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Investors Savings Bank v. Harvard Evergreen Properties

HNT-L-280-10 (N.J. Super. Law Div. 2010) (Unpublished)

FORECLOSURES — While New Jersey has a statute that requires that a fair market credit be given in connection with a foreclosure, that statute is only applicable in a suit for a deficiency action once the property has been sold; therefore, a court may issue a money judgment for the entire amount owed on the note if the creditor has not first foreclosed on the property.

Undisputedly, a commercial mortgage was in default. The lender chose not to proceed by way of foreclosure. Instead it sued for the amount owed. The borrower argued that the lender had “failed to provide [it] with a ‘release price’ – that is, a price that the [lender] would accept for a sale of [the] property in order to discharge the lien.” Essentially, the borrower argued that it was entitled to a fair-market credit on its property before the court could issue a money judgment for the amount owed. New Jersey has a statute that requires a fair market credit to be given, but that statute is only applicable in a suit for a deficiency action once the property has been sold. Also, in New Jersey, “a creditor need not foreclose first and proceed immediately to a money judgment” when “the debt secured is for a business or commercial purpose other than a one-family, two-family, three-family or four-family residence which the owner or immediate family resides.” For this reason, the Court refused to “make an equitable exception to [what is a] clear statutory scheme.” Therefore, whether the debtor, as a practical matter, could not sell its property, was irrelevant to the Court. Reaching that conclusion, the Court found “no right to amend the statute to further [the borrower’s] idea of a better public policy as to timing of a fair market value credit.”


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