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HSBC Bank USA, National Association v. Vasquez

A-3053-09T2 (N.J. Super. App. Div. 2011) (Unpublished)

FORECLOSURE; FRAUD; BROKERS — Fraud is not an independent basis for equitable relief in a foreclosure action when the fraudulent act alleged to be committed was by a third party, such as by a real estate broker.

Homeowners bought their house with a purchase money mortgage from a bank. They defaulted and the bank filed a foreclosure complaint. A judgment was entered to sell the property through a sheriff’s sale. The homeowners contacted a real estate broker for help. The real estate broker advised them to speak with an attorney. The homeowners did not have direct contact with the attorney, instead communicating with him through the real estate broker. The homeowners made checks payable to the real estate broker, who in turn, would tell them it would serve as their legal payment. The attorney claimed he never received these payments. He claimed he represented them on a pro bono basis to vacate the sheriff’s sale. After the second postponement of the sheriff’s sale, the bank sent the homeowners a letter informing them of the final change in date.

The homeowners unsuccessfully moved to vacate the sale. They then appealed from the order denying their motion. The homeowners’ motion to vacate was premised on an allegation that they were victims of a mortgage rescue fraud perpetrated by the real estate broker. The lower court denied the motion, explaining that fraud perpetrated by a third party did not justify vacating the sheriff’s sale.

They appealed further, but the Appellate Division affirmed, ruling the lower court did not abuse its discretion when denying the motion to vacate the sale based on the real estate broker’s actions. Under New Jersey’s court rules, a motion to vacate a sheriff’s sale requires that any objection to the sale must be served within ten days following the sale or before delivery of the deed, whichever is later. No matter how calculated, the ten day period had expired before their objection was filed. Courts also will set aside a sheriff’s sale for fraud, accident, surprises, mistake, irregularities in the conduct of the sale, or for other equitable considerations. On that basis, the homeowners argued that the real estate broker’s conduct was grounds for equitable relief. However, the Court ruled that the real estate broker was entirely unaffiliated with the homeowners. The relevant case law does not speak to fraud as an independent basis for equitable relief when the act is committed by a third party.

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