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Heritage Bank, N.A. v. Magnefaxcorp.

Decided: March 20, 1984.

HERITAGE BANK, N.A., PLAINTIFF,
v.
MAGNEFAXCORP., ET AL., DEFENDANTS



Cohen, J.s.c.

Cohen

In Hardyston Nat. Bank v. Tartamella, 56 N.J. 508 (1970), the Supreme Court decided that, after foreclosure and sheriff's sale, the owner-mortgagor may still redeem the property by paying the mortgage debt plus foreclosure and sale costs. He may do so within the ten-day period fixed by R. 4:65-5 for objections to the sale and until an order is entered confirming the sale if objections are filed. In Lobsenz v. Micucci Holdings, Inc., 127 N.J. Super. 50 (App.Div.1974), the Appellate Division decided that the owner-mortgagor's post-sale right to redeem could be transferred to another who could then exercise it.

In the present case, the assignee of the mortgagors' right to redeem is also the successful bidder at the sheriff's sale. He seeks judicial approval of his exercise of that right in lieu of his completing his purchase from the sheriff. His application is denied for the following reasons.

The mortgagor's post-sale right to redeem is not statutory. It was created by equity to protect him against forfeiture of his property. Hardyston Nat. Bank v. Tartamella, supra. Since the right was a judicial creation, its incidents and the conditions of its exercise and assignment are subject to judicial regulation and scrutiny.

In Lobsenz, the mortgagee bought in for $100 at sheriff's sale a property worth more than had to be raised at the sale to satisfy its debt and costs. The mortgagor was paid $5000 by the assignee for the transfer of the right to redeem. The fairness and adequacy of that consideration was not challenged. There was no overage for the mortgagor to have a stake in. If exercise of the assigned right to redeem had not been approved, the mortgagee would have received a windfall equal to the owner's equity and the mortgagor would have lost the $5000 that was paid for the assignment.

This case is very different. Here there was strong bidding at the sheriff's sale. The amount to be raised was some $16,000. The assignee was high bidder at $27,100. Since there were no junior liens, the remaining $11,000 belonged to the mortgagors.

The assignee then obtained from the mortgagors the transfer of their fee title and an assignment of their post-sale right to redeem. He applied here for approval of the exercise of that right, but did not give the mortgagors notice of that application.

After reviewing his application, I twice asked the assignee for further information about the matter. In a letter, I expressed my

reservations about the manner in which the mortgagors who were currently entitled to an overage were persuaded to transfer their right, on what representations and for what consideration.

I received further information, the latest of which counsel labelled "the last documentation my client intends to submit in this matter." The totality of it is this:

The assignee says that after the sale he inspected the property and investigated the zoning. He discovered facts that made him regret the amount of his bid. He contacted the mortgagors who told him that they would give him an assignment of their right to redeem and that they wanted nothing for it. In return, he bought them a large fruit basket, offered them free masonry services in the ...


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