DocketNumber: No. CV98 061380
Judges: CURRAN, J.
Filed Date: 4/6/1999
Status: Non-Precedential
Modified Date: 7/5/2016
On January 7, 1998, The Bank Mart assigned the note to R.I. Waterman Properties, Inc. ("Waterman"). Waterman accelerated on the note and, by complaint filed February 3, 1998, sought a foreclosure of the property. The defendants disclosed no defense to this action, and the court entered a judgment of strict foreclosure on April 13, 1998. At that time, the court found the debt owed by the defendants amounted to $128,575.21 plus costs and fees. The fair market value of the property was found to be $70,000. On that same date, the court also granted a motion to substitute Fleet Funding (hereinafter "the plaintiff") as the party plaintiff.
The plaintiff filed a motion for a deficiency judgment on July 29, 1998. On August 13, 1998, the defendants objected to the calculation of debt in the motion for deficiency judgment. Both parties subsequently filed memoranda of law in support of their CT Page 4562 respective position.
The defendant's first objection to the calculation of deficiency is that it was as of the date of the motion rather than the day title passed to the plaintiff. The plaintiff has addressed the defendants' first objection to the calculation by recalculating the debt in accordance with the objection. The court, therefore, finds that the objection is now moot.
The defendants' second argument is that the plaintiff or assignor had previously rejected a bona fide offer. The defendants' offer evidence showing that they previously had an offer by a third party to purchase the property in question for $80,000. According to the defendants, however, the plaintiff's assignor, refused to approve this purchase and thus caused an additional year of interest to accumulate and a loss of $10,000 of benefit to the defendants as the fair market value of the property is now $70,000.
The court finds that this argument cannot be considered at this time and stage of the proceedings. A deficiency judgment presumes the amount of debt as established by the foreclosure judgment. First Federal Bank, FSB v. Gallup,
The defendants' final argument is that there is no deficiency remaining for the plaintiff to collect as the plaintiff has benefitted [benefited] from a private mortgage insurance paid for and purchased by the defendants. The defendants argue that a condition of the mortgage/note was the requirement that the defendants purchase a private mortgage insurance policy which would reimburse the plaintiff for any deficiency in the event of CT Page 4563 the defendants default. Since they have now defaulted, the defendants maintain that the mortgage insurance covers any remaining deficiency.
The plaintiff, however, argues that whether it has received any insurance benefits is immaterial to the deficiency judgment at hand. The plaintiff argues that the defendants are not beneficiaries under the insurance policy, but rather remain liable on their obligation under the note regardless of any insurance policy benefits. Moreover, since the insurance company possesses subrogation rights against the defendants, the plaintiff argues that the deficiency judgment is the sole method by which the plaintiff and its assignees may protect their debt.
General Statutes §
In general, a deficiency judgment is the only method of satisfying a mortgage note when the security is inadequate to make a foreclosing plaintiff whole. Eichman v. J J BuildingCo.,
Nonetheless, a deficiency judgment is a "statutory procedure that is part of, and complementary to, the traditional and equitable common law action of strict foreclosure." FederalDeposit Ins. Co. v. Hillcrest Associates,
Thus, it would appear that the court is able to consider whether certain credits, from the private mortgage insurance, are due the defendants in calculating the deficiency judgment. Under the general principles of equity, it would be appropriate to, at the very least, credit the defendants for the amount of money the defendants expended in purchasing the mortgage insurance. SeeSandusky v. First National Bank of Sikeston,
Furthermore, it would be inequitable for the plaintiff to seek a deficiency if, in fact, the plaintiff has already collected on its claim from the insurance company. Since the reimbursement from the insurance company would make the plaintiff whole as to damages, any further recovery would be a windfall to the plaintiff. See Citicorp Mortgage. Inc. v. Younger,
At least one state has apparently established a statutory mechanism that provides a credit to the defendant in a deficiency judgment to take into account any proceeds from mortgage insurance the plaintiff may have received. See Palma v. VerexAssur., Inc.,
However, even if a credit is applied against the lender, the CT Page 4565 court agrees with the plaintiff that the defendants ultimately do remain liable on the note. If the lender receives proceeds from a private mortgage insurer, it assigns any and all rights to the insurer and the insurer will be entitled to exercise its rights of subrogation. Ultimately, the insurer may seek reimbursement from the defendants for any deficiency still owing on the original note. In this regard, the defendants will still be required to live up to their original obligation regardless of whether the plaintiff has collected insurance proceeds. Such a result is consistent with the fact that the private mortgage insurance exists for the security and benefit of the lending party and not for the benefit of the defendants. See Key PacificMortgage, Inc. v. Industrial Indemnity Company of Alaska,
It is noteworthy that cases that have addressed mortgage insurance benefits in the context of a deficiency judgment usually involve the insurer as a party to the action.1 The involvement of the insurer in the deficiency judgment allows the insurer to protect his rights against the party still liable on the note while, at the same time, ensuring that the plaintiff does not recover damages that have already been covered by the, mortgage insurance.
In the present case, it is somewhat unclear whether the plaintiff has actually received benefits from the insurer under its mortgage insurance policy.2 If the plaintiff has received benefits from the insurance company in an amount that covers the deficiency judgment entirely, then it would seem that the insurer, via subrogation, is the proper party to the action and, pursuant to Practice Book § 99, now Practice Book (1998 Rev.) §
The plaintiff herein is hereby ordered to cite in the insurance carrier as a party to this action.
The Court CT Page 4566
By Curran, J.