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Zweig v. Pappas

A-6297-99T2 (N.J. Super. App. Div. 2002) (Unpublished)

MORTGAGES; FORECLOSURE— Even if a default judgment might not otherwise be set aside, where a mortgagee’s misconduct is egregious and extraordinary, a court of equity will not permit foreclosure of a property, particularly where the mortgage has already been paid.

A homeowner borrowed a small amount of money and gave its lender a note and a recorded mortgage. From the proceeds of a refinancing of unrelated property, a check was delivered by the closing attorney to the mortgagee’s father. In return, the mortgagee’s father delivered a satisfaction of the mortgage to the closing attorney. The closing attorney delivered the document to the homeowner’s brother who delivered it to the homeowner. Nonetheless, the mortgagee obtained a judgment of foreclosure by default and the home was sold by the sheriff to the mortgagee. In fact, the sheriff’s deed was delivered to the mortgagee. The lower court was faced with testimony from the closing attorney to the effect that a valid satisfaction of the mortgage had been delivered by the mortgagee’s father and there was other substantiating testimony at trial. In contrast, the lower court found that the testimony from the mortgagee’s father was “less than candid and of questionable credibility.” As to the homeowner having notice of the foreclosure proceeding, the lower court found that “they were aware of it but they foolishly accepted representations” from the mortgagee’s father. It was also the lower court’s finding that the homeowner never received actual notice of the adjourned date of the foreclosure sale. The Appellate Division refused to disturb the factual findings and legal conclusions of the lower court, but felt compelled to state that “[t]he misconduct presented to the Chancery Judge was so egregious and extraordinary that it would have been incomprehensible for a court of equity to permit a foreclosure sale of this property, pursuant to a mortgage which already had been paid, to stand.” Consequently, the mortgage sale was set aside notwithstanding the default judgment and the mortgagee’s contention that laches should have barred disturbing the sheriff’s sale.

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