October 27, 2011
US BANK NATIONAL ASSOCIATION, AS TRUSTEE RESIDENTIAL FUNDING COMPANY, LLC, PLAINTIFF-RESPONDENT,
TIFFANY H. MAHN AND DAVID FLEMMING, DEFENDANTS-APPELLANTS.
On appeal from the Superior Court of New Jersey, Chancery Division, Atlantic County, Docket No. F-17843-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 28, 2011
Before Judges Axelrad and Ostrer.
Defendants-mortgagors, Tiffany Mahn and David Flemming, asked the trial court to void the sheriff's sale of their property because they allegedly did not receive notice of the sale, which had been repeatedly adjourned. Rather than resolve the disputed issue of whether defendants actually received notice, Judge William C. Todd, III ordered an extension of the redemption period. Defendants appeal, arguing that the court should have found a lack of notice, and declared the sale void. We disagree and affirm.
Defendants borrowed $350,000, secured by a mortgage on their primary residence in Galloway Township on August 31, 2006. They defaulted within the year, on March 1, 2007. Plaintiff, the assignee of the mortgage, filed a foreclosure complaint July 19, 2007, and default was entered after defendants failed to file a responsive pleading. Flemming filed a Chapter 13 bankruptcy petition, and the foreclosure action was stayed until relief from the stay was granted November 8, 2008. The court then entered default judgment on September 2, 2009, and issued a writ of execution. The judgment reflected an amount due of $392,538, plus interest from December 31, 2008 and counsel fees.
The first sheriff's sale was scheduled for October 29, 2009. Defendants do not dispute that the initial notice was sent by certified mail. The sale was then repeatedly adjourned. According to plaintiff, there were nine adjournments, each one lasting a little over a month, leading to a scheduled sheriff's sale on October 7, 2010. Plaintiff claimed that each adjournment was preceded by a letter notice sent regular mail to each defendant as well as to the two of them care of Gregg Charles Mele, LLC. Plaintiff provided copies of all adjournment and rescheduling notices it represented were sent.
There is no dispute that defendants were exploring loan modification. Flemming certified that a payment of $1860 was made against the balance due. But, the parties do not dispute that defendants were notified on October 7, 2010 that a modification would not be accepted. Plaintiff claimed that a notice was sent by regular mail, dated October 7, 2010, that the sale would be adjourned (a tenth and final time) to October 21, 2010. The sale proceeded that day.
However, both Mahn and Flemming claimed they did not receive notice that the sale would occur on October 21, 2010. Flemming claimed that he received a letter on or about October 14, 2010 inviting him and Mahn to reapply for a modification; however, he did not submit a copy of the letter to the trial court. Flemming certified that he learned that the sale occurred when he called a representative of the plaintiff on October 22 or 23, 2010, to inquire about making another payment and to apply for modification. Flemming and Mahn filed their motion to vacate the sale on November 16, 2010.
Following oral argument on December 3, 2010, Judge Todd denied defendants' request to vacate the sale, but extended the redemption period to December 31, 2010, memorialized in an order of December 6, 2010. The court recognized a disputed issue of fact existed regarding whether defendants received actual notice of the October 21, 2010 sale. Defendants' counsel opposed extension of the redemption period, arguing that if defendants had received notice, they would have sought additional adjournments and may have sought relief in Bankruptcy Court. Plaintiff's counsel responded that Flemming had previously filed a petition in Bankruptcy Court, plaintiff obtained relief from the stay, and defendants were simply seeking delay.
Judge Todd relied on United States v. Scurry, 193 N.J. 492 (2008), in which the Court approved extension of the redemption period as a remedy for a failure of notice. The court concluded that it did not need to resolve the factual issue of notice because even if defendants failed to receive notice, extension of the redemption period was an appropriate remedy.
I'm going to simply extend the time for redemption. . . . [T]hat result is consistent with Scurry. That's what the defendants would get if they were to prevail; in other words, there wouldn't be any particularly compelling reason even if I accepted everything they said for me to say, well, we're going to just start over and have another sale. We'd still get back to the redemption period.
[T]he rescheduling of a Sheriff's sale in this scenario is essentially an artifice, because all that would result from it on a practical level, putting aside the filing of a bankruptcy petition, which is something I suppose could happen, would be additional time to redeem.
This appeal followed.
We reject defendants' argument that they were entitled to notice of the October 21, 2010 sheriff's sale by certified mail. We have held that Rule 4:65-2, regarding notice of sale, and Rule 4:65-4, regarding the sheriff's power to adjourn, do not expressly require notice by certified or registered mail of an adjourned date. First Mut. Corp. v. Samojeden, 214 N.J. Super. 122, 126-27 (App. Div. 1986). Yet, actual notice is required. "[A]s a matter of fundamental fairness, these rules [Rules 4:65-2 and -4] must be construed as entitling interested parties to actual knowledge of the adjourned date upon which the sale actually takes place." Id. at 123.
Here, defendants denied actual notice. The mere denial of receipt has been deemed insufficient to rebut a presumption of receipt. See SSI Med. Servs., Inc. v. State of New Jersey, 146 N.J. 614, 621 (1996) (recognizing presumption); United Pac. Ins. Co. v. Estate of Lamana, 181 N.J. Super. 149, 169 (Law Div. 1981) (mere denial insufficient to overcome presumption).*fn1
However, defendant Flemming presented circumstantial evidence that he was unaware of the sale. Recognizing a disputed issue of fact, the trial court assumed, for the sake of deciding defendants' motion, that actual notice was not achieved.
We find no error in the court's decision to avoid resolving the disputed factual issue. Nor do we find error in Judge Todd's determination to extend the redemption period as a remedy for the lack of notice that he posited.
We recognize that a court of equity may set aside a sale and provide defendants with notice of another sheriff's sale. First Trust Nat'l Ass'n v. Merola, 319 N.J. Super. 44, 49 (App. Div. 1999). "The general rule is that when insufficient notice of a sheriff's sale is given, the preferred remedy is that which restores the status quo ante to the greatest extent possible." New Brunswick Sav. Bank v. Markouski, 123 N.J. 402, 425 (1991). The court may void the sale if the party seeks relief promptly, was unaware of the pending sale, and no innocent third parties would be prejudiced. Ibid.
However, the remedy to void the sale is based on "some evidence of actual prejudice to an interested party." G.E.Capital Mortg. Servs., Inc. v. Marilao, 352 N.J. Super. 274, 283 (App. Div. 2002). The power to void the sale is "discretionary and must be based on considerations of equity and justice." First Trust Nat'l Ass'n, supra, 319 N.J. Super. at 49. We defer to that exercise of discretion, absent a mistake of law or an abuse of discretion. Ibid. See also Scurry, supra, 193 N.J. at 502-03 (abuse of discretion standard applies to review of application to vacate mortgage foreclosure proceeding).
The Supreme Court recognized in Scurry, supra, 193 N.J. at 506, that extension of the redemption period may be an appropriate alternative remedy for a lack of notice. In Scurry, the plaintiff admittedly failed to provide required notice of the initial sale date. The defendant learned of the sale only when served with a writ of possession. Id. at 495. She moved to vacate the sale three months later, although she meanwhile consulted a bankruptcy attorney who tried to resolve the matter and offered $10,000 to cure arrears that accrued since defendant's bankruptcy filing.*fn2 Id. at 497-98. The trial court denied the defendant relief based on the doctrine of laches and we affirmed. Id. at 499-500. The Supreme Court reversed, holding the balance of equities rendered laches inapt. Id. at 503-05.
The Court held it would be futile to return the parties "to the procedural juncture where the error first occurred: plaintiff's failure to provide defendant proper notice of the sheriff's sale." Id. at 506. The Court relied on the "time-honored maxims that 'the law does not compel one to do a useless act[,]' and that equity follows the law." Ibid. (quoting Albert v. Ford Motor Co., 112 N.J.L. 597, 603 (E. & A. 1934), and citing Howell v. Teel, 29 N.J. Eq. 490, 495 (Ch. 1878)).
Instead the Court ordered the trial court on remand to determine whether the defendant was able to redeem the property, and only if the defendant were so able, should the court vacate the sheriff's sale. The Court reviewed the circumstances supporting that result: a foreclosure action had been pending for several years before judgment was entered; . . . the plaintiff in foreclosure fails to satisfy procedural notice requirements; . . . the defendant in foreclosure deposits substantial sums with her counsel to cure her arrears; . . . defendant's counsel communicates with plaintiff's counsel, offering to remedy defaults and receives no substantive reply; . . . the successful purchaser at the sheriff's sale is the original mortgagee/plaintiff in foreclosure; . . . the property remains vacant and has not been transferred to an innocent third party; and . . . there has now been a significant passage of time since the sheriff's deed was issued and defendant was dispossessed[.] [Scurry, supra, 193 N.J. at 506.]
Defendants try to distinguish Scurry, emphasizing that Scurry, unlike Mahn and Flemming, was ready to deposit substantial sums to cure arrears and communicated an offer to remedy default. However, defendants' comparatively lesser ability to cure arrears would make the alternative relief they seek - voiding the sale and requiring another round of notice - even more unproductive than in Scurry, not less. This case, like Scurry, involves a long-pending foreclosure action. The sale was adjourned numerous times without resolution. Plaintiff had obtained relief from the automatic stay in Flemming's bankruptcy case. We find no abuse of discretion in Judge Todd's determination to extend the redemption period, rather than hold a plenary hearing to determine as a threshold matter whether defendants were denied actual notice of the sale.