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Mercer County Improvement Authority v. Trenton Studios, Inc.

A-2475-06T3 (N.J. Super. App. Div. 2008) (Unpublished)

FORECLOSURE; REDEVELOPMENT — Where a municipality holds both a mortgage and the right to pursue reversion of title on a lot it conveyed to a redeveloper, the redeveloper’s right to redeem the property in a mortgage foreclosure does not bar the governmental agency from pursuing its right to reversion under the redevelopment agreement.

A municipal agency and a redeveloper entered into a redevelopment agreement under which the redeveloper was to purchase a tract of land from the agency and redevelop it as a movie production facility. The redeveloper signed a promissory note and a mortgage in favor of the agency. Five months after sending notice to the redeveloper that payment had not been received and was overdue, the agency sent a default notice. Subsequently, the agency asserted the redeveloper that the redeveloper had defaulted under the redevelopment agreement because it did not begin construction by the targeted date. In a foreclosure action brought by the agency against the redeveloper, the lower court found that the redeveloper had the right to redeem the property under the mortgage but that the agency had the right to pursue the reversion of title remedy under the redevelopment agreement for the redeveloper’s breach.

The agency sued to reenter and repossess the premises. After finding a partner to help satisfy the mortgage, the redeveloper responded that the agency’s action for reversion interfered with its right to redeem the property. The lower court found in favor of the agency and issued an order for possession and a transfer of title to the agency.

On appeal, the Appellate Division found that under the mortgage, a default on the redevelopment agreement could constitute a default under the mortgage, but that the mortgage was not necessarily incorporated by the redevelopment agreement. As a result, it agreed with the lower court’s finding that the redeveloper’s right to redeem the property did not prevent the agency from pursuing its right to possession under the redevelopment agreement and affirmed its decision.

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