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Citicorp Mortgage Inc. v. Pessin

Decided: February 22, 1990.


On appeal from Superior Court, Chancery Division, Middlesex County.

Petrella, O'Brien and Stern. The opinion of the court was delivered by Petrella, P.J.A.D.


[238 NJSuper Page 607] The issue in this case revolves around the effect of the failure of the first mortgagee to name the assignees of a second mortgagee in a foreclosure action. Citicorp Mortgage, Inc. (Citicorp)*fn1 foreclosed on its first mortgage and thereafter brought a strict foreclosure action to cut off the rights of all

lienholders who had not been joined in the original foreclosure action. Citicorp had been the successful bidder at the sheriff's sale which followed the first foreclosure. The Chancery Division Judge concluded that despite the fact there had been an omission to join the assignee of the second mortgage, he had to balance the rights acquired by the purchaser under the foreclosure action against those of the omitted party. He fashioned an equitable remedy and allowed the junior encumbrancer the opportunity to pay off the senior mortgage indebtedness to preclude strict foreclosure.

L. Steven Pessin, one of the assignees, appeals and argues that Citicorp, as purchaser of the property, was not entitled to equitable relief, that strict foreclosure here would violate the recording act and that strict foreclosure should not have been granted.

The property which is the subject of this action is located in Piscataway Township. It was owned by Glen A. Holcombe, Sr. who executed a first bond and mortgage to Citicorp for $123,700 on November 10, 1986. On the same date Holcombe executed a second mortgage to Rudy Grillo, Sr. in the amount of $19,000. Both mortgages were recorded on November 25, 1986. The second mortgage was expressly subordinate to that of Citicorp. Both mortgages reflect that Pessin witnessed Holcombe's signature as mortgagor. Moreover, the second mortgage to Grillo bears Pessin's name as preparer. See N.J.S.A. 46:15-13. By assignment of mortgage dated September 18, 1987 Grillo assigned his mortgage to Theresa Klein, Richard Hollander and Pessin in consideration of payment of $10,500.*fn2 Pessin witnessed Grillo's signature on the instrument

of assignment and took the acknowledgment as an attorney at law. The assignment was recorded in the Middlesex County Clerk's office on October 16, 1987.

Three days later, on October 19, 1987, Citicorp filed a foreclosure action by a complaint dated October 13, 1987 which named the Holcombes and Grillo as defendants. Since the complaint was dated October 13, 1987, but not filed until October 19, the assignment to Pessin, which was recorded on October 16, 1987, was not only omitted from the complaint but could not have been discovered as of the date indicated that the complaint was signed. Cf. Gutermuth v. Ropiecki, 159 N.J. Super. 139, 148, 387 A.2d 385 (Ch.Div.1977). A notice of lis pendens was filed on November 6, 1987 under the caption of the foreclosure action. This lis pendens, captioned in the cause, was filed after the recordation of the assignment of the second mortgage.

The foreclosure action proceeded uneventfully. Eventually, the property was sold to Citicorp at a sheriff's sale on May 11, 1988 for $108,487. A sheriff's deed to Citicorp was recorded on June 20, 1988. It appears from a certification of Citicorp's attorney submitted to the trial court that on December 6, 1988 Pessin advised them that he and others were the assignees of the Grillo mortgage.

Citicorp then instituted an action against the assignees.*fn3 It moved for summary judgment and to strike Pessin's answer which was filed in that action. Judge Bachman in a March 23, 1989 written opinion refused to place the second mortgagee in a superior position to that of the first mortgagee. He accorded an equitable remedy to Pessin of the right to redeem the property and pay off the entire senior debt within 60 days. The judge stated:

It is clear that the junior encumbrancer must pay the whole amount of the senior mortgage debt, not the foreclosure sale price, if he is to redeem from the senior lienholder. . . . [Citations omitted.] This is because the senior lienholder is entitled to payment of ...

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