Court Opinion

ID: 7842974
Source: CourtListenerOpinion
Date Created: 2022-09-08 17:04:43.838276+00
Date Added: 2024-06-11T16:20:31.743576
License: Public Domain

Berdon, J.,
dissenting. I join in Justice Katz’ dissent that a hearing to determine the fair market value of the mortgaged property to be used in calculating a deficiency judgment is constitutionally required.1 I also write separately to identify an independent statutory ground that requires such a hearing.
General Statutes § 49-28, which applies to foreclosures by sale, merely provides that “the deficiency shall be determined.” The statute is silent, however, as to the specific procedure for calculating the amount of the deficiency. In interpreting this silence, we are guided by the well established principle that “a foreclosure action constitutes an equitable proceeding. . . . In an equitable proceeding, the trial court may examine all relevant factors to ensure that complete justice is done. . . . The determination of what equity requires in a particular case, the balancing of the equities, is a matter for the discretion of the trial court.” (Citation omitted; internal quotation marks omitted.) Citicorp Mortgage, Inc. v. Burgos, 227 Conn. 116, 120, 629 A.2d 410 (1993). We are also guided by Practice Book § 528, which provides that the deficiency shall be determined at a judicial hearing at which the court shall “hear the evidence, establish a valuation for the mortgaged property and . . . render judgment for the *287plaintiff for the difference, if any, between such valuation and the plaintiffs claim.”2 Interpreting § 49-28 to conform to these equitable principles, I believe that a reasonable construction of § 49-28 leads to the conclusion that the deficiency should be based upon the fair market value of the mortgaged property.
I am fully aware that recent dicta of this court has indicated that the amount of the deficiency is predicated on the sale price realized at the public auction. Fairfield Plumbing & Heating Supply Corporation v. Kosa, 220 Conn. 643, 646 n.8, 600 A.2d 1 (1991) (involving issue of whether General Statutes § 49-14 applies to foreclosure of a judgment lien); Baybank Connecticut, N.A. v. Thumlert, 222 Conn. 784, 788-89, 610 A.2d 658 (1992) (involving issue of whether time limitations of General Statutes § 49-14 apply to foreclosure by sale). Nevertheless, this is the first time that we have been squarely faced with the specific issue of whether § 49-28, interpreted in light of equitable principles, requires a hearing to determine the fair market value of the property.
It is only reasonable that a deficiency, whether it results from a proceeding in strict foreclosure or foreclosure by sale, should be predicated on the fair market value of the property that secured the loan, and not by a forced sale through a public auction. The distressed sale by public auction does not generally achieve the fair market value of the mortgaged property. See footnote 7 of Justice Katz’ dissent. If the amount of the deficiency were determined by a price obtained from the public auction, the defendant mortgagor, as a practical matter, would have no means of protection short of bidding on the property. If the mortgagor could bid on the property in order to ensure that the fair market value were realized, he or she probably would not be involved as a defendant in a foreclosure action in the first instance. On the other hand, foreclosing mortgagees are in a position to protect their interests because they may bid on *288the property in order to raise the price to the fair market value. Indeed, the mortgagee, if the successful bidder, is only required to pay to the court “so much of the proceeds as exceed the amount due upon his judgment debt, interest and costs”; General Statutes § 49-27; and is usually excused by the court’s order of sale from the deposit requirement.
The facts of this case underscore the inequity of the majority’s construction of § 49-28, which allows the deficiency to be determined by the sale price at a public auction. The plaintiff, New England Savings Bank, filed a motion for judgment of strict foreclosure, after the defendants had defaulted on payment of a promissory note secured by a mortgage on certain property. Another defendant, a subsequent encumbrancer, moved for a foreclosure by sale, over the objection of the defendant mortgagors and the plaintiff mortgagee. The trial court, finding the value of the mortgaged property to be $490,000 on the basis of the testimony of the appraisers, and the amount of the debt to be approximately $385,000 (excluding interest and costs), ordered a foreclosure by sale. The plaintiff was the only bidder at the auction sale and bid $260,000, free and clear of all encumbrances, except for the tax lien of $23,000. Accordingly, the plaintiff will receive a total value of $622,905.30 to satisfy a debt of only $411,341.50 (including interest and costs).3 This result simply cannot be characterized as equitable.
By holding that § 49-28 and Practice Book § 528 do not require a hearing to determine the fair market value of the mortgaged premises for purposes of determining a deficiency judgment, this court once again travels down a path that leads to an inequitable result. Cheshire Mortgage Service, Inc. v. Montes, 223 Conn. 80, 116, 612 A.2d 1130 (1992) (Berdon, J., dissenting). We must *289remember that this court sits “as a court of equity in reviewing this appeal from the granting of foreclosure of the defendants’ property.” Id.
Accordingly, I dissent.

 I also add my comments to the majority’s constitutional analysis. The majority concedes that the defendants have a constitutionally “protected property interest in the proper measurement of any deficiency judgment that may be rendered against them.” The majority goes one step further, however, and concludes that the defendants must have a substantive due process entitlement to the fair market value of the property. It seems to me that once the defendant has identified a constitutionally protected property interest in the proper valuation of the deficiency judgment, the next step in the analysis is to determine whether he has had the “opportunity to be heard ... at a meaningful time and in a meaningful manner.” (Internal quotation marks omitted.) Armstrong v. Manzo, 380 U.S. 545, 552, 85 S. Ct. 1187, 14 L. Ed. 2d 62 (1965). As Justice Katz points out, the “process” that is due is governed by the balancing test in Mathews v. Eldridge, 424 U.S. 319, 96 S. Ct. 893, 47 L. Ed. 2d 18 (1976). The public auction does not satisfy the “meaningful manner” requirement. The amount of the deficiency must be determined at a hearing at which the defendant can present evidence as to the value of the property that was subject to the lien. Society for Savings v. Chestnut Estates, Inc., 176 Conn. 563, 409 A.2d 1020 (1979).

 The majority cites absolutely no authority for its claim that Practice Book § 528 applies only to deficiency judgments in strict foreclosure cases.

 The property value of $467,000 ($490,000 value of mortgaged premises as found by the court less the tax lien of $23,000) added to the deficiency judgment against the defendant mortgagors in the amount of $155,905.30, as found by the court, amounts to $622,905.30.