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Garruto v. Cannici

A-5639-09T1 (N.J. Super. App. Div. 2011) (Unpublished)

FORECLOSURE; MORTGAGES; FAIR FORECLOSURE ACT — The Fair Foreclosure Act has a statute of limitations for residential foreclosures and looks at the date of the last payment made by a borrower to see when it begins to run.

A decedent’s brother claimed that his sister had granted him a purchase money mortgage to secure a debt. His sister used the proceeds of the loan, together with other funds, to purchase a house. It was a 15-year loan with fixed monthly payments. The mortgage was not recorded. At the lender’s option, all outstanding principal and interest payments would become due thirty days after a default in payment. The brother claimed a balance on the loan, but could not produce the mortgage note.

According to the brother, his sister came to him and said she was having money problems and difficulty paying the loan. As a result, he and his brother had a family meeting with the sister. The other brother recommended that interest would continue to accrue on the loan, but that the decedent would not have to make any payments until she sold the house. The claimant said claimed that his brother drew up a loan modification agreement to that effect and it was signed by all three siblings. The brother could not produce the agreement and it was not recorded.

The estate contracted to sell the house. A title search revealed the recorded mortgage. The executrix asked the brother to release the mortgage, and he refused. This was not a surprise because the parties had been involved in prior intra-family disputes regarding the estate. The two surviving brothers had previously sued the executrix, alleging she had committed fraud and claiming that they were denied their proper shares of the decedent’s estate. The Law Division determined that the brothers were unable to support their claims factually, and the Appellate Division had affirmed.

In this action, the brother stated that he asked the attorney he used for the estate challenge for advice regarding the mortgage loan, which he claimed would be due at the time of his sister’s death. According to him, his attorney advised him that if he and his brother won the estate challenge he would, in essence, be paying himself back. The brother claimed that when he lost the estate challenge, he thought he had then lost his right to collect on the mortgage. His attorney then sent a notice to the executrix, stating that the mortgage was in default. During discovery, the executrix was able to provide proof of twenty payments on the mortgage, but was unable to locate additional cancelled checks, having been informed by the sister’s bank that earlier records no longer existed. Nonetheless, the executrix asserted that the sister had paid the loan in full.

The executrix then filed a motion to dismiss, and ultimately for summary judgment, on the grounds that the brother’s claim was barred by the application of the relevant statutes of limitations, laches, and for his failure to timely file a claim against the estate. The brother filed a cross-motion for summary judgment. The lower court found that there were no genuine issues of material fact because, as a matter of law, the claim was barred by both the six-year and the twenty-year statute of limitations. The lower court also found that the brother had failed to establish that the mortgage had been modified since no proof of the modification was provided. Further, the judge rejected the brother’s claim that the doctrine of promissory estoppel applied.

On appeal, the Appellate Division looked to the date of the decedent’s last payment and, assuming she defaulted thereafter, found that the Fair Foreclosure Act’s statute of limitations barred the brother’s claim absent a modification of the mortgage. The Court noted that no writing existed evidencing the alleged mortgage modification. Further, the brother’s actions did not evince any modification, either written or oral, of the mortgage.

The Court also found that the brother’s certification, the deposition testimony of the other brother, and that of the executrix were insufficient to establish the prima facie elements of the brother’s promissory estoppel claim. Even when viewing the proofs in a light most favorable to the brother, the promissory estoppel claims lacked sufficient support to present genuine material issues of fact. The Court, affirming, directed the Chancery Division, in its discretion, to enter an order either compelling the brother to cancel the mortgage of record or directing the County Clerk to cancel the mortgage of record.

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