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South Shore Housing Associates, L.L.C. v. Hercules Associates, L.L.C..

A-6645-03T1 (N.J. Super. App. Div. 2005) (Unpublished)

FORECLOSURE; NOTICE — In a foreclosure action, notice of the sale need only be given to the owner and those who appeared in the action.

A condominium developer defaulted on a mortgage loan. After the lender started foreclosure proceedings, the parties entered into a contract to permit the lender and a replacement developer to take over the property. When the original developer could not give good title, the replacement developer sued for breach of contract and specific performance with only the bank defending. In the meantime, the bank filed a lis pendens and got a final judgment for foreclosure. The replacement developer never appeared in the foreclosure action, but it did record the contract of purchase. In its specific performance action, the replacement developer obtained various orders to adjourn the sheriff’s sale, but when the last adjournment order ran out, it did not reapply for any further adjournments. However, the bank itself put the sale off a few times.

The bank then entered into a contract with an investor who would accept an assignment of the bank’s foreclosure bid with the bank providing financing for the investor to develop the property. In the meantime, the replacement developer obtained a judgment and lien on the property based on the original developer’s breach of contract. The sheriff’s sale “was later conducted without [the bank] giving [the replacement developer] notice, and [the investor] obtained title to the property.” The replacement developer claimed that it was entitled to notice of the sheriff’s sale and that if it had received such notice, it would have bid to protect its judgment in the underlying action. The replacement developer, however, did not “deny that [it was] not in a position to bid the amount necessary for full satisfaction of the judgment.”

The Court held that pursuant to Rule 4:65-2, “[i]n a mortgage foreclosure action[,] notice of the sale need only be given to the owner and parties who appeared in the action.” The replacement developer did not appear in the foreclosure action, and thus was not entitled to notice. Since the only ground of the suit by the replacement developer against the bank and against the investor was “for interference with prospective business advantage” and it was based on the bank’s failure to give notice, and since notice was not required, the lower court properly dismissed the replacement developer’s case.

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