U.S. ex rel. Usda v. Scurry

• Decision Date: 21 February 2008
• Citation: 940 A.2d 1164,193 N.J. 492
• Parties: UNITED STATES of America, acting through the UNITED STATES DEPARTMENT OF AGRICULTURE (hereinafter referred to as "USDA") formerly known as Farmers Home Administration, Plaintiff-Respondent, v. BARBARA SCURRY, Defendant-Appellant, and Kevin Scurry, Defendant.
• Court: New Jersey Supreme Court

940 A.2d 1164

193 N.J. 492

UNITED STATES of America, acting through the UNITED STATES DEPARTMENT OF AGRICULTURE (hereinafter referred to as "USDA") formerly known as Farmers Home Administration, Plaintiff-Respondent, v. BARBARA SCURRY, Defendant-Appellant, and Kevin Scurry, Defendant.

Supreme Court of New Jersey.

Argued January 7, 2008.

Decided February 21, 2008.

Adam D. Greenberg, Voorhees, argued the cause for appellant (Honig & Greenberg, attorneys; Mr. Greenberg and Sven E. Pfahlert, on the briefs).

Michael D. Bonfrisco argued the cause for respondent (Simeone & Bonfrisco, attorneys; Mr. Bonfrisco and Kimberly A. Ruggieri, on the brief).

Justice RIVERA-SOTO delivered the opinion of the Court.

A homeowner facing foreclosure and dispossession is entitled to procedural protection. As one of several means of corroborating adherence to those procedural requirements, a party who secures an order allowing a sheriff's sale "shall, at least 10 days prior to the date set for sale, serve a notice of sale by registered or certified mail, return receipt requested, upon [the homeowner]." R. 4:65-2.

In this case, the foreclosing mortgagee did not serve the order authorizing the sheriff's sale of the homeowner's residence in the manner required by the Rule, and the homeowner only learned of the sale once she was served with a writ of possession commanding that she vacate her home. That same day, the homeowner visited her lawyer and deposited a significant sum of money for use in curing the arrears; the homeowner's lawyer promptly notified the mortgagee's lawyer of those facts. The foreclosure proceeded unabated, title to the property was transferred to the mortgagee, and the homeowner was dispossessed.

On the homeowner's application to vacate the sheriffs sale, both the trial court and the Appellate Division agreed that the mortgagee had failed to comply with the notice requirements of Rule 4:65-2. However, both courts further found that the homeowner's actions were barred by the application of the doctrine of laches and, thus, denied relief to the homeowner. We disagree and conclude that, in the circumstances presented, the doctrine of laches cannot serve to bar relief to this homeowner.

I.

Defendant Barbara Scurry was the title owner of certain premises located in Fairfield Township, Cumberland County, New Jersey (the property). Since 1997, the property had been encumbered by a mortgage to the benefit of plaintiff, the Farmers Home Administration of the United States Department of Agriculture. Defendant fell behind on her payments and, as a result, plaintiff sought to foreclose on its mortgage; a final judgment of foreclosure was entered against defendant on August 11, 2003. On April 1, 2004, after the final judgment of foreclosure was entered but before title, possession and ejectment were sought, defendant sought protection from her creditors pursuant to Chapter XIII of the United States Bankruptcy Code,¹ 11 U.S.C. §§ 1301-1330, a step that triggered an automatic stay of any proceedings against defendant. 11 U.S.C. § 362(a).

While the automatic stay was in place, defendant again fell behind on her mortgage payments, this time on those payments due after the filing of her bankruptcy petition (the post-petition arrears). As a result, on March 28, 2005, plaintiff sought and was granted relief from the automatic stay, 11 U.S.C. § 362(c), and proceeded to secure title to and, ultimately, possession of the premises. The property was scheduled for a sheriffs sale on April 19, 2005. Plaintiff was required to provide defendant at least ten days' prior written notice of the sheriff's sale and that notice was to be made via "registered or certified mail, return receipt requested[.]" R. 4:65-2. Although plaintiff produced a copy of a letter dated April 5, 2005, which was addressed to defendant and explained that the sheriffs sale on the property was scheduled for April 19, 2005, plaintiff failed to demonstrate that its notice letter had been mailed in the manner required by the Rule. Plaintiff likewise was unable to produce, any return receipt showing actual delivery of that notice. Nevertheless, the sheriffs sale was held on April 19, 2005. Plaintiff was the successful bidder and, on May 2, 2005, a sheriff's deed was issued vesting title to the property in plaintiff. Plaintiff then sought a writ of possession; that writ issued on July 25, 2005, and the Cumberland County Sheriff's Department personally served the writ of possession on defendant that same day.

Defendant immediately contacted her bankruptcy counsel and deposited $10,000 with her attorney to bring her mortgage arrears current. Eleven days later, by a letter dated August 5, 2005, defendant's bankruptcy counsel wrote to plaintiff's counsel as follows:

I represent [defendant], the debtor in a Chapter 13 petition from which you obtained stay relief in March 2005. Apparently, you have effected a Sheriff's Sale subsequent to that. My client has just sent me a copy of the Writ of Possession in favor of [plaintiff] and she is completely dumbfounded as to how this sale could have occurred without notice to her. She is a resident of the property and she asserts that no one served her with notice of the pending sheriff's sale.

What's more, on July 25, 2005 she came into my office and brought in Ten Thousand ($10,000.00) Dollars to be applied toward curing post-petition arrears and reinstating her Chapter 13 bankruptcy. So, I am dealing with a client who has worked very hard to get back on track. We were ready to make the application to reinstate the stay as against [plaintiff] and pay a substantial amount of money to [plaintiff] to bring things current and now we find that there has been a sheriff's sale. The only good thing that I can see from this is that [plaintiff] was the purchaser. That still leaves the opportunity for a resolution that might benefit both parties.

Is your client interested in entering into a new transaction with [defendant] to either reinstate the Chapter 13 plan or effect some sort of a[n] occupancy agreement with her? I have substantial funds to work with and I would like to explore this promptly to perhaps achieve a resolution which would be satisfactory to all.

Would you please contact me with regard to a possible resolution of this matter as suggested above and also provide my office with information as to how [defendant] was served notice of the sheriff's sale and when the sheriff's sale actually occurred.

Thank you for your courtesies.

Inexplicably, plaintiff never responded to that entreaty. Instead, on September 8, 2005, defendant and her possessions were removed from the property (the "lock-out").

Three months later, on December 13, 2005, defendant moved before the Chancery Division, and sought an order vacating the sheriffs sale of the property due to plaintiffs failure to provide proper notice of the sheriffs sale. Plaintiff opposed that request, largely claiming that it had expended slightly over three thousand dollars in evicting defendant and that those sums, together with the delay between the September 2005 "lock-out" and the date of defendant's application, prejudiced plaintiff. The trial court heard argument on the matter on February 17, 2006. It initially ruled that "the notice of the sale was deficient, pursuant to Rule 4:65-2." It, however, further determined that "even though proper notice may not have been given, the defendant and her belongings were evicted from the property in September" and that "[h]er failure to act in a timely manner has prejudiced the plaintiff in that respect." As a result, it concluded that "the application to vacate the sheriff's sale after eight months, nine months, has to be denied."² It nevertheless expressed the hope that "perhaps—just perhaps [plaintiff] would' entertain an offer by [defendant] to buy back the property."

Defendant moved for reconsideration in a timely manner, and plaintiff opposed that request also. This time, defendant focused on her belief that the trial court had barred relief based on the doctrine of laches and that "[i]n order to find laches there must be two elements, an unreasonable delay and significant prejudice to the party opposing the relief." In defendant's view, "[t]hat simply isn't present here." In response, plaintiff asserted that it would be prejudiced if the relief requested was granted because it had embarked on a course of action—the "lock-out" of defendant from the property on September 8, 2005, and the costs incurred thereafter— that inured to its detriment.

The trial court denied defendant's motion for reconsideration. It explained that "[a]lthough notice may have been deficient pursuant to Rule 4:65-2, it seems as though there are other interests to be worried about here." It identified those "other interests" as follows:

The defendant had her—all her belongings removed from the property some four months prior to making the application to vacate the sale.³ She was evicted. Even though she may not have been given proper notice of the sale, her failure to act timely has prejudiced the plaintiff in this respect.

It is also unclear how the alleged $10,000 go towards satisfying her arrears. As indicated by the plaintiff in this case, there were three prior bankruptcies.

It concluded that "it's a[n] issue that I believe was properly resolved, my decision in the prior motion."

Defendant appealed and, in an unpublished opinion, the Appellate Division affirmed. The panel started from the premise that, "without dispute, the notice required by Rule 4:65-2 was not provided to defendant in advance of the [sheriff's] sale." It then explained that "the sole basis upon which defendant's motion to vacate the sale was denied was laches." That limitation caused it to couch the issue presented as

whether [the trial court] mistakenly exercised [its] discretion in finding that under all of the pertinent circumstances that a four-and-one-half month...