On certification to the Superior Court, Appellate Division.
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
The issue before the Court is whether the courts below improperly applied the doctrine of laches to bar relief to the property owner, Barbara Scurry.
Scurry was the title owner to certain property located in Fairfield Township, Cumberland County, New Jersey (the property). Since 1997, the property had been encumbered by a mortgage to the benefit of plaintiff, the Farmers Home Administration of the USDA. Scurry fell behind in her mortgage payments and, as a result, plaintiff sought to foreclose on its mortgage; a final judgment of foreclosure was entered against Scurry on August 11, 2003. On April 1, 2004, after final judgment of foreclosure was entered but before title, possession, and eviction were sought, plaintiff sought protection from Scurry's creditors in bankruptcy, a step that triggered an automatic stay of any proceedings against Scurry.
While the automatic stay was in place, Scurry again fell behind on her mortgage payments, this time on those payments that were due after the filing of her bankruptcy petition (the post-petition arrears). As a result, on March 28, 2005, plaintiff sought and was granted relief from the automatic stay and thereafter proceeded to secure title to, and ultimately, possession of the property. The property was scheduled for a sheriff's sale on April 19, 2005. Plaintiff was required to provide Scurry at least ten days' prior notice of the sheriff's sale and that notice was to be made by registered or certified mail, return receipt requested. Although plaintiff produced a copy of a letter dated April 5, 2005, which was addressed to Scurry and provided the date scheduled for the sheriff's sale on the property, plaintiff failed to demonstrate that its notice letter had been mailed in the manner required by the Rules of Court. Plaintiff also could not produce any return receipt showing actual delivery of that notice. Nonetheless, the sheriff's sale was held on April 19, 2005. Plaintiff was the successful bidder and, on May 2, 2005, a sheriff's deed was issued vesting title to the property in plaintiff. Plaintiff then sought a writ of possession; that writ issued on July 25, 2005, and the Cumberland County Sheriff's Department served the writ of possession on Scurry the same day.
Scurry immediately contacted her bankruptcy attorney and deposited $10,000 with her lawyer to bring her mortgage arrears up to date. Eleven days later, by letter dated August 5, 2005, Scurry's bankruptcy counsel wrote to plaintiff's counsel and addressed, among other things, the lack of notice of the sheriff's sale, the $10,000 he was holding on behalf of his client, and his desire to resolve all outstanding issues. Plaintiff's counsel never responded. Instead, on September 8, 2005, Scurry and her possessions were removed from the property (the "lock-out").
Three months later, on December 13, 2005, Scurry moved before the Chancery Division for an order vacating the sheriff's sale of the property on the basis of lack of proper notice. Plaintiff opposed that request, claiming that it had spent about three thousand dollars to evict Scurry and that those sums, together with the delay between the September 2005 'lock-out" and the date of Scurry's motion, had prejudiced plaintiff. The trial court denied the motion, concluding that while notice of the sheriff's sale was deficient, Scurry's failure to act in a timely manner once evicted from the property prejudiced the plaintiff.
Scurry moved for reconsideration arguing that the trial court had denied relief based on the doctrine of laches, which requires the court find an unreasonable delay and significant prejudice to the party opposing the relief. According to Scurry, neither factor was present in this case. The trial court denied the reconsideration motion, concluding that Scurry failed to act timely once she had been evicted and that failure prejudiced plaintiff.
Scurry appealed to the Appellate Division, which affirmed the decision of the chancery judge. The appellate panel found that, although plaintiff failed to properly notify Scurry of the sheriff's sale, there was no abuse of judicial discretion in the trial court's denial of the motion to vacate the sheriff's sale in light of the delays caused by Scurry's bankruptcy proceeding, the additional delay after Scurry became aware of the sheriff's sale, and the absence of any evidence of Scurry's financial ability to rectify the situation.
The Supreme Court granted certification.
HELD: In the circumstances presented in this case, the doctrine of laches cannot serve to bar relief to this homeowner.
1. The appropriate standard of review of an application to open, vacate or otherwise set aside mortgage foreclosure proceedings is whether the trial court abused its discretion. It is against this standard that Scurry's substantive claims must be evaluated. (P. 12)
2. The doctrine of laches is invoked to deny a party enforcement of a known right when the party engages in an inexcusable and unexplained delay in exercising that right which results in prejudice of the other party. The key factors to be considered in whether to apply the doctrine of laches are the length of the delay, the reasons for the delay, and the changing conditions of either or both parties during the delay. The core concern is whether a party has been harmed by the delay. (Pp. 12-14)
3. Here, the court abused its discretion in applying the doctrine of laches to bar Scurry's relief from the sheriff's sale. In balancing the equities, the prejudice alleged by plaintiff does not match up to Scurry having been dispossessed from her home without plaintiff's compliance with its procedural notice requirements. Where plaintiff cannot demonstrate compliance with the procedural requirements precedent to a valid mortgage foreclosure action, a conclusion contrary in respect of the doctrine of laches lacks rationality inexplicably departs from established policies, and rests, therefore, on an impermissible basis. Thus, despite the usual deference rightly owed to the Chancery Division in this context, its decision cannot be sustained. Therefore, judgment of the Appellate Division affirming the chancery court must be reversed. (Pp. 14-16)
4. In view of the unique circumstances of this case, on remand, the trial court should determine first whether, within a reasonable period of time, Scurry is able to redeem the property from plaintiff; the amount necessary for redemption should include all principal and interest due on the mortgage, plus any out-of-pocket costs for maintenance, repair, upkeep and insurance incurred by plaintiff in the period between the issuance of the sheriff's deed and the date of the remand hearing, but should not include the sums expended by plaintiff to dispossess Scurry. If Scurry cannot redeem the property within a reasonable time period as determined by the trial court, then there is no need to vacate the sheriff's sale and title will remain with plaintiff. If however, she can redeem the property, she is to be given the opportunity to purchase her property free and clear of all existing liens. (Pp. 16-18)
Judgment of the Appellate Division is REVERSED and the matter is REMANDED for further proceedings before the Chancery Division consistent with the principles set forth in this opinion.
CHIEF JUSTICE RABNER and JUSTICES LONG, LaVECCHIA, ALBIN, WALLACE and HOENS join in JUSTICE RIVERA-SOTO'S opinion.
The opinion of the court was delivered by: ...