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Nowosleska v. Steele

400 N.J. Super. 297, 946 A.2d 1097 (App. Div. 2008)

EJECTMENT — Where a series of transactions involving a mortgage may have involved predatory lending practices, a court could find the necessary exceptional circumstances that would allow it to set aside a judgment of ejectment.

An elderly woman owned her home of forty-three years with her daughter and son-in-law. They obtained a mortgage loan, which they used for repairs and consolidating other debts. When they failed to repay the loan, the lender filed a foreclosure action, obtained a foreclosure judgment, and scheduled a sheriff’s sale. The owners prevented the foreclosure sale when they obtained a loan from another lender for the amount owed. The owners signed a promissory note that required them to repay that note within thirty days. The owners maintained that they understood that if they did not repay the loan, which they anticipated doing with funds from their retirement accounts, the new lender would foreclosure. However, the owners had, in fact, signed a deed in lieu of foreclosure as security for the loan. The promissory note provided that, upon foreclosure, they would be paid $20,000 and forfeit all rights to the property. In order to avoid losing the property, the owners then found another lender. The lender paid off all the liens and mortgages, title and closing costs, and a fee to his company. The owners unwittingly gave that lender title to the property and signed an occupancy agreement whereby they were allowed to remain as long as they made monthly payments and were afforded the right to buy the property back within a year. The lender sold the property to someone else, who then sold it to a third person, who then filed suit to have them ejected when they failed to pay the required occupancy fee. The owners were served with the complaint, but failed to respond and a default judgment was entered against them. Four months later, the owners filed an emergency application to vacate the default and enter an answer. The lower court denied their application and they appealed. The Appellate Division reversed. The Court noted that, under Court Rule 4:50-1(f), a court may set aside a judgment if there are “exceptional circumstances.” An “exceptional circumstance” exists where the failure to set aside the judgment would result in a grave injustice. In this case, the Court found that the series of transactions may have involved predatory lending practices and therefore it qualified as an exceptional circumstance. In this case, the ultimate purchaser bought the house for about $405,000. The owners, who had secured debt totaling $145,000, lost title to their property along with about $260,000 in equity. The Court found this to be the kind of grave injustice that Court Rule 4:50-1(f) was enacted to prevent.

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