On appeal from Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-8130-91.
The opinion of the court was delivered by: Skillman, P.J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted February 4, 2010
Before Judges Skillman, Fuentes and Simonelli.
The primary issue presented by this appeal is whether a judgment debtor is entitled to a fair market value credit for property that is executed upon and then purchased by a judgment creditor at a sheriff's sale for a nominal amount. We conclude that, even in the absence of express statutory authorization, a court has inherent equitable authority to allow a fair market value credit in order to prevent a double recovery by a judgment creditor against a judgment debtor. We also conclude that this inherent authority was properly exercised in the present case.
In October 1990, defendant Gary Grieser entered into a ten-year commercial lease for the second floor of a building in Long Branch with 200 Ocean Boulevard Associates (200 Ocean). In April 1991, defendant filed a bankruptcy petition but failed to list 200 Ocean as a creditor or to identify the lease as an asset or liability. Following the filing of the bankruptcy petition, defendant discontinued paying rent but continued to occupy the leased premises until October 1991.
After defendant vacated the premises, 200 Ocean brought this action in the Law Division seeking past due rent as well as rent for the approximately nine years remaining on the term of the lease. 200 Ocean served defendant by publication and, after he failed to answer, obtained a default judgment against him for $1,630,481.69, representing unpaid rent for the entire ten-year term of the lease.
200 Ocean subsequently assigned the default judgment to MMU of New York (MMU), which was substituted as plaintiff in the action. Defendant filed numerous motions to vacate the default judgment, which were apparently based on his discharge in the bankruptcy proceeding, all of which were denied.
In 1996, defendant obtained title to a property in Monmouth Beach. In 2000, MMU levied an execution on the property to satisfy the default judgment and scheduled a sheriff's sale. Defendant filed an order to show cause to stay the sale and vacate the default judgment. The trial court denied defendant any relief and the sheriff's sale was allowed to proceed. On appeal, we affirmed the order memorializing this ruling in an unpublished opinion. MMU of N.Y. v. Grieser, No. A-4441-00T1 (May 3, 2002).
In September 2001, MMU purchased the Monmouth Beach property at the sheriff's sale for $100. The following month, MMU entered into a contract to sell the property to a third party for $1,200,500. MMU collected an additional $188,944 by executing upon six other properties owned by defendant. Thus, MMU eventually realized a total of $1,389,444 through its collection activities.
In April 2007, defendant filed a motion challenging the validity of the default judgment. The trial court denied this motion on the ground that defendant's failure to pay the rent on the leased premises and various conduct related to this litigation demonstrated "unclean hands" that precluded him from challenging the default judgment.
On appeal, we reversed this denial in an unpublished opinion. MMU of N.Y., Inc. v. Grieser, No. A-5904-06T3 (May 21, 2008). Our opinion stated in part:
Defendant makes a reasonable argument that the landlord was not entitled to rent for the balance of the lease term because the landlord subsequently re-rented the premises and then sold it within two years. Defendant also asserts that the sums plaintiff has collected to date should have significantly reduced, if not satisfied, the balance due on the judgment, even if the judgment amount was proper in the first instance. Neither of these arguments should be precluded simply because defendant remained in the property for six months in 1991 without paying rent. Defendant's failure to pay rent in the first instance gave the landlord grounds for eviction and a money judgment, but has no bearing on ...