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US Bank National Association v. Mahn

A-2369-10T1 (N.J. Super. App. Div. 2011) (Unpublished)

FORECLOSURE; NOTICES — If insufficient notice of a sheriff’s sale is given, the preferred remedy is one which restores the status quo, but a court’s power to void a sheriff’s sale is discretionary and is to be based on equitable considerations.

Borrowers defaulted on their mortgage loan and the lender filed a foreclosure complaint. The borrowers failed to respond and a default judgment was entered. A sheriff’s sale was scheduled, but it was repeatedly adjourned. The initial notice was sent by certified mail, but the subsequent adjournment notices were sent by regular mail. The borrowers claimed they did not receive the last adjournment notice and that they first learned that the sheriff’s sale had taken place when they called a representative of the bank to seek a loan modification. The lender claimed that all notices were sent and it provided copies to the court. The lower court recognized a disputed issue of fact as to the borrowers’ receipt of actual notice of the sheriff’s sale. However, instead of vacating the sale, the lower court extended the redemption period. In doing so, it rejected the borrowers’ argument that, had they had received notice of the sale, they would have requested additional adjournments or sought relief in the bankruptcy court. The lender argued that the borrowers were only interested in delaying the inevitable, and that they had previously filed a bankruptcy petition and the automatic stay was lifted allowing the foreclosure. In extending the redemption period for the borrowers, the lower court relied on a New Jersey Supreme Court case, United States v. Scurry, 103 N.J. 492 (2008), in which the Supreme Court approved an extension of the redemption period as a remedy for a lender’s failure to notify the borrowers. The borrowers appealed, but the Appellate Division affirmed.

In doing so, the Court rejected the borrowers’ claim they were entitled to receive notice by certified mail and that notice by regular mail was inadequate. It held that Court Rule 4:65-2, dealing with notices of a sheriff’s sale, and Rule 4:65-4, dealing with the adjournment of sheriff’s sales, do not require notice by certified or registered mail. The Court Rules only require actual notice to the borrowers. In this case, the borrowers denied having received notice. The Court noted that merely denying receipt is not sufficient to rebut the presumption that notice was received. However, in this case there was circumstantial evidence that called into question whether the borrowers, in fact, had received notice. The Court recognized the general rule that when insufficient notice of a sheriff’s sale is given, the preferred remedy is one which restores the status quo. However, it also noted that a court’s power to void a sheriff’s sale is discretionary and is to be based on equitable considerations. Here, the Court agreed with the lower court’s finding that the Scurry case permitted extension of the redemption period as a remedy for lack of notice because it would be futile to vacate this particular sale and start over. The Court noted that the case involved a long-pending foreclosure, one in which the sheriff’s sale had been adjourned numerous times without resolution, and where the borrower had continuously sought to delay the sale.


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