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United States v. Scurry

193 N.J. 492, 940 A.2d 1164 (2008)

FORECLOSURE; LACHES — Where a mortgagor’s claimed suffering based on a homeowner’s delay in seeking to set aside a sheriff’s sale does not outweigh the upheaval to the homeowner that would be caused by being dispossessed from his or her home, a court should not reject the homeowner’s application to vacate a foreclosure judgment based on the passage of time.

After a homeowner fell behind on her mortgage, her mortgagee brought a foreclosure action. Following the homeowner’s declaration of bankruptcy, the mortgagee was granted relief from the automatic stay. A sheriff’s sale was held on the scheduled date, at which time the mortgagee bid on, and purchased, the house. About three months later, the mortgagee took possession of the premises. This was the same day that the sheriff’s department served the writ of possession. Eleven days later, the homeowner’s attorney contacted the mortgagee claiming that the homeowner never received notice of the impending sheriff’s sale and that she had deposited $10,000 in his trust account in an attempt to resolve the matter and retake possession of the house.

The mortgagee never responded. The homeowner then attempted to have the sheriff’s sale vacated on the grounds that the mortgagee never provided proper notice of the scheduled sale. The lower court held that although the mortgagee had not provided adequate notice, the nine month delay from the date that its borrower was evicted until when she sought vacation of the sheriff’s sale amounted to laches by reason of an inexcusable delay. The lower court found that the delay in seeking to vacate the sheriff’s sale prejudiced the mortgagee. The lower court also noted that the amount of money deposited by the homeowner with her attorney was short of what was needed to pay the outstanding balance and that she had three prior bankruptcies. On appeal, the Appellate Division ruled that because the homeowner did not appear able to satisfy the mortgage and that her delay in attempting to resolve the matter was inexcusable, the lower court had properly decided the matter.

On review, the New Jersey Supreme Court pointed out that the doctrine of laches is intended to discourage stale claims but is only to be enforced when a party has had ample opportunity to assert a right but delayed in doing so to the detriment of an opposing party that had acted in good faith. Thus, it held that the lower court abused its discretion because it did not offer a rational explanation for its decision and that its findings departed from established standards. The Court pointed out that the mortgagee acknowledged that it failed to serve notice of the scheduled sheriff’s sale by certified or registered mail. It also pointed out that the first time the homeowner received notice that she was losing possession of the property was when the writ of possession was served on her, roughly three months after the sheriff’s sale. The Court also pointed that on the same day that the homeowner received the writ of possession, she contacted her attorney who in a timely manner, contacted the mortgagee in an attempt to amicably resolve the matter. It noted that the mortgagee never responded. Furthermore, the Court pointed out that the premises remained vacant until the Court’s review.

The Court held that, on balance, the prejudice that the mortgagee claimed it suffered based on the homeowner’s delay did not outweigh the upheaval to the homeowner’s life of having been dispossessed of her home. Accordingly, the Appellate Division’s decision was reversed and the matter was remanded to the lower court. The Court noted that given the circumstances and the passage of time since the sheriff’s sale, it would not have been practical to restore the parties to point at which the mortgagee failed to give proper notice to the homeowner. So, it directed the lower court to make a determination on whether the homeowner would have been financially able to redeem the house. If she could not have, then the sheriff’s sale should stand and title to the house should remain with the mortgagee. If the homeowner was found to have been able to redeem the house, then she was to be given the same opportunity to purchase the house that she would have had if she had properly received notice of the sheriff’s sale.

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