Time-Bar Invoked in Mortgage Foreclosure Action

Home Foreclosure Time-Bar Invoked in Mortgage Foreclosure Action
201607.12
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Time-Bar Invoked in Mortgage Foreclosure Action

Max Mitchell, New Jersey Law Journal 

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Wading into the rarely-invoked statute of limitations for mortgage foreclosure actions in New Jersey, a Bergen County judge has barred a mortgage company from filing a foreclosure action, finding that the suit was brought outside the statute of limitations.

In a recent decision made public Monday, Bergen County Superior Court Judge Edward A. Jerejian determined that a mortgage company seeking to file a foreclosure complaint was time-barred because it filed the suit more than six years after the maturity date outlined in the mortgage. As part of the ruling, Jerejian also determined that the statute of limitations law, which took effect in August 2009, should be applied retroactively.

“Although the legislature did not specify whether the statute should be applied retroactively, N.J.S.A. 2A:50-56.1 is meant to be curative, and provide guidance on an issue that was previously unaddressed,” Jerejian said in Anim Investment v. Shalhoub.

Although the mortgage company had contended that section (c) of that statute, which provides for a 20-year statute of limitations starting from the date of default, Jerejian ultimately determined that section (a), which provides for a six-year statute of limitations starting from the last payment or the maturity date in the mortgage, would apply in the case.

Attorney Myron D. Milch, who represented the defendants, George and Kathleen Shalhoub, said the ruling will provide guidance on an issue that has not been addressed by the courts.

“It clarifies the law with respect to the statute of limitations,” he said.

Arnold G. Shurkin, who represented Anim Investment, however, said he felt Jerejian applied the law improperly, and that the six-year statute of limitations only applied to suits on the mortgage note itself.

“The judge said the six-year statute applies to mortgage foreclosures, which makes the 20-year and the 36-year statutes of limitation don’t apply to anything,” he said. “We’re not suing anybody, we’re just foreclosing.”

Shurkin added that he plans to appeal the decision.

According to Jerejian, the Shalhoubs borrowed $178,100 from Mina Investment Co. in September 1990. The Shalhoubs, Jerejian said, defaulted on their first payment in November 1990.

The mortgage was later assigned to Anim Investment, and the company filed its complaint against the Shalhoubs on Aug. 31, 2015. The Shalhoubs then filed a summary judgment motion, claiming the action was barred under the statute of limitations.

The parties initially agreed that the 20-year statute of limitations should be applied from the default date but disputed whether the default date should be applied as the maturity date stated in the mortgage, which was Oct. 1, 1995, or the date of the first missed payment.

Jerejian, however, noted that, under N.J.S.A. 2A:50-56.1, the statute of limitations begins to run at the earliest of several possible dates, including six years from the date for making the last payment or the maturity date, or 20 years from the date on which the debtor defaulted.

After additional briefing in the case, the mortgage company argued that the six-year statute of limitations under subsection (a) did not apply. The company further argued that the U.S. District Court for the District of New Jersey’s 2015 decision in Specialized Loan Service LLC v. Washingtonmeant that subsection (c), which outlines the 20-year limitation period, applied to the case.

Jerejian said that decision dealt with the definition of “accelerated” but did not support the company’s argument that subsection (a) applied only to lawsuits for damages, or that the 20-year statute of limitations applied.

Section (a), Jerejian said, is “unambiguously” defined as a six-year statute of limitations starting from the maturity date outlined in the mortgage note.

“The court sees no reason why acceleration would change the commencement of the limitations period from that date,” Jerejian said. “Here, maturity date states on the note and mortgage is Oct. 1, 1995. Applying the plain language of the limitations period described in subsection (1), an action to foreclose on the mortgage is timely as long as it is commenced no later than Oct. 1, 2001.”

Max Mitchell can be contacted at 215-557-2354 or [email protected] Follow him on Twitter @MMitchellTLI.

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