661 A.2d 163 | Me. | 1995
Union Mortgage Company, Inc. (Union) appeals from the judgment of the District Court
In February 1993, RCR filed a complaint, pursuant to 14 M.R.S.A. § 6321 (Supp.1994), alleging that RCR’s mortgage was entitled to priority over Union’s recorded junior mortgage and seeking to foreclose Union’s interest in the property. After a trial, the District Court issued a judgment of foreclosure on August 23, 1994. From the judgment of the trial court, concluding that the action was a “reforeclosure” within the purview of 14 M.R.S.A. §§ 6321-6325 (Supp.1994), and determining that Union’s interest would be adequately protected by permitting Union to redeem the property on payment to HUD of $80,520.26 within ninety days from the entry of the judgment, Union appeals.
Union contends that providing an omitted junior mortgagee in a subsequent action to foreclose its interest only with the right to redeem deprives the omitted mortgagee of the right to appear at the sale, to bid and to protect its interest. HUD responds that if a second sale were to occur Union would have to bid in excess of $80,520.26 to purchase the property. Accordingly, it argues that by providing Union the right to redeem the property on the payment to HUD of $80,-520.26, Union is provided the same protection it would have received had it been joined in the original proceeding.
We review the trial court’s construction of a statutory scheme as a matter of law. Stiller v. State, 627 A.2d 513, 515 (Me.1993). The foreclosure by civil action provided by 14 M.R.S.A. §§ 6321-6325 as an alternative method to the foreclosure process provided in 14 M.R.S.A. §§ 6201 and 6203 (1980 & Supp.1994) (foreclosure with and without possession) is specifically subject to section 6205 (1980).
Following a breach of a condition of a mortgage of first priority, section 6321 provides that the mortgagee may foreclose against all parties in interest and further provides:
The complaint must allege with specificity the plaintiffs claim by mortgage on such real estate, describe the mortgaged premises intelligibly ... state the amount due on the mortgage, state the condition broken and by reason of such breach demand a foreclosure and sale. Service of process on all parties in interest and all proceedings must be in accordance with the Maine Rules of Civil Procedure. “Parties in interest” include ... mortgagees ... as reflected by the indices in the registry of deeds and the documents referred to therein affecting the mortgaged premises, through the time of the recording of the complaint or the clerk’s certificate. Failure to join any party in interest does not invalidate the action nor any subsequent proceedings as to those joined.
14 M.R.S.A. § 6321.
By the terms of section 6321 a sale of property that has been judicially foreclosed does not convey the premises free and clear of a recorded interest if the holder of that
On the expiration of the period of redemption, and after the mortgagee publishes notice, the mortgagee must hold a public sale, sell the property to the highest bidder, and deliver a deed of sale to the purchaser. § 6323(1) (Supp.1994). The statute specifically provides that the mortgagee and any party in interest may bid at the sale and the deed conveys the premises “free and clear of all interests of the parties in interest joined in the action.” § 6323(1). In foreclosure proceedings conducted prior to January 1, 1995, there is no statutory requirement to notify the original parties in interest to the foreclosure action of the public sale.
By RCR’s failure to include Union as a party in interest to the original foreclosure action, Union’s interest was not foreclosed. Accordingly, unless that interest is subsequently foreclosed, Union’s junior mortgage would be elevated to the status of a senior mortgage. In such instance, “the junior mortgagee would be presented with a windfall through the mere fact of omission.” See, Note, Remedies of Junior Lienors Omitted from Prior Foreclosure, 88 U.Pa.L.Rev. 994, 998-999 (1940) (hereinafter Note). Some courts have held that in these circumstances “a purchaser at a foreclosure sale of a senior mortgage to which a junior mortgagee was not a party may by proceedings de novo, to which the junior mortgagee is a party, foreclose the senior mortgage as to him.” 55 Am.Jur.2d, Mortgages § 856 (1971). See, e.g., Jorgensen v. Endicott Trust Co., 100 A.D.2d 647, 473 N.Y.S.2d 275, 276 (1984) (holding that purchaser’s appropriate remedy by statute is to set aside sale or to refore-close); Deming Nat’l Bank v. Walraven, 133 Ariz. 378, 380, 651 P.2d 1203, 1205 (App.1982) (holding that second foreclosure action permitted to foreclose junior lien when junior lienholder omitted by mistake from first foreclosure action); Polster v. General Guaranty Mortgage Co., 180 So.2d 484, 487 (Fla.App.1965) (holding that right to reforeclose omitted junior lien is a matter of substantive law).
Maine’s civil foreclosure statute does not address the respective rights of an omitted junior mortgagee and the purchaser. We conclude that any attempt to subsequently foreclose against the junior mortgagee must preserve the junior mortgagee’s light to redeem the senior mortgage and the right to participate in a second public sale. Thus, reforeclosure proceedings must comply with the same requirements as those provided in 14 M.R.S.A. §§ 6321-6325. Accordingly, for HUD to foreclose Union’s interest, it must
There is ample justification for such a practice because it does no more than provide for the omitted lienor that which was denied to him at the previous foreclosure, i.e., a sale at which he could appear and protect his interest.... Before the prior foreclosure he was subject to such a proceeding upon maturity of the senior mortgage. Since the purchaser is accorded the rights of the senior incumbrancer, there is no reason why a prior omission should bar this legitimate right.
Note, 88 U.Pa.L.Rev. at 1006 (1940). Accordingly, the trial court erred in providing Union the right to redeem without granting it the corollary right to participate in a second public sale.
The entry is:
Judgment vacated. Remanded for further proceedings consistent with the opinion herein.
All concurring.
. 4 M.R.S.A. § 152(5)(E) and (H) (Supp.1994) grant the District Court original jurisdiction concurrent with the Superior Court and authorize the grant of equitable relief in "[a]ctions to foreclose mortgages [pursuant to 14 M.R.S.A. §§ 6321-6325 (Supp.1994)]” and "actions for the foreclosure of mortgages for real and personal property and for redemption of estates mortgaged.”
. Although RCR Services, Inc. initiated the present proceeding, because it had conveyed its interest in the property to the United States Department of Housing and Urban Development by a deed dated September 14, 1990, that Department was substituted as the plaintiff prior to the trial of this matter.
. Section 6205 (1980) provides, in pertinent part: When proceedings for the foreclosure of any prior mortgage of real estate have been instituted by any method provided by law, the owner of any subsequent mortgage of the same real estate or any part of the same real estate may, at any time before the right of redemption from such prior mortgage has expired, in writing, request the owner of such prior mortgage to assign the same and the debt thereby secured to him, upon his paying the owner of the prior mortgage, the full amount, including all interest, costs of foreclosure and such other sums as the mortgagor or person redeeming would be required to pay in order to redeem.
. We note that by P.L.1993, ch. 544, 14 M.R.S.A. section 6323 was amended to provide, “In foreclosures by civil action commenced on or after January 1, 1995, the mortgagee shall cause notice of the public sale to be mailed by ordinary mail to all parties who appeared in the foreclosure action or to their attorneys of record.’’