Too Little, Too Late

September 2012Articles In the Zone

The New Jersey Appellate Division has disallowed a claim, raised by a foreclosure defendant for the first time on appeal, that the plaintiff lacked standing because it did not possess the note showing the repayment obligation when it filed its complaint. In PHH Mortgage Corp. v. Krowicki, et al., decided by the Superior Court of New Jersey, Appellate Division, on August 27, 2012, the court, on equitable grounds, affirmed the decision of the lower court denying defendant’s contentions that the foreclosure judgment and sale should be set aside. While the court was sympathetic to the interests of the innocent purchaser of the property, it also chided the defendant for waiting too long, in this case several years, before seeking to set aside the judgment and sale and for raising, for the first time on appeal, the plaintiff’s lack of standing.

The New Jersey Supreme Court adopted significant amendments to the court rules governing foreclosures in 2011. Among those amendments include certifications concerning the existence of the original note. In this case, the initial loan documents were executed in 1991; modifications to those documents were executed in 1998 at the time of a loan extension. The defendant defaulted in August 2006, resulting in the entry of default judgment in June 2007. During the set aside proceedings, the defendant contended that the 1998 loan was a new loan, with which the court disagreed. On appeal, the Appellate Division found the defendant’s standing argument, i.e. failure in possession of the 1998 note, to be without merit, not only on equitable grounds, but also on the basis that the judgment and sale were entered and accomplished in 2007 and 2010, respectively, well before the court rule amendments were adopted.