## Facts

- RCR Services, Inc. (RCR) held a first mortgage on Maine real property in the amount of $45,153.
- Union Mortgage Company, Inc. (Union) held a junior mortgage on the same property in the amount of $9,900.
- RCR brought a foreclosure action on the first mortgage but did not name Union as a party in interest, even though Maine’s foreclosure statute required joinder of junior mortgagees.
- RCR obtained a foreclosure judgment and then conducted a foreclosure sale without notifying Union.
- RCR purchased the property at the foreclosure sale for $80,520.26, representing the balance owed to RCR.
- Because Union was not made a party to the first foreclosure, Union’s junior mortgage was not extinguished and remained an encumbrance on the property.
- RCR transferred title to the United States Department of Housing and Urban Development (HUD).
- HUD filed a separate complaint seeking to foreclose Union’s remaining interest in the property.
- The trial court granted foreclosure for HUD, concluding that Union was adequately protected by its statutory right of redemption.
- Union appealed, arguing that a redemption right alone did not sufficiently protect its interest because it had been deprived of the chance to appear and bid at the senior foreclosure sale.

## Issues

1. When a senior mortgagee forecloses without joining a junior mortgagee as required by statute, does the omitted junior mortgagee have a right to demand a new foreclosure sale so it can appear and bid?
2. Is preservation of the junior mortgage lien and the junior mortgagee’s statutory right of redemption sufficient protection for the omitted junior mortgagee’s interest?

## Decision

- The Supreme Judicial Court of Maine affirmed the judgment in HUD’s favor.
- The court held that Union’s omission from the senior foreclosure did not entitle Union to compel a second foreclosure sale.
- The court concluded that Union remained protected because its junior lien was not cut off by the first foreclosure and Union retained the statutory right to redeem.

## Legal Principles

- A junior mortgagee that is not joined in a senior foreclosure, despite a statutory joinder requirement, is not bound by that foreclosure judgment and its junior lien is not extinguished.
- The principal consequence of failing to join a junior mortgagee is that the junior mortgage remains an outstanding encumbrance and the junior mortgagee retains the statutory right to redeem.
- Maine’s foreclosure statutes do not provide an automatic remedy requiring a second foreclosure sale solely because a junior mortgagee was omitted from the first action.
- A later action to foreclose the surviving junior interest may be used to resolve title and determine the junior mortgagee’s remaining rights, rather than setting aside or re-running the earlier sale.

## Conclusion

The Maine Supreme Judicial Court held that RCR’s failure to join Union in the first foreclosure left Union’s junior mortgage intact and preserved Union’s statutory redemption right, but it did not give Union the right to force a new senior foreclosure sale to bid; accordingly, the court affirmed the foreclosure judgment entered in HUD’s subsequent action against Union’s remaining interest.


United States Department of Housing and Urban Development v. Union Mortgage Company, 661 A.2d 163 (1995)