Dime Savings Bank v. Cornaglia

Lavery, J.,

dissenting. Because the facts of this case, established by the record, reveal manifest injustice, I respectfully dissent.

The facts of this case are undisputed. The defendant Rose Marie Cornaglia mortgaged her home to The *557Dime Savings Bank of Wallingford so that her son, Carl, and his wife, Lucy, could buy property in Wallingford known as parcel B. Although Carl and Lucy signed a note promising to pay the bank $150,000, Rose never signed the note. Rose mortgaged her home because the bank wanted more security than the mortgages on parcel B and Carl and Lucy’s house at 58 North Branford Road in Wallingford.1

After Carl and Lucy failed to repay the note, the bank began foreclosure proceedings against all three pieces of property. Lucy, Carl and Rose were defaulted and the trial court ordered a foreclosure by sale on April 20, 1992.

In early June, the bank filed two judgment liens on parcel B, immediately subsequent in priority to the bank’s mortgage. A few days later, on June 12,1992, Carl and Lucy filed for chapter 11 bankruptcy protection. The automatic bankruptcy stay protected both parcel B and Carl and Lucy’s residence from the bank’s foreclosure proceeding. The bank continued foreclosure proceedings against Rose’s home, while moving in bankruptcy court to lift the stay partially so it could foreclose on parcel B to satisfy its judgment liens. The bank, however, did not request the bankruptcy court to lift the stay as to its first mortgage on parcel B.

Because the bank refused to subrogate Rose or to proceed against the Carl and Lucy’s property first, Rose moved to open the judgment in October, 1992, seeking to have the court order the bank to subrogate *558her or proceed against the other property first.2 The trial court granted only Rose’s request to extend the sale date of parcel B, and specifically ordered that the bank was not required to subrogate Rose. Thus, although Rose mortgaged her property to secure another’s debt with the knowledge that the borrower’s property would be the primary security, the bank was permitted to use parcel B to satisfy its two judgment liens subsequent in time to its first mortgage on the property and take Rose’s property to satisfy the mortgage. This appeal resulted.

The facts as alleged in the bank’s complaint alone establish, as a matter of law, that Rose was a surety. See Farmers & Mechanics Savings Bank v. Sullivan, 216 Conn. 341, 350, 579 A.2d 1054 (1990) (appellate review absent a finding limited to determining whether record established status as matter of law); Stroiney v. Crescent Lake Tax District, 205 Conn. 290, 296, 533 A.2d 208 (1987) (plaintiff’s factual allegations constitute judicial admissions that appellate courts can use to review trial court’s ruling). Suretyship results where one mortgages property to secure the debt of another. Cross v. Allen, 141 U.S. 528, 534, 12 S. Ct. 67, 35 L. Ed. 843 (1891); A. Stearns, Law of Suretyship (5th Ed. Elder 1951) § 2.2; E. Spencer, Suretyship (1913) § 9; Restatement of Security (1941) § 82, comment h; 72 *559C.J.S. Principal and Surety (1987) § 36; 74 Am. Jur. 2d Suretyship (1974) § 12; see also Quinnipiac Brewing Co. v. Fitzgibbons, 73 Conn. 191, 197, 47 A. 128 (1900) (husband who mortgaged his own property to secure loan to wife is surety); Ayres v. Husted, 15 Conn. 504, 517 (1843) (wife who mortgaged her own property to secure husband’s debt is surety). In this case, Rose mortgaged her home to secure Carl and Lucy’s debt. Rose neither signed the note nor received any money from the bank. By her pledge Rose became a surety as a matter of law.

As a surety, Rose was entitled to be subrogated to all of the securities held by the bank against Carl and Lucy upon payment of the debt.3 See Spitz v. Century Indemnity Co., 129 Conn. 396, 398, 28 A.2d 874 (1942); Restatement, Security (1941) § 141; Restatement, Suretyship (Council Draft No. 2 1993) §§ 23 and 24; A. Stearns, supra, § 11.1; L. Simpson, Suretyship (1950) § 47. Once subrogated, Rose also had the right to the same priority accorded the debt when held by the bank. See American Surety Co. of New York v. Bethlehem Bank, 314 U.S. 314, 317, 62 S. Ct. 226, 86 L. Ed. 241 (1941); Restatement, Security, supra, § 141, comment a; Restatement, Suretyship, supra, § 25; A. Stearns, supra, § 11.1; L. Simpson, supra, § 47.

Rose’s status as a surety also entitled her to insist that the bank collect first from Carl and Lucy’s property before resorting to her home provided that (1) failure to do so threatened hardship to Rose, (2) Rose paid off the debt and (3) Carl and Lucy’s property was available. See Restatement, Security, supra, § 131; E. Spencer, Suretyship (1913) § 133; 72 C.J.S., Principal and Surety (1987) § 219 (b); 74 Am. Jur. 2d, Sur*560etyship (1974) § 203. The first two conditions were met because Rose risked losing her home and offered to pay the judgment in its entirety, but the bank itself ensured that Carl and Lucy’s property was unavailable. By seeking relief in bankruptcy court only as to its two judgment liens, and ignoring its own prior mortgage on the property, the bank could collect its judgment liens from parcel B and profess to the trial court that parcel B was not amenable to foreclosure. The bank’s own tactical maneuvering was the sole reason it could not foreclose on Carl and Lucy’s property.

Foreclosure is an equitable proceeding in which the goal is complete justice. Virginia Corp. v. Galanis, 223 Conn. 436, 448, 613 A.2d 274 (1992). “One who seeks equity must also do equity and expect that equity will be done for all.” Gelinas v. West Hartford, 225 Conn. 575, 587, 626 A.2d 259 (1993). Although Rose had a right to subrogation, the bank refused to subrogate her. Thus, the bank sought equity without doing equity.

Moreover, those that come into equity must come with clean hands. Poliveri v. Peatt, 29 Conn. App. 191, 202, 614 A.2d 484, cert. denied, 224 Conn. 913, 617 A.2d 166 (1992). By preventing itself from foreclosing on parcel B, the bank thwarted Rose’s equitable right to have the bank seek satisfaction of the debt from Carl’s property before resorting to her home. By violating an equitable principle, the bank comes to equity with unclean hands.

Thus, we are presented with the following: the bank seeks the equitable relief of foreclosure but refuses to do equity, as it must, and comes to equity with unclean hands, as it must not. Rose is forced to choose either to become a surety for the bank’s judgment liens and pay off the mortgage debt and the judgment liens or to lose her home. The trial court denied Rose her equitable rights as a surety and granted an undeserving *561party equitable relief but refused to explain its reasoning. Finally, the majority permits justice to be strangled by procedure even though the bank’s complaint recites the basis of suretyship.

It is clear from the record as it now stands that Rose was a surety and, therefore, deserved certain rights. It is equally clear that she was deprived of the protection of those rights by the trial court in favor of the bank which refused to do equity or to permit equity to be done. This court has the authority to look to the plaintiffs factual allegations that constitute judicial admissions to review the trial court’s decisions. Stroiney v. Crescent Lake Tax District, supra. I would, therefore, reverse the judgment and remand the case for a new hearing.

Alternatively, I would remand for further articulation because the record lacks an explanation for the trial court’s actions. Although we do not remand for articulation “under normal circumstances”; J.M. Lynne Co. v. Geraghty, 204 Conn. 361, 367-77, 528 A.2d 786 (1987); our appellate courts do remand for articulation, even where the appellant has failed to satisfy our rules regarding perfection of the record. See, e.g., State v. Patterson, 227 Conn. 448, 455, 629 A.2d 1133 (1993); Connecticut Bank & Trust Co. v. Winters, 225 Conn. 146, 163, 622 A.2d 536 (1993); Lauer v. Zoning Commission, 220 Conn. 455, 470, 600 A.2d 310 (1991); Associated Catalogue Merchandise, Inc. v. Chagnon, 210 Conn. 734, 751, 557 A.2d 525 (1989); State v. Garrison, 199 Conn. 383, 388, 507 A.2d 467 (1986); State v. Lafferty, 191 Conn. 73, 76, 463 A.2d 238 (1983); Grunschlag v. Ethel Walker School, 189 Conn. 316, 321, 455 A.2d 1332 (1983); Kaplan v. Kaplan, 185 Conn. 42, 46, 440 A.2d 252 (1981); State v. Ostroski, 184 Conn. 455, 460-61, 440 A.2d 166 (1981); Powers v. Powers, 183 Conn. 124, 125, 438 A.2d 845 (1981); North Park *562Mortgage Services, Inc. v. Pinette, 27 Conn. App. 628, 633-34, 608 A.2d 714 (1992).

By refusing to remand and allowing Rose’s appeal to die a procedural death, the majority breaks with the precedent established by our Supreme Court in Connecticut Bank & Trust Co. v. Winters, supra. In that case, our Supreme Court reviewed a trial court’s ruling in a foreclosure action in which the appellant failed to perfect the record as required by the rules of practice. The court exercised its “authority to order a remand because this case required the trial court . . . to exercise its equitable powers to achieve substantial justice among the parties, and the present record provides an insufficient basis upon which to review that exercise of equitable discretion.” Id. We should follow the example of our Supreme Court and remand for articulation where, as here, it is our duty to review the equitable discretion of the trial court.

The majority complains that the only alternative to this unduly harsh result is anarchy. Our precedents, however, guide this court in deciding when to remand for articulation. Although remand is unavailable in “normal circumstances,” remand is appropriate where necessary for the interests of justice; Sadloski v. Manchester, 228 Conn. 79, 85, 634 A.2d 888 (1993); where required for our review of equitable discretion; Connecticut Bank & Trust Co. v. Winters, supra; where serious civil penalties hang in the balance; Carothers v. Capozziello, 215 Conn. 82, 114, 574 A.2d 1268 (1990); and where the appellant had attempted in good faith to perfect the record. North Park Mortgage Services, Inc. v. Pinette, supra. In this case, complete justice, the goal of all equitable proceedings, requires that we remand for articulation.

Finally, the spirit of the rules of appellate procedure dictates that we remand for articulation. Practice Book *563§ 4187 requires that the rules be interpreted liberally where failure to do so would result in injustice. Section 4187 also states explicitly that the rules are designed to facilitate business and advance justice. Although the majority’s solution certainly facilitates business, it certainly does not advance justice.

“[T]his court does not favor unyielding adherence to rules of procedure where the interests of justice are thereby disserved . . . .” (Internal quotation marks omitted.) State v. Hall, 213 Conn. 579, 593, 569 A.2d 534 (1990). It is clear that a remand for articulation is necessary, within our power, envisioned and intended by our rules of appellate procedure, supported by our precedent and imperative to achieve justice in this case. I would, therefore, reverse and remand for a new hearing in light of the record establishing Rose’s surety status and her right to the relief requested, or in the alternative, remand this case for articulation.4

The complaint states: “As further security for the payment of said note [signed by Carl and Lucy], the Defendant, Rose Marie Cornaglia, and one Basil Cornaglia, mortgaged to the plaintiff by their mortgage deed” her residence at 123 South Main Street in Wallingford. The complaint further states that Basil Cornaglia, Rose’s husband, died on April 19, 1988. Rose succeeded to his interest in the residence.

Rose’s prayer for relief sought “(1) That the [bank] be ordered to first seek satisfaction of the debt underlying this action from the property of the defendants Carl and Lucy Cornaglia, before having recourse to the property of the defendant Rose Marie Cornaglia; or, in the alternative

“(2) That the [bank] be ordered to assign the debt and mortgage underlying this action, and the judgment herein, to the defendant Rose Marie Cornaglia upon payment by the said defendant to the [bank] of the amount of the judgment herein, plus interest and costs, including the Committee’s reasonable fees and expenses; and
“(3) That the sale date be extended to March 13,1993 to afford the defendants a reasonable time within which to obtain permission from the Bankruptcy Court to proceed with a private sale of Parcel B, as proposed herein, or to obtain the funds to pay the judgment, as aforesaid.”

Rose offered to pay the full judgment rendered against her, plus interest and costs. See footnote 2.

The majority asserts that Rose denies liability for the debt in this appeal. This statement, however, is unsupported by the record. Rose necessarily admits her liability by asserting her status as a surety. By seeking to assert her equitable rights pertaining to sureties, she admits that, as a surety, she is liable for the mortgage debt.

Rose disclosed no defense to the foreclosure action because she had no defense to her liability for the mortgage debt. Further, Rose acted properly by not appealing the judgment of foreclosure by sale because she had no basis for appeal. Her equitable rights were first infringed when the bank sought selective relief from the stay and refused to subrogate her to the mortgage.