Ross v. Ventimiglia

A-1714-97T5 (N.J. Super. App. Div. 1998) (Unpublished)
  • Opinion Date: October 22, 1998

MORTGAGES; FORECLOSURE; RENT—Not until a mortgagee or buyer at a foreclosure sale takes actual possession of the property is it entitled to collect rent from the mortgagor in possession.

A mortgagee sought payment for use and occupancy of a single-family residence after entry of a judgment of foreclosure. It also sought payment for a stove and built-in dishwasher that the mortgagors had removed from the premises. By its terms, the mortgage covered “all fixtures that are now, or will be attached to the land or buildings (for example, furnaces, bathroom fixtures and kitchen cabinets)... .” The mortgage also gave the mortgagee the right to “take possession and manage the property including the collection of rents and profits” upon the mortgagor’s default. While the foreclosure action was pending, the mortgagor filed a bankruptcy petition. Eventually the bankruptcy court lifted the stay and final judgment of foreclosure was entered on April 15, 1996. On May 6, 1996, the bankruptcy court granted a discharge of the mortgagors. On September 4, 1996, the premises were sold at auction to the mortgagee. The sheriff’s deed issued September 13, 1996, but the mortgagors continued to occupy the premises until November 18, 1996. Under these facts, the lower court found that the mortgagor was obligated to pay fair market rental from May 6, 1996 until the end of October, 1996.

The Appellate Division ruled that a mortgagee has the right to take possession of the mortgaged premises after default, but that only when the mortgagee acts upon the default and takes possession, does it gain the rights of a mortgagor that arise from possession. Thus, a receiver appointed to collect rents has no right to rents that had accrued prior to its appointment because a mortgagee is not entitled to rents accrued before the date of taking possession. Here, the mortgagee did not exercise its right to possession during the period in question. Consequently, the Appellate Division ruled that it was not entitled to rent. In addition, because the action before the lower court was not one for ejectment, the mortgagee was not yet entitled to use and occupancy.

Both the lower court and the Appellate Division agreed that the stove and dishwasher were fixtures and that the mortgagor was liable for removal of them in contravention of the security interest granted by the mortgage.