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Leipzig v. Major Enterprise, Inc.

A-1981-97T1 (N.J. Super. App. Div. 1998) (Unpublished)

MORTGAGES; FORECLOSURE—Foreclosure is an equitable remedy and, if it finds good reason, a court may deny such remedy and stay a sale pending resolution of a money conflict between a mortgagor and mortgagee.

As part of a transaction involving the sale of commercial property, the seller took back a balloon note and mortgage which provided for monthly installments until the balance became due. Following the closing, the seller and the borrower-mortgagor became embroiled in a controversy over contamination on the property. The buyer alleged that its seller committed fraud by not disclosing prior environmental reports describing the true nature and extent of the contamination. Consequently, it refused to pay the mortgage balance when it came due.

The seller then commenced a foreclosure action and obtained a default judgment and a writ of execution directing sale of the property. In response, the buyer-mortgagor then sought an order to stay the sheriff’s sale, vacate the default judgment, and grant it leave to file an answer to the foreclosure complaint. The Chancery Division (1) stayed the sale on the condition that the buyer continue to make monthly payments, and (2) placed the action on the inactive list pending resolution of the seller’s action in the Law Division for judgment on the underlying mortgage note. Upset by this, the seller appealed, alleging that the lower court abused its discretion by staying the sale under traditional equitable principles governing the grant of temporary injunctive relief, failing to make the required findings of fact and conclusions of law, and depriving the seller of an opportunity to oppose the application. The mortgagee was unable to file any opposing papers, but in orally responding to buyer’s request for emergent relief, its attorney did not object to the stay, indicating only that he could not consent to delaying the sale. No adjournment to file responding papers was requested, nor was a motion for relief from the order filed. On those facts, the Appellate Division concluded that the lower court did not abuse its discretion.

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