Opinion
No. CV 05 4004777
November 16, 2007
MOTION FOR SUMMARY JUDGMENT NO. 115
I. BACKGROUND
The question presented in this motion for summary judgment is whether a defectively executed mortgage deed is nullified in an action to foreclose the mortgage. The parties have not disputed the following allegations for the purposes of this motion. The challenged mortgage deed in the principal amount of $45,800 is now owned by Novastar Mortgage, Inc. (Novastar). The mortgage deed was executed on January 26, 2005, by Darren Smith (Smith), and was witnessed and acknowledged solely by his attorney. On January 31, 2005, this instrument was received by the North Haven Town Clerk, and recorded upon the land records in volume 701 at page 0852. Novastar claims that this mortgage is secured by real property and improvements located at 43 Giles Avenue in North Haven.
The note secured by the mortgage was originally owned by Premier Mortgage Funding, Inc. and the property was mortgaged to Mortgage Electronic Registration Systems, Inc., as Nominee for Premier Mortgage Funding, Inc.
Smith sold the Giles Avenue property to Patricia Moye (Moye) on June 30, 2005, and she is now the owner of the equity of redemption in the property. On the same day, Moye executed a mortgage deed for the principal amount of $225,000 on the same premises to Argent Mortgage, LLC. This mortgage is now owned by Wells Fargo Bank, N.A. (Wells Fargo), as Trustee. The Wells Fargo mortgage deed was subsequently recorded on July 6, 2005, in Volume 714 at Page 773 of the North Haven Land Records.
The plaintiff, Novastar, brought this foreclosure action by writ, summons and complaint filed on November 8, 2005. The defendant filed an amended special defense and counterclaim on February 22, 2006, alleging that the Novastar mortgage is void as it lacks a second witness, as required by General Statutes § 47-5(a)(4). Wells Fargo further alleges that this omission in the Novastar mortgage is not cured by General Statutes § 47-36aa, the so-called "validating act," because a lis pendens challenging the validity of the mortgage was recorded within two years of the Novastar mortgage. Based upon this legal claim, Wells Fargo seeks a summary judgment and decree that the Novastar mortgage is void and, further, it seeks an order to release the mortgage and attendant lis pendens.
General Statute § 47-5(a) provides in relevant part: "All conveyances of land shall be: (1) In writing . . . and (4) attested to by two witnesses with their own hands." In addition, a mortgage in Connecticut conveys title to real property. General Statutes § 47-36h provides: "A deed following the form entitled `Mortgage Deed,' when duly executed, has the force and effect of a deed to the mortgagee in fee simple, subject to defeasance, with mortgage covenants, to secure the payment of money as well as the performance of any obligation or obligations therein specified or referred to; provided any other lawful covenants, agreement or condition may be inserted in the mortgage deed and any of the terms and provisions of said statutory mortgage covenants and conditions may be added to by any lawful agreement, covenant and condition specified in the mortgage deed."
General Statutes § 47-36aa provides in relevant part: "(a) Conveyancing defects. Any deed, mortgage, lease, power of attorney, release, assignment or other instrument made for the purpose of conveying, leasing, mortgaging or affecting any interest in real property in this state recorded after January 1, 1997, which instrument contains any one or more of the following defects or omissions is as valid as if it had been executed without the defect or omission unless an action challenging the validity of that instrument is commenced and a notice of lis pendens is recorded in the land records of the town or towns where the instrument is recorded within two years after the instrument is recorded: (1) The instrument contains a defective acknowledgment or no acknowledgment; (2) The instrument is attested by one witness only or by no witnesses . . ."
The lis pendens was filed upon the North Haven Land Records in Volume 733 at page 0877 on February 22, 2006.
Novastar claims that, notwithstanding its defectively witnessed mortgage, it has an equitable interest in the mortgaged property that may be enforced, citing General Statutes § 47-17, which provides in relevant part that "any instrument intended as a conveyance of land, but which by reason of a formal defect operates only as a conveyance of an equitable interest in such and . . . may be recorded in the records of the town in which such land is situated; and such record shall be notice to all the world of the equitable interest thus created."
II. DISCUSSION A. Summary Judgment
Summary judgment ". . . shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Practice Book § 17-49. "In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party." (Internal quotation marks omitted.) Hertz Corp. v. Federal Ins. Co., 245 Conn. 374, 381, 713 A.2d 820 (1998).
"The party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under applicable principles of substantive law, entitle him to judgment as a matter of law . . ." (Citation omitted; internal quotation marks omitted.) Appleton v. Board of Education, 254 Conn. 205, 209, 757 A.2d 1059 (2000). "[T]he party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact." (Internal quotation marks omitted.) Schilberg Integrated Metals Corp. v. Continental Casualty Co., 263 Conn. 245, 252, 819 A.2d 773 (2003). "A `material fact' is a fact that will make a difference in the result of the case . . . The facts at issue are those alleged in the pleadings." (Citation omitted; internal quotation marks omitted.) Mountaindale Condominium Ass'n., Inc. v. Zappone, 59 Conn.App. 311, 315, 757 A.2d 608, cert. denied, 254 Conn. 947, 762 A.2d 903 (2000).
B. Historical Treatment of Defectively Witnessed Mortgage Deeds
Historically, most technical defects in recorded documents granting interests in real property have been validated by the General Assembly through the regular adoption of special acts, validating these defectively executed instruments. Recently, however, the General Assembly has passed a general statute, perpetually validating such defective instruments, ". . . unless an action challenging the validity of that instrument is commenced and a notice of lis pendens is recorded in the land records of the town or towns where the instrument is recorded within two years after the instrument is recorded . . ." General Statutes § 47-36aa. (See footnote 3, supra, for the full text.) In view of the fact that Wells Fargo's special defense, counterclaim and lis pendens have all been filed within the two-year period excluded by the validating act, General Statutes § 47-36aa is inapplicable to the case before the court.
Novastar counters that a different statutory provision, General Statute § 47-17, operates to cure the defectively witnessed mortgage in this case. This statute, or one that is substantially similar to it, has been in effect since the mid-nineteenth century, but has rarely been cited in recorded cases. Novastar cites D'Urso v. Lyon, Superior Court, judicial district of New Haven, Docket No. CV 99 0426188 (April 17, 2000, DeMayo, J.) (27 Conn. L. Rptr. 81), in support of its claim. In D'Urso, the court held that General Statute § 47-17 is "sufficient to permit a holder of a defective and as-yet invalidated mortgage to foreclose that mortgage." D. Caron and G. Milne, Connecticut Foreclosures (4th Ed. 2004) § 28.03D, p. 608. Although no appellate court in Connecticut has decided this question, Id., a contrary conclusion was reached in dicta by Chief Justice Peters in a case cited by Wells Fargo, Connecticut National Bank v. Lorenzato, 221 Conn. 77, 602 A.2d 959 (1992).
The official General Statutes of Connecticut cite a number of cases decided under this statute involving the effect of an attorney's lien, among other, unrelated issues. Although one case cited involves the invalidity of an improperly witnessed deed, Carter v. Champion, 8 Conn. 549, 558-59 (1831), this case appears to pre-date any present or historic version of General Statutes § 47-17.
A distinction has been drawn in our case law between invalidly executed mortgages, which were void as to third parties, as opposed to invalidly recorded mortgages. The invalidity of defectively executed mortgages, as to third parties without actual notice, was well settled in the 1800s in a line of cases cited by Justice Peters in the Lorenzato case. In holding that a defectively recorded instrument was valid, she stated in dicta that "[w]e have consistently held that the recordation of . . . a defectively executed mortgage does not give constructive notice to third persons. See e.g., Goodman v. Randall, 44 Conn. 321, 325-26 (1877); Winsted Savings Bank Building Assn. v. Spencer, 26 Conn. 195, 198(1857); Sumner v. Rhodes, 14 Conn. 135, 139 (1840); Carter v. Champion, 8 Conn. 549, 558-59 (1831); Watson v. Wells, 5 Conn. 468, 473 (1825); Merwin v. Camp, 3 Conn. 35, 41-42 (1819)." (Emphasis added.) Connecticut National Bank v. Lorenzato, supra, 221 Conn. 81. "There is a principled distinction between a mortgage deed that is imperfectly executed and one that is imperfectly recorded. The former is a nullity and is, therefore, incapable of giving constructive notice; the latter affords constructive notice to subsequent third party creditors to the extent that the mortgage, as recorded, contains sufficient information to put a title searcher on inquiry." (Emphasis added.) Id., 83-84.
The cases cited by Justice Peters in Connecticut National Bank v. Lorenzato begin in the year 1819 and continue through 1877. These cases generally stand for the proposition that an invalidly executed mortgage deed is only valid with respect to parties with actual notice of the encumbrance, even though it is properly recorded. See Merwin v. Camp, 3 Conn. 35, 41-42 (1819). ("All pretence of title, then, on the part of the defendants, fails from the incompetency of [the] deed, which constitutes an indispensible part of it.") Also see Watson v. Wells, 5 Conn. 468, 473 (1825). ("[T]he plaintiff's deed to which there was only one witness; and that from the record of a deed, which is not complete according to law, and which, therefore, conveys nothing, there is no presumption of notice.") Also see Carter v. Champion, 8 Conn. 549, 558 (1831). ("As a general rule . . . there is no doubt, that the recording of an instrument so defective that it cannot pass title by our law, cannot be considered constructive notice of the existence of such instrument.") Also see Sumner v. Rhodes, 14 Conn. 135, 139 (1840). ("The policy of our law makes the record sufficient notice. But the case is otherwise when the deed is defective. Before his legal title can be postponed to a prior equitable title, it must appear that he had actual notice of such equity.") Also see Winsted Savings Bank Building Ass'n. v. Spencer, 26 Conn. 195, 198-99 (1857). ("The record of it, i.e., of an imperfect deed, is not even constructive notice to third persons of its existence . . . The question depends therefore upon the meaning of the statute concerning lands, which provides that the `subscribing of the name of the grantor shall be attested by two witnesses.' But this is an ancient statute, and as we suppose, has by the profession always been considered as requiring that deeds should be attested by disinterested or competent witnesses; witnesses who could testify in court in respect to the execution upon any controversy that might arise in respect to it.") (Citations omitted.)
This line of cases cited by Justice Peters ends with the case of Goodman v. Randall, 44 Conn. 321 (1877). In the Goodman case, the plaintiff's mortgage deed was unsigned by the grantor, but he claimed his mortgage deed was validated by statute: "This instrument was recorded in the records of the town where the land lies. This is notice to all the world of our title. It is an equitable title that is good to us under our statute. (Gen. Statutes, p. 554, [sic] sec. 13.)" Goodman v. Randall, supra, 44 Conn. 324. Nevertheless, the court held that this statutory provision, validating defectively executed instruments, did not apply to a mortgage deed that was not signed by the grantor, as opposed to, for example, deeds with other, more technical defects such as those with only one witness: "It is claimed that the deed may be established by a court of equity and thus have validity as a mortgage. Courts of equity will sometimes give effect to deeds that are defectively executed; but not, so far as we know, to a deed defective because it was not signed by the grantor." Id., 325-26.
In reviewing the line of cases cited by Justice Peters in Connecticut National Bank v. Lorenzato, supra, it appears that a validating statute was enacted between the cases of Winsted Savings Bank Building Ass'n v. Spencer, decided in 1857, and the case of Goodman v. Randall, decided in 1877. The statute referred to in Spencer is Title 18, Ch. 6, § 13, p. 354 of the 1875 Revision of the Connecticut General Statutes. That statute provided that "[a]n unacknowledged deed, and any instrument intended as a conveyance of lands, but which by reason of a formal defect shall operate only as a conveyance of an equitable interest in such lands, and contracts for the conveyance of lands, or of any interest therein, and all instruments by which an equitable interest in lands is created, in which such lands are particularly described, may be recorded in the records of the town in which such lands are; and such record shall be notice to all the world of the equitable interest thus created." This statute was originally enacted in 1865, with essentially the same meaning. This 1865 statute validates defective instruments intended as conveyances of land, and appears to nullify prior Connecticut Supreme Court cases which, until that time, had held to the contrary. This 1865 statute remains substantially the same to the present day, and is codified as General Statutes § 47-17.
Public Acts of 1865, Ch XVIII provided in § 2 "[t]hat contracts for the conveyance of lands, or of any interest therein, and instruments of any kind, by which an equitable interest in lands is created or conferred, where such lands are particularly described in such contract or other instrument, may be recorded in the land records of the town in which such lands are situated, and such record shall be held to be notice to all the world of the equitable interest thus created or conferred." The act was codified, after a technical revision, in Title 37, Ch. 1, § 23, p. 540 of the 1866 Revision of the Connecticut General Statutes, as follows: "[c]ontracts for the conveyance of lands, or of any interest therein, and instruments of any kind, by which an equitable interest in lands is created or conferred, where such lands are particularly described in such contract, or other instrument, may be recorded in the land records of the town, in which such lands are situated, and such record shall be held to be notice, to all the world, of the equitable interest thus created or conferred."
Wells Fargo cites several cases decided after the enactment of the 1865 validating statute. These cases however, do not consider this particular validating statute. New Haven Trust Co. v. Camp, 81 Conn. 539, 71 A. 783 (1909). (The court considered whether a deed may be determined by the laws of New York, as they existed in August 1857.) CT Page 19623 Bickart v. Sanditz, 105 Conn. 766, 136 A. 580 (1927). (The court considered whether a chattel mortgage should conform, in all respects, to the manner of execution and acknowledgment of a mortgage of land.) Bowne v. Ide, 109 Conn. 307, 147 A. 4 (1929). (The court concluded that the validating acts of 1923 and 1925 did not validate the deed at issue in the case.)
Since a validly executed mortgage deed in Connecticut is a conveyance of real property, in that it transfers legal title to the mortgagee while the mortgagor retains equitable title, General Statutes § 47-17 generally applies to the challenged Novastar mortgage deed in this case. Therefore, in applying the language of this statute to this case, a defectively executed mortgage deed "operates only as a conveyance of an equitable interest in such land . . . and . . . may be recorded in the records of the town in which such land is situated; and such record shall be notice to all the world of the equitable interest thus created." (Emphasis added.)
The first question presented by this statutory language is the nature of the "equitable interest thus created" in the context of a foreclosure and, second, whether recording the defective deed, giving "notice to all the world," operates as constructive notice to third parties, thereby preserving priority over subsequent and inferior encumbrances. Taken together, the court believes that it does, to the extent that the mortgage is otherwise valid and the documents recorded give proper notice to third parties of the nature of the encumbrance.
C. Statutory Construction
Our Supreme Court instructs that ". . . in construing statutes, [the] fundamental objective is to ascertain and give effect to the apparent intent of the legislature . . . In seeking to discern that intent, we look to the words of the statute itself, to the legislative history and circumstances surrounding its enactment, to the legislative policy it was designed to implement, and to its relationship to existing legislation and common law principles governing the same general subject matter." (Internal quotation marks omitted.) Loughlin v. Loughlin, 280 Conn. 632, 641-42, 910 A.2d 963 (2006). "In seeking to determine that meaning, General Statutes § 1-2z directs us first to consider the text of the statute itself and its relationship to other statutes. If, after examining such text and considering such relationship, the meaning of such text is plain and unambiguous and does not yield absurd or unworkable results, extratextual evidence of the meaning of the statute shall not be considered." (Internal quotation marks omitted.) Kinsey v. Pacific Employers Ins. Co., 277 Conn. 398, 405, 891 A.2d 959 (2006).
The current version of the 1865 statute, cited by Novastar, is codified at General Statutes § 47-17, and provides that "[a]n unacknowledged deed, and any instrument intended as a conveyance of land, but which by reason of a formal defect operates only as a conveyance of an equitable interest in such land, and any contract for the conveyance of land, or of any interest therein, and any instrument by which an equitable interest in land is created, in which such land is particularly described, may be recorded in the records of the town in which such land is situated; and such record shall be notice to all the world of the equitable interest thus created."
This statute applies to ". . . any instrument intended as a conveyance of land . . . or of any interest therein . . ." Since the statute applies to a wide variety of legal instruments, including deeds, mortgages, contracts for sale, leases and other instruments, the "equitable interest thus created" appears to be generically applicable to the specific instrument "intended as a conveyance of land." In the case before the court, that interest is a mortgage, and the court therefore concludes that the statute transforms a defectively executed mortgage into an equitable mortgage. An equitable mortgage may be enforced between the parties to the agreement and, therefore, this statutory language is consistent with the cases decided by our courts prior to 1865. It appears, therefore, to restate the common law. However, the language of the statute goes on to provide that a defectively executed mortgage "may be recorded in the records of the town in which such land is situated; and such record shall be notice to all the world" of the equitable mortgage thus created. Notice to all the world can mean only that recording the equitable mortgage results in constructive notice to third parties, which was contrary to the common law prior to 1865.
"There are a number of situations wherein instruments which are not effective as mortgages at law will be regarded as such under equitable principles, and thus will be considered as binding on the parties as if mortgages in due form had been properly executed. Such instruments are known as equitable mortgages. This rule is derived from the maxim that `equity regards as done that which has been agreed to be, and ought to have been done.' The circumstances upon which equitable mortgages may be predicated are various. Broadly speaking, the reservation of a lien on property which is conveyed, an appropriation of specific property to secure the performance of an obligation, or an attempt to create a mortgage, although insufficient to constitute a mortgage at law, will in equity be given the effect and operation of a mortgage." 54A Am.Jur.2d, 661-62 Mortgages, § 100 (1996).
D. Nature of Mortgage Deeds and Foreclosure in Connecticut
The nature of a foreclosure action in Connecticut may be helpful in understanding the meaning of General Statutes § 47-17, as applied to this case. "Connecticut follows the `title theory' of mortgages, which provides that on the execution of a mortgage on real property, the mortgagee holds legal title and the mortgagor holds equitable title to the property . . . As the holder of equitable title, also called the equity of redemption, the mortgagor has the right to redeem the legal title on the performance of certain conditions contained within the mortgage instrument . . . The mortgagor continues to be regarded as the owner of the property during the term of the mortgage . . . The equity of redemption gives the mortgagor the right to redeem the legal title previously conveyed by performing whatever conditions are specified in the mortgage, the most important of which is usually the payment of money. General Statutes § 47-36h . . .
"Generally, foreclosure means to cut off the equity of redemption, the equitable owner's right to redeem the property . . . The equity of redemption can be cut off either by sale or by strict foreclosure . . . In Connecticut, strict foreclosure is the rule, foreclosure by sale the exception. A decree of strict foreclosure finds the amount due under the mortgage, orders its payment within a designated time and provides that should such payment not be made, the debtor's right and equity of redemption will be forever barred and foreclosed. Most significantly, the effect of strict foreclosure is to vest title to the real property absolutely in the mortgagee and to do so without any sale of the property. A judgment of strict foreclosure, when it becomes absolute and all rights of redemption are cut off, constitutes an appropriation of the mortgaged property to satisfy the mortgage debt." (Citations omitted; emphasis added and omitted from original; internal quotation marks omitted.) Ocwen Federal Bank, FSB v. Charles, 95 Conn.App. 315, 322-23, 898 A.2d 197, cert. denied, 279 Conn. 909, 902 A.2d 1069 (2006).
Therefore, a distinction may yet be drawn between the enforcement rights associated with an equitable mortgage in strict foreclosure compared with a foreclosure by sale. Nonetheless, reformation of a defective mortgage deed may be possible in a court of equity and may result in a fully enforceable mortgage deed, with legal title vesting upon a strict foreclosure. These issues, however, are not before the court at this time, and need not be addressed for purposes of this motion for summary judgment.
III. CONCLUSION
As previously stated, the question presented in this case is whether a defectively witnessed mortgage is void as a matter of law, or if it may be enforced ahead of a subsequent, validly executed and recorded mortgage. Both parties agree that the Novastar mortgage is defectively executed, with only one witness, in violation of General Statute § 47-5(a)(4).
In its motion for summary judgment, Wells Fargo claims that the Novastar mortgage deed is void due to this omission. The court disagrees. No other infirmity in the mortgage deed has been alleged for the purposes of this motion. The Novastar mortgage, therefore, represents an "equitable interest" in the real property located at 43 Giles Avenue in North Haven, pursuant to General Statutes § 47-17. This equitable interest may be enforced in an equitable cause of action, such as foreclosure, to the extent that the mortgage is otherwise shown to be valid. See Schroeder v. Tomnlinson, 70 Conn. 348, 356, 39 A. 484 (1898). In a recent case, a superior court similarly reasoned that "[t]he modern law is that even though a defectively executed or acknowledged deed is not good as a conveyance of the legal title, Bowne v. Ide, 109 Conn. 307, 312: New Haven Trust Co. v. Camp, 81 Conn. 539, 541, it transfers the equitable title by statute and the recordation of the deed charges all subsequent parties with notice of the equitable interest held by the grantee. Sec. 47-17 now authorizes the recording of documents which only create an equitable interest and provides that the record shall be; 926; 926 notice to; 928;928 all the; 930;930 world of such; 933;933 equitable; 934;934 interest. Specifically included in this statute is an unacknowledged deed as well as ` any instrument intended as a conveyance of land, but which by reason of a formal defect operates only as a conveyance of an equitable interest in such land.' This latter obviously will include unattested or defectively attested instruments. Therefore, if a conveyance, regardless of where executed, fails to be witnessed or acknowledged, or is defectively witnessed or acknowledged, its recordation will serve to charge subsequent parties with notice of the grantee's right to go into equity to have the instrument reformed . . ." (Emphasis in original.) D'Urso v. Lyon, supra, Superior Court, Docket No. CV 99 0426188 (27 Conn. L. Rptr. 82).
"Tomlinson acquired title, therefore, as a bona fide purchaser, and, while he failed to record his deed within a reasonable time, this did not impair his right to perfect his title by a subsequent record, except as against some other purchaser of greater diligence. It was recorded on April 1st, two days before the record of the proceedings upon the execution. This priority of record, had his deed been taken after the commencement of the levy, would prima facie have given him priority of title, to be defeated only by proof that he was guilty of fraud, or that which is equitably equivalent to fraud." Schroeder v. Tomlinson, supra, 70 Conn. 356.
Based upon the allegations and pleadings in this case, the mortgage deed was executed and acknowledged by the mortgagor, but was signed only by one witness. In view of the fact that this mortgage deed was properly recorded in the North Haven Land Records, it gave constructive notice to all third parties, to the extent that the nature and substance of the encumbrance was reasonably disclosed. See People Savings Bank v. Corrado, 151 Conn. 388, 391, 198 A.2d 209 (1964); Sadd v. Heim, 143 Conn. 582, 585, 124 A.2d 522 (1956); Swaye v. Murphy, 126 Conn. 497, 500, 12 A.2d 547 (1940); Bridgeport Land Title Co. v. George Orlove Co., 91 Conn. 496, 497-98, 100 A. 30 (1917); Beach v. Osborne, 74 Conn. 405, 408, 50 A. 1019 (1902); Merrills v. Swift, 18 Conn. 257, 264 (1847); Pettibone v. Griswold, 4 Conn. 158, 162 (1822). By virtue of the language of § 47-17, actual notice to third parties is no longer required to foreclose such an equitable interest in real property, as had been required by our common law prior to the statute's original enactment in 1865.
Therefore, the Novastar mortgage is not void for omitting a second witness, and Wells Fargo's motion for summary judgment is denied.