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Schuyler Savings Bank v. Gelenitis

A-3621-96T5 (N.J. Super. App. Div. 1998) (Unpublished)

MORTGAGES; FORECLOSURE—There is a difference between material mortgage provisions and those that do not threaten a mortgagee’s security in the property. Foreclosure is not the proper remedy for breach of a mortgage’s non-material provisions.

A bank, acting as mortgagee, filed a complaint in foreclosure alleging that the mortgagor failed to occupy the property and committed waste by making unapproved renovations, in breach of the terms of the mortgage. The mortgagor, which was always current with mortgage payments, moved for summary judgment. The motion judge granted the mortgagor’s motion for summary judgment, holding that even if the mortgagor had committed waste, a foreclosure action was not maintainable because the mortgagor’s actions did not impair the mortgagee’s security interest in the real property. The judge also concluded that failure to occupy the premises did not detrimentally affect the mortgagee’s security interest such that the acceleration clause should be invoked.

In reviewing the lower court’s decision, the Appellate Division distinguished between material mortgage provisions and provisions that do not threaten a mortgagee’s security interest in real property, citing decisions holding that breach of a non-material mortgage provision does not give rise to an action in foreclosure. In this case, the Court affirmed dismissal of the bank’s foreclosure action because the claimed breaches did not affect the mortgagee’s security interest in the property.

It is interesting to note that this involved residential property and the borrowers were the bank’s former president and the bank’s former attorney.


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