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Mercury Capital Corp. v. Freehold Office Park, Ltd.

363 N.J. Super. 235, 832 A.2d 369 (Ch. Div. 2003)

FORECLOSURE; REDEMPTION—Until the time that a sheriff’s deed is delivered, a mortgagee has the right to both redeem the property and file a court objection, even if such actions are taken beyond the statutory ten day period within which the deed cannot be delivered; the right to such a late redemption is not predicated on there being a sustainable objection.

A mortgagee obtained a judgment in foreclosure and it bought the property at a sheriff’s sale. Ten days passed without any response from the mortgagor. However, as the sheriff made arrangements to deliver a deed, the mortgagor “allegedly presented to the sheriff’s office funds sufficient to redeem.” The sheriff refused to accept the redemption, and the mortgagor immediately applied to the Court, “objecting to the sale and seeking a restraint on the tendering of the deed to the mortgagee.” The Court restrained the sheriff from tendering the deed pending further proceedings.

The mortgagee contended that because the mortgagor neither redeemed nor filed a motion objecting to the sale within ten days of the foreclosure order, “both the right of redemption and the right to object to the sale were lost.” It also argued that even if the application was timely, the mortgagor did not state a valid objection nor did not properly attempt to redeem. Lastly, it claimed that the mortgagor had bargained away its right to redeem as part of an earlier settlement agreement.

A sheriff may deliver a deed “unless a motion for the hearing of an objection to the sale is served within 10 days after the sale or at any time thereafter before the delivery of the conveyance.” Consequently, there was no question that in the ten day period following the sheriff’s sale, “and without the need for court approval, the mortgagor ‘has an absolute right to redeem the property by tendering the full amount due on the mortgage.’” This left the question as to whether the opportunity to object or redeem is expanded until such time as the sheriff “actually delivers the deed or whether it automatically terminates with the passage of ten days.” The Court refused to adopt the mortgagee’s suggested interpretation because that would have required “the elimination or disregardment of an entire phrase of the rule (i.e., ‘or at any time thereafter before the delivery of the conveyance’).” The Court believed “that the right of redemption is an equitable remedy devised to protect the mortgagor from the forfeiture of his title, and for that reason is a ‘favored right.’” After reviewing case law, it held that because the deed had not yet been issued, “it was not too late for the mortgagor to either redeem the property or to file an application objecting the sheriff’s sale.”

The Court then addressed the mortgagee’s contention “that the ability to redeem pivots upon the court’s alternate ruling on the sufficiency of the mortgagor’s objection to the sale.” If that were the law, then redemption after the ten day period would be contingent upon the mortgagor having a sustainable objection to the sale in the first place. The Court rejected that proposition “as inaccurately stating the present status of the law in New Jersey.” The case cited by the mortgagor was “ignored” by the Court because in the fifteen years since it was decided, “it [had] only been cited once by our courts and then only in dissent.” There were subsequent cases that chose not to rely on the case cited by the mortgagee and therefore, according to the Court, it was fair to conclude that the holding in the case cited by the mortgagee, “that the right of redemption is tied to the sufficiency of the post-sale objection [was] not consistent with [later case law], and [did] not constitute an accurate statement of New Jersey law.” Citing Justice Holmes’s statement that “the life of the law ... has been experience,” the Court held that “[o]ur court’s experience with [the fifteen year old case] has been to largely ignore it.”

The Court would not resolve the factual question as to whether the funds tendered to the sheriff were “good” funds on the date presented. It left that issue to be determined by the lower court. It did, however, address the mortgagee’s contention that turning over “sufficient funds to the sheriff was not the proper mode of redeeming property.” The mortgagee referred to no legal authority for that proposition other than a learned treatise, where it was stated that the “‘proper procedure to be used for a redemption’ after the sheriff’s sale ‘is to deposit the full judgment amount, with interest, taxed costs and sheriff’s fees with the clerk of the court, and to proceed before the vicinage chancery judge… .” The Court found it noteworthy that the treatise spoke only of the “proper procedure, not a legally mandated procedure.” This was emphasized in the treatise by the following text: “Redemption should not be made to the sheriff after the sale. However, if the full judgment amount, interest, taxed costs and sheriff’s fees are tendered to the sheriff after sale and accepted by the sheriff, redemption in this instance would not be erroneous.” According to the Court, because the right of redemption is an equitable remedy, it would be inappropriate “to bar redemption because the mortgagor did not exercise the alleged preferred method of depositing the money with the clerk of the court.”

Before the foreclosure took place, the borrower and lender entered into a consent order wherein the borrower agreed to dismiss its defenses and its appeal and not to apply for “any stay [of] relief from [the] foreclosure judgment of any nature or kind including but not limited to a postponement of any foreclosure sale other than as agreed to herein, and/or challenging the manner in which the foreclosure sale was conducted… and/or to extend the statutory time period for [mortgagor] to redeem its property subsequent to a foreclosure sale.” The Court interpreted this agreement, holding that the consent order did not “support a contention that the mortgagor was thereby precluded from redeeming the property in accordance with our court rules or even from objecting to a later sheriff’s sale, but only from seeking a stay of a future sheriff’s sale or a stay pending appeal.” Further, no stay had been sought and no postponement was requested. The challenge to the sale was not made based on “the manner” in which it was conducted. It was about the purchase price obtained. This was not an attempt “to extend the time for redemption; rather, the mortgagor [was] attempting to redeem within the time period permitted” by the court rules for redemption. Even though this tactic had the effect of stretching the time for redemption, it was not seen as an attempt by the mortgagor to “extend” its right beyond the scope of the court rule.

By reason of its analysis, the Court remanded the matter to the lower court to determine whether the mortgagor had tendered good and sufficient funds.

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