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Hubin v. Valtrust Corporation

A-5000-97T2 (N.J. Super. App. Div. 1999) (Unpublished)

LOANS; USURY—A willing borrower does not give up its rights in a usurious transaction.

A final judgment in an action to foreclose a real estate mortgage fixes the amount due under the mortgage and directs the sale of the real estate to raise funds to satisfy it. However, when there is a dispute concerning the amount due under a mortgage, a court must determine the amount to which the mortgagee is entitled. If there is a genuine issue of material fact, a court must deny a summary judgment motion and hold a hearing to resolve the dispute. In this case, the mortgagee contended that it bought an assignment of an existing first mortgage, advanced recording fees, and gave cash to the mortgagor. The mortgagee also contended that the mortgagor paid no principal or any of the 14% interest due under the mortgage. Further, it was contended that the mortgagor violated the mortgage by transferring the property to his wife’s company. In the mortgage foreclosure action, the mortgagee claimed the face amount of the mortgage, interest at 14% per year, taxes, and attorney’s fees and costs. The mortgagor, in return, maintained that he never received the extra cash and that the principal amount of the loan was inflated to circumvent certain tax laws and to cover up a usurious transaction which in reality exacted 41% annually. The lower court determined that because the mortgagor signed the note and mortgage in the face amount and “the interest rate was acknowledged,” the mortgagor could not be heard to complain. The Appellate Division, however, held that a willing borrower does not give up its rights in a usurious transaction. Therefore, it reversed the lower court’s partial summary judgment as to the usury defense and remanded the usury of issues for a plenary hearing.

The second issue raised by the mortgagor was that the lower court should have disqualified the mortgagee’s counsel because even though the mortgagor signed a consent agreement to allow his former counsel to represent the lender in the foreclosure action, he argued that he only consented for the purpose of allowing the attorney to negotiate between the parties and arbitrate the disputed issue as to the amount due under the mortgage. The mortgagor further contended that the attorney did not fully consult with him or make a “full disclosure of the circumstances” or fully ask for his consent. The lower court judge refused to disqualify the attorney, reasoning that because the mortgagor had signed a consent, no disqualification was required. The Appellate Division, without suggesting how the issue should be resolved, remanded the matter to the lower court for a finding of fact or conclusions of law with respect to the mortgagor’s conflict of interest arguments.


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