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City of Jersey City v. Vasquez

A-3562-08T1 (N.J. Super. App. Div. 2010) (Unpublished)

MORTGAGES; STANDING — The assigner of a mortgage has no standing to seek remedies under the mortgage unless the mortgage is reassigned to it.

Two-family houses were built as part of a federally funded affordable housing project. They were only to be sold to low and moderate income buyers. A woman purchased a home and executed two mortgages as required by the project. One mortgage was subordinate to the other and specifically prohibited the woman from selling or transferring title for ten years at a price exceeding the maximum resale price set by the municipality. If she were to make a “non-exempt” transfer, she had to repay 95% of the amount in excess of the resale price. The municipality assigned the second mortgage to a development corporation, an autonomous agency created to administer the federal grants being used to implement the project. One month before the end of the ten-year restriction period, the development corporation the maturely discharged the second mortgage. When the municipality became aware of the second mortgage’s discharge, it sued the woman claiming breach of contract and unjust enrichment. It also alleged that she was required to pay 95 percent of the amount that she received in excess of the resale price. The municipality claimed that the mortgage discharge was executed in error and that “it was not paid at all.” After the action began, the development corporation, by resolution, authorized the municipality to prosecute, defend, settle, and take all other actions in the case.

The lower court held that the municipality lacked standing to bring the action because the development corporation was an autonomous body. The lower court would also have dismissed the complaint, in part, because the first mortgagee, as an indispensible party, was not joined in the proceedings.

On appeal, the Appellate Division affirmed, but, to the extent the lower court may have dismissed the case due to the municipality’s failure to join an indispensible party, it disagreed with the ruling. Since the municipality was seeking money damages, a recovery would not affect the first mortgagee’s priority and it was not necessary to join the first mortgagee as a party in this action. On the other hand, the Court agreed with the lower court that the municipality had no standing to bring the action as it had no interest in the mortgage when the case was commenced. According to the Court, the resolution authorizing the municipality to represent the assignee did not reassign the mortgage or give any interest in it to the municipality. The Court’s decision did not preclude the filing of a new action by the development corporation as a proper party to bring suit.


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