On appeal from the Superior Court of New Jersey, Chancery Division, Burlington County.
Havey and Brochin. The opinion of the court was delivered by Brochin, J.s.c. (temporarily assigned).
Irvin E. Povlow, the appellant, was the successful bidder for real property at a mortgage foreclosure sale. Ralph Powell, the respondent, was both the mortgagee and the owner of the equity of redemption. Povlow, appearing pro se, appeals to this court from an order of the Chancery Division which set aside the judgment for foreclosure, voided the Sheriff's sale*fn1 and returned his deposit. Since voiding the sale would permit Powell, who attempted unsuccessfully to perpetrate a fraud on prospective bidders and junior lienors, to extricate himself from the consequences of his failed scheme at Povlow's expense, we reverse.
On October 10, 1980, Lorenzo Giddens, Jr., purchased the property which is the subject of this proceeding from John A. Wescott and Yoshiko M. Wescott, his wife. The Wescotts took back a purchase money mortgage in the principal amount of $16,000.
According to Powell's complaint for foreclosure and the certification of Erwin D. Apell, Esq., his attorney, Lorenzo Giddens, Jr. conveyed the property to Powell on July 8, 1986, by a duly
recorded, bargain and sale deed, with a covenant solely as to the grantor's acts, for a consideration of $5,000. The deed was not expressly subject to outstanding mortgages and other liens, and it did not contain any covenant to assume them. The outstanding liens included Giddens' purchase money mortgage to the Wescotts, an October 17, 1985, second mortgage for $12,301.80 in favor of the Broadway Bank and Trust Company, assigned to the U.S. Department of Housing and Urban Development, and various other smaller mortgages and judgment liens.
Upon acquiring the fee, Powell sought to negotiate with the various lienholders to clear title. Apparently he was unable to reach a satisfactory settlement with at least some of them. On March 23, 1987, he purchased the interest of the Wescotts' in their purchase money mortgage from Giddens for an undisclosed amount. The assignment of the mortgage to Powell was duly recorded on April 6, 1987.
Acting in the right of the purchase money mortgagees, Powell commenced a foreclosure proceeding on April 23, 1987. The complaint, as amended, named Powell as plaintiff and described him as the foreclosing mortgagee by assignment from the Wescotts. It named several of the holders of subordinate liens as defendants. It also named Lorenzo Giddens, Jr. and Mary Giddens, who, the record indicates, was Mr. Giddens' mother, alleging that they were then in possession of the premises and that Mary Giddens might have an equitable interest in the property. Quite intentionally, the complaint did not disclose that Powell was the owner of the fee interest. In fact, the complaint implied that Lorenzo Giddens was a defendant because he was still the owner of the fee.
The judgment for foreclosure was for $21,087.12 plus costs and counsel fees. It recites that the named defendants were duly served and that they defaulted. According to the usual form, the mortgaged premises were ordered to be sold and "the defendants, and each of them, [would] stand absolutely debarred
and foreclosed of and from any equity of redemption of, in and to so much of said mortgaged premises as shall be sold, as aforesaid, under this Judgment." The legal advertisement of the foreclosure sale announced that "No prior mortgages or liens are outstanding." No announcement was made at the sale to inform prospective bidders that Powell had acquired Giddens' equity of redemption. However, Povlow had discovered that information.
Powell and Povlow were the two bidders at the foreclosure sale, and Povlow finally prevailed with a bid of $24,100. He deposited $3,500 with the Sheriff. Before paying the balance, he telephoned Powell's attorney for title information. The attorney told him that Powell had acquired the fee interest and, according to Povlow's undisputed certification, warned him that "[I]f I settled with ...