Housing Development Fund, Inc. v. Burke Real Estate Management, LLC

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HOUSING DEVELOPMENT FUND, INC. v. BURKE
REAL ESTATE MANAGEMENT, LLC, ET AL.
(AC 36198)
DiPentima, C. J., and Prescott and Dupont, Js.
Argued November 17, 2014—officially released February 17, 2015
(Appeal from Superior Court, judicial district of
Stamford-Norwalk, Mintz, J.)
Benjamin Gershberg, for the appellant (defendant
JRS Investments, LLC).
Richard Lewis, for the appellee (plaintiff).
Opinion
DiPENTIMA, C. J. The defendant JRS Investments,
LLC (JRS), a junior lienholder,1 appeals from the judg-
ment of the trial court approving the foreclosure by
sale of a six unit apartment building. On appeal, JRS
claims that (1) the court abused its discretion by approv-
ing the sale where there had not been an inspection of
the interior of the individual units, and (2) the court
improperly failed to cite in the tenants of the individual
apartments as necessary parties. We are not persuaded
by these claims and, accordingly, affirm the judgment
of the trial court.
The following facts and procedural history are rele-
vant to our resolution of this appeal. In a complaint
dated April 19, 2010, the plaintiff, Housing Development
Fund, Inc., commenced a foreclosure action against the
named defendant, Burke Real Estate Management, LLC
(Burke, LLC), and the defendants Pete A. Burke and
Karen M. Burke (Burkes). Burke, LLC, had executed a
note in the amount of $460,000 with interest in favor
of the plaintiff. This note was secured by a mortgage
on the property, which was located at 7 Milton Street
in Stamford. Burke, LLC, and the Burkes, individually,
executed and delivered a guaranty in which they jointly,
severally and unconditionally guaranteed payment of
the note. Burke, LLC, defaulted on the note as a result of
nonpayment and, as of April 30, 2010, owed the plaintiff
approximately $444,831.39. In the second count of the
complaint, the plaintiff sought to enforce the guaranty
of payment against the Burkes, individually, for the
full amount of any deficiency judgment following the
foreclosure of its mortgage.2
Burke, LLC, had executed two subsequent mortgages
in favor of JRS in the amounts of $170,000 and $88,888.
On June 15, 2010, the court rendered a default judgment
against JRS for its failure to plead.
On January 14, 2011, the plaintiff moved for a judg-
ment of strict foreclosure. Approximately three months
later, it moved for summary judgment as to liability.
The court granted the plaintiff’s motion for summary
judgment and, on November 21, 2011, rendered a judg-
ment of strict foreclosure.3 On July 16, 2012, Burke,
LLC, moved to open the judgment of strict foreclosure
and requested the court to enter a judgment of foreclo-
sure by sale. The court granted this motion on Septem-
ber 19, 2012. The record discloses that that were several
subsequent entries of judgment, and that the final judg-
ment of foreclosure by sale was rendered on May 13,
2013.
On August 14, 2013, the court received the committee
report. That report stated that the fair market value of
the property was $550,000 and that at the foreclosure
sale on August 10, 2013, three bidders had placed forty
bids, with a winning bid of $501,500. The committee
moved the court to approve the sale, accept its report
and allow reasonable fees to the committee and the
appraiser.
JRS objected to the committee’s motion to approve
the sale. It argued that prospective bidders lacked
access to the interior apartments on the date of the
foreclosure sale. Approximately one month later, JRS
moved, pursuant to General Statutes §§ 52-107 and 52-
108 and Practice Book § 9-22, to cite in the tenants of
the property as necessary parties. On September 23,
2013, the court denied the motion to cite in tenants
and, overruling the objection to the motion to approve
the sale, approved the sale. This appeal followed.
Before addressing the specific claims raised by JRS
on appeal, we set forth the following relevant legal
principles. ‘‘A foreclosure action is an equitable pro-
ceeding. . . . The determination of what equity
requires is a matter for the discretion of the trial court.
. . . In determining whether the trial court has abused
its discretion, we must make every reasonable presump-
tion in favor of the correctness of its action. . . . Our
review of a trial court’s exercise of the legal discretion
vested in it is limited to the questions of whether the
trial court correctly applied the law and could reason-
ably have reached the conclusion that it did.’’ (Internal
quotation marks omitted.) Rockville Bank v. Victory
Outreach Ministries, Inc., 125 Conn. App. 1, 6, 6 A.3d
177 (2010); see also First Connecticut Capital, LLC v.
Homes of Westport, LLC, 112 Conn. App. 750, 760–61,
966 A.2d 239 (2009).
‘‘The court is the vendor in a foreclosure by sale
resulting from a judicial proceeding, and the committee
. . . is the mere agent of the court. . . . The balancing
of the equities and the determination of what is required
by equity in a particular case are matters of discretion
for the trial court. . . . Our review of the court’s factual
determinations is limited to whether those facts are
supported by the evidence, or whether, in light of the
evidence and the pleadings in the whole record, those
facts are clearly erroneous.’’ (Internal quotation marks
omitted.) First National Bank of Chicago v. Maynard,
75 Conn. App. 355, 363–64, 815 A.2d 1244, cert. denied,
263 Conn. 914, 821 A.2d 768 (2003).
‘‘In approving the committee sale, [t]he court must
exercise its discretion and equitable powers with fair-
ness not only to the foreclosing mortgagee, but also to
subsequent encumbrancers and the owners.’’ (Internal
quotation marks omitted.) First Connecticut Capital,
LLC v. Homes of Westport, LLC, supra, 112 Conn. App.
763. ‘‘Most importantly, the court possesses the author-
ity to refuse to confirm sales upon equitable grounds
where [the sales are] found to be unfair or the price bid
was inadequate.’’ (Internal quotation marks omitted.)
Rockville Bank v. Victory Outreach Ministries, Inc.,
supra, 125 Conn. App. 10; see also First National Bank
of Chicago v. Maynard, supra, 75 Conn. App. 361 (‘‘[i]t
is generally recognized that the grounds which would
warrant a court’s refusal to approve a sale are fraud,
misrepresentation, surprise or mistake’’ [internal quota-
tion marks omitted]). Guided by these principles, we
address each of JRS’s appellate claims in turn.
I
JRS first claims that the court improperly approved
the sale in light of the committee’s failure to obtain
access to the interior of the individual units at the prop-
erty, contrary to the uniform foreclosure standing
orders. The plaintiff counters that neither our case law
nor the uniform foreclosure standing orders, read in
their entirety, support this claim. It further contends
that JRS presented no evidence that such an inspection
would have resulted in a higher sale price of the prop-
erty. We agree with the plaintiff.
The following additional facts are necessary for our
discussion. At the hearing on the motion to approve
the sale, the committee indicated that the winning bid
of $501,500 constituted approximately 91 percent of the
fair market value of $550,000. In objecting, JRS argued
that without an inspection of the units’ interior, the sale
price was lower than it should have been. The court
inquired as to why the committee did not have access to
allow inspections.4 The committee responded: ‘‘Tenants
were in there and we were told by Mr. Burke that they
would not be allowing—there was a language difficulty.
Most of them that I saw spoke Spanish. I do not speak
Spanish and when we had the inspection with the
appraiser, which you ordered an interior, I was there
and we did view of couple of the units and the people
that I saw were Spanish speaking. Mr. Burke did inform
us that he couldn’t get access to the other ones. And
on the day of the sale, I didn’t knock on every door,
but I did knock on the rear door of one of the apartments
where we gained access and there was no answer. I
did give bidders the opportunity to knock on some
doors if they felt it was appropriate for them to do so.’’
The court also asked if JRS had any proof to support
its contention that had there been an interior inspection
of the units, a higher sale price would have resulted.
After a second request by the court, JRS stated that it
did not have a witness to testify. The court also noted
that JRS did not make a bid at the sale. After two
additional invitations from the court to present evi-
dence to support its claim, counsel for JRS acknowl-
edged that no such witness was present at the hearing.
The court then overruled its objection and approved
the sale.
We begin our analysis by examining the relevant lan-
guage from the uniform foreclosure standing orders.
Paragraph 8 of Form JD-CV-79, entitled Foreclosure by
Sale Standing Orders, provides: ‘‘The inspection of the
premises must be from 10:00 a.m. to 12:00 noon on
the date of the sale.’’ JRS interprets this to require an
inspection of the interior of the six apartments so that
potential bidders would have been able to evaluate the
condition of the property, resulting in a higher sale
price. This reasoning, however, ignores Form JD-CV-
81, which, under the heading ‘‘Access to Premises,’’
states: ‘‘Under no circumstances should the committee
force entry into the property against the will of the
party in possession. If the Debtor is not living at the
property, the committee should try to obtain keys to
enable the committee to inspect the property and show
the property to prospective purchasers prior to the auc-
tion.’’ Thus, it is clear that committee was not able
to require that the tenants allow an inspection by the
bidders at the foreclosure sale.
Our reasoning is buttressed by our Supreme Court’s
decision in Second National Bank of New Haven v.
Burtchell, 166 Conn. 388, 349 A.2d 831 (1974). In that
case, the plaintiff successfully foreclosed the property
of the defendants and the court accepted the commit-
tee’s report and approved the sale. Id., 389–90. On
appeal, the defendants argued that the committee had
obstructed an inspection of the property. Id., 392. The
trial court found ‘‘(1) that the defendants did not cooper-
ate in voluntarily permitting prospective purchasers to
go into the house and examine it and (2) that the com-
mittee respected this right of privacy and announced
this to persons attending the sale.’’ Id. Our Supreme
Court determined that the court’s factual finding that
the committee had ‘‘respected the defendants’ right of
privacy and had no authority to order the defendants
to permit prospective purchasers to enter their home
for the purpose of inspecting it’’ was not clearly errone-
ous. Id., 392–93.
We conclude that the court in the present case did
not abuse its discretion in granting the committee’s
motion to approve the sale. Although the standing order
cited by JRS provides for the time of an inspection on
the date of the sale, it does not set forth the scope of
this inspection. Moreover, Form JD-CV-81 specifically
instructs that the committee should not force entry into
a property contrary to the will of the party in possession.
Further, in accordance with Burtchell, the court prop-
erly concluded that the committee lacked the authority
to force the tenants to permit an inspection in the apart-
ments. Finally, JRS failed to present any evidence in
support of its bald assertion that such an inspection
would have resulted in a higher sale price. For these
reasons, we conclude that trial court did not abuse
its discretion.
II
JRS next claims that the court improperly denied its
motion to cite in the tenants of the individual units as
parties. Specifically, it argues that the tenants were
necessary parties, and, therefore, the court should have
added them as parties pursuant to § 52-107. We
disagree.
The following additional facts are necessary for our
discussion. In a motion dated September 20, 2013, JRS
moved to add the tenants of the property as party defen-
dants pursuant to General Statutes §§ 52-107 and 52-
108, and Practice Book § 9-22.5 Specifically, JRS argued
that the court should cite in the tenants under either
the ‘‘mandatory intervention’’ provision of § 52-107 or
the permissive provision of that statute. The court
denied JRS’ motion on September 23, 2013.6
‘‘The decision whether to grant a motion for the addi-
tion of a party to pending legal proceedings rests gener-
ally in the sound discretion of the trial court. . . .
Accordingly, [o]ur review . . . is confined to determin-
ing whether the trial court abused its discretion. . . .
Judicial discretion [however] . . . is always legal dis-
cretion, exercised according to the recognized princi-
ples of equity. . . . While its exercise will not
ordinarily be interfered with on appeal to this court,
reversal is required where the abuse is manifest or
where injustice appears to have been done. . . . In
essence, the trial judge’s discretion should be exercised
in conformity with the spirit of the law and in a manner
to subserve and not to impede or defeat the ends of
substantial justice.’’ (Citations omitted; internal quota-
tion marks omitted.) In re Devon B., 264 Conn. 572,
580–81, 825 A.2d 127 (2003); see Lettieri v. American
Savings Bank, 182 Conn. 1, 13, 437 A.2d 822 (1980)
(decision to grant motion for addition of party to pend-
ing legal proceedings rests generally in sound discretion
of trial court); 1525 Highland Associates, LLC v. Fohl,
62 Conn. App. 612, 619, 772 A.2d 1128 (same), cert.
denied, 256 Conn. 919, 774 A.2d 137 (2001).
General Statutes § 52-102 provides: ‘‘Upon motion
made by any party or nonparty to a civil action, the
person named in the party’s motion or the nonparty so
moving, as the case may be, (1) may be made a party
by the court if that person has or claims an interest in
the controversy, or any part thereof, adverse to the
plaintiff, or (2) shall be made a party by the court if
that person is necessary for a complete determination
or settlement of any question involved therein; provided
no person who is immune from liability shall be made
a defendant in the controversy.’’ Pursuant to this stat-
ute, the trial court is required to grant a motion to cite
in a necessary party. Donner v. Kearse, 234 Conn. 660,
669, 662 A.2d 1269 (1995).
Our Supreme Court has defined necessary parties as
‘‘[p]ersons having an interest in the controversy, and
who ought to be made parties, in order that the court
may act on that rule which requires it to decide on,
and finally determine the entire controversy, and do
complete justice, by adjusting all the rights involved in
it. . . . [B]ut if their interests are separable from those
of the parties before the court, so that the court can
proceed to a decree, and do complete and final justice,
without affecting other persons not before the court,
the latter are not indispensable parties. . . . In short,
a party is necessary if its presence is absolutely required
in order to assure a fair and equitable trial.’’ (Citation
omitted; internal quotation marks omitted.) Biro v. Hill,
214 Conn. 1, 5–6, 570 A.2d 182 (1990); see also Sturman
v. Socha, 191 Conn. 1, 6–7, 463 A.2d 527 (1983). The
question, therefore, is whether the trial court properly
determined that it could do complete and final justice
without the tenants being joined as parties.
In Tappin v. Homecoming Financial Network, Inc.,
265 Conn. 741, 753, 830 A.2d 711 (2003), our Supreme
Court observed that the title to property and possession
of that property are separate questions and that title
to property may be obtained via a foreclosure action
without acquiring the right to possession. A foreclosing
mortgagee has two options to obtain possession of the
property from a tenant: the mortgagee may name the
tenant as a party in the foreclosure action and obtain
a judgment of ejectment; or, the mortgagee separately
may pursue a summary process action after obtaining
title. Federal Home Loan Mortgage Corp. v. Van Sickle,
52 Conn. App. 37, 42–43, 726 A.2d 600 (1999); see also
Tappin v. Homecomings Financial Network, Inc.,
supra, 759.
The tenants are not necessary parties to this foreclo-
sure action. The plaintiff did not name the tenants as
defendants. As a result, the tenants were not subject
to a judgment of ejectment. The only issues in the fore-
closure action pertained to the note, the default by
Burke, LLC, and the determination of legal title to the
property. The matter of possession of the apartments
was not before the court. Accordingly, the appearance
of the tenants was not needed to assure a fair and
equitable trial, and the court could render a complete
and final judgment without the tenant’s participation.
We conclude, therefore, that the court did not abuse
its discretion in denying JRS’ motion to cite in.
The judgment is affirmed.
In this opinion the other judges concurred.
1
The other defendants named in the complaint are Burke Real Estate
Management, LLC, the mortgagor, Pete A. Burke and Karen M. Burke, guaran-
tors of the $460,000 note, and the city of Stamford, the Stamford Water
Pollution Control Authority and the Aquarion Water Company of Connecti-
cut, entities that had subordinate encumbrances of record on the property.
None of these defendants is involved in this appeal.
2
On January 13, 2011, the plaintiff withdrew the action against the Burkes.
3
This judgment of strict foreclosure was rendered as to the $460,000 note
and mortgage made between Burke, LLC, and guaranteed by the Burkes, indi-
vidually.
4
In the foreclosure by sale fact sheet and the posting on the Judicial
Branch website, the committee had indicated that the property was being
sold ‘‘as is,’’ that the committee made no warranties concerning the condition
of the property and that no adjustments to the sale price would be made
after the sale date.
5
General Statutes § 52-107 provides: ‘‘The court may determine the contro-
versy as between the parties before it, if it can do so without prejudice to
the rights of others; but, if a complete determination cannot be had without
the presence of other parties, the court may direct that such other parties
be brought in. If a person not a party has an interest or title which the
judgment will affect, the court, on his application, shall direct him to be
made a party.’’
General Statutes § 52-108 provides: ‘‘An action shall not be defeated by
the nonjoinder or misjoinder of parties. New parties may be added and
summoned in, and parties misjoined may be dropped, by order of the court,
at any stage of the action, as the court deems the interests of justice require.’’
Practice Book § 9-22 provides: ‘‘Any motion to cite in or admit new parties
must comply with Section 11-1 and state briefly the grounds upon which it
is made.’’
6
At the September 23, 2013 hearing, the court stated: ‘‘The court is going
to find that the motion to cite was not before the court but even if it was
based on the argument that I’ve heard, I would deny it because they—if
they wanted to be in it, [the tenants] could be in it but then they would
[be] subject to an ejectment [action]. In fact, the motion to cite would be
an undue burden on the tenants to subject them to the writ of ejectment
from this court, which would be a lot more summary than the eviction
process in Housing Court where they have all the rights of tenants.
‘‘So, the court would deny the motion to cite in anyway because if [the
tenants] wanted to be in its mandatory. But the fact that a subsequent
lienholder would try to burden tenants with the expense of perhaps hiring
attorneys here, perhaps being subjected to a writ of ejectment, which would
be a lot more summary than the summary of process procedure [and] which
would be an undue burden on them and as the court of equity, the court
would not allow that.
‘‘The court will allow [the tenants] not be subject to the writ of ejectment
and force the successful bidders who knowingly and voluntarily have noted
that they are going to have to go to Housing Court to evict [the tenants] if
they want to, which could take a lot longer than a writ of ejectment here.
So, the court would not do that.’’