Opinion
No. CV 06 4004100
August 31, 2006
MEMORANDUM OF DECISION
George Colli, Jr., was the successful bidder at a public, committee sale held in execution of a foreclosure by sale judgment. He now moves to vacate that sale and for the refund of his deposit. The basis for this motion is inadequate disclosure before the sale as to the true state of the title regarding the subject property. On August 2, 2006, the court heard oral argument on this motion, and no party proffered evidence outside of the contents of the court file.
The following facts are gleaned from the court records or are otherwise undisputed. On December 14, 2005, the original plaintiff, National City Mortgage Co., commenced this action to foreclose the equity of redemption interest of the mortgagor, Robert M. Olejarz, Jr. The mortgage encumbered eight lots, located in Ellington, which were consolidated and known as 10 Cedar Street.
The complaint and accompanying lis pendens contained a purported description of this property by way of a photocopy of a portion of the deed, which attachment was designated as Schedule A. Unfortunately, one page of the actual deed description was omitted. As a consequence of this omission, Schedule A refers to and describes only six of the eight lots to which the mortgage applied. Also, the missing page noted the supposed existence of a prior mortgage possibly making the encumbrance being foreclosed a second mortgage.
On March 6, 2006, Judge Peck entered a judgment of foreclosure by sale and found that the amount of indebtedness was $198,263.37 and that the fair market value of the property was $220,000. Attorney Karen Best Parris was appointed committee of sale, and the sale was ordered to be held on May 6, 2006. The committee report discloses that the independent appraisal, received on April 28, 2006, estimated the fair market value of the property to be $159,000. The committee report further discloses that at the public auction the bidding began at $136,000 and culminated with the movant's winning bid of $172,000. The movant deposited $22,000 with the committee, and these parties signed a purchase agreement obligating the committee to convey the premises, as is, to the movant within thirty days of court approval of the sale and that the title would be "free and clear of the liens being foreclosed and of all claims subsequent thereto." (Emphasis added.)
On May 23, 2006, the court approved the sale and committee deed which contained the correct description of the full, eight-lot parcel. On May 20, 2006, the committee sought the advice and supplemental order of the court because the buyer's counsel had discovered the possible outstanding prior mortgage. The committee requested an extension of time in which to consummate the transfer to June 29, 2006. Judge Klaczak granted this extension on June 20, 2006.
On June 30, 2006, the substitute plaintiff, J.P. Morgan Chase Bank, Trustee, moved to reform the mortgage deed, nunc pro tunc, retroactive to the date of judgment, March 6, 2006, in order to correct the incomplete description noted above. It was also discovered that the undisclosed prior mortgage had, in fact, been paid off at some earlier date. The motion represented in paragraph ten that "the Committee of Sale and successful bidder have no objection to this motion." No objection to this motion or the representation contained therein was filed by anyone, including the movant. On July 11, 2006, Judge Peck granted the reformation motion.
On the next day, July 12, 2006, the movant filed the present motion to vacate the approval of the sale and to return the deposit held by the court. Essentially, the movant contends that, because the mortgaged property was misdescribed and a possible prior mortgage was undisclosed, the transfer of title to the premises failed to occur by June 29, 2006, in violation of the order of the court and the purchase agreement. Therefore, the movant argues, he is absolved from any duty to buy the property and is entitled to have his deposit returned. The substitute plaintiff counters that the movant's failure to object to the motion to reform the mortgage deed nunc pro tunc constitutes a waiver of any time constraint and that no prejudice occurred by virtue of the delay. Because the court finds that the absence of prejudice is dispositive, the court does not address the waiver issue.
In this case, the court ordered the property transferred to the successful bidder within thirty days of court approval of the sale and extended that period to June 29, 2006. The closing failed to occur on or before that date because of the need to ascertain the status of the undisclosed prior mortgage and to reform the mortgage deed description.
When the court's orders surrounding a judicial sale are abridged, the court must carefully scrutinize the transaction to ensure that no interested party is harmed by the violation. First National Bank of Chicago v. Maynard, 75 Conn.App. 355, 358-59 (2003). The mere occurrence of an irregularity is insufficient, however, to mandate nullification of the proceedings and require that the court order a resale, although such resale order is possible, Id., 359-60. In the case cited, the committee entered into a bond for deed with an entity different from the name registered by the prevailing bidder. The plaintiff's attorney, who arrived at the auction site after the bidding concluded, claimed that the court ought to disapprove the sale and order a new one based on that discrepancy. Our Appellate Court rejected this claim stating "[a]lthough there was an irregularity, the plaintiff fail[ed] to show how it was injured by this irregularity." Id., 359. Thus, a dissatisfied party must demonstrate particular prejudice to that party caused by the putative misstep before the court is required to overturn a sale that it has previously ratified. The court may choose to order a resale if the equities support such an order, but it retains the discretion to deny such a request in the absence of prejudice to the movant.
This prejudice analysis was specifically employed by our Supreme Court with respect to violations of the same time constraint for closing as arose in the present case. In Citicorp. Mortgage, Inc. v. Burgos, 227 Conn. 116 (1993), the committee could not close within thirty days of court approval of the sale because of delays caused by bankruptcy and appeal filings. The committee was unprepared to transfer the premises until 137 days after court approval. Id., 119. By the that time, the successful bidder had lost the investors who were to finance the purchase. Id. The Supreme Court ruled it was an abuse of discretion for the trial court to refuse to vacate the sale and order the return of deposit because the prevailing bidder had shown it suffered prejudice by the withdrawal of investors. Id., 123.
In the present case, the irregularities claimed by the movant are the undisclosed, prior mortgage, the inaccurate property description, and the delay after June 29, 2006, used to address these issues. As noted above, the parties agreed at oral argument that no outstanding, prior mortgage exists. The reformed description would convey to the movant more land than the previous description might have led him to believe was being sold. It should be noted that the six-lot parcel was subject to a restrictive covenant prohibiting subdivision and that covenant was contained in the original, incomplete description. The additional two lots are subject to the identical restriction. The movant cannot explain how he is harmed by this windfall.
As to the delay in closing itself, the court pointedly asked movant's counsel if the delay caused the movant to forfeit a favorable mortgage commitment or interest rate. His counsel identified no such financial harm or other personal prejudice caused by the rather brief delay. Weighing the equities, including the added costs and delays of a new auction, the court declines to overturn the previously-approved sale. While not condoning the violations of the court's orders, the motion for refund is denied, and the movant is directed to arrange with the committee for a suitable closing date to occur within thirty days of the date of this decision.