and the propriety of the item included in the debt, including attorney's fees. In addition, the defendants have reserved the right to require the [FDIC] to account for the collection of rents by the court-appointed receiver of rents and, if such rents are disbursed to the [FDIC] by this District Court, to claim a credit against the debt for all or a portion of the rents collected. These issues may be raised by the defendants at the hearing on any ... motion for a deficiency judgment which the [FDIC] may file." In addition, the judgment recited a finding of the value of the property of $1,050,000 "for the purposes of entering this judgment of strict foreclosure and the establishment of law days only. The defendants have reserved the right to introduce evidence at the hearing on any motion for a deficiency judgment which the [FDIC] may file." Finally, the judgment stated: "Provided, however, that: (i) the day on which the value of the Premises is determined for purposes of any deficiency judgment in this case shall be deemed to be September 30, 1992; and (ii) a motion for deficiency judgment must be filed by the [FDIC] within thirty (30) days of November 1, 1992."

On November 4, 1992, the FDIC recorded a certificate of foreclosure on the land records, and on November 5, 1992, moved for a deficiency judgment. The defendants moved to dismiss the motion for deficiency judgment under rule 12(b)(6) of the Federal Rules of Civil Procedure. ⁵ The defendants argued that the court had no subject matter jurisdiction to render a deficiency judgment because the FDIC had filed its motion more than thirty days after the expiration of the "time limited for redemption," as required by § 49-14(a), namely, September 30, 1992, which was, in the defendants' view, the date on which title to the mortgaged property had become absolute in the FDIC.

Magistrate Judge Eagan made a recommended ruling to the District Court that: (1) the defendants' failure to object to the judgment of strict foreclosure of August 26, 1992, estopped them from arguing a lack of subject matter jurisdiction; (2) under equitable principles, the court had the power to extend the deadline for filing a motion for a deficiency judgment; and (3) the defendants had waived their right to object to such an extension. The defendants objected to the recommended ruling.

The District Court held that under Connecticut law: (1) the motion for deficiency judgment was untimely under § 49-14(a) because the thirty day time limit began to run on September 29, 1992; and (2) the time limit was subject matter jurisdictional and, therefore, could not be waived. Accordingly, the court denied the FDIC's motion for a deficiency judgment, and granted the defendants' objection to the recommended ruling and motion to dismiss. The FDIC appealed to the Court of Appeals, which certified the two questions of law to this court. See footnote 2.

The FDIC claims that the District Court improperly dismissed the motion for deficiency judgment because: (1) the magistrate judge had the equitable power and discretion to establish November 1, 1992, as the date of vesting of title in the FDIC, and that, under Connecticut law, the owner's equity of redemption expires on the date set for vesting of title in the mortgagee, which is not necessarily the date of expiration of the law days; and (2) in the alternative, the thirty day time limitation contained in § 49-14(a) is not subject matter jurisdictional and, therefore, the defendants were properly held to have waived that time limit. The defendants respond that the District Court was correct because: (1) as a matter of...