Msnd Financial, LLC v. 187 Loveladies Holdings, LLC ( 2024 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1744-23
MSND FINANCIAL, LLC,
Plaintiff-Respondent,
v.
187 LOVELADIES HOLDINGS,
LLC,
Defendant-Respondent,
and
SCOTT FORBES and GINA
COURY GUARDINO,
Defendants.
___________________________
187 NAUTILIS DR LLC,
Appellant.
___________________________
Argued April 30, 2024 – Decided July 22, 2024
Before Judges Natali and Bergman.
On appeal from the Superior Court of New Jersey,
Chancery Division, Ocean County, Docket No.
F-006797-20.
Michael J. Jurista argued the cause for appellant
(Jurista Law, LLC, attorneys; Michael J. Jurista, on the
brief).
Joseph M. Casello argued the cause for respondents 187
Loveladies Holdings, LLC (Collins, Vella & Casello,
LLC, attorneys; Joseph M. Casello, on the brief).
PER CURIAM
In this residential foreclosure action, appellant and successful third-party
bidder 187 Nautilis Dr., LLC 1 (appellant) challenges a February 5, 2024
Chancery Division Order that partially granted defendant 187 Loveladies
Holdings, LLC's (defendant) motion in which it objected to a sheriff's sale
pursuant to Rule 4:65-5 and sought to redeem the foreclosed property. Because
we are satisfied the court erred in granting defendant that relief, we reverse and
vacate the stay we entered.
I.
We begin by reciting the pertinent and uncontested facts in the record.
Defendant owned a single-family home located at 187 Nautilus Drive in
1
Based upon the record before us, it does not appear appellant moved to
intervene in the foreclosure matter pursuant to Rule 4:33. Defendant does not
challenge appellant's standing to appeal the order.
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Loveladies. Plaintiff MSND Financial, LLC, the mortgagee, obtained a final
judgment in foreclosure and the property was set to be sold at sheriff's sale on
August 15, 2023. After defendant twice requested and received an adjournment,
the sale was scheduled to occur on October 10, 2023. At 2:09 p.m. on October
10, 2023, appellant successfully bid $1,255,000 for the property.
Minutes later, at 2:17 p.m., Scott Forbes, defendant's managing member,
filed a Chapter 11 bankruptcy petition on defendant's behalf. The bankruptcy
created an automatic stay, 2 and the sheriff accordingly was barred from
delivering the deed to appellant. On December 12, 2023, the first day following
the sixty-day extension to cure defaults provided by 11 U.S.C. § 108(b), plaintiff
filed a motion for relief from the automatic stay in the United States Bankruptcy
Court for the District of New Jersey. 3
Seventy-nine days after the sheriff's sale, on December 28, 2023,
defendant filed a motion objecting to the sheriff's sale pursuant to Rule 4:65-5.
Defendant contended it did not receive adequate notice of the sale's completion,
and there was no proof the sheriff's sale was completed prior to its bankruptcy
2
See 11 U.S.C. § 362.
3
At oral argument on appeal, the parties advised the panel the stay had been
lifted.
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3
filing. It also asserted the purported timing of its bankruptcy filing created an
automatic stay that should have prevented the sale from occurring. Defendant
requested the sale be vacated, appellant's purchase funds be returned, and any
further sheriff's sale be stayed pending the bankruptcy proceedings.
In support, defendant submitted Forbes' certification dated December 28,
2023, in which he stated he filed bankruptcy on defendant's behalf on October
10, 2023 at 2:17 p.m., and noted plaintiff "produced no document from the
Sheriff of Ocean County corroborating th[e] allegation" that the sale was
concluded at 2:09 p.m. Forbes also confirmed defendant "never received formal
notice that the property . . . was sold at sheriff's sale or that the time for
redeeming the property had commenced."
Appellant responded by submitting the certification of its managing
member, Yaakov Fishman. Fishman certified he had attended the sheriff's sale ,
unlike Forbes, and recorded the time of completion as 2:09 p.m., consistent with
his practice when bidding at sheriff's sales. Appellant also provided a receipt
from the Ocean County Sheriff, which had 2:09 p.m. handwritten at the bottom.
In addition, appellant presented the certification of Michael S. Ackerman,
Esq., plaintiff's attorney, who stated another attorney, Leonardo Hernandez,
Esq., attended the sale on plaintiff's behalf. Following the sale, Ackerman
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explained, Hernandez "reported to [him] that the sale was held and concluded at
2:09 [p.m.]." Additionally, Ackerman certified he contacted the Ocean County
Sheriff's Office on October 11, 2023, and confirmed with a supervisor there "the
sale was concluded at 2:09 [p.m.] on October 10, 2023."
In its reply brief before the Chancery Division, defendant also asserted,
for the first time, it had the right to redeem the property as the deed had not been
delivered to appellant and it possessed the necessary funds to do so. According
to defendant, its counsel requested the redemption amount from the Ocean
County Sheriff three times during January 2024, but the sheriff's office failed to
provide it. As plaintiff's counsel confirmed on the record, at some point prior,
plaintiff's counsel asked the sheriff's office not to provide defendant with
redemption information as counsel believed defendant no longer had a right to
redeem.
After considering the parties' submissions and oral arguments, the court
issued an order on February 5, 2024 which denied defendant's request to set
aside the sheriff's sale, but nevertheless ordered defendant be permitted to
redeem the property.4 In its written statement of reasons, the court first rejected
4
The court also submitted an amplification pursuant to Rule 2:5-1(d) which
corrected a typographical error and added a sentence to its February 5, 2024
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defendant's contention that notice of the sale's completion was insufficient,
explaining there was "no duty to advise the borrower that the property was sold
and when the [d]efendant's right of redemption had started to run." Further,
based on the parties' submissions, the court specifically found the sale concluded
at 2:09 p.m. on October 10, 2023, and defendant filed for bankruptcy "five
minutes after the sale."
The court next considered "whether the right to redeem is expanded until
such time as the sheriff delivers the deed or whether it automatically terminates
with the passage of ten days." It explained under Brookshire Equities v.
Montaquiza, 346 N.J. Super. 310, 315 (App. Div. 2002), a mortgagor has an
absolute right to redeem the property by tendering the full amount due during
the ten days following a sheriff's sale. The court also noted Rule 4:65-5
"acknowledges and expressly provides for an additional procedure by which a
mortgagor may interpose an objection to a sheriff's sale within [ten] days
following the sale or at any time thereafter before the delivery of the
conveyance." The court found the plain language of Rule 4:65-5
opinion. After noting it denied defendant's motion objecting to the sheriff's sale
in part as to the notice of sale, the court found "the period of redemption has not
expired as the [s]heriff's deed has not been delivered to the third -party
purchaser."
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"demonstrate[s] that the right to object to a sheriff's sale continues until the deed
is delivered."
The court further relied upon Mercury Capital Corp. v. Freehold Office
Park, Ltd., 363 N.J. Super. 235 (Ch. Div. 2003), noting while that decision was
not binding on it, the court's holding "provide[d] guidance on the resolution of
this issue" and was "compelling and highly persuasive." The court explained
Mercury Capital held Rule 4:65-5 "unquestionably indicates that the right to
object is not finally terminated until the sheriff delivers a deed to the successful
bidder." The court stressed the Rule dictates the sheriff shall deliver the deed
"unless a motion for the hearing of an objection to the sale is served within ten
(10) days after the sale or at any time thereafter before the delivery of the
conveyance." The court also concluded, relying upon Mercury Capital and its
interpretation of Brookshire Equities and Hardyston National Bank v.
Tartamella, 56 N.J. 508 (1970), the ten-day period applied to both the right to
redeem and the right to file an objection, and such period may be extended due
to a bankruptcy filing.
Ultimately, the court rejected plaintiff's and appellant's arguments and
concluded "while the [d]efendant's objection to the [s]heriff['s] [s]ale has been
rejected, its right to redeem has not expired, and therefor[e] [defendant] must be
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provided the redemption information and given the opportunity to redeem its
property within a reasonable period of time." It ordered plaintiff to provide
defendant with a statement indicating the "payoff amount" within five days, and
stated defendant had ten days from receipt of such statement to satisfy the
"payoff amount." The court stated if defendant timely completes payment, the
sheriff's sale would be set aside, and if payment was not made, the court would
dismiss defendant's application and allow the sheriff's office to issue the deed to
appellant.
Appellant sought a stay of the order, which the court granted for twenty-
four hours to allow appellant to make an application to us. Appellant thereafter
filed an emergent application seeking a stay pending appeal of the court's
February 5, 2024 order, which we granted. Following oral argument, appellant
submitted a letter advising of a pending tax foreclosure matter involving the
property.
II.
We begin by briefly discussing the standard applicable to our review.
"[T]he appropriate standard of review of an application to open, vacate or
otherwise set aside mortgage foreclosure proceedings is whether the trial court
abused its discretion." United States v. Scurry, 193 N.J. 492, 503 (2008). We
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review de novo, however, questions of law such as interpretation of our court
Rules. DiFiore v. Pezic, 254 N.J. 212, 228 (2023). Under that standard, "a trial
court's interpretation of the law and the legal consequences that flow from
established facts are not entitled to any special deference." Rowe v. Bell &
Gossett Co., 239 N.J. 531, 552 (2019) (quoting Manalapan Realty, L.P. v. Twp.
Comm. of Manalapan, 140 N.J. 366, 378 (1995)).
Before us, appellant argues a mortgagor loses its right of redemption if no
objection and no attempt to redeem is made within the sixty-day period
following a bankruptcy petition, under Brookshire Equities. It asserts defendant
neither attempted to redeem nor filed any objection within the sixty-day period;
rather, defendant filed its invalid objection to the sheriff's sale seventy-nine days
after the sale. Appellant maintains "delivery of the deed by the sheriff is a
ministerial act, routinely performed, which does not affect the redemption rights
of the parties," and the court "failed to recognize the fundamental holding" of
the cases on which it relied. Specifically, it argues "a mortgagor can file an
objection under [Rule] 4:65-5 after the ten-day period and before conveyance of
the deed but only if there exists a valid ground for objection."
Appellant contends defendant failed to raise a valid objection and notes
the court "summarily rejected" the basis of defendant's motion. It assert s the
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court's decision renders the ten-day and sixty-day redemption periods
meaningless, and allowing mortgagors to redeem outside of such periods and
without valid objections so long as the deed has not yet been delivered "will
encourage mortgagors to do whatever it takes to stop the deed from being
delivered, which is exactly what was done in this case." Appellant further
contends such actions are inconsistent with the law and frustrate the purpose of
sheriff's sales, which is to secure the highest and best price for the parties and
achieve finality.
In requesting we affirm, defendant relies upon Hardyston, in which it
contends the Supreme Court "made clear that the policy of New Jersey is to
provide every opportunity for a defendant to redeem property from a sheriff's
sale." It argues it should be given the opportunity to redeem its property
regardless of any lodged objection to the sheriff's sale, and it is prepared to do
so. Defendant maintains the plain language of Rule 4:65-5 dictates an objection
to a sheriff's sale may be filed within ten days after the sale or anytime thereafter
prior to the delivery of the deed, but a valid objection to the sheriff's sale is not
required to redeem. It also relies on Mercury Capital for the proposition that
"up until deed delivery, the mortgagor has two rights: object to the sale or
redeem the property."
A-1744-23
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Notably, before us, defendant does not reprise its objections to the sale or
challenge the court's decision on that ground. It makes no argument regarding
the timing of the sale and its bankruptcy filing, the propriety of evidence
supporting the court's conclusion as to that timing, or the sufficiency of notice.
More specifically, defendant has not challenged before us the competent proofs
as to the timing of the sheriff's sale contained in Fishman's certification.
"The right to redeem is the right of a mortgagor to reassert complete fee
simple ownership of his property by paying the complete debt and any other
charges assessed under the terms of the mortgage or under statutory provision."
Borough of Merchantville v. Malik & Son, LLC, 218 N.J. 556, 567 (2014). In
New Jersey, "an owner-mortgagor has a right to redeem the mortgaged property
following foreclosure and [s]heriff's [s]ale, by the payment in full of the
mortgage indebtedness, costs of foreclosure, and costs of sale." Ibid."A sheriff's sale is automatically confirmed after ten days without an
objection being filed." Brookshire Equities, 346 N.J. Super. at 316. Where a
timely objection to the sale is made, "the right to redeem continues until the
disposition of the filed objections." Borough of Merchantville, 218 N.J. at 567.
Rule 4:65-5 governs sheriff's sales and objections thereto and, as relevant here,
provides:
A-1744-23
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A sheriff who is authorized or ordered to sell real estate
shall deliver a good and sufficient conveyance in
pursuance of the sale unless a motion for the hearing of
an objection to the sale is served within [ten] days after
the sale or at any time thereafter before the delivery of
the conveyance.
This ten-day period is extended when the mortgagor has filed bankruptcy.
11 U.S.C. § 362 triggers an automatic stay of certain proceedings to collect upon
debts and enforcement of judgments against a debtor's property upon filing a
bankruptcy petition. Additionally, 11 U.S.C. § 108(b) provides:
[I]f applicable nonbankruptcy law . . . fixes a period
within which the debtor . . . may file any pleading,
demand, notice, or proof of claim or loss, cure a default,
or perform any other similar act, and such period has
not expired before the date of the filing of the petition,
the trustee may only file, cure, or perform, as the case
may be, before the later of—
(1) the end of such period, including any suspension of
such period occurring on or after the commencement of
the case; or
(2) [sixty] days after the order for relief.
[Emphasis added.]
As such, "when a bankruptcy petition is filed before the expiration of a statutory
grace period, if need be § 108(b) can extend the grace period for [sixty] days
from the date of the filing of the petition." In re Connors, 497 F.3d. 314, 321
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(3d. Cir. 2007) (quoting Counties Contracting & Constr. Co. v. Const. Life Ins.
Co., 855 F.2d 1054, 1059 (3d Cir. 1988)).
In Hardyston, our Supreme Court explained the right to redeem is a
"favored right" which was "devised by equity to protect [the mortgagor] from
the forfeiture of his [or her] title." 56 N.J. at 513. The Court held "the just
course is to permit the mortgagor to redeem within the ten-day period fixed by
[Rule] 4:65-5 for objections to the sale and until an order confirming the sale if
objections are filed under the [R]ule."5 Ibid. Therefore, it affirmed the trial
court's determination that the "mortgagor had an unqualified right to redeem the
property within the ten-day period provided by [Rule] 4:65-5." Id. at 509(emphasis added). The Court was not presented with the circumstance of a
mortgagor's attempt to redeem outside that period.
Subsequently, in Brookshire Equities, we considered the propriety of an
order denying the mortgagors' right to redeem and rejecting their objection filed
approximately nine months after the sheriff's sale. 346 N.J. Super. at 313-14.
The mortgagors had filed for bankruptcy eight days after the sheriff's sale, and
5
At the time Hardyston was decided, the Rules required a confirmation order
to finalize a sheriff's sale, but this requirement was subsequently eliminated " to
streamline the process and cut back on paperwork," and sheriff's sales are now
automatically confirmed after ten days if no objection is filed. Brookshire
Equities, 346 N.J. Super. at 315.
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their objection was filed after the bankruptcy court vacated the automatic stay
but prior to transfer of the deed to the successful purchaser. Id. at 314.
We affirmed, reasoning Rule 4:65-5 "extend[s] the period wherein
redemption may occur . . . [but] a prerequisite of this extension is the filing of
an objection within the ten-day period allowed by the rule." Id. at 316.
Although a mortgagor may file an objection pursuant to Rule 4:65-5 after the
ten-day period and before the deed is delivered, there must be "some valid
ground for objection." Id. at 317. Valid grounds include "fraud, accident,
surprise, irregularity, . . . impropriety in the sheriff's sale," or where "the price
paid by the buyer . . . is below fair market value." Ibid. A bankruptcy filing,
however, does not constitute a valid objection. Ibid. We concluded, because
the mortgagors took no action within the sixty-day period, they were "out of
time, and acted well beyond the period when they had the right to redeem their
property." Id. at 316-17.
Applying these principles to the record before us, we are convinced the
court erred in permitting defendant to redeem the property outside the ten- and
sixty-day periods set forth in Rule 4:65-5 and 11 U.S.C. § 108(b)(2),
respectively, absent a valid objection to the sheriff's sale. While Hardyston
expressed a policy favoring redemption, its holding involved only redemption
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attempts "within the ten-day period provided by [Rule] 4:65-5." 56 N.J. at 509.
On the other hand, as in Brookshire Equities, in which the mortgagors failed to
file a valid objection until after the sixty-day period had elapsed, here defendant
failed to file any objection or make any attempt to redeem until seventy-nine
days after the sheriff's sale.
We are satisfied, contrary to the court's and defendant's conclusions,
Mercury Capital does not compel a different result. First, we note that decision
is a Chancery Division opinion which is not binding upon us. See N.J.
Highlands Coalition v. N.J. Dep't of Env'tl Prot., 456 N.J. Super. 590, 602 n.8
(App. Div. 2017) (noting published trial court opinion not binding on Appellate
Division). While we acknowledge certain language in Mercury Capital supports
defendant, notably its comment "[t]he plain language of the [R]ule [4:65-5]
demonstrates that the right [to redeem] continues until the deed is delivered ,"
363 N.J. Super. at 240, we conclude the Mercury Capital decision is simply
incompatible with Brookshire Equities, which has remained good law for over
twenty years. Although we are not bound by our prior decisions, see State v.
Harrell, 475 N.J. Super. 545, 564 (App. Div. 2023), we depart only in certain
limited situations. See, e.g., State v. Rochat, 470 N.J. Super. 392, 439 (App.
Div. 2022) (giving "due consideration" to prior decision's "carefully considered
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statements"); Gerszberg v. Jacuzzi Whirlpool Bath, 286 N.J. Super. 197, 204
(App. Div. 1995) (declining to readdress issue decided in prior case which "has
stood for twenty years without modification by rule or subsequent case law") ;
see also Pressler & Verniero, Current N.J. Court Rules, cmt. 3.3 on R. 1:36-3
(2024) (noting panels of the Appellate Division "have been reluctant to interfere
in long-standing, unchallenged holdings of their co-equal panels, especially if
doing so would unsettle years of established procedure").
In Mercury Capital, a mortgagor attempted to redeem a property twenty-
two days after it was sold at a sheriff's sale but prior to delivery of the deed. 363
N.J. Super. at 237. The mortgagor then filed an objection contending the sale
price was below fair market value and sought a restraint on the delivery of the
deed. Id. at 238.
The court in Mercury Capital found Hardyston and Brookshire Equities
"determined that the right of redemption persists so long as the right to object
exists and both these rights co-exist so long as the sheriff has not delivered the
deed to the purchaser." Id. at 242-43. It stated the ten-day period after the sale
"represents a time frame within which the sheriff cannot deliver the deed and
within which the mortgagor may redeem the property notwithstanding the
absence of an objection to the sheriff's sale." Id. at 243 (emphasis in original).
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Once the ten-day period has passed, the court reasoned, the sheriff is free to
deliver the deed "unless a motion objecting to the sale is filed in the interim; in
this way, after the passage of ten days, the burden of interrupting the post -sale
process falls upon the mortgagor." Ibid.Although it did not expressly rule upon the mortgagor's objection because
it concluded the mortgagor should have been permitted to redeem, the court
noted the allegation, if proven, of a sale price approximately $3 million below
the property's recent appraisal value would justify setting aside the sale. Ibid.The court nevertheless concluded the right to redeem was not "tied to the
sufficiency of the post-sale objection." 6 Id. at 248.
Contrariwise, Brookshire Equities makes clear the right to redeem is
extended beyond ten days only if: (1) an objection is filed within the ten-day
period pursuant to Rule 4:65-5, or (2) a valid objection is filed outside the ten-
day period but prior to delivery of the deed. 346 N.J. Super. at 316-17; cf.
Pressler & Verniero, Current N.J. Court Rules, cmt. 2.1 on R. 4:65-5 (2024)
6
The court rejected the reasoning of another published trial court opinion, East
Jersey Savings & Loan Association v. Shatto, 226 N.J. Super. 473 (Ch. Div.
1987), in which the court rejected the mortgagor's timely but non-meritorious
objection to the sheriff's sale and subsequent attempt to redeem outside the ten -
day period. Although Shatto also does not bind us, we note the Chancery
Division in that case held the mortgagor was not entitled to redeem beyond the
ten-day period absent a meritorious objection. Id. at 481-82.
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(noting "the right to redeem is lost if either redemption is not made or an
objection is not filed within the ten-day period"). Neither of those events
occurred here. Defendant filed no objection within either ten or sixty days of
the sheriff's sale. And its untimely objections were rejected by the court,
findings defendant does not challenge before us. Accordingly, defendant's
failure to take action to preserve its rights within the required time resulted in
the loss of its right to redeem.
Our decision is further supported by the Third Circuit's opinion in
Connors, in which it considered whether a debtor could redeem a foreclosed
property under New Jersey law after expiration of the sixty-day automatic
bankruptcy stay. 497 F.3d at 317. The Third Circuit resolved a disagreement
among New Jersey district courts with respect to whether the right to redeem
ends when "the gavel falls at a foreclosure sale" or extends "until the deed is
delivered to the winning bidder," reasoning the "gavel rule" was more
appropriate. Id. at 318-19. The court concluded the proper period to redeem
under New Jersey law is ten days, which may be extended to sixty days upon
filing a bankruptcy petition, pursuant to 11 U.S.C. § 108(b). Id. at 321.
Additionally, it explained, unlike the delivery of the deed, the sale requires
notice to the debtor, which permits "ample opportunity to protect his or her
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interests by filing a bankruptcy petition before the foreclosure sale" or by
redeeming. Id. at 322-23.
We acknowledge the well-settled principle that "equity abhors a
forfeiture." Dunkin' Donuts of Am., Inc. v. Middletown Donut Corp., 100 N.J.
166, 182 (1985). It is equally well-settled, however, that "equity follows the
law," and will "generally conform to established rules and precedents." Id. at
183.
Simply put, we are convinced the balance of the equities simply do not
favor defendant. Defendant offered no reasoned explanation for its failure to
timely object or attempt to redeem the property. Despite receiving two
adjournments of the sheriff's sale as was its right, defendant did not file for
bankruptcy until after the sale's conclusion. It did not object or seek to redeem
until nineteen days after expiration of the sixty-day bankruptcy stay. And, as
the court concluded after considering the competent evidence presented which
defendant has not challenged, defendant's objections lacked merit. Under
Brookshire Equities, defendant's failure to timely object or to present a
meritorious objection precluded it from redeeming the property outside the
sixty-day period provided by its bankruptcy filing.
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Our stay of the court's order is lifted, except that the stay shall continue
for twenty-four hours to allow the parties to seek emergent relief from the
Supreme Court. Should any party file an emergent application with the Supreme
Court, the stay shall continue until the Supreme Court disposes of that
application, or until further order of the Court.
In light of our decision, we need not, and do not, reach appellant's
argument regarding whether the court erred by granting defendant relief sought
only in its reply brief.
Reversed. We do not retain jurisdiction.
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