NJ Supreme Court Rules in Favor of Homeowner in Challenge to Foreclosure Sale Based on Deficient Sheriff's Sale Notice
In a victory for homeowners, the New Jersey Supreme Court has ruled that where notice of a sheriff's sale was procedurally deficient, the equitable doctrine of laches will not serve to bar relief to the homeowner. U.S. v. Scurry, A-14 September Term 2007.
In this case, the homeowner was sued in foreclosure by her lender after falling behind in her mortgage payments. The homeowner subsequently filed Chapter 13 bankruptcy in an effort to save her home, however she also fell behind in her post-petition mortgage payments resulting in the bank obtaining relief from the automatic stay of the bankruptcy case. The bank then returned to the foreclosure court, obtained final judgment and received notice of a sheriff's sale date. Pursuant to NJ Court Rule 4:65-2, the bank was required to provide the homeowner with at least 10 days' prior written notice of the sheriff's sale by registered or certified mail return receipt requested. The bank was unable to prove that it satisfied this requirement, failing to produce a return receipt card. Notwithstanding, the sheriff's sale was held and the bank was the successful bidder.
Approximately 3 months after the sheriff's sale had concludedd, the sheriff's department served the homeowner with a writ of possession which prompted the homeowner to immediately contact her bankruptcy lawyer. The homeonwer then deposited the post-bankruptcy mortgage arrears with her lawyer, and her lawyer promptly notified the bank's foreclosure counsel that he was holding the funds necessary to cure the post-petition arrears. The bank's counsel never responded, and on September 8, 2005 the homeowner and her personal belongings were removed from the property.
Three months after the lockout, the homeowner filed a motion before the Chancery Court seeking to vacate the sheriff's sale on the basis of lack of proper notice. Not surprisingly, the bank opposed the motion claiming it had incurred $3000 in costs to enforce the lockout and that it would be prejudiced by the inordinate delay - the sheriff's sale having occurred some 7 months earlier. The trial court denied the homeowner's motion, and after an unsuccessful motion for reconsideration she appealed to the Appellate Division. The Appellate Division affirmed, finding that even though the bank didn't properly provide notice of the sheriff's sale the trial court did not abuse its discretion given the delay caused by the homeowner's bankruptcy case, the further delay after she became aware of the sheriff's sale, and the absence of any evidence of her financial ability to rectify the situation. The Appellate Division concluded that the equitable doctrine of laches, which will deny a party enforcement of a known right when the party engages in an inexcusable delay in exercising that right to the prejudice of the other party, barred relief to the homeowner.
Championing the rights of substantive due process, the New Jersey Supreme Court overturned the Appellate Division's decision. The Court found, in balancing the equities, the prejudice, alleged by the bank did not match the prejudice sustained by the defendant who had been dispossessed from her home without the bank's compliance with the procedural notice requirements. The Supreme Court therefore concluded that application of the equitable doctrine of laches to bar relief to the defendant constituted an abuse of discretion.
In this author's opinion, this represents a substantial victory for homeowners. Too many times, lenders' foreclosure attorneys don't comply with procedural rules and get away with it because most litigants in this position don't have the financial resources to mount a challenge. The Supreme Court apparently was not willing to overlook such a substantial defect in the notice requirements imposed by the New Jersey Court Rules.
In this case, the homeowner was sued in foreclosure by her lender after falling behind in her mortgage payments. The homeowner subsequently filed Chapter 13 bankruptcy in an effort to save her home, however she also fell behind in her post-petition mortgage payments resulting in the bank obtaining relief from the automatic stay of the bankruptcy case. The bank then returned to the foreclosure court, obtained final judgment and received notice of a sheriff's sale date. Pursuant to NJ Court Rule 4:65-2, the bank was required to provide the homeowner with at least 10 days' prior written notice of the sheriff's sale by registered or certified mail return receipt requested. The bank was unable to prove that it satisfied this requirement, failing to produce a return receipt card. Notwithstanding, the sheriff's sale was held and the bank was the successful bidder.
Approximately 3 months after the sheriff's sale had concludedd, the sheriff's department served the homeowner with a writ of possession which prompted the homeowner to immediately contact her bankruptcy lawyer. The homeonwer then deposited the post-bankruptcy mortgage arrears with her lawyer, and her lawyer promptly notified the bank's foreclosure counsel that he was holding the funds necessary to cure the post-petition arrears. The bank's counsel never responded, and on September 8, 2005 the homeowner and her personal belongings were removed from the property.
Three months after the lockout, the homeowner filed a motion before the Chancery Court seeking to vacate the sheriff's sale on the basis of lack of proper notice. Not surprisingly, the bank opposed the motion claiming it had incurred $3000 in costs to enforce the lockout and that it would be prejudiced by the inordinate delay - the sheriff's sale having occurred some 7 months earlier. The trial court denied the homeowner's motion, and after an unsuccessful motion for reconsideration she appealed to the Appellate Division. The Appellate Division affirmed, finding that even though the bank didn't properly provide notice of the sheriff's sale the trial court did not abuse its discretion given the delay caused by the homeowner's bankruptcy case, the further delay after she became aware of the sheriff's sale, and the absence of any evidence of her financial ability to rectify the situation. The Appellate Division concluded that the equitable doctrine of laches, which will deny a party enforcement of a known right when the party engages in an inexcusable delay in exercising that right to the prejudice of the other party, barred relief to the homeowner.
Championing the rights of substantive due process, the New Jersey Supreme Court overturned the Appellate Division's decision. The Court found, in balancing the equities, the prejudice, alleged by the bank did not match the prejudice sustained by the defendant who had been dispossessed from her home without the bank's compliance with the procedural notice requirements. The Supreme Court therefore concluded that application of the equitable doctrine of laches to bar relief to the defendant constituted an abuse of discretion.
In this author's opinion, this represents a substantial victory for homeowners. Too many times, lenders' foreclosure attorneys don't comply with procedural rules and get away with it because most litigants in this position don't have the financial resources to mount a challenge. The Supreme Court apparently was not willing to overlook such a substantial defect in the notice requirements imposed by the New Jersey Court Rules.
Comments