NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A - 5225
- 12T2

A - 1893
- 13T3 A - 2109
- 13T3

BRUNSWICK BANK & TRUST,

Plaintiff
- Respondent,

v. AFFILIATED BUILDING CORP.,

Defendant
- Appellant.

_________________________________ BRUNSWICK BANK & TRUST,

Plaintiff
- Respondent,

v. HELN MANAGEMENT, LLC,

Defendant
- Appellant.

__________________________________ BRUNSWI C K BANK & TRUST,

Plaintiff
- Respondent,

v. HELN MAN AGEMENT, LLC , and AFFILIATED BUILDING CORP.,

Defendants
- Appellants.

_________________________________________________ APPROVED FOR PUBLICATION March 17, 2015
APPELLATE DIVISIONA - 5225
- 12T2 2 Argued January 6, 2015
– Decided Before Judges Fisher, Nugent and Manahan. On appeal from the Superior Court of New Jersey, Chancery Division, Middlesex County, Docket No s. F - 30990
- 10 (A
- 5225
- 12) and F - 21231
- 13 (A
- 2109
- 13) and Monmouth County, Docket No. F
- 26278
- 10 (A
- 1893
- 13). Philip R. Kaufman argued the cause for appellants. Anthony B. Vignuolo argued the cause for respondent (Borrus, Goldin, Foley, Vignuolo, Hyman & Stahl, P.C., attorneys; Mr. Vignuolo and Anthony T. Betta, on the brief). The opinion of the court was delivered by FISHER, P.J.A.D. In these th ree appeals of orders entered in thr ee separate foreclosure actions, we consider, among other things, the impact

cause d by the plaintiff
- lender having first sought and obtained a money judg ment in the Law Division

– before seeking foreclosure
– for the pur pos e of determining whether plaintiff has been fully compensated. Because we can draw no certain conclusions from the convoluted and unsettled factual record, we remand.

I The record generated in these cases reveals that between September 2007 and July 2009, plaintiff Brunswick Bank & Trust made five construction and development loans to defendants Heln March 17, 2015A - 5225
- 12T2 3 Management, LLC , an d Affiliated Building Corp . , that were guara nteed by Jeffrey Miller, a principal of both entities, and his daughter Melanie Miller. E ach loan was secured by a mortgage on one o f four properties, which we will refer to as Matthew Manor, Beacon Hill, Loren Terrace and Baldwin Street. 1 A table identify ing the five loans is set forth below. 2 In May 2010, plaintiff filed a complaint in the Law Division against Heln, Affiliated, and the two guarantors , on four of the five loans. 3 On August 18, 2010, the C lerk of the
Court entered a default judgment in favor of plaintiff and against Heln for $1, 884,141.84 , against Affiliated for $175,000,

1 To be more specific, Matthew Manor consists of se ven lots in East Brunswick; Beacon Hill, Loren Terrace and Baldwin Street consist of single lots in Marlboro, East Brunswick and New Brunswick, respectively.

2
Borrower Loan Date Loan Amount Loan Security Heln Sept. 18, 2007 $1,500,000 Matthew Manor Heln May 22, 2008 $289,900 Beacon Hill Heln Sept. 10, 2008 $100,000 Loren Terrace Heln April 20, 2009 $300,000 Baldwin Street Affiliated July 28, 2009 $175,000 Baldwin Street

3 The complain t did not seek relief on the $300,000 loan to Affiliated that was secured by a mortgage on Baldwin Street.A - 5225
- 12T2 4 an d against the guarantors for the entire amount of the indebtedness , $2,05 9,141.84 . The judgment also declar ed that plaintiff was entitled to "post
- judgment interest" and an attorney fee . After filing the Law Division complaint , but a few months before default judgment was entered, plaintiff commenced three foreclosure actions ; a fourth was filed three years later. Specifically , plaintiff filed a complaint in Monmouth County on May 10, 2010 , against Heln seeking foreclosure on Beacon Hill , and two foreclosure complaints in Middlesex County on June 8, 2 010
– one against Heln seeking foreclosure on Matthew Manor and the other against Af filiated seeking foreclosure on Baldwin
Street . The fourth complaint wa s filed in Middlesex County on June 19, 2013, against Heln and Affiliated seeking foreclosure

on Loren Terrace . Defendants 4 did not respond to the first three foreclosure complaints , and judgments were entered foreclosing on Matthew Manor, Beacon Hil l and Baldwin Street on May 2, 2012, September 5, 2012, and February 22, 2013; the judgments set the

4 For clarity's sake, we refer to all defendants either individually or collectively as "defendants" even though not every p roceeding involved all defendant s.A - 5225
- 12T2 5 redemption amounts at $1,679,400. 19, $297,590.10, and $330,777.83 , respectively. 5 In July 2012, after entry of th e foreclosure judgment regarding Matthew Mano r, defendant s applied for a stay of the sheriff's sale scheduled for certain lots within Matthew Manor. In his supporting certification, guarantor Jeffrey Miller asserted that Heln had contracted to sell one lot for $1,000,000, which would result in a $50 0,000 payment to plaintiff, and that Heln had also contracted to sell another lot for $1,735,000. In September 2012, the Chanc ery judge permitted the sales to continue with respect to all the lots within Matthe w Manor except the lot for which there was a n existing
contract ; as to this excepted lot , the judge ordered the sale to go forward if a closing did not occur by the end of October 2012. Later, the judge considered defendants' application for a stay of all further forec losure p roceedings based on the contention that the loans were " over - collateralized. " I n his written decision, the Chancery judge recognized he was empowered to "prevent a potential double recovery or windfall to a judgment creditor," MMU of N.Y., Inc. v. G r ieser , 415 N.J.

5 These sum s included awards of counsel fees of $7,500, $3,094.95, and $3,434.43, respectively.A - 5225
- 12T2 6 Super. 37, 40 (App. Div. 2010), but he found the matter too muddled by the other pending matters and recognized the exercise of his power to prevent a windfall had to wait until "a full and complete factual record [could] be established." Later, by order entered on Ma rch 6, 2013, the Chancery judge denied a motion to vacate or stay the pending sheriff sales but the right of redemption was extended until March 1, 2013. 6 The judge also denied a request to c onsolidate th e various law suits . Defendants thereafter mo ved for an order declaring the Law Division judgment sat isfied. Defendants argued plaint iff had received $2,517,063 .01
– consisting of $1,217,063.01 in cash 7 and $1,300,000 in property

– which exceeded the amount due on the money judgment even when interest of $ 113,534.88, running from August 18, 2010, to March 1, 2 013, was add ed . On July 1 , 2013, the Chancery judge discharg ed 8 the Law Division judgment "without prejudice to the legal rights and position of the parties as have been asserted or remain" in the Bea con Hill and Loren
Terra ce foreclosure actions.

6 The final date for redemption is inexplicable in light of the date of the order , but we assume the order memorialized an earlier oral decision.

7 Defendants allege that p laintiff was paid $717,063.01 in 2011 and r eceived another $500,000 upon sale of a Matthew Manor lot.

8 T he order was entered in both the Law Division action and the Matthew Manor foreclosure action.A - 5225
- 12T2 7 No appeal was filed regarding any of these orders. Those circumstances, howe ver, set the stage for entry of the orders under review in these three appeals.

II
A. The first appeal . Prior to his disposition of the motion that led t o the July 1, 2013 order described above, the Chancery judge heard argument on defendants' motion for a stay of a sheriff 's sale of Baldwin St reet. A temporary stay was gra nted to allow the parties to be heard on defendants'
conte ntion that the $175,000 Baldwin Street mortgage was subsumed within the Law Division ju dgment and had therefore been satisfied and, also, with regard to defendants' assertion that they had found a buyer for the property that would generate $335,000, which would more t han satisfy the mortgage. P laintiff respond ed that the contract price would no t satisfy the amount still owed as reflected by the foreclosure judgment. Without conducting an evidentiary he aring to resolve this dispute, the judge denied the mo tion for a stay of the sheriff's sale. Defendants' notice of appeal i n A - 5225
- 12 seeks review of the May 21, 2013 order that memorializes the judge's ruling . B. The second appeal . In November 2013 , defendants moved for a stay of a sheriff's sale of Beaco n Hill in the one matter pending in another vicinage. In adhering to the approach takenA - 5225
- 12T2 8 in the other matters, the judge in the Beacon Hill matter denied defendants' application by order entered on November 22, 2013 , and plaintiff purchased Beacon Hill at the sheriff's sale that followed. Consequently, defendants filed their second appeal (A - 1893
- 13).
C. The third appeal . As noted earlier, plaintiff's foreclosure complaint regarding Loren Terrace was not filed until June 19, 2013. Defendants responded to that complaint , asserting among other things that the under lying debt had been satisfied and plaintiff was otherwise estopped from foreclosing on the mortgage. Defendants moved for dismissal , and plaintiff cross
- moved for summary judgment. On November 18 , 2013, after hearing oral argument, the Chancery judge granted plaintiff's summary judgment motion and struck defendant's answ er to the foreclosure complaint; the order, however, also declared that its entry "will be without prejudice to [d]efendants' rig ht to seek damages in the event of a reversal of this decision by the Appel late Division." In addition, the order directed that the

case would thereafter proceed on an unconteste d basis.
D efendants , however, filed their third notice of appeal (A - 2109
- 13) on January 2, 2014, before a final judgment could be entered.A - 5225
- 12T2 9 A few months later , when the property was sold by mutual agreement of the par ties

– and with defendants' payment to plaintiff of the proceeds under protest
– the jud ge entered an ord er, declaring that "subject to the appeal of the order . . . striking the [a]nswer of [d]efendants [] the within matter be and hereby is dismissed with prejudice" but that "this dismissal shall be without prejudice to the issues now on appeal." The order additionally declared that " in the event [d]efendant [s] sh all prevail on appeal, then [their] remedy shall be limited to money damages." 9

III Defendants present the same three arguments in all three appeals, namely: (1) whether plaintiff, by filing suit for a money judgment prior to seeking foreclosure, is bound by the

mone y judgment as to the amount due on the underlying notes; (2) whether the mortgages were satisfied by the payment of the underlying obligation, and (3) whether, in a commercial transacti on, mortgagor s are entitled to a fair market credit for property taken in foreclosure.

9 Our disposition of these appeals makes unnecessary our determination of whether defendants mistakenly filed a notice of appeal before finality was achieved in this matter in the trial court.A - 5225
- 12T2 10 We commence our examination of the se issues by mentioning a few legal principles that illuminate the way . To start , a mortgage is simply a form of "security for the pa yment of a debt," J.W. Pierson Co. v. Freeman , 113 N.J. Eq. 268, 271 (E. & A. 1933) , and full payment of the underlying debt, by operation of law, will extinguish a mortgage, Valley Nat'l Bank v. Meier , 437 N.J. Super. 401, 404
- 05 (App. Div. 2014), certif. denied , __ N.J. __ (2015); see also Shields v. Lozear , 34 N.J.L. 496, 503 (E. & A. 1869) (holding that a mortgage "is annihilated by the extinguis hment of the debt secured by it " ) . Furthermore, a "mortgagee is not entitled to reco ver more than full amoun t of [the] mortgage debt." 79
- 83 Thirteenth Ave., Ltd. v. De Marco , 79 N.J. Super. 47, 54 (Law Div. 1963), aff’d , 83 N.J. Super. 497 (App. Div. 1964), aff’d , 44 N.J 525 (1965). In addition , we have held that, even in a commercial setting, courts have

" in herent equitable authority to allow a fair market value credit in order to prevent a double recovery by a judgment creditor against a judgment debtor." MMU of N.Y., Inc. , supra , 415 N.J. Super. at 40. In that case, the plaintiff purchased the defendant's prope rty at a sheriff's sale for nominal value and then quickly sold it fo r approximately $1,200,000 . Id. at 41. We affirmed the trial court's ruling that the defendant, who owed the plaintiff $1,600,000 on a Law Division judgment,A - 5225
- 12T2 11 was enti tled to a cre dit based on the property's fair m arket value . Id. at 41
- 43. What these authorities illustrate is that plaintiff was entitled only to recover the amount of its loan

– together with accruing interest and other damage s permitted by the loan agreements
– and defendants were entitled to a fair market credit for any property acquired by plaintiff in the collection of its debt. Of further interest is that the "foreclosure first" rule , N.J.S.A. 2A:50
- 2, which acts to avoid the type of convoluted circumstance s p re sented here, re quires that foreclosure be sought first when collecting on a debt secured by a mortgage . Only if the eventual disposition of the foreclosed proper ty fails to " bring an amount sufficien t to satisfy the debt, interest , and costs," may th e lender commence an action on the deficiency . Ibid. Although the "foreclosure first" rule was intended to prevent the possibility of multiple actions for the recovery of such a debt, Light v. Granatell , 171 N.J. Super. 557, 561 (App.
D iv. 1979), the Le gislature created exceptions and determined

– for reasons apparently "based on efficiency and respect for

arms - length business transactions," Bus. Loan Ctr., L.L.C. v. Nischal , 331 F. Supp. 2d 301, 309 (D.N.J. 2004)
– that when the debt is secured "for a b usiness or commercial purpose , " such asA - 5225
- 12T2 12 here, the lender is no t obligated to foreclose first. N.J.S.A. 2A:50
- 2.3 (a) . A s we have seen, plaintiff chose the alternative
route permitted by this exception , thereby convoluting the circumstances now befo re us. 10 In any event, as made clear by First Union Bank v. Penn Salem Marina , 190 N.J. 34 2, 344
- 45 (2007), by fixing in the Law Division the amount due on four of the loans, plaintiff is now estopped from claiming a greater amount was due on the sam e items of dam ages then adjudicat ed. As the First Union Court held, "[e]xcept for amounts accruing after the first judgment and for different categories of damages, the amount of the judgment entered in [both the Law Division and foreclosure] action[s] should be identi cal." Id. at 345. Because of the lack of clarity in the record as to how the application of these principles impact the parties' rights and obligations, we remand for further proceedings. Despite the Chancery judge's accurate comment early in thes e proce edings regarding defendants' claim s of "over
- collateralization " and overpayment of the debt
– that "a full and complet e factual

10 A further complication arises from the fact that the Law Division action sought a money judgment on only four of the five loans. Plaintiff's rights and remedies regarding that fift h loan are, therefore, not capped by t he Law Division jud gment except to the extent plaintiff may have already collected more than owed on the total of all five loans as a result of its efforts on the first four loans.A - 5225
- 12T2 13 record" was required

– uncertainty and unresolved fact disputes continue to plague an understanding of the parties' rights. The parties are entitled to a consideration of these issues after the creation of "a full and complete factual record ." We note that c ertain pieces of the puzzle are already in place . First, the Law Division judgment fixed the total amount of the principal i ndebtedness on four of t he five loans at $2,059,141.84, as of August 18 , 2010 , the date judgment was entered ; the certification submitted by plaintiff in support of the entry of that default judgmen t designates

– and caps
– the amount due on each of the f o ur loans involved. That default judgment also awarded plaintiff post
- judgment interest on the adjudicated principal, thus fixing the accrual of interest on any unpaid portion of that judgment

– for however long it remained unpaid

– at the rule
- based inter est rate contained in Rule 4:42
- 11(a) . 11 Those determinations in the Law Division precluded the awarding of additional damages on those cate gories in the later Chancery Division actions. First Union Bank ,

11 The judgment also found defendants liable for an "attorney fee , " but no am ount was fixed . The judge should determine whet her plaintiff's failure to quantify its attorney's fees when applying for the default judgment in the Law Division constituted a waiver of that category of damages in the Chancery Division matters or whether it is more equit able to permit the later determinations in the foreclosure judgments to constitute awards for the unspecified attorney fee permitted by the Law Division judgment.A - 5225
- 12T2 14 supra , 190 N.J. at 355. On the other hand, plaintiff's right to seek relief on the fifth loan was not so limited. We further observe that a certification , which was filed in support of defendants' motion to dismiss the Loren Terrace foreclosure action , asserted that plaintiff was paid $717,063.01

" [b]etween March 30, 2011 and December 28, 2011," and another $500,000 was paid to plaintiff on or about January 21, 2013. It is not clear from the record whether plaintiff disputes these payments. If so, then there must be an evidenti ary hearing to resol ve that dispute; if not, then the amount due on the Law Division judgment should have been reduced and the amount of interest accruing o n the remainder should have be en adjust ed accordingly . In addition, defendants contend plaintiff received property thro ugh sheriff's sales that would further reduce

– or, if defendants are correct as to the pro perty's fair market value, fully satisfy

– the amount due on the judgment. Defendants are entitled to a credit against the outstanding indebtedness for the fair mar ket value of the property obtained by plaintiff . And plaintiff is entitled to recover any reasonable sums for expenditures properly incurred but not adjudicated by way of the Law Division action , such as
– if applicable or permitted by the loan agreement s – real estate taxes, insurance or property preservation .A - 5225
- 12T2 15 In short, the questions posed in these appeals cannot be properly or clearly answered without a fu ll accounting of the cash and property collected b y plaintiff applied against the amount of the Law Division judgment and the interest that accrued on that judgment, as well as expenditures in "different categories of [permissible] damages" not adjudicated in the Law Division action. First Union Bank , supra , 190 N.J. at 345. Although we are unsure of th e practical effect of reversing the orders under review in A
- 5225
- 12 and A
- 1893
- 13, 12 we reverse those orders as well as the order granting summary judgmen t in favor of plaintiff under review in A
- 2109
- 13 . And , we remand for further proceedings in conformity with this opinion. These proceedings should be conducted by the Chancery judge who presided ove r most of these lawsuits even though one of the
matters
– that which is before us in A
- 1893
- 13
– was adjudicated in a neighboring vicinage ; to avoid inconsistent rulings or further delay, the matter requires a global resolution by a single judge. Reversed and remanded. We do not retain jurisdiction.

12 Those orders denied defendants' applications for stays of sheriff's sal es that eventual ly went forward.