Case Law Summaries

Holiday Trenton, Inc. v. Goldberger, Moore & Novick Urban Renewal, L.P.

• Opinion Date: June 13, 2001
• Real Property Law
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FORECLOSURE—A foreclosing mortgagee is entitled to recover only those post-default expenses permitted under the mortgage and needed to preserve the security of the mortgage.

After a Judgment in Foreclosure was issued in favor of a lender, the lender filed a motion to increase the judgment by a significant amount, asserting that it had expended funds to preserve the property and to pay ongoing expenses such as taxes, utilities, and insurance. The holder of an inferior judgment lien opposed the application. The lower court directed the foreclosing mortgagee to demonstrate that each expenditure was necessary to preserve the property and to demonstrate its contractual right to recover the extra expenses. The mortgage provided that, after a default, the mortgagee could pay the taxes or other charges, or pay the cost of repairing the premises, or pay the cost of otherwise preserving the security of the mortgage and the amount so spent would be added to the underlying obligation. The Court noted that the default in this case was occasioned by non-payment of principal and interest rather than a failure to pay any of the specified charges. Therefore, the mortgagee was only entitled to recover the amounts spent on capital improvements, real estate taxes, utilities charges and insurance premiums if those expenditures preserved the security of the mortgage. Here, the evidence was that the mortgagee spent a considerable sum to improve the premises in satisfaction of a tenant’s lease and not clearly for any other purpose. As a result, the lower court held that those expenditures were not the kind that could be added to the Judgment of Foreclosure. The mortgagee filed a Notice of Appeal. It also had the foreclosure sale adjourned without date. The holder of the inferior judgment lien then successfully applied to the lower court to have the sale go forward. The mortgagee sought to have the sale delayed based on its having filed a Notice of Appeal with respect to the denial of the judgment enhancement that it had sought. The sale took place anyway and the mortgagee was the successful bidder. There was a substantial amount of money left over after the satisfaction of the original Judgment of Foreclosure. Those funds were deposited with the Clerk of the Superior Court. The Appellate Division held that although the money spent by the mortgagee to comply with the tenant’s lease were not the kind of expenditures to be added to the Judgment in Foreclosure, a claim could be made in a surplus money proceeding where it would be determined how much of the surplus money would be paid to the judgment lien holder and how much would be paid to the mortgagor. Further, the Appellate Division would not review the appeal of the order that granted the judgment lien holder to proceed with the sheriff’s sale because the issue was moot. In doing so, it stated that “in any event, [the mortgagee’s] appeal ... did not deprive the trial judge of jurisdiction to enforce the judgment of foreclosure.”

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