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Spencer Savings Bank, SLA v. Shaw

May 28, 2008


On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. F-3636-07.

The opinion of the court was delivered by: Messano, J.A.D.



Argued April 2, 2008

Before Judges Payne*fn1 Sapp-Peterson and Messano.

Plaintiff Spencer Savings Bank, SLA, appeals from the July 19, 2007, order that denied its summary judgment motion and dismissed its foreclosure complaint against defendants Walter and Carole Shaw. As the trial judge noted, at issue "is the novel question of whether a lender may charge the borrower attorney's fees and costs during the interim period between the expiration of the right to cure as set forth in the [n]notice of [i]ntention to [f]oreclose (NOI), and the commencement of a foreclosure complaint." In a comprehensive, well-reasoned written opinion, Judge Peter E. Doyne answered the question in the negative, denied plaintiff's motion for summary judgment, and dismissed its complaint. We affirm substantially for the reasons expressed by Judge Doyne.

The facts are essentially undisputed. On June 24, 2004, defendants executed and delivered to plaintiff a home equity line of credit agreement in the maximum amount of $250,000. The corollary note was payable at an adjustable rate of interest based upon "the then existing . . . Prime Rate as published in the 'Money Rates' section of the Wall Street Journal," "minus .50%." Defendants were to make monthly payments on the last day of each month over a ten-year draw period, followed by payments of principal and interest until the note was paid in full.

Plaintiff secured the loan with a first lien mortgage on defendants' residence at 250 Oxford Avenue, Saddle Brook.

Defendants failed to make the payment that was due on October 31, 2006, and on November 30, 2006, plaintiff issued a written NOI. The NOI advised defendants that they "could avoid the initiation of foreclosure proceedings by paying [the] sum [then] due within thirty [] days of th[e] letter, which expire[d] December 30, 2006." The NOI further provided that if defendants failed to pay the amount due within the thirty days, plaintiff "intend[ed] to exercise [its] right to accelerate the mortgage payments, consider the mortgage in default and initiate foreclosure proceedings . . . ." The NOI advised defendants that they Ha[d] the right to cure [their] default, and bring [their] mortgage payments current, after the date of expiration of th[e] letter, until the entry of the foreclosure judgment or order of redemption; however [they] w[ould] be responsible for [plaintiff's] court costs and attorney's fees, calculated consistent with the Rules Governing the Courts of the State of New Jersey, incurred in the foreclosure proceedings.

Defendants did not make any payments by December 30, 2006. Plaintiff's counsel then sent defendants a letter dated January 2, 2007, setting forth the total due for the three unpaid monthly payments, i.e., October, November, and December, and demanding defendants pay that amount plus an unspecified amount of attorney's fees. Defendants called plaintiff's counsel and requested the figures for reinstatement of the loan; this resulted in further correspondence in which plaintiff's counsel set forth the full amount due, but inadvertently included the payment for January. On January 16, 2007, plaintiff's counsel sent another letter to defendants, acknowledging receipt of their payment of the monthly amounts for October, November, and December. However, he indicated that defendants had failed to pay $1174.50 comprised of 1) costs associated with a property report, inspection report, credit report, and appraisal; and 2) attorney's fees. The letter gave defendants until January 18, 2007, to make payment, or their "previous tender w[ould] be returned . . . and foreclosure proceedings w[ould] continue" until full payment was made.

Defendants requested a short extension, which plaintiff granted until January 31, 2007. When defendants did not pay the costs and fees by that date, plaintiff commenced foreclosure proceedings on February 6, 2007. Defendants filed an answer that asserted, among other things, that plaintiff was not entitled to collect the fees and costs incurred prior to the foreclosure complaint being filed. Plaintiff then moved for summary judgment requesting that defendants' answer be stricken and the complaint be returned to the foreclosure unit as an uncontested matter.

Judge Doyne analyzed the issue presented by considering two specific portions of the Fair Foreclosure Act (the FFA), N.J.S.A. 2A:50-53 to -68. He noted that N.J.S.A. 2A:50-56 sets forth the mandatory requirements of the lender's NOI, which includes a minimum thirty day period during which the debtor can "cure the default to avoid initiation of foreclosure proceedings." N.J.S.A. 2A:50-56(c)(5). The NOI must also advise the debtor that if he "does not cure the default by the date specified," the lender may then (6) . . . take steps to terminate the debtor's ownership in the property by commencing a foreclosure suit in a court of competent jurisdiction.

(7) [] [I]f the lender takes the steps indicated pursuant to paragraph (6) . . . a debtor shall still have the right to cure the default . . . but . . . the debtor shall be responsible for the lenders' court costs and attorneys' fees in an amount not to exceed the amount permitted pursuant to the [Court Rules]. [N.J.S.A. 2A:50-56(c)(6) and (7)(emphasis added).]

Plaintiff urged the judge to consider, however, the language contained in the next section of the FFA, entitled, "Curing of default." N.J.S.A. 2A:50-57. We quote those relevant ...

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