Opinion
No. CV 02 0397258 S
April 22, 2003
MEMORANDUM OF DECISION ON THE ISSUE OF STANDING
This is an action having a return date of November 5, 2002, in which the plaintiff Manufacturers Traders Trust Company, seeks to foreclose a mortgage executed by the defendants Felix and Diana Figueroa. Default for failure to appear entered against the defendants and the plaintiff filed a motion for strict foreclosure. At the hearing on this motion and during the court's review of the loan documents, it was established that the plaintiff was assigned the note and mortgage, but that the assignment of the mortgage had not been recorded on the land records. The court, sua sponte, raised the issue whether the plaintiff had standing to invoke the court's jurisdiction to render a judgment of foreclosure. Daley v. Hartford, 215 Conn. 14, 27-28, 574 A.2d 194, cert. denied, 498 U.S. 982, 111 S.Ct. 513, 112 L.Ed.2d 525 (1990) (a court may raise question of subject matter jurisdiction sua sponte). The court directed the plaintiff to file a memorandum addressing this issue because two Superior Court decisions, relying on Family Financial Services Inc. v. Spencer, 41 Conn. App. 754, 677 A.2d 479 (1996), recently concluded that a plaintiff holding an unrecorded assignment of the mortgage lacks standing to prosecute an action to foreclose the mortgage. See Wells Fargo Bank v. Hubyk, Superior Court, judicial district of Milford-Ansonia at Milford, Docket No. CV 02 0278152 (October 4, 2002, Curran, J.) ( 33 Conn.L.Rptr. 218, 219); Electronic Mortgage v. Dorcely, Superior Court judicial district of Stamford-Norwalk at Stamford, Docket No. CV 02 187258 (September 18, 2002, Hickey, J.) ( 33 Conn.L.Rptr. 133, 133-34). These decisions conflict with other unreported Superior Court cases holding that the holder of an unrecorded mortgage assignment has standing to institute a foreclosure action. See Connecticut National Bank v. Marland, Superior Court, judicial district of Middlesex, Docket No. CV 67947 (March 15, 1993, Walsh, J.) ( 8 Conn.L.Rptr. 482); Bank United v. LeMoult, Superior Court, Docket No. CV 00 179862, judicial district of Stamford-Norwalk at Stamford (January 9, 2001, Resha, J.).
In Family Financial Services Inc. v. Spencer, supra, 41 Conn. 754, the court concluded that "[o]ur courts have clearly interpreted § 47-10 to apply to the assignment of mortgages . . . [and] therefore, . . . the trial court properly found that § 47-10 applies to the . . . [plaintiff's] assignment . . . and that the assignment . . . needed to be recorded on the land records in order to be effective against the defendant." Id., 761-62.
After review, this court agrees with these latter decisions and concludes that a holder of an unrecorded mortgage has standing to foreclose a mortgage when the holder has a valid assignment of the promissory note in compliance with General Statutes § 49-10.
The validity and enforceability of an assignment of the mortgage debt are governed by General Statute § 49-10. More specifically, § 49-10 provides that the assignment of the mortgage debt executed in accordance with the provisions of the statute "vests" title in the assignee. General Statutes § 49-10. The statute also delineates what actions are sufficient to give the mortgagor notice of the assignment, and states that the recording of the assignment alone is insufficient to constitute such notice. General Statutes § 49-10 (f) and (g).
Section 49-10 (a) defines mortgage debt as "a debt or other obligation secured by mortgage, assignment of rent or assignment of interest in a lease."
Section 49-10 (b) provides in relevant part: "Whenever any mortgage debt is assigned by an instrument in writing containing a sufficient description to identify the mortgage . . . and that assignment has been executed, attested and acknowledged in the manner prescribed by law for the execution, attestation and acknowledgment of deeds of land, the title held by virtue of the mortgage . . . shall vest in the assignee."
The case law also establishes that the assignment of the debt gives an assignee the right to collect the debt personally from the obligor without recourse to foreclosure. Hartford National Bank Trust Co. v. Kotkin, 185 Conn. 579, 581, 441 A.2d 593 (1981) ("A note and a mortgage given to secure it are separate instruments, executed for different purposes and in this State, action for foreclosure of the mortgage and upon the note are regarded and treated, in practice, as separate and distinct causes of action, although both may be pursued in a foreclosure suit" (internal quotation marks omitted)).
Furthermore, Connecticut statute also provides that a mortgage may be foreclosed by the holder of an assignment of the mortgage note even though the assignee may not have received an assignment of the mortgage deed. General Statutes § 49-17. General Statutes § 49-17 explicitly provides that the holder of a mortgage note, who has not also received an assignment of the mortgage deed, may bring a foreclosure action and acquire title through the foreclosure to the same extent as such title would have vested in the mortgagee if he had foreclosed.
General Statutes § 49-17 provides the following: "When any mortgage is foreclosed by the person entitled to receive the money secured thereby but to whom the legal title to the mortgaged premises has never been conveyed, the title to such premises shall, upon the expiration of the time limited for redemption and on failure of redemption, vest in him in the same manner and to the same extent as such title would have vested in the mortgagee if he had foreclosed, provided the person so foreclosing shall forthwith cause the decree of foreclosure to be recorded in the land records in the town in which the land lies."
Certainly, if the assignee of a note who has never received an assignment of the mortgage has standing to foreclose the mortgage, an assignee of a note who has received but not recorded an assignment of the mortgage must also have standing to foreclose. This conclusion is consistent with the maxim that the security follows the debt. See Second National Bank of New Haven v. Dyer, 121 Conn. 263, 269, 184 A. 386 (1936) ("Ordinarily, as between the indebtedness and the mortgage securing it, the indebtedness is the principal thing and the security incidental; an assignment of the debt carries with it the right and benefit of the security, though that be not assigned; and an assignment of the security apart from the debt transfers the bare title, the beneficial interest in which remains with the owner of the debt"); South End Plaza Assn., Inc. v. Cote, 52 Conn. App. 374, 378, 727 A.2d 231 (1999) ("The assignment of the note evidencing the debt automatically carries with it the assignment of the mortgage . . . This principle holds true even when the mortgage is in the hands of another" (citation omitted; internal quotation marks omitted)).
Other Superior Court judges have reached similar conclusions. In Connecticut National Bank v. Marland, supra, the court held that "where there is a valid assignment of a mortgage note, the assignee has a right to bring an action to foreclosure upon the assigned note as if he or she were the original mortgagee" even though the assignment of the mortgage is unrecorded. Id.; see also Bank United v. LeMoult, supra (finding that a holder of a note and mortgage has standing to prosecute a foreclosure when the assignment of mortgage is unrecorded). Similarly, in Commercial Loan Services v. Sklat, Superior Court, judicial district of Hartford, Docket No. CV 98 057907 (January 4, 2000, Satter, J.T.R.), the court held that an owner of the note and mortgage has standing to prosecute a foreclosure action even though the formal assignment of the mortgage to the plaintiff was not executed until after institution of the suit.
Denis Caron, a leading commentator on Connecticut foreclosure actions, makes the following observation regarding these issues: "It should be clear that the assignee of a mortgage deed cannot foreclose without prior compliance with § 49-10 and perhaps even § 47-10, but such is not the situation with the assignee of a mortgage note. Thus, the holder of a mortgage note has the same right to proceed against the security as does a mortgagee, provided that the statutory requirements are followed." (Emphasis in original.) D. Caron, Connecticut Foreclosures, (3d Ed. 1997) § 4.02A, p. 72. However, as to the transfer of the mortgage deed alone without a transfer of the note, see Second National Bank of New Haven v. Dyer, supra, 121 Conn. 272 (". . . an assignment of the security apart from the debt transfers the bare title, the beneficial interest in which remains with the owner of the debt"); Fleet National Bank v. Nazareth, 75 Conn. App. 791, 794-95 (2003) (holding that a person who has been assigned a mortgage, but not the note, does not have an interest sufficient to establish standing to foreclose the mortgage); Novastar Mortgage v. Mendoza, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket No. CV 99 0169865 (October 27, 1999, Rodriquez, J.) ( 25 Conn.L.Rptr. 628) ("Where the mortgagee has `transferred' only the mortgage, the transaction is a nullity and his `assignee,' having received no interest in the underlying debt or obligation, has a worthless piece of paper," quoting, 4 Powell On Real Property, § 37.27(2), p. 37-178 (1997)).
The Superior Court judges in, Wells Fargo Bank v. Hubyk, supra, and Electronic Mortgage v. Dorcely, supra, reached a different conclusion, and held that the holder of a note and an unrecorded mortgage does not have standing to prosecute an action to foreclose the mortgage. These cases conclude that a plaintiff is required, pursuant to General Statutes § 47-10, to record the mortgage assignment in order to have standing to maintain a foreclosure action.
General Statutes § 47-10 provides that "[n]o conveyance shall be effectual to hold any land against any other person but the grantor and his heirs, unless recorded on the records of the town in which the land lies." An assignment of a mortgage is unquestionably a conveyance within the meaning of this statute. Farmers Mechanics Savings Bank v. Garofalo, 219 Conn. 810, 816 n. 8, 595 A.2d 341 (1991); Second National Bank of New Haven v. Dyer, supra, 121 Conn. 267. Consequently, the courts above reasoned that in the absence of filing an assignment on the land records, a holder of the assignment cannot hold it against the land as to any party except the "grantor," which is, in this case, the transferor of the assignment. See Wells Fargo Bank v. Hubyk, supra, 33 Conn.L.Rptr. 219.
Thus, on one hand, § 47-10 suggests that a person who holds an unrecorded, mortgage assignment cannot hold this assignment against anyone other than the assignor, and therefore, does not have standing to foreclose the mortgage. Whereas, on the other hand, § 49-10 suggests that the holder of such an unrecorded assignment has a fully vested and enforceable interest in the mortgage. Courts have a duty to seek an interpretation of statutory schemes which harmonizes the body of law; see Nizzardo v. State Traffic Commission, 259 Conn. 131, 157, 788 A.2d 1158 (2002); and therefore, this court must reconcile §§ 47-10 and 49-10 with 49-17 so that each provision may rationally coexist.
The apparent conflict between §§ 47-10 and 49-10 is resolved by first emphasizing that while § 47-10 concerns conveyances generally, § 49-10 more specifically addresses the assignment and the enforceability of the mortgage debt. "It is a well-settled principle of construction that specific terms covering the given subject matter will prevail over general language of the same or another statute which might otherwise prove controlling." (Internal quotation marks omitted.) Oles v. Furlong, 134 Conn. 334, 342, 57 A.2d 405 (1948) (quoting Kepner v. United States, 195 U.S. 100, 125, 24 S.Ct. 797, 49 L.Ed. 114 (1904)). Accordingly, § 49-10 is dispositive because it addresses the issue more specifically.
Furthermore, the class of people sought to be protected under § 47-10 are those who rely on the land records and are prejudiced by another's failure to record a conveyance: "The basis of the protection so afforded is an equitable estoppel which arises out of the fact that the person who has failed to record the instrument under which he claims has thereby misled creditors into the belief that title is in the person who appears upon the record to own the property." Second National Bank of New Haven v. Dyer, supra, 121 Conn. 271. Indeed, in Second National Bank of New Haven v. Dyer, 126 Conn. 101, 111-12, 9 A.2d 503 (1939), the Supreme Court found against the plaintiff, not because its unrecorded, mortgage assignment deprived it of standing, but because a subsequent assignee filed its assignment of the mortgage without knowledge of the plaintiff's prior interest.
Moreover, this estoppel protection accorded by § 47-10 is further circumscribed because it is unavailable to those who have actual knowledge of the status of the title or who lack such knowledge because of their own negligence. Second National Bank of New Haven v. Dyer, supra, 126 Conn. 111-12; accord, Andretta v. Fox New England Theatres, Inc., 113 Conn. 476, 479-80, 155 A. 848 ("One who purchases land with actual notice of unrecorded documents affecting title to it buys subject to any rights created by them in others"). Consequently, as compared to § 49-10, § 47-10 is less concerned about the validity of a conveyance as much as it is concerned with the priority of a conveyance. See Second National Bank of New Haven v. Dyer, supra, 121 Conn. 271 ("The person claiming the property may have a good title to it, but as against anyone who is entitled to rely upon the record he is barred from asserting that title").
In the instant case, there is no question that the plaintiff is the owner of the note and mortgage. The plaintiff established ownership, by complying with § 49-10, thereby, giving it standing to foreclose the mortgage. Cf. Connecticut Bank Trust Co., N. A. v. Reckert, 33 Conn. App. 702, 705, 638 A.2d 44 (1994). In short, here, the parties are not disputing who has priority over the property.
Connecticut Bank Trust Co., N. A. v. Reckert, supra, 33 Conn. App. 702, the Appellate Court was presented with a similar issue. In that case, a bank officer testified that the plaintiff had purchased the note and mortgage at the bank. The court held that the bank officer's testimony was sufficient to establish the bank's ownership of these documents and its right to prosecute the foreclosure without further evidence of the actual assignment or of the recording.
The court notes that a far different situation presents itself when the controversy involves a dispute between two assignees of the mortgage debt, where one has recorded its assignment, and the other has failed to record it or has failed to do so within a reasonable time. See Second National Bank of New Haven v. Dyer, supra, 121 Conn. 269; Richmond v. Malkin, 6 Conn. Sup. 97 (1938). As discussed above, such conflicts may be resolved by reference to § 47-10, which requires that conveyances be recorded on the land records. See id.; see also Second National Bank of New Haven v. Dyer, supra, 126 Conn. 101; Farmers Mechanics Savings Bank v. Garofalo, 219 Conn. 810, 595 A.2d 341 (1991); Cottiero v. Ifkovic, 35 Conn. App. 682, 674 A.2d 9, cert. denied, 231 Conn. 938, 651 A.2d 262 (1994). The court also notes the potential title problems that may arise if a plaintiff in a foreclosure action fails to record its assignment of mortgage even after final judgment of foreclosure enters. See generally, D. Caron, supra, § 4.02A, p. 73-74. Consequently, although a plaintiff with an unrecorded mortgage assignment may have legal standing to foreclose, there are practical and policy considerations that militate against a delay in the filing of the assignment.
The court acknowledges that there is language in Family Financial Services, Inc. v. Spencer, supra, 41 Conn. App. 760-62, suggesting that an assignee of a mortgage must record the assignment in order to have standing to prosecute a foreclosure action. However, these statements were premised on the finding that the plaintiff was not the maker of the loan and had not received a valid assignment of either the note or the mortgage. The plaintiff, in that case, executed the purported assignment to himself pursuant to a power of attorney, but neither the power of attorney, nor the assignment had been filed on the land records. Consequently, the facts of Family Financial Services, Inc. v. Spencer, supra, 41 Conn. App. 754, are distinguishable because, here, the plaintiff holds both the note and the mortgage.
In summary, the court concludes that the plaintiff, holder of the mortgage note and an unrecorded assignment of the mortgage, has standing to prosecute this foreclosure action.
So ordered this 22nd day of April 2003.
STEVENS, J.