Case Law Summaries

New Jersey National Bank v. Burrascano

• Opinion Date: July 2, 2001
• Real Property Law
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MORTGAGES; SETTLEMENTS—A homeowner’s failure to comply with the terms of a consent settlement that was filed in its own bankruptcy proceeding cannot have the resultant foreclosure sale set aside on the ground that it can now raise the necessary redemption funds.

A homeowner defaulted on his mortgage. The mortgage company notified the homeowner of the default and thereafter filed a complaint to foreclose the mortgage. The homeowner, appearing pro se, admitted that a default occurred. The mortgage company moved to have the lower court enter default against the homeowner and allow it to proceed as in an uncontested foreclosure. The lower court entered default and allowed the mortgage company to prosecute the matter as an uncontested foreclosure. It also ordered a foreclosure sale to satisfy the judgment. One week earlier, however, the homeowner had filed a Chapter 13 bankruptcy petition. After the mortgage company learned of the bankruptcy filing, it moved promptly in the Bankruptcy Court to lift the automatic stay. However, before the return date on that motion, the mortgage company and the homeowner entered into a settlement agreement, whereby the homeowner agreed to pay a fixed sum of money up front, then make twelve fixed sum payments over the following year, and then make a final balloon payment at the end of that year for the balance of the money due and owing to the mortgage company. The agreement was filed with the Bankruptcy Court and it provided that if the homeowner defaulted on the agreement, that the mortgage company would be entitled to an immediate order granting relief from the automatic stay and would not be precluded from proceeding with a foreclosure sale. The homeowner paid the initial payment and the twelve monthly payments for the next year, but failed to pay the lump sum balloon payment. The mortgage company notified the homeowner of the default and advised him that if the final payment was not made within ten days, it would proceed with the foreclosure sale. The property was subsequently sold at a foreclosure sale. Then, the homeowner sought to have the foreclosure sale set aside and to allow the homeowner to redeem the property. The lower court denied the homeowner’s motion on the basis that “[h]e’s waited too long. He dillydallied. He’s made all sorts of claims about not getting the right information from the plaintiff. . . The [homeowner] had over three years to raise the money or get financing to save the property and yet he waits until the last minute, to once again, delay the foreclosure process.” The homeowner appealed, arguing that he was denied due process of law, that the judgment of foreclosure was void by reason of the bankruptcy proceeding pending at the time the judgment was entered, and that the court erred by not allowing the homeowner to redeem. The Appellate Division began by recognizing that “principles of judicial estoppel preclude [the homeowner] from impugning the foreclosure judgment after he recognized its validity in the consent order in the Bankruptcy Court.” The Appellate Division then addressed the issue of the settlement agreement and concluded that settlement agreements are contracts governed by general principles of contract law. “When the language of the settlement is clear and unambiguous, no further inquiry is necessary.” The Court found that, “here, the language of the consent order is unambiguous.” It went on, “the consent order in which the Bankruptcy Court and [the homeowner] himself ratified the judgment of foreclosure was a proper validation of the judgment’s terms as modified by the consent of the parties with the imprimatur of the Bankruptcy Court.” On this basis, the Appellate Division affirmed the lower court’s denial of the homeowner’s motion to have the foreclosure judgment set aside.

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