By Michael L. Moskowitz and Michele K. Jaspan
Recently we were tasked by one of our long-time lender clients to file what should have been a run-of-the-mill residential mortgage foreclosure case in New Jersey after borrower’s failure to make mortgage payments on a first mortgage and credit line mortgage.
Upon receipt of the file, we analyzed the title report and determined only the credit line mortgage appeared of record. We asked the title company to double check the county records since lender advised there were two mortgages in default. Further investigation revealed the first mortgage had erroneously been marked “discharged” instead of another mortgage which had been paid in full. The balance due on the discharged mortgage was more than $300,000 at the time of the default. In the aggregate, the two mortgages totaled in excess of $500,000, excluding costs and expenses.
We alerted our client to this potentially costly mistake and promptly added a cause of action for reinstatement of the discharged mortgage in the foreclosure complaint. The lis pendens also provided record notice of Plaintiff’s intention to first reinstate, and then foreclose, upon the discharged mortgage.
Applying our research to the facts, we were able to formulate several equitable arguments supporting reinstatement of the discharged mortgage. Specifically, the borrower had continued to make the mortgage payments for eight years before the first default in payment occurred and the lender continually accepted the payments. Thankfully, there were no subsequent lienors who would have been prejudiced by the reinstatement of the mortgage.
In granting Lender’s Motion for Summary Judgment seeking reinstatement of the discharged mortgage, the court stated that, “[e]quity looks to the substance rather than the form.” The court recognized the harm and prejudice to the lender significantly outweighed the substantial windfall Borrower would have obtained if the mortgage was not reinstated. The court ordered the discharged mortgage reinstated and allowed lender to proceed with its foreclosure case.
Our experience allowed us to anticipate and execute a strategy to obtain a successful result for our client. By successfully obtaining court approval reinstating the mortgage, our client was able to recoup what might have been a loss of more than $300,000! In the end, outside-the-box thinking can turn what appears to be a hopeless objective into a winning outcome. Contact Michael Moskowitz at mlm@weltmosk.com to review your foreclosure challenges.
About Weltman & Moskowitz, LLP, A New York and New Jersey Business, Bankruptcy, and Creditors’ Rights Law Firm:
Founded in 1987, Weltman & Moskowitz, LLP is a highly regarded business law firm concentrating on creditors’ rights, bankruptcy, foreclosure, and business litigation. Michael L. Moskowitz, a partner with the firm, focuses his practice on business and bankruptcy litigation, as well as creditor’s rights, foreclosure, adversary proceeding litigation, corporate counseling, M&A, and transactional matters. Michael can be reached at (212) 684-7800, (201) 794-7500 or mlm@weltmosk.com. Michele Jaspan is an associate of the firm. Michele can be reached at mkj@weltmosk.com.
