In an unpublished decision issued on June 30, 2016, a Bergen County trial judge granted summary judgment in favor of homeowners by declaring the lender’s foreclosure complaint was time barred under the 6-year statute of limitations period commencing from the maturity date of the loan. Anim Investment Co. v. Shaloub, Superior Court of New Jersey, Law Division, Bergen County, Docket No. F-30508-15.
It’s true. Every now and then miracles do happen. The homeowners in this case hit the jackpot by receiving a free home without ever making a single mortgage payment.
Certain dates are critical to comprehending the Court’s decision. On September 19, 1990 the homeowners Mr. and Mrs. George Shalhoub signed a purchase money mortgage to secure a $178,100 loan from Mina Investment Company (“Mina”) covering residential premises in River Vale, New Jersey. The mortgage and accompanying promissory note specified a maturity date of October 1, 1995. The borrowers never made a single mortgage payment to Mina, having initially defaulted on November 1, 1990.
On October 14, 1997 Mina assigned the mortgage to the plaintiff Anim Investment Company (“Anim Investment”). By that time the loan maturity date of October 1, 1995 already had passed. The borrowers never made a mortgage payment to Anim Investment.
Approximately 18 years after Anim Investment obtained ownership of the mortgage and note by assignment from the original lender, Anim Investment filed a foreclosure complaint on September 2, 2015. In response, the borrowers contended that the mortgage was unenforceable because the applicable statute of limitations – which they argued was 6 years from the loan’s maturity date of October 1, 1995 – had expired. The lender claimed that the controlling statute of limitation period in mortgage foreclosure actions is 20 years from the date of the default. The lender further argued that the proper default date was October 1, 1995 when the loan matured, and therefor suit was timely filed on September 2, 2105 which was within 20 years of October 1, 1995.
6-Year vs 20-Year Statute of Limitations Residential Mortgage Foreclosure
The trial court was faced with deciding which statute of limitations period controlled – the 6-year statute of limitations period commencing from the maturity date of the loan, or the 20-year period commencing from the date of default.
Under New Jersey law,
An action to foreclose a residential mortgage shall not be commenced following the earliest of:
a. Six years from the date fixed for the making of the last payment or the maturity date set forth in the mortgage or the note, bond, or other obligation secured by the mortgage;
b. Thirty-six years from the date of recording of the mortgage, or, if the mortgage is not recorded, 36 years from the date of execution, so long as the mortgage itself does not provide for a period of repayment in excess of 30 years; or
c. Twenty years from the date on which the debtor defaulted, which default has not been cured, as to any of the obligations or covenants contained in the mortgage or in the note, bond, or other obligation secured by the mortgage.
N.J.S.A. 2A:50-56.1 (emphasis added).
The trial judge concluded that the above statute left no ambiguities when applied to the facts of this case. The “earliest of” the two limitations period for Anim Investment to foreclosure its mortgage was the 6-year period set forth in subsection (a), N.J.S.A. 2A:50-56.1(a). In other words, Anim Investment had 6 years from the October 1, 1995 loan maturity date to file a foreclosure suit. The court rejected the lender’s argument that the 20-year period should apply, holding that subsection (c) of the statute predicated on the date of default did not apply. In other words, the date of the borrowers’ default was irrelevant because the “earliest of” the two statute of limitations periods was the 6-year period that was triggered on October 1, 1995 – the loan maturity date – and expired on October 1, 2001.
Retroactive Application of the Statute of Limitations Defense
Perhaps the most intriguing issue raised in this case was whether N.J.S.A. 2A:50-56.1 (enacted in 2009) should be applied retroactively to bar Anim Investment’s foreclosure complaint predicated on a mortgage that preexisted the statute’s effective date. The court concluded that the statute met New Jersey’s two-part test for retroactive application; namely, (1) whether the Legislature intended to give the statute retroactive application, and (2) whether retroactive application will result in either an unconstitutional interference with vested rights, or result in a manifest injustice. In re D.C., 146 N.J. 50 (1996).
The trial judge rejected Anim Investment’s argument, in holding that N.J.S.A. 2A:50-56.1 should be applied retroactively. The court noted the lender’s failure to: (i) cite any case law or statute to the contrary, (2) offer any reason why retroactive application would cause a manifest injustice, or (3) justify why the defendants’ expectations did not warrant retroactive application.
While the end result of this case is somewhat distasteful in that no one should really be entitled to get a free home, in this author’s opinion the judge correctly interpreted the plain meaning of the statute as it applied to the facts. The decision does not explain why the lender waited almost 18 years before finally filing foreclosure.
Expect an appeal by the lender. We will monitor the case and post the outcome of an appeal should one be filed.
Read our related post on the statute of limitations applied to real estate tax sale foreclosures.