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Valley National Bank v. Friends, Inc.

A-3530-03T2 (N.J. Super. App. Div. 2005) (Unpublished)

MORTGAGES; FORECLOSURE — An appeal of a final foreclosure judgment is moot when the property has been sold to a third party and as a result, effective relief can no longer be granted by a court.

A property owner took a mortgage loan from a bank. Various entities, none of whom owned the property, were co-obligors on the note. The property owner failed to make its mortgage payments and the bank filed a complaint to foreclose on the mortgage and requested appointment of a rent receiver. The entities, based on the bank’s failure, opposed the application, arguing that the foreclosure action where barred by the entire controversy doctrine by failing to foreclose on the mortgage during a prior action that it filed to foreclose on properties owned by the entities. The lower court disagreed and appointed a rent receiver. The entities then filed additional applications with the lower court seeking to dismiss the foreclosure action on the basis of the entire controversy action, all of which were denied. The bank moved to dismiss the foreclosure action as to the entities, arguing that they were not necessary parties to the proceeding because they neither executed the mortgage nor owned the property at issue. The lower court granted that motion. A final judgment of foreclosure was subsequently entered by the lower court. The entities appealed the lower court’s final judgment, but did not seek a stay of the judgment pending the appeal. As a result, the property was sold at a sheriff’s sale to a bona fide third party purchaser and the deed to the property was delivered to the purchaser. On appeal, the entities once again argued that the foreclosure action should have been barred by the entire controversy doctrine. In response, the bank asserted that the appeal was moot because the property had been sold and the entities lacked standing to appeal the final judgment.

The Appellate Division affirmed the lower court’s judgment. It ruled that the failure of the entities to obtain a stay of the foreclosure action and the subsequent sale of the property rendered the appeal moot because the Court was no longer able to grant the requested relief. It further held that the entities had been properly dismissed from the case by the lower court, and therefore lacked standing to appeal.

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