NEW JERSEY HOME CONSTRUCTION, INC., et al. v. VOORHEES ONE TRUST and EDWARD SHUMAN

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2615-05T12615-05T1

NEW JERSEY HOME CONSTRUCTION, INC.,

and DONALD POLLACK,

Plaintiffs-Respondents,

v.

VOORHEES ONE TRUST and EDWARD SHUMAN,

Defendants-Appellants,

and

WALTER P. WRENN and GLENDA L. WRENN,

Defendants.

__________________________________

 

Argued January 22, 2007 - Decided February 13, 2007

Before Judges S.L. Reisner and Seltzer.

On appeal from the Superior Court of New Jersey, Chancery Division, Camden County,

C-176-04.

John A. Alice argued the cause for appellants.

Michael D. Bonfrisco argued the cause for respondents.

PER CURIAM

Defendants, Voorhees One Trust and Edward Shuman, appeal from trial court orders striking their offer of judgment, denying their motion for summary judgment, and granting summary judgment in favor of New Jersey Home Construction, Inc. (herein "plaintiff") and its principal, Donald Pollack.

The summary judgment order confirmed a sheriff's sale in which plaintiff was the successful bidder at a price of $295,000. The order also vacated the redemption of the property by the mortgagors, Dr. and Mrs. Wrenn. There is no dispute that the mortgagors redeemed for the amount of the mortgage debt (upset price) of approximately $201,000 in order to complete the sale of the property to a contract purchaser, defendant Voorhees. The mortgagors claimed to have obtained no financial benefit from the transaction with Voorhees and, by redeeming, they forfeited nearly $94,000 in equity of redemption. There further appears to be no dispute that the Internal Revenue Service (IRS), which was named in the foreclosure complaint as the United States of America but was not made a party to this case and was not served with the pleadings, held an $180,000 lien on the property. There is no legally competent evidence in this record to support defendants' claim that the IRS waived its lien and there is no evidence as to the circumstances of such alleged waiver.

Defendants claim that Dr. and Mrs. Wrenn wanted Voorhees' principal, Edward Shuman, to have the house because they liked him and wanted him to live in the house with his family. They claim Dr. Wrenn also felt morally obligated to redeem the property because the Wrenns had contracted to sell it to Shuman's trust, Voorhees, prior to the sheriff's sale, although Shuman was unable to close prior to the sale taking place. However, plaintiff claims, albeit without legally competent evidence, that Shuman was a frequent bidder at sheriff's sales who was merely trying to undermine the bidding system. Moreover, the few deposition pages properly placed before us indicate that Mrs. Wrenn may have proceeded under the mistaken assumption "that Internal Revenue would benefit in some way" from the Wrenns redeeming the property and selling it to Shuman.

There is also no legally competent evidence in the record as to whether the Wrenns still owned the house at the time they redeemed. The sheriff's sale occurred on September 8, 2004. They signed a deed in favor of Shuman on September 10, 2004. In the trial court and at oral argument, defendants claimed, albeit without record evidence, that the Wrenns did not actually deliver the deed until September 15, 2004, the date on which they redeemed the property.

On this appeal, defendants contend that the Wrenns had an absolute right to redeem the property, citing to Lobsenz v. Micucci Holdings, Inc., 127 N.J. Super. 50, 52 (App. Div. 1974), which also held that a mortgagor could assign the right to redeem the property, in return for "fair and adequate consideration." Id. at 54. They also contend that the right of redemption may be exercised to satisfy moral as well as financial obligations of the mortgagors. Although defendants do not specifically raise the argument, the pre-existing sale contract may have created some obligation on the Wrenns to redeem the property in order to fulfill the contract, although the contract by its terms contains no such specific obligation.

Plaintiffs, citing to Heritage Bank v. Magnefax Corp., 194 N.J. Super. 376, 380 (Ch. Div. 1984) and Carteret Sav. & Loan Ass'n v. Davis, 105 N.J. 344, 349 (1987), contend that the trial court was obligated to intensely scrutinize the transaction for overreaching and other impropriety. They contend the court properly vacated the redemption because it did not serve the purpose of the redemption right, namely to prevent the mortgagors' "loss of property and subsequent personal liability for the deficiency." Carteret, supra, 105 N.J. at 351. They contend that in tangible terms, the redemption resulted in a detriment rather than a benefit to the Wrenns, as well as to their major creditor, the IRS, and presented a significant potential for creditor fraud.

As the preceding discussion illustrates, the facts of this case are unusual and raise novel issues concerning the limitations on a mortgagor's right to redeem foreclosed property after a sheriff's sale. Unfortunately, the proceedings in the trial court were conducted in the wrong docket, without notice to necessary parties, and with inadequate attention to the Rules of Court. Because plaintiff filed its challenge to the redemption through a separate complaint instead of proceeding in the foreclosure docket, neither the IRS nor any other lienholders were served with the pleadings in this case. Hence, they had no opportunity to protect their financial interest in the excess funds from the sheriff's sale. Moreover, the summary judgment motions were not supported by statements of material facts, as required by R. 4:46-2, the summary judgment briefs cited to deposition transcripts not provided to the trial judge (or to us on this appeal), and they otherwise produced a record inadequate for our review. On this appeal, the parties have inappropriately attempted to address some of these deficiencies by citing to materials not in the record.

Finally, even if the record were more complete, we would still conclude that the circumstances of this case, which raise issues of credibility and potential creditor fraud on other lienholders, require that the trial court hold a plenary hearing. See State v Moore, 180 N.J. 459, 460 (2004) (novel legal issue should be decided on "a full and complete record"); see also Carteret, supra, 105 N.J. at 349; Heritage Bank, supra, 194 N.J. Super. at 380 (mandating "intense judicial scrutiny" of mortgagors' voluntary assignment of redemption right).

For all of these reasons, we vacate the order granting plaintiff summary judgment and remand for a plenary hearing. Prior to the hearing, the IRS and any other defendants served in the foreclosure action must be served with the pleadings and with a copy of this opinion, and must have an opportunity to participate in the hearing. We anticipate that the Wrenns and Shulman will testify at the hearing.

We affirm the order striking defendants' $501 offer of judgment. Even if a monetary offer of judgment could have been made in a case such as this, an issue we do not decide, defendants' offer of judgment was so de minimus as not to be a bona fide offer. See Frigon v. DBA Holdings, Inc., 346 N.J Super. 352, 356-57 (App. Div. 2002). See also R. 4:58-1(a) (amended effective September 1, 2006 to limit offers of judgment to cases in which the relief sought is exclusively monetary).

Affirmed in part, reversed and remanded in part.

 

The foreclosure complaint also named John Delgiorno, M.D. as a defendant. EMC Mortgage Corp. v. Wrenn, Superior Court of New Jersey, Chancery Division, Camden County, No. F-9458-01.

Other deficiencies in the proceedings include the lack of proper verification of the complaint and no proper provision for service of plaintiff's order to show cause (OSC) on any defendant. A provision in the OSC allowing mailed service to defendants' last known address or personal service at plaintiff's discretion was palpably improper. See R. 4:52-1(b).

The trial court may wish to require the parties to brief the applicability of Simon v. Cronecker, ___ N.J. ___ (2007), which addresses the adequacy of consideration in the tax sale context.

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A-2615-05T1

February 13, 2007