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Connecticut: Subsequent Lienholders

Posted By USFN, Monday, October 13, 2014
Updated: Tuesday, October 13, 2015

October 13, 2014


by Jane Torcia
Bendett & McHugh, PC – USFN Member (Connecticut, Maine, Vermont)

Recently, the Connecticut Appellate Court reversed a superior court’s ruling that had been entered in favor of the plaintiff-mortgagee. Bombero v. Trumbull on the Green, LLC , Case No. AC 35690 (Aug. 19, 2014). The appellate court based its decision on the defendant’s contention that the plaintiff’s mortgage interest had been extinguished by a previous foreclosure of a prior mortgage, which had been brought by a mortgagee with a first position mortgage interest.

It was undisputed at the superior court level that the plaintiff’s mortgage had no value at the time of the prior foreclosure action — and that said mortgage would have been foreclosed out. Nonetheless, the superior court reasoned that the plaintiff should be permitted to foreclose, in light of the prior mortgagee’s failure to name the plaintiff as a defendant (by virtue of the plaintiff’s subsequent lien) in the prior foreclosure action.

Indeed, as contemplated by Connecticut law, the prior mortgagee was afforded the opportunity to initiate an “omitted party action” under Connecticut General Statutes §49-301, which would have cured the previous omission of the plaintiff mortgagee from the prior mortgage foreclosure. Moreover, the superior court found that the prior mortgagee had actual knowledge of the plaintiff’s lien at the time it took title to the property. However, the appellate court found that the plaintiff-mortgagee should not be permitted to foreclose, despite omission of the plaintiff from the prior mortgage foreclosure, and in spite of the prior mortgagee’s failure to initiate an omitted party action. In so holding, the appellate court relied upon several Connecticut appellate and supreme court decisions, basing its opinion almost exclusively upon the notion of balancing the equities of the parties, as well as principles of logic and common sense in stating that “[i]t is also a basic principle of law that common sense is not to be left at the courtroom door.” Id. at 370.

Accordingly, if a prior mortgagee fails to name a subsequent mortgagee or lienholder in its foreclosure action, the subsequent mortgagee or lienholder cannot receive a windfall by commencing its own foreclosure action, provided that no equity would have existed for said party.

1 Connecticut General Statutes § 49-30 allows a plaintiff to bring a separate foreclosure action against any party or parties “owning any interest in or holding an encumbrance on such real estate subsequent or subordinate to such mortgage or lien [which] has been omitted or has not been foreclosed of such interest … Such omission or failure to properly foreclose such party or parties may be completely cured and cleared by deed or foreclosure or other proper legal proceedings to which only the necessary parties shall be the party acquiring such foreclosure title…and the party or parties thus not foreclosed, or their respective successors in title.”

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