Executive Summary: Key Legal and Evidentiary Issues

• Foreclosure proceedings involved both purchase and non-purchase mortgage components, triggering statutory limits on deficiency judgments.

• Conexus failed to follow required procedure by not paying judicial sale proceeds into court, which the court flagged as a growing concern.

• Costs claimed by the mortgagee were scrutinized for eligibility, reasonableness, and statutory authority.

• The court emphasized the need for properly organized evidence and itemized summaries in cost assessment applications.

• Legal fees far exceeded standard awards and were partly reduced due to costs attributable to correcting Conexus’ own documentation errors.

• A deficiency judgment was granted only on the non-purchase portion of the mortgage, calculated on a pro rata basis in compliance with statutory limitations.

Facts and procedural background

Conexus Credit Union 2006 brought a foreclosure action against Derrick and Kimberly Engen and several other parties with interests in the mortgaged property. The Engens had assumed a mortgage originally used to purchase rural residential property. In 2016, the mortgage was amended with a re-advance of $79,000. The Engens defaulted on payments in 2018, and after an extensive litigation history, Conexus obtained summary judgment in 2023.

The property was sold by judicial sale for $655,000 in early 2024, following an Order Nisi for Sale setting a minimum sale price of $585,000. Conexus then applied for a deficiency judgment and for an assessment of costs incurred throughout the proceedings.

Procedural irregularities and assessment of costs

The court noted a procedural irregularity: the selling officer did not pay the sale proceeds into court as required by Rule 10-47(2) of The King’s Bench Rules. Instead, the funds were paid directly to Conexus’ lawyer based on terms added to the Order Confirming Sale. These additions had not been brought to the attention of the presiding justice, contrary to established procedure. The court expressed concern about an increasing disregard for this rule.

In assessing costs, the court highlighted Conexus’ failure to present a clear, itemized summary of costs, which complicated the review. Despite this, the court reconstructed the evidence and calculated the following recoverable amounts: property taxes ($96,425.37), insurance ($27,710.52), utilities ($3,031.10), preservation costs ($9,839.41), realtor commissions ($29,082), and reduced selling officer’s fees ($6,713.25).

Legal fees and court discretion

Conexus claimed $88,033.19 in legal fees and disbursements, far above the standard foreclosure allowance of $5,500. The court acknowledged that this was not a typical case—it had spanned over three years, involved contested summary judgment, multiple appearances, extensive document production, and difficult conduct by the mortgagors. The legal work included complex issues such as rectification of the mortgage agreement and the enforceability of its terms. Ultimately, the court awarded $60,000 in legal fees, reducing the claim to account for costs related to rectification of Conexus’ own drafting errors.

Application of statutory limits on deficiency judgments

The court applied section 2 of The Limitation of Civil Rights Act, which prohibits a deficiency judgment on purchase money mortgages. Because part of the debt arose from a re-advance not used for purchasing the property, the court prorated the deficiency judgment accordingly. Conexus had calculated that the non-purchase portion represented 13.93% of the total mortgage. The court accepted this method, which was consistent with precedent, and held that only this portion was eligible for personal judgment.

Final outcome

After combining the mortgage balance and allowed costs, then subtracting the sale price, the court calculated a total deficiency of $168,797.35. Applying the 13.93% apportionment, the court granted a deficiency judgment of $23,513.47 to Conexus. The case concluded with a strong emphasis on adherence to foreclosure procedure and statutory protections for mortgagors.