Borrower Cannot Abandon Germane Defense To Foreclosure And Later Sue For Damages Based On That Defense

 by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Foreclosure (PD)
It is always helpful when a court lets you know up front what its decision is all about. This was the case in Adelman v. BSI Financial Services, Inc., where the Appellate Division began its decision as follows: "A defendant in a foreclosure case may not fail to diligently pursue a germane defense and then pursue a civil case against the lender alleging fraud by foreclosure." Definitely not burying the lede (or is it burying the "lead"?).

In Adelman, plaintiff was the executrix of the estate of her deceased husband, Norman. Before they were married, Norman entered into a loan with his lender that was secured by a mortgage on his home. Three years later, the loan went into default, and six months after that, the lender filed a foreclosure complaint. Norman offered no defense to the complaint, and default was entered. Three months after that, he began discussing the possibility of a loan modification with the lender. However, Norman's chances for a successful modification ended when he could not make the first payment under the proposed modification and when a title search revealed five other liens on the property. 

Months later, final judgment of foreclosure was entered. Norman did not object to the entry of final judgment. One year after that, the property was sold at sheriff's sale, and nine months after the sale, the lender filed a motion to remove Norman from the property. Only then, for the first time, did Norman argue, in a motion to stay his removal from the property, that the foreclosure was improper because the loan modification cured the default. The court denied this motion. Plaintiff appealed but then withdrew the appeal. Ultimately, shortly after Norman passed, and more than five years after the loan went into default, plaintiff vacated the property. 

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Back to Basics: Personal Guaranty Not Enforceable Without Consideration

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Gas pump
Sometimes the most basic things can cause the biggest problems. One of the first lessons learned in the first year of law school is that a valid contract requires consideration – some benefit flowing to each side of the deal. In M. Spiegel & Sons Oil Corp. v. Amiel, the Appellate Division reminded us how failing to satisfy this basic requirement can derail an otherwise seemingly straightforward matter.

In Spiegel, defendants were two individuals who formed an LLC that operated two gas stations. The LLC purchased fuel oil from plaintiff. By March 2012, however, the LLC allegedly owned plaintiff more than $1 million for fuel oil deliveries, therefore plaintiff stopped making deliveries. Shortly thereafter, plaintiff entered into an agreement with the LLC pursuant to which the LLC agreed to make regular monthly payments to plaintiff to resolve its debt. As part of the agreement, the LLC entered into a promissory note with defendants for the full amount of the debt. Defendants were never asked to, and never agreed to, provide a personal guaranty in connection with the promissory note. But, shortly after the promissory note was signed, plaintiff asked defendants to sign a personal guaranty, which they did.  

The LLC eventually defaulted on the promissory note, and plaintiff sued defendants to recover on the personal guaranty. Both sides moved for summary judgment. The only fact issue that either side raised was whether there was adequate consideration for the personal guaranty. Plaintiff asserted that the personal guarantee was provided to induce plaintiff to continue to supply fuel oil to the LLC’s gas stations, therefore there was adequate consideration and the guaranty should be enforced. Defendants countered that, by the time the personal guaranty was presented to them, the LLC had already made arrangements to purchase fuel oil from a new supplier and therefore the personal guaranty was void for lack of consideration.

The trial court granted plaintiff’s motion and denied defendants’ cross-motion, holding that the guaranty was “clear and direct,” and that the “‘forbearance of the plaintiff to forego collection of the full amount’ and to ‘span out a payment plan’” provided adequate consideration. Defendants appealed and the Appellate Division reversed.

 

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Divorce Equality Comes To New Jersey

by:  Peter J. Gallagher (@pjsgallagher)

When asked about same-sex marriage, the musician/politician/author Kinky Friedman is quoted as having said: “I support gay marriage. I believe they have a right to be as miserable as the rest of us.” In a recent decision, Groh v. Groh, a New Jersey trial court ruled that, if same-sex partners are "as miserable as the rest of us" (present company excluded, natch), they can now get a divorce for the same reason as "the rest of us" — irreconcilable differences. Interestingly, while Groh dealt with the often divisive issue of same-sex marriage (or, more accurately, divorce), it was a lesson in the much less divisive practice of statutory interpretation.  

In Groh, plaintiff and defendant entered into a civil union only to file competing claims to dissolve the civil union five years later on the no-fault grounds of irreconcilable differences. The parties entered into a written settlement agreement that resolved all of their differences, and “sought to conclude the proceedings via dual judgment of dissolution.” However, N.J.S.A. 2A:34-2.1, which sets forth the grounds upon which the dissolution of a civil union can be based, does not include irreconcilable differences. Accordingly, the court had to decide whether it could grant the dissolution on those grounds.

 

 

Continue reading “Divorce Equality Comes To New Jersey”