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Hsbc Bank Usa, National Association v. Fidel Vasquez and Antonia Vasquez


October 19, 2011


On appeal from Superior Court of New Jersey, Chancery Division, Hudson County, Docket No. F-16966-08.

Per curiam.


Submitted September 21, 2011 -

Before Judges J. N. Harris and Koblitz.

Defendants Fidel and Antonia Vasquez appeal from the motion judge's December 23, 2009 order denying their motion to vacate the September 3, 2009 sheriff's sale of their foreclosed property to plaintiff-mortgagee, HSBC Bank USA, National Association, as trustee for Home Equity Loan Trust Series Ace 2006-HE1 (HSBC). Defendants' motion to vacate was premised on an allegation that they were victims of a mortgage rescue fraud perpetrated by real estate broker, Frank De La Rosa.*fn1 Defendants argue that De La Rosa's fraud prevented them from completing a loan modification or filing for bankruptcy protection and should therefore result in vacation of the sale. The motion judge denied defendants' motion, explaining that fraud perpetrated by a third party did not justify vacating the sheriff's sale.

Defendants also maintain for the first time on appeal that they did not receive plaintiff's July 30, 2009 letter informing them that the sheriff's sale was rescheduled for September 3, 2009. After reviewing the record in light of the contentions advanced on appeal, we affirm.

On September 9, 2005, Fidel Vasquez borrowed $368,000 individually from FGC Commercial Mortgage Finance, dba Fremont Mortgage (Fremont), to purchase their home. Defendants secured this loan collectively with a purchase money mortgage on their property, located on 17th Street in Union City. The mortgage was executed in favor of Mortgage Electronic Registration Systems, Inc., as nominee for Fremont, and was later assigned to plaintiff HSBC on April 28, 2008.

Due to defendants' financial setbacks, their loan went into default as of January 1, 2008. Plaintiff filed its foreclosure complaint on April 30, 2008. Antonia Vasquez was personally served on May 10, 2008. After entry of default on the foreclosure complaint, final judgment in favor of plaintiff and a writ of execution were entered on November 17, 2008, directing that the property be sold by sheriff's sale, with the proceeds to be paid to plaintiff.

Antonia Vasquez contacted family friend and real estate broker De La Rosa. Defendants assert that De La Rosa agreed to help them seek either a loan modification, a short sale of the property, or file a bankruptcy petition. Defendants also claim that De La Rosa recommended that they consult with Anthony F. Sarsano, Esq., who served as their counsel when purchasing the house. Defendants had no direct contact with Sarsano or his staff at this time, instead communicating with him through De La Rosa. Antonia Vasquez issued three checks payable to De La Rosa in the total amount of $6000, which he agreed to give to Sarsano as payment for legal services.

Sarsano indicated that De La Rosa spoke with the attorney's staff. However, none of the money given by defendants to De La Rosa was ever delivered to Sarsano. Sarsano's office administrator certified that De La Rosa then indicated that defendants were no longer pursuing the matter and thus Sarsano's legal services were no longer required. After the sheriff's sale, defendants sought help directly from Sarsano. He provided pro bono representation to defendants for their motion to vacate the sheriff's sale. Neither defendants nor Sarsano were able to locate De La Rosa.

The sheriff's sale was initially scheduled for May 21, 2009. Defendants exercised their two statutory adjournments pursuant to N.J.S.A. 2A:17-36, thereby postponing the sale until June 25, 2009. After several more adjournments by plaintiff, the sheriff's sale was set for September 3, 2009. Plaintiff's counsel sent a letter through regular mail to both Antonia and Fidel Vasquez informing them of this final change in date.

Defendants claim for the first time on appeal that they did not receive this letter. They also indicate that they were out of the country on September 3, 2009 when the sheriff's sale occurred. They assert that they returned on September 9, 2009 and learned that their house had been sold to plaintiff. The deed was delivered to plaintiff on September 28, 2009 and was recorded on October 20, 2009.*fn2

"Because foreclosure proceedings seek primary or principal relief which is equitable in nature," and because no error of law is alleged here, the "application to open, vacate or otherwise set aside a foreclosure judgment or proceedings subsequent thereto is subject to an abuse of discretion standard." United States v. Scurry, 193 N.J. 492, 502-03 (2008) (citing Wiktorowicz v. Stesko, 134 N.J. Eq. 383, 386 (E. & A. 1944)). A trial judge's application or denial of equitable remedies should not be disturbed "unless it can be shown that the trial court palpably abused its discretion, that is, that its finding was so wide off the mark that a manifest denial of justice resulted." Green v. N.J. Mfrs. Ins. Co., 160 N.J. 480, 492 (1999) (internal quotation omitted).

A motion to vacate a sheriff's sale is governed by Rule 4:65-5, which states that any objection to the sale must be served within the ten days following the sale or before delivery of the deed, whichever is later. "Examples of valid grounds for objection include fraud, accident, surprise, irregularity, or impropriety in the sheriff's sale." Brookshire Equities v. Montaquiza, 346 N.J. Super. 310, 317 (App. Div.), certif. denied, 172 N.J. 179 (2002) (citing Orange Land Co. v. Bender, 96 N.J. Super. 158, 164 (App. Div. 1967)).

Defendants through counsel filed a motion, dated October 8, 2009, to vacate the sheriff's sale.*fn3 The sheriff's sale was completed on September 3, 2009, and the deed was delivered to plaintiff on September 28, 2009. Thus, pursuant to Rule 4:65-5, defendants' right to object to the sale was extinguished upon conveyance of the deed. Therefore, if defendants were merely seeking to invoke their rights under the Rule, this objection would be untimely, as the ten-day period had expired and the deed had been delivered before the motion was filed.

Although defendants failed to file a timely objection to the sheriff's sale under Rule 4:65-5, the trial court retained discretion to set aside the sale if defendants had alleged a valid "independent ground for equitable relief." Crane v. Bielski, 15 N.J. 342, 346 (1954) (citing Karel v. Davis, 122 N.J. Eq. 526 (E. & A. 1937)). "Quite independent of statute or rule of court, the Court of Chancery has inherent power to order a sale of mortgaged premises and to control its process directed to that end, and this inherent power of the court has never been doubted." Id. at 347 (citing Fed. Title & Mortg. Guar. Co. v. Lowenstein, 113 N.J. Eq. 200 (Ch. 1933)).

"[O]ur courts will set aside a sheriff's sale for fraud, accident, surprise, or mistake, irregularities in the conduct of the sale, or for other equitable considerations[.]" First Trust Nat. Assoc. v. Merola, 319 N.J. Super. 44, 50 (App. Div. 1999) (citing Karel, supra, 122 N.J. Eq. at 528). Therefore, a valid objection alleging one of these equitable bases will not be barred by the timing restriction of Rule 4:65-5, Union Cnty. Sav. Bank v. Johnson, 210 N.J. Super. 589, 598 (Ch. Div. 1986) (citing Mutual Life Ins. Co. v. Goddard, 33 N.J. Eq. 482 (Ch. 1881)), or by the doctrine of laches, id. at 600. Despite the court's broad discretion to employ equitable remedies, this power should be "sparingly exercised" and "a sale so conducted shall be vacated only when necessary to correct a plain injustice." First Trust Nat. Assoc., supra, 319 N.J. Super. at 52 (quoting Karel, supra, 122 N.J. Eq. at 529) (internal quotations omitted).

Defendants point to De La Rosa's deceitful conduct as constituting grounds for equitable relief. However, as the motion judge noted, De La Rosa was entirely unaffiliated with plaintiff. The Karel progeny of cases do not speak to fraud as an independent basis for equitable relief when the act was committed by a third party. The Court has stated that "when one of two innocent parties must suffer a financial loss because of a fraud perpetrated by an agent, courts have generally held that the party who enabled the fraud to be committed should shoulder the burden." Sears Mortg. Corp. v. Rose, 134 N.J. 326, 346 (1993).

Rather than seeking advice directly from Sarsano, defendants chose to communicate with him through De La Rosa. They made checks payable to De La Rosa, which he was then supposed to deliver to Sarsano as payment for legal services. De La Rosa then absconded with the funds. A judicial sale should not ordinarily be vacated "'on the ground of mistake flowing from [a moving party's] own culpable negligence.'" First Trust Nat. Assoc., supra, 319 N.J. Super. at 49 (quoting Karel, supra, 122 N.J. Eq. at 528). The motion judge did not abuse his discretion when he denied defendants' motion to vacate the sheriff's sale based on De La Rosa's actions.

Additionally, defendants assert for the first time on appeal that they were not notified of the sheriff's sale scheduled for September 3, 2009. An issue not raised at the trial level will ordinarily not be considered on appeal unless the issue is jurisdictional in nature or substantially implicates "matters of great public interest." Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973). This issue satisfies neither criteria.

Moreover, our scope of review is limited to whether the motion judge's decision is supported by the record as it existed at the time of the decision. N.J. Div. of Youth & Family Servs. v. M.M., 189 N.J. 261, 278 (2007); R. 2:5-4. Other than defendants' representation in their appellate brief, no sworn statement was provided to the motion judge to substantiate the claim that notice was never received. We therefore do not consider this issue except to make the following comments.

Defendants clearly were aware of an impending sheriff's sale as they exercised their two statutory adjournments. We held in First Mutual Corp. v. Samojeden, 214 N.J. Super. 122 (App. Div. 1986) that mortgagees were required to give notice to mortgagors of adjourned sheriff sale dates. We note the presumption "that mail correctly addressed, stamped and mailed, was received by the party to whom it was addressed. That presumption . . . may be overcome by evidence that the notice was never in fact received." Tower Mgmt. Corp. v. Podesta, 226 N.J. Super. 300, 304 n.3 (App. Div. 1988) (quoting Szczesny v. Vasquez, 71 N.J. Super. 347, 354 (App. Div. 1962)). Plaintiff sent a letter on July 30, 2009 to both defendants at their home address informing them that the sale had been adjourned from August 6 to September 3, 2009. Rule 4:65-4, dealing generally with sheriff's sale adjournments, does not require that notice of adjourned dates be served in any particular manner. Plaintiff complied with its duty to inform defendants of the adjourned date.


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