New Jersey Appellate Court Dismisses Lender’s Deficiency Action When Required Notice Was Not Recorded Before Lender Filed Complaint, Despite Purportedly Timely Mailing

The New Jersey Appellate Division recently held that a lender’s deficiency action was barred because the Notice of Proposed Deficiency Action was not recorded by the county clerk until five days after the lender’s deficiency complaint was filed, even though the lender had mailed the Notice to the clerk two weeks earlier.  See Foreclosed Assets Sales & Transfer P’ship v. Strauss, 2019 WL 1092703 (N.J. Super. Ct. App. Div. Mar. 8, 2019).  In the case, defendant defaulted on a loan with plaintiff and plaintiff sold defendant’s property via a sheriff’s sale on November 17, 2016.  Under N.J.S.A 2A:50-2, plaintiff was required to bring any action for a deficiency within three months from the date of the sale—i.e., by February 17, 2017.  Under N.J.S.A 2A:50-6, plaintiff also was required to file a Notice of Proposed Deficiency Action with the county clerk before filing the complaint.  Thus, on February 8, 2017, plaintiff sent the Notice to the county clerk via regular mail, but the clerk did not record the Notice until February 22, 2017.  On February 17, 2017, plaintiff filed the deficiency action.  Plaintiff moved for summary judgment in the action, but the trial court denied the motion and dismissed the complaint, finding that plaintiff lacked standing to bring this action because it filed the complaint before the clerk recorded the Notice.

On appeal, the Appellate Division affirmed the trial court’s order.  The Court rejected plaintiff’s argument that it substantially complied with the statute, finding that “[t]he doctrine of substantial compliance, equitable in nature, cannot be invoked to circumvent the mandate of the statute.”  Further, the Court found that “Plaintiff does not present any basis as to why the Notice could not have been mailed earlier or why it could not be hand-delivered and stamped ‘received’ by the clerk’s office prior to filing the deficiency complaint.”  Accordingly, the Court affirmed the denial of the motion and the dismissal of the action.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Michael Crowley at mcrowley@riker.com, or Dylan Goetsch at dgoetsch@riker.com.