New Jersey Housing and Mortg. Finance Agency v. Bedminster Hills Housing Corp.

• Decision Date: 15 November 1995
• Citation: 666 A.2d 1018,285 N.J.Super. 255
• Parties: NEW JERSEY HOUSING AND MORTGAGE FINANCE AGENCY, Plaintiff-Respondent, v. BEDMINSTER HILLS HOUSING CORPORATION, Defendant-Appellant, and Charles R. Heine and Deborah S. Heine, his wife, the Village Green at Bedminster Neighborhood Condominium Association, Inc., the Hills Village Master Association, Inc., and Greenwood Trust Company, Defendants, and John J. Besold, Respondent.
• Court: New Jersey Superior Court — Appellate Division

Page 255

285 N.J.Super. 255

666 A.2d 1018

NEW JERSEY HOUSING AND MORTGAGE FINANCE AGENCY, Plaintiff-Respondent, v. BEDMINSTER HILLS HOUSING CORPORATION, Defendant-Appellant and Charles R. Heine and Deborah S. Heine, his wife, the Village Green at Bedminster Neighborhood Condominium Association Inc., the Hills Village Master Association, Inc., and Greenwood Trust Company, Defendants and John J. Besold, Respondent.

Superior Court of New Jersey Appellate Division.

Argued May 17, 1995.

Decided Nov. 15, 1995.

Gregory A. Molyneux, argued the cause for appellant (Fadem & Molyneux, attorneys; Mr. Molyneux, on the brief).

Judith C. Arnold, argued the cause for respondent New Jersey Housing and Mortgage Finance (Richard M. Milstead, attorney; Ms. Arnold, on the brief).

Thomas P. Fischer, argued the cause for respondent John J. Besold (Broscious, Israels, Glynn & Gentile, attorneys; Mr. Fischer, of counsel and on the brief).

Before Judges BAIME, KESTIN and A. A. RODRIGUEZ.

The opinion of the court was delivered by

KESTIN, J.A.D.

This case involves the rights and responsibilities of the parties in a mortgage foreclosure proceeding that reached the post-sheriff's sale stage. R. 4:65-5. The mortgagors had purchased the property as a below-market-value condominium unit under a court-approved affordable housing plan. The non-profit corporate entity designated by the court to administer the affordable housing plan "in aid of a governmental function" sought eventually to exercise the mortgagors' right of redemption, claiming it by assignment under a power of attorney executed in its favor by the mortgagors at the time of purchase. The trial court denied the corporation's motion to set aside the sheriff's sale and to be permitted to redeem the subject property for the upset price. The corporation appeals. We reverse as to the motion to set aside the sheriff's sale.

The property is a condominium unit subject to both "The Village Green at Bedminster Master Deed" and the "Village Green at Bedminster Neighborhood Condominium Declaration of Covenants, Conditions and Restrictions of Resale" (Declaration). The Village Green at Bedminster Neighborhood Condominium Association (condominium association) was a named defendant but has not participated in the appeal.

In 1984, pursuant to Southern Burlington County N.A.A.C.P. v. Mount Laurel Tp., 92 N.J. 158, 456 A.2d 390 (1983) (Mount Laurel II ), Judge Serpentelli entered a consent order in a builder's remedy suit in the trial court, Allan Deane Corp. v. Tp. of Bedminster. The consent order was based upon a finding that the proposed development of which the subject property was to be a part included 260 lower income housing units and fully complied with the requirements of Mount Laurel II. The consent order provided, inter alia, that the developer was to fund the creation of a non-profit corporation, Bedminster Hills Housing Corporation (BHHC), to administer the 260 lower income units and to assist first-time low income homebuyers. The assistance was to include payment of costs related to closing where appropriate.

The consent order approved an agreement of assignment between the developer and BHHC, as well as BHHC's certificate of incorporation and by-laws. Among other clauses pertaining to BHHC's functions, the consent order:

• provided that BHHC was to be established "to administer the income screening, resale controls, and policy considerations affecting the low and moderate income housing";

• declared BHHC to be "necessary to carry out the requirements of Mount Laurel II ... performing a service in aid of a governmental function";

• declared resale restrictions on the low and moderate income units, as established in the Declaration, to be "necessary to carry out the purposes of Mount Laurel II ";

• established BHHC's right of first refusal in any sale of a low or moderate income unit;

• provided that "[t]he recapture mechanism, and any loans made by the BHHC" to purchasers were not secondary mortgages under N.J.S.A. 17:11A-34 et seq.; and

• declared that State law was not violated by the powers of attorney BHHC was to take back from purchasers, BHHC's right to treat a breach or default of the purchasers' obligations established in the Declaration as an offer to sell the housing unit, or the terms of the Declaration providing that, "in the event of foreclosure, the former owner ... shall receive no more than such owner would have been entitled to receive if the unit would have sold for its maximum resale price at the time of ... foreclosure...."

The consent order also contained other provisions designed to assure that low and moderate income units would be marketed and sold to eligible persons. Additionally, it established that, if the funding provided to BHHC by any developer was "inadequate to cover ... necessary administrative expenses," Bedminster Township would "make reasonable contributions for administrative expenses as shall be necessary to insure the fiscal viability of [BHHC]" as well as other expenditures to assure the successful effectuation of the municipality's affordable housing plan. The order expressly contemplated that "the New Jersey Housing and Mortgage Finance Agency [ (HMFA) plaintiff herein] has agreed to supply[ ] $9.4 million in mortgage loans to finance the purchase of housing units by low and moderate income buyers." The trial court retained jurisdiction over the affordable housing case.

In July 1985, defendants Charles R. and Deborah S. Heine (the Heines) purchased the subject property for $34,200. Their deed recited the market value of the property as $77,000. The Heines agreed to be bound by the terms of the Declaration, and they executed a power of attorney granting BHHC the authority to take actions on their behalf in pursuit of the terms of the Declaration, including authorization to perform any acts or sign any documents on their behalf in connection with the subject property. To finance the purchase, the Heines executed a $32,490 mortgage which was assigned to HMFA.

In April 1991, the Heines defaulted on their common charges obligation and on their mortgage. The condominium association filed a lien claim in May and HMFA commenced mortgage foreclosure proceedings in November 1991. BHHC and the condominium association were among the named defendants in the foreclosure action. The Heines were served by mail sent to both the subject premises and an address in Florida, but no answer was filed on their behalf.

BHHC filed an answer to the foreclosure complaint in which, except to admit the one allegation of the complaint asserting its status, it averred insufficient knowledge or information to admit or deny the allegations of the complaint. Without pleading an affirmative defense or a counterclaim, BHHC demanded

judgment directing the plaintiff as first purchase money mortgagee not to terminate the resale restrictions imposed by the Village Green at Bedminster Neighborhood Condominium Declaration of Covenants, Conditions and Restrictions of Resale pursuant to Article IX, Section 9.01 of such declaration.

This answer was deemed by the trial court to be non-contesting. ¹

The condominium association filed an answer captioned as "non-contesting", in which it admitted its status as a junior lienholder for unpaid condominium charges and assessments, averred insufficient knowledge or information to admit or deny all other allegations of the complaint, and joined in HMFA's demand for a judgment of foreclosure and payment of the value of its lien from the proceeds of sale.

On December 2, 1993, a default was entered against the Heines and other non-answering defendants; and, because the only answers that had been filed were seen as non-contesting, a final judgment of foreclosure was entered establishing the amount due HMFA as $41,872.28 plus costs, a counsel fee of $568.72, and interest from May 31, 1993. Pursuant to published notice, a sheriff's sale was held on March 8, 1994, with an upset price of $46,383.50. BHHC bid for the property at the sheriff's sale but, after bidding to its authorized limit of $60,000, was outbid. The property was sold to the highest bidder, respondent Besold, for $60,100. The consideration was paid and, after the trial court denied BHHC's motion to set aside the sale, Besold received a sheriff's deed dated April 15, 1994. ²

BHHC undertook several related courses of action on March 17, 1994. It deposited with the Clerk of Somerset County, an assignment to itself of the Heines' "rights of redemption." This document had been executed by the President of BHHC pursuant to the power of attorney from the Heines. BHHC also submitted a check for $60,101 to the Clerk of the court in exercise of the right of redemption, without prejudice to its right to redeem for the upset figure of $46,383.59. Finally, BHHC filed a motion with the trial court seeking, on several grounds, an order setting aside the sheriff's sale, and permitting BHHC to redeem the property for $46,383.59, as well as a stay of further proceedings regarding the sale of the property.

In an apparent effort to perfect its claim further, BHHC, on March 24, 1994, filed a deed conveying "ownership of" the subject property to BHHC. The deed had been executed the day before by the President of BHHC pursuant to the power of attorney given by the Heines.

After oral argument on the motion, the relief sought by BHHC was denied. In a letter decision dated March 31, 1994, the trial court, after detailing the factual and procedural background of the foreclosure case, observed:

By being deemed an "affordable housing unit," certain restrictions cloud the resalability of the present mortgaged property. Since the property is an "affordable housing unit," the Village Green Declaration provides that the unit should only be sold to persons who fall within the low to moderate income range. However, Article 9 of the Declaration provides that the resale restrictions...