Summary
In Litton Loan Services, LP v. Casiano, 2004 WL 1489566, the court, Satter, J., noted that a mortgagee’s right to participate in the distribution of the proceeds through a supplemental judgment was a substantial insurable interest.
Summary of this case from Liberty Bank v. HeffernanOpinion
No. CV 02-0816298
June 16, 2004
MEMORANDUM OF DECISION
Juan Pichardo, the successful bidder at an auction held pursuant to a judgment of foreclosure by sale, moves to vacate the sale and for return of his deposit.
The underlying facts are as follows.
Judgment of foreclosure by sale entered in favor of the plaintiff Litton Loan Servicing, LP (hereinafter "Litton") on August 18, 2003, the court finding the plaintiff's debt to be $54,590.49 and the fair market value of the property to be $105,000.00. Sale was set for November 15, 2003. On that date, bidders were allowed to inspect the property. Pichardo did so and was satisfied with its condition. The auction elicited spirited bidding, with Pichardo finally offering the highest price of $103,100.00. The committee, Patrick T. Hulton, and Pichardo entered into a bond for deed pursuant to which Pichardo made a deposit of $10,500.00 and under the terms of which the sale was to take place within thirty days of the court approving the sale price. The committee promptly moved for confirmation of the sale on November 25, 2003. On December 15, 2003, Pichardo wrote to the committee informing him that his bank's appraiser needed access to the property to make an inspection. Pichardo followed up with several calls to Hulton for this purpose. When he did not hear from Hulton, Pichardo wrote to him again on January 19, 2004 asking for access for purposes of inspection. Hulton finally responded on February 9, 2004 to the effect that his "right as a committee of sale to enter the property is limited to the date of the public auction which was held on November 15, 2003."
On February 10, 2004 the motion for confirmation finally came before the court and the court approved the sale. On February 12, 2004, Pichardo wrote to Hulton that he hoped the sale had been approved, but added that he had stopped by the property to check it out from the outside, heard water dripping and saw water coming out of the window frames. He added, "I think water pipe brock [sic] and there is a swimming pool in the basement." On March 10, 2004, Pichardo moved for permission to extend the time to purchase of the property for six weeks in order to assess the damages. The court granted that motion on March 15, 2004, and further ordered the plaintiff and Pichardo to gain access to the property in order to determine the extent of the damages and to turn off the water. The court set the date of March 29, 2004 for the parties to report back to the court. On March 29, 2004, Pichardo informed the court that water had severely damaged the property and he orally moved to stay the closing, vacate the sale and return his deposit. The court heard evidence on May 3 and May 6, 2004 as to the water damage to the property.
Plaintiff's witness testified that he estimated the cost of repairing the property would amount to $26,810.00. Pichardo's contractor testified that the cost of repair would be $62,300.00. In the court's opinion either figure represents a substantial cost that was not anticipated by Pichardo or the committee and requires the equitable intervention by the court.
It is clear from the evidence that after the signing of the bond for deed on November 15, 2003, the property was abandoned by the owner of the equity, Mr. Casiano, with the consequence that the water pipes broke and caused the extensive water damage. Pichardo made every effort in December and January to gain access to the property for purposes of inspection by a bank appraiser, and neither the committee nor the plaintiff's attorney allowed him to do so. The court itself must bear some responsibility, having delayed from November 25, 2003 until February 10, 2004 to hear the committee's motion for approval of the sale.
In Anderson v. Yaworski, 120 Conn. 390 (1935), the Supreme Court held that when a fire damaged property subject to a bond for deed between the date of the bond for deed and the closing, the risk of loss fell upon vendor and there was a substantial failure of consideration that relieved the vendee of responsibility.
However, this court prefers not to rely upon that legal principle. Rather, this court recognizes that a foreclosure action is an equitable proceeding, Harbour Landing Development Corp. v. Herman, 27 Conn. App. 98, 101 (1992), and it has the power to set aside a sale after confirmation if equitable principles so demand.
In Citicorp Mortgage, Inc. v. Burgos, 227 Conn. 116 (1993), where there was an untoward delay between court confirmation of a sale and the sale itself as a consequence of which the bidder lost his financing, the Supreme Court set aside the sale and ordered the return of the bidder's deposit on equitable grounds.
A case directly in point is Citifinancial Mortgage Co., Inc. v. Skyers, CV 02389419S, Judicial District of Fairfield at Bristol (Thim, J., Feb. 27, 2003) ( 34 Conn. L. Rptr. 212). There, property was substantially damaged as a result of broken pipes between the date of confirmation of the sale and the sale date itself. The court granted the motion to set aside the sale and ordered return of most of the deposit to the bidder. The factors the court considered in reaching its decision was that the water damage caused a substantial reduction in the market value of the property, the damage was not due to the fault of any of the parties to the proceedings, and none of the parties changed position in reliance on the court's confirmation of the sale. It added that the foreclosing mortgagee could have insured against the loss. All of those factors exist in this case and this court reaches the same result.
At the time of the confirmation of the sale, the defendant owner of the equity lost the right to redeem the mortgage. Washington Trust Co. v. Smith, 241 Conn. 734, 742-43 (1997). The plaintiff foreclosing mortgagee at that point did not have a mortgage interest in the real property but rather a right to participate in the distributions of the proceeds through a supplemental judgment. But that right is a substantial insurable interest. The mortgagee, which has maintained insurance on the property up to the date of the confirmation of the sale, should continue that insurance until it is finally paid. As between the mortgagee and the successful bidder, this court determines that equitable principles dictate that the mortgagee is in the best position to insure the property and should bear the loss of damage to the property until the sale is consummated.
Pichardo's motion to vacate the sale and refund his deposit of $10,500.00 is granted.
BY THE COURT
Robert Satter Judge Trial Referee CT Page 9420