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Asbury Park Press, Inc. v. Steimel

A-5411-02T5 (N.J. Super. App. Div. 2004) (Unpublished)

FORECLOSURE; PARTITION—Where a judgment creditor’s only remedy is to foreclose a real property lien against a property’s co-owner, a court should not bar the sale just because the ultimate result might be a partition because the court before whom any such partition action will be heard can balance the equities at that time.

A husband conveyed title in his home from himself, individually, to himself and his wife as tenants by the entirety. Then, he failed to pay for some newspaper advertisements. The newspaper sued, and got a judgment against him. The husband and the newspaper then entered into a consent order with a payment schedule to satisfy the judgment. He did not keep up with his payments and a sheriff’s sale of his house was scheduled. Two weeks before the auction, the husband filed for bankruptcy, and the bankruptcy trustee subsequently abandoned the estate’s interest in the house. The husband then requested an order to show cause seeking to restrain the sale. The lower court granted a preliminary restraining order. Then, after a hearing, it granted the husband’s request for permanent restraints because of a fear that the sale would eventually lead to a partition and force the man’s family to vacate the house.

The Appellate Division reversed the lower court’s holding because of its conflict with N.J.S.A. 2A:17-17. That statute provides that all real estate is liable to levy and sale for the collection of judgments. In addition, the Court held that the lower court failed to consider the husband’s bankruptcy proceeding. The bankruptcy left the lien in place, but discharged the underlying debt. This left the newspaper with the ability to collect only what it was owed by foreclosing on the lien. According to the Appellate Division, the solution adopted by the lower court did not adequately protect the judgment creditor against the consequences that could follow if both the husband-debtor and his wife, in the future, filed for bankruptcy. According to the Court, there is a difference between an execution sale and the equitable remedy of partition. Specifically, partition can be sought only after an execution sale has taken place. Following such a sale, the successful buyer must file a partition application, and at that point, a court must engage in a balancing process, weighing the risk to a creditor against the impact on the debtor and his family. Since the sale had yet to occur, it would have been inappropriate for a court to consider the effects of a partition. For those reasons, the Appellate Division reversed the lower court’s decision, allowing the sheriff’s sale to proceed.

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