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Huddy v. Nusko, LLC

A-5912-05T5 (N.J. Super. App. Div. 2008) (Unpublished)

LOANS; SETTLEMENT AGREEMENTS; ATTORNEYS FEES — Even though a mortgage may provide that the lender is entitled to be reimbursed for its attorney’s fees resulting from a foreclosure action, if a subsequent settlement agreement is silent as to the payment of attorney’s fees, it is an issue of fact to be determined by a court as to whether the parties intended that attorney’s fees still be payable.

Two homeowners entered into a loan agreement that provided them the opportunity to satisfy a foreclosure judgment against them and prevent their house from being sold at a sheriff’s sale. According to the terms of the agreement, if the homeowners did not repay the loan in thirty days, a quit claim deed on the homeowners’ house, signed and executed in favor of the lender’s principals, was to be recorded and the homeowners would have been barred from any legal actions or attempts to reclaim the house. Following an extension of the maturity due date, the loan remained repaid and the principals recorded the quit claim deed. Subsequently, a settlement agreement was reached between the parties. It further extended the time to repay the loan but also added interest and fees to the amount due. According to the settlement agreement, when the total amount due was paid, the principals were to execute a quit claim deed on the house in favor of the homeowners. In the event of a default on the part of the homeowners, a one-year occupancy agreement was to commence and the house was then to be sold with the proceeds to be split equally between the homeowners and the lender.

The homeowners sued to have the settlement agreement set aside. They claimed it was signed under duress. They also sought to have the amount due reduced to the original principal amount. The parties then entered into a consent agreement under which the deed was transferred back to the homeowners and a mortgage for the remaining principal under the loan, plus lawful interest, was executed in favor of the lender. The lender, after not receiving payment from the homeowners, subsequently sought to have the consent order enforced. It also sought attorneys’ fees. The lender and another mortgagee on the homeowners’ house both brought foreclosure actions against the homeowner. The homeowners later informed the lender that they were able to satisfy their debt and requested confirmation of the total amount due. The lender replied with an amount due that included the principal, interest, and attorneys’ fees. The attorney’s fees amounted to more than one quarter of the principal due.

The homeowners paid the entire amount due so that they could reclaim title to their house. They then sued the lender and the principals for violations of lending laws and consumer protection laws and sought the return of the amount that they paid towards the lender’s attorneys fees. The lower court declined to hear the newly asserted claims and granted the lender’s motion to have the settlement enforced, including for the attorneys’ fees.

On appeal, the Appellate Division declined to hear the homeowner’s argument that provisions for attorneys’ fees were not included in the terms of the mortgage or consent agreement. The claims had not been raised at trial. It found there was an unresolved question as to whether the communications between attorneys for the parties that had taken place just before the homeowners paid the lender constituted a newly negotiated settlement agreement. The Court also found that a credibility determination was necessary to resolve the question, but that it was unable to make such a determination on review. It then held that the lower court’s finding was not supported by adequate, substantial, and credible evidence. Thus, the lower court’s order to have the settlement agreement enforced was reversed and remanded for a plenary hearing as to whether a subsequent agreement was reached between the parties to fully resolve the matter in exchange for payment of attorneys’ fees by the homeowners.

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