On appeal from the Superior Court of New Jersey, Chancery Division, Cape May County, Docket No. F-12842-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Fuentes, Gilroy and Simonelli.
Defendants William F. Sherlock and Patricia Sherlock appeal from the April 23, 2009 Chancery Division order denying their motion to vacate a final judgment of foreclosure. We reverse the order, set aside the sheriff's sale, and remand for entry of an amended judgment.
This matter has a long and tortured history, which we do not recite in full. Rather, we focus on the following facts relevant to our review. Defendants owned property located at 106 119th Street in Stone Harbor. On July 22, 2003, defendants executed a mortgage note and mortgage to plaintiff Robert Herdelin for $1,789,570.91 together with interest at eleven percent per annum. The mortgage term was for one year with two one-year options and an additional ninety day option to extend. The following provisions in the mortgage commitment and memorandum of agreement (the mortgage commitment) governed the option to extend:
3. Option to Extend: Lender has granted to borrower the right to two additional one year extensions based on a[n] agreement by borrower to pay an additional 1% fee each year and a pre-payment of interest at the same rate of 11% based upon the outstanding principal balance at the time of extension. Borrower and lender agree that at the expiration of the second option term borrower shall have the right to extend for an additional three months upon the payment of pre-paid interest for those three months without any additional fees.
5. Interest Rate: Lender agrees to lend to borrower the sum set forth above at 11% simple interest on all amounts advanced by lender at closing. Borrower agrees that any additional option year extensions exercised by borrower shall also require a 1% administrative fee except for the final three month extension set forth above. Defendants' attorney prepared all of the above documents.
It is undisputed that defendants paid one year of interest in advance but made no payments thereafter. As a result, as of July 23, 2004, defendants were in default, and plaintiff immediately instituted a foreclosure action, which defendants' counsel vigorously defended. In July 2004, defendants also filed a complaint in the federal district court for the Eastern District of Pennsylvania, seeking to rescind the mortgage.
On January 14, 2005, the court in this matter entered an order granting plaintiff summary judgment, striking defendants' answer and affirmative defenses. The court did not fix an amount due and forwarded the matter to the Foreclosure Unit for consideration of an application to enter final judgment. The court also ordered that no execution on a final judgment, including a Sheriff's sale, shall occur pending resolution of the federal action.
In March 2005, plaintiff filed a motion to enter judgment. On May 23, 2005, the Foreclosure Unit declined to enter judgment due to certain deficiencies in the application, and because the January 14, 2005 order prohibited execution on a final judgment.
Plaintiff then filed a motion for partial summary judgment in the federal action. On March 17, 2008, the federal court entered an order granting the motion. Shortly thereafter, on April 29, 2008, plaintiff filed a motion to vacate the January 14, 2005 order and to permit the foreclosure to proceed. Defendants' counsel opposed the motion and requested that it be stayed pending the outcome of mediation in the federal action. On May 28, 2008, the court entered an order vacating the January 14, 2005 order and permitting plaintiff to apply for judgment and obtain a writ of execution.
Defendants filed a motion for reconsideration. The court entered an order on July 24, 2008, denying the motion and permitting plaintiff to proceed with an application for entry of judgment after computation of the amount due. The court also permitted defendants to file a motion if they disputed the amount plaintiff claimed was due.
On July 2, 2008, plaintiff filed a motion for entry of final judgment and served the motion papers on defendants' then counsel of record.*fn1 Plaintiff provided proof of an amount due of $2,755,939.11, which included interest of $787,441.20 at eleven percent per year from July 22, 2004 to July 23, 2008 ($196,852.80 per year); an extension fee of $89,478.50 due under the option to extend in paragraph 3 of the mortgage commitment at one percent per year for the same period ($17,895.70 per year); and a one ...