Fidelity Trust Co. v. Irick, 13190

• Decision Date: 08 March 1988
• Docket Number: No. 13190,13190
• Citation: 538 A.2d 1027,206 Conn. 484
• Court: Connecticut Supreme Court
• Parties: The FIDELITY TRUST COMPANY v. Betty IRICK et al.

Page 1027

538 A.2d 1027

206 Conn. 484

The FIDELITY TRUST COMPANY v. Betty IRICK et al.

No. 13190.

Supreme Court of Connecticut.

Argued Jan. 12, 1988.

Decided March 8, 1988.

Robert A. Nagy, Asst. Atty. Gen., with whom, on the brief, was Joseph I. Lieberman, Atty. Gen., for appellant (defendant state of Connecticut).

James D'Alton Murphy, with whom was Frederick M. Tobin, Stamford, for appellee (plaintiff).

Before PETERS, C.J., and ARTHUR H. HEALEY, SHEA, GLASS and COVELLO, JJ.

GLASS, Associate Justice.

The sole issue in this appeal is whether the Appellate Court erred in finding no abuse of discretion in the trial court's decision to order a strict foreclosure rather than a foreclosure by sale of property owned by the named defendant, Betty Irick. The following facts are relevant to our consideration of this issue: On November 22, 1983, the named defendant, Betty Irick, executed a mortgage on property located in Norwalk to the plaintiff Fidelity Trust Company (bank). The mortgage was security for a loan made to Irick in the amount of $60,000. In consideration for public assistance grants, Irick gave a second mortgage to the Connecticut department of income maintenance (state). In addition to these encumbrances, the bank had a junior lien because of an attachment on the property arising out of an independent debt due to the bank from Irick.

Irick defaulted in payment of her mortgage loan from the bank. On January 25, 1985, the bank instituted foreclosure proceedings against Irick, the state as second mortgagee, and itself as third encumbrancer by virtue of an attachment against the property. Irick was defaulted for failure to appear and all the defendants were defaulted for failure to disclose a defense. The bank then moved for judgment, but did not specify whether it sought strict foreclosure or foreclosure by sale. The state moved for foreclosure by sale.

At the hearing on October 15, 1985, the bank's appraiser testified that the value of the property was $96,750. ¹ The court found the bank's debt to be $71,996.70, allowed attorney's fees of $1662.50 and allowed other costs of $944.60, for a total of $74,603.80. The total of estimated accrued municipal real estate taxes was $5000, increasing the total of the obligation having priority over the state's second mortgage to $79,603.80. The court denied the state's motion for foreclosure by sale and granted the bank's motion for judgment. The court then rendered a judgment of strict foreclosure. Thereafter, the state moved to open the judgment, again seeking a foreclosure by sale. This motion was denied. The state appealed to the Appellate Court, claiming that the trial court had abused its discretion in denying its motion for foreclosure by sale. The Appellate Court upheld the trial court's decision. We granted certification to review the judgment of the Appellate Court. We reverse and remand for further proceedings.

Initially, we note the limited scope of our review of the issue on appeal. In a similar situation, we stated that " '[i]n this appeal the focus of our review is not the judgment of the Superior Court but of the Appellate Court. We do not hear the appeal de novo. The only questions we need consider are those squarely raised by the petition for certification and the appellee's preliminary statement of issues, and we will ordinarily consider these issues in the form in which they have been framed in the Appellate Court. See Practice Book §§ 3012(a), 3154; State v. Beckenbach, 198 Conn. 43, 47, 501 A.2d 752 (1985); State v. Torrence, 196 Conn. 430, 433, 493 A.2d 865 (1985).' Petrowski v. Norwich Free Academy, 199 Conn. 231, 234, 506 A.2d 139 (1986)." Shelby Mutual Ins. Co. v. Della Ghelfa, 200 Conn. 630, 634, 513 A.2d 52 (1986).

The state claims that the Appellate Court erred in upholding the judgment of strict foreclosure rendered by the trial court, and challenges the method of computation used by the trial court to determine whether to grant strict foreclosure or foreclosure by sale. The trial court added the indebtedness due the bank as first mortgagee to allowed fees, costs and estimated taxes, for a total of $79,603.80. Next, it added the second mortgage debt of the state in the amount of $24,976.42, and $12,000 due the bank on account of its attachment, making a total of $116,580.22. Fidelity Trust Co. v. Irick, 11 Conn.App. 53, 55, 525 A.2d 551 (1987). Because the total of all liens, taxes, costs and fees, plus the estimated expenses of a foreclosure by sale of $7000, amounted to $123,580.22, ² and the appraiser valued the property at $96,750, the trial court concluded, in the exercise of its discretion, and the Appellate Court agreed, that strict foreclosure was proper in this case. We disagree.

In a foreclosure proceeding the authority of the trial court to order either a strict foreclosure or a foreclosure by sale is clear. General Statutes § 49-24 provides: "All liens and mortgages affecting real property may, on the written motion of any party to any suit relating thereto, be foreclosed by a decree of sale instead of a strict foreclosure at the discretion of the court before which the foreclosure proceedings are pending." In interpreting this statute, we have stated that "[i]n 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 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 (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).

The amount due the bank, plus allowable fees, costs and taxes is $79,600 and the appraised value of the property is $96,750, for a difference of $17,150. Given the estimate of $7000 of expenses for conducting the foreclosure by sale, there would be a remainder of approximately $10,000 available for distribution to the subsequent encumbrancer. Payment of $10,000 on the $25,000 debt to the second mortgagee would amount to a payment of 40 percent of the mortgagor's indebtedness. Under the order of strict foreclosure the bank as foreclosing mortgagee may receive property the value of which exceeds by $17,150 the amount of its mortgage debt and expenses. The state, notwithstanding its status as second mortgagee, is excluded from the payment of its mortgage debt even though there is substantial equity in excess of the first mortgagee's debt. In another context, we have stated that "a mortgagee is only entitled to the payment of the debt owing him, including such incidental charges as he may add to it...." Lomas & Nettleton Co. v. DiFrancesco, 116 Conn. 253, 258, 164 A. 495 (1933).

We recognize that the state, as a junior lienholder under strict foreclosure, may protect its interest because of its right to redeem the property. The state argues that the legislature has not allocated to it the finances necessary to redeem under the circumstances presented by this case. The bank argues to the contrary that notwithstanding the state's lack of financial resources for redeeming the property, the court is precluded from according the state any preferential treatment under General Statutes § 49-31. ³ We find it unnecessary to consider these...