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DSK Enterprises Inc. v. United Jersey Bank

Decided: May 6, 1983.


On appeal from the Superior Court, Chancery Division, Bergen County.

Michels, Pressler and Trautwein. The opinion of the court was delivered by Pressler, J.A.D.


Defendant United Jersey Bank (UJB) appeals from a judgment of the Chancery Division rescinding an assignment of a foreclosure judgment made by it to plaintiff, DSK Enterprises, Inc. (DSK). We reverse.

In view of the nature of the issues here raised, a detailed explication of the facts of this controversy is required. The property which was the subject of the original foreclosure action is a single-family residence in Bergenfield, New Jersey, purchased in June 1973 by Joseph and Bettye Hagins, husband and wife. They conveyed to Bettye Hagins about a month later. During the following eight months three separate mortgages were purportedly executed by Mr. and Mrs. Hagins in favor of UJB, securing an aggregate debt of approximately $51,000. Payments on the mortgage debts soon fell into arrears, and UJB in due course instituted a foreclosure action. At some unspecified time during its pendency Mr. Hagins obtained separate legal representation for Mrs. Hagins, retaining on her behalf in the foreclosure action the same lawyer who apparently had or was in the process of handling his business bankruptcy. Mr.

Hagins was represented in the foreclosure action by a different firm, and there is nothing in the record to suggest that at the time these arrangements were made, UJB had any reason to know of the apparent conflict of interest on the part of Mrs. Hagins' attorney. In any event, an answer was filed on behalf of Mrs. Hagins in the foreclosure action challenging the validity of the mortgages on the ground that her signature had been forged on all three mortgage instruments.

Insofar as we can determine from the record, extensive discovery ensued and settlement negotiations were undertaken between UJB and the Haginses. Mrs. Hagins, it appears, was aware of these negotiations and at least to some extent participated in them, relying, however, on her husband to protect her interests. It further appears that in August 1976 an initial settlement was reached whereby the Haginses agreed to pay UJB $20,000 by way of full satisfaction of the mortgage debt, $11,000 upon execution of the agreement and $9,000 within 90 days thereafter. Both Mr. and Mrs. Hagins and Mrs. Hagins' attorney signed a stipulation of settlement so providing.

This settlement apparently aborted due to the Haginses' inability to make the initial payment, and negotiations were resumed. A second settlement was reached in January 1977, and this time it was placed on the record in a Chancery Division proceeding. The terms of this settlement included an undertaking by the Haginses to pay UJB the sum of $20,000 within 2 1/2 weeks, Mrs. Hagins' attorney representing that a loan on their behalf had been negotiated which would provide the funds necessary for the payment. It was further agreed that if the settlement was not timely consummated "the defendants here are waiving their right to trial in the matter and the plaintiff may proceed by affidavit." We are satisfied that this proviso was understood and intended by all parties to mean that UJB was accorded the right to have a foreclosure judgment entered in the amount of the original mortgage debt. Neither Mrs. Hagins nor her attorney was present when the settlement was

placed on the record. At the outset of the hearing Mr. Hagins' attorney advised the judge that

Mr. Hagins, who was in court, was then questioned by the judge and was asked by him if he was indeed "authorized to speak for your wife to put this settlement on the record." The answer was in the affirmative, the case was marked settled by the court, and a form of order so indicating was entered.

The Haginses did not, however, comply with the obligations imposed upon them by the settlement and, after a lengthy period of forebearance by UJB during which further settlement negotiations were unsuccessfully conducted, UJB finally availed itself of its right under the terms of the settlement agreement to seek entry of final judgment of foreclosure on affidavit. The judgment was entered on July 5, 1978, fixing the mortgage debt as $51,843.53 plus interest.

At some unspecified time thereafter Mrs. Hagins retained her present attorney, who on her behalf obtained numerous postponements of scheduled sheriff's sales and attempted to reinstitute negotiations with UJB on her behalf. In the meantime, the various notices of sheriff's sale were published. ...

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