United States Department of Housing & Urban Development v. Union Mortgage Co.
1995 Me. LEXIS 203, 661 A.2d 163 (1995)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
When a junior mortgagee is omitted from a senior mortgagee's foreclosure action, the proper remedy in a subsequent action to foreclose the junior's interest is not merely to grant the junior mortgagee a right of redemption, but to conduct a new public foreclosure sale.
Facts:
- RCR Services, Inc. (RCR) held a recorded first mortgage on a property in the amount of $45,153.
- Union Mortgage Company, Inc. (Union) held a recorded junior mortgage on the same property for $9,900.
- In January 1989, RCR initiated a foreclosure action on its first mortgage.
- RCR failed to name Union as a party in interest in that foreclosure proceeding.
- In June 1990, following a judgment of foreclosure, RCR purchased the property at the foreclosure sale for $80,520.26, the amount of the outstanding debt.
- RCR later conveyed its interest in the property to the United States Department of Housing and Urban Development (HUD).
Procedural Posture:
- RCR (later substituted by HUD) filed a complaint in the District Court seeking to foreclose Union's junior mortgage interest which had survived the initial foreclosure.
- The District Court issued a judgment of foreclosure, determining the action was a 'reforeclosure' and granting Union a right to redeem the property by paying HUD the amount of the original senior debt within ninety days.
- The District Court did not order a new foreclosure sale.
- Union, as appellant, appealed the District Court's judgment to the Supreme Judicial Court of Maine, arguing it was entitled to a new sale.
- HUD is the appellee in this appeal.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a junior mortgagee, mistakenly omitted from a senior mortgagee's foreclosure action, have a right to a new public sale in a subsequent proceeding to foreclose its interest?
Opinions:
Majority - Glassman, Justice
Yes. A junior mortgagee omitted from a foreclosure proceeding is entitled to a new public sale and is not limited to only the right to redeem the property. The Maine foreclosure statute grants a junior mortgagee two fundamental rights: the right to redeem the senior mortgage and the right to participate in a public foreclosure sale to receive any surplus proceeds. Limiting an omitted junior mortgagee's remedy to only the right of redemption deprives it of the crucial opportunity to bid at the sale, encourage other bidders, and potentially recover its own debt if the property sells for more than the senior mortgage amount. Therefore, to properly foreclose the omitted junior mortgagee's interest, a 'reforeclosure' must occur that complies with the original statutory requirements, including conducting a new public sale. At this new sale, HUD, as the successor to the original senior mortgagee, will have first priority to the proceeds.
Analysis:
This decision clarifies the rights and remedies for junior lienholders who are mistakenly omitted from senior foreclosure actions. It establishes that a 'reforeclosure' is the proper procedure, which must include a new public sale, not just an offer of redemption. This holding protects the economic interests of junior mortgagees by ensuring they retain their right to participate in the competitive bidding process, which is often the only way they can recover their investment. The ruling prevents purchasers at the initial flawed sale from obtaining a windfall by simply extinguishing the junior lien without affording the junior lienholder its full statutory rights.
Unlock the full brief for United States Department of Housing & Urban Development v. Union Mortgage Co.