Title: West Pleasant-CPGT, Inc. v. U.S. Home Corporation
Citation: N/A
Docket Number: 
State: new-jersey
Issuer: new-jersey Supreme Court
Date: July 8, 2020

West Pleasant-CPGT, Inc. v. U.S. Home Corporation Annotate this Case Justia Opinion Summary In 2005, U.S. Home Corporation entered into a contract to purchase two contiguous tracts of land, one of which was owned by West Pleasant-CPGT, Inc. Under the contract, West Pleasant and the other landowner were to gain certain approvals permitting development of the properties. Pursuant to the contract, U.S. Home paid advances to the landowners totaling over $1.5 million. As security for the advances, West Pleasant executed a mortgage and note on its property; the other landowner did not. When a contract dispute arose in 2006, U.S. Home sought to terminate the contract and get a return of its total advance. U.S. Home prevailed in arbitration and was awarded a judgment in the full amount of the advance, plus interest. The Appellate Division affirmed the judgment in 2009. When the judgment was not satisfied, U.S. Home commenced foreclosure actions against the properties. The foreclosure proceedings were stayed when West Pleasant and the other property owner filed for bankruptcy. In West Pleasant’s bankruptcy action, U.S. Home moved to dismiss and for relief from the automatic stay. West Pleasant and U.S. Home executed a Consent Order, in which West Pleasant dismissed its bankruptcy proceeding, waived a fair market valuation and its right to object to a sheriff’s sale of its property, and released U.S. Home from any claims in law or equity. U.S. Home never proceeded with any deficiency action against either landowner. Nonetheless, the landowners commenced the affirmative litigation that gave rise to this appeal, seeking a declaration that the arbitration award was fully satisfied, as well as compensation “in the amount of the excess fair market value of the properties obtained by defendant[] U.S. Home over the amount of its outstanding judgment.” The second property owner then assigned its rights to West Pleasant. After trial, the court valued the second property as worth almost $2.4 million and West Pleasant’s property as worth almost $2 million. The court ordered U.S. Home to pay the fair market value of the West Pleasant property, plus interest, and extinguished the arbitration award on the second property. On appeal, the Appellate Division determined that West Pleasant had waived its right to a fair market valuation on its property but that it was owed a fair market value credit for the second property. The Appellate Division remanded the matter to the trial court for recalculation of damages. The New Jersey Supreme Court reversed, finding use of fair market value credit by this debtor to obtain a money judgment against a creditor, in the absence of a deficiency claim threatened or pursued or any objection being raised at the time of the sheriff’s sales, was "inconsistent with sound foreclosure processes and, moreover, inequitable in the circumstances presented." The judgment of the Appellate Division was reversed and the matter remanded for further proceedings. Read more Want to stay in the know about new opinions from the Supreme Court of New Jersey? Sign up for free summaries delivered directly to your inbox. Learn More › You already receive new opinion summaries from Supreme Court of New Jersey. Did you know we offer summary newsletters for even more practice areas and jurisdictions? Explore them here . SYLLABUSThis syllabus is not part of the Court’s opinion. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Court. In the interest of brevity, portions of an opinion may not have been summarized. West Pleasant-CPGT, Inc. v. U.S. Home Corporation (A-1-19) (082981)Argued March 3, 2020 -- Decided July 8, 2020LaVECCHIA, J., writing for the Court. In this appeal, the Court considers whether a fair market value credit can be sought in the absence of a deficiency action or similar proceeding as a means for a debtor to obtain a money judgment against a creditor. In 2005, U.S. Home Corporation (U.S. Home) entered into a contract to purchase two contiguous tracts of land, one of which was owned by West Pleasant-CPGT, Inc. (West Pleasant). Under the contract, West Pleasant and the other landowner were to gain certain approvals permitting development of the properties. Pursuant to the contract, U.S. Home paid advances to the landowners totaling over $1.5 million. As security for the advances, West Pleasant executed a mortgage and note on its property; the other landowner did not. When a contract dispute arose in 2006, U.S. Home sought the contract’s termination and return of its total advance. U.S. Home prevailed in arbitration and was awarded a judgment in the full amount of the advance, plus interest. The Appellate Division affirmed the judgment in 2009. When the judgment was not satisfied, U.S. Home commenced foreclosure actions against the properties. The foreclosure proceedings were stayed when West Pleasant and the other property owner filed for bankruptcy. In West Pleasant’s bankruptcy action, U.S. Home moved to dismiss and for relief from the automatic stay. West Pleasant and U.S. Home executed a Consent Order, in which West Pleasant dismissed its bankruptcy proceeding, waived a fair market valuation and its right to object to a sheriff’s sale of its property, and released U.S. Home from any claims in law or equity. In the bankruptcy action of the owner of the second property, the bankruptcy court accepted the appraisals of U.S. Home’s expert of $806,000 for the second property and $412,500 for the West Pleasant property. Because the combined value of the two properties was less than the amount owed to U.S. Home, the court determined there was no equity in the second property and lifted the stay, allowing U.S. Home to proceed with the foreclosures. 1 U.S. Home obtained a foreclosure judgment against West Pleasant in November 2010. It executed first on the second property, which it purchased for $100 as the sole bidder at a sheriff’s sale. Not long afterward, U.S. Home purchased the West Pleasant property, also for $100 as the sole bidder at a sheriff’s sale. U.S. Home never proceeded with any deficiency action against either landowner. Nonetheless, the landowners commenced the affirmative litigation that gave rise to this appeal, seeking a declaration that the arbitration award was fully satisfied, as well as compensation “in the amount of the excess fair market value of the properties obtained by defendant[] U.S. Home over the amount of its outstanding judgment.” The second property owner then assigned its rights to West Pleasant. After a trial, the court valued the second property as worth almost $2.4 million and West Pleasant’s property as worth almost $2 million. The court ordered U.S. Home to pay the fair market value of the West Pleasant property, plus interest, and extinguished the arbitration award on the second property. On appeal, the Appellate Division determined that West Pleasant had waived its right to a fair market valuation on its property but that it was owed a fair market value credit for the second property. Therefore, the Appellate Division remanded the matter to the trial court for recalculation of damages. The Court granted certification. 239 N.J. 82 (2019).HELD: The use of fair market value credit by this debtor to obtain a money judgment against a creditor -- in the absence of a deficiency claim threatened or pursued or any objection being raised at the time of the sheriff’s sales -- is inconsistent with sound foreclosure processes and, moreover, inequitable in the circumstances presented.1. The Court reviews the legislative history of the relevant statutes. In its present form, N.J.S.A. 2A:50-2 provides that, after the foreclosure of a mortgage, if the foreclosure action fails to generate “an amount sufficient to satisfy the debt, interest and costs,” the creditor may bring a deficiency action. And N.J.S.A. 2A:50-3 provides that a debtor “may file an answer in the action for deficiency, disputing the amount . . . sued for” (emphasis added), after which the court shall take evidence and determine the fair market value of the property. The Legislature included the fair market value credit as a protection for mortgagors in deficiency actions to use as a shield, not as a sword. The mortgagor is not left without a remedy, however. The mortgagor may object to the sheriff’s sale under Rule 4:65-5 and seek a fair market value credit at that time. (pp. 16-20)2. The statutory scheme is relevant even when, as here, foreclosure follows the deficiency judgment because courts may consider equitable relief in the form of fair market value credit in appropriate circumstances. For example, although the statutory scheme does not apply to judgment creditors, equitable principles grant a court the inherent power to prevent a potential double recovery or windfall to a judgment creditor who profits on the purchase of the property at the foreclosure sale and who also seeks to 2 obtain satisfaction of his judgment. But equity follows the law; it will not change or unsettle rights that are created and defined by existing legal principles. Thus, the legislative purposes of the fair market value credit under N.J.S.A. 2A:50-3 have informed the Court’s equity jurisdiction where the statute would not otherwise apply. Those purposes -- to protect the mortgagor from a large deficiency judgment and liability for more than the difference between the fair market value of the property and the mortgage debt -- are not present here. (pp. 20-22)3. New Jersey courts that have equitably applied a fair market value credit, where statutorily it otherwise would have not applied, have done so when the creditor is seeking a deficiency judgment. MMU of N.Y., Inc. v. Grieser, 415 N.J. Super. 37 (App. Div. 2010), on which West Pleasant relies, is distinguishable. The creditor’s continued pursuit of recovery against the debtor in that case distinguishes Grieser from these circumstances. (pp. 22-23)4. Here, U.S. Home has not sought a deficiency judgment against West Pleasant or pursued West Pleasant for collection in other ways. U.S. Home conceded at oral argument that it has waived its judgment against West Pleasant. The Court reviews in detail U.S. Home’s approach with respect to the foreclosures and concludes that U.S. Home did nothing untoward in proceeding as it did to obtain the two properties. The Court stresses that the sheriff’s sales took place months before the instant complaint was filed and without any deficiency claim being pursued by U.S. Home. (pp. 24-26)5. This remarkable proceeding in which a debtor brought an after-the-fact affirmative claim for fair market value and obtained a money judgment against the creditor is unprecedented and unwarranted. Public policy generally favors finality in the foreclosure process. A debtor has the ability to seek a fair market value credit by objecting to the sheriff’s sale. After the time for objecting to the sheriff’s sale has passed, unless a deficiency action or other collection activity is pursued, later claims for fair market value credit should not be permitted to generate endless litigation. And prior to filing this affirmative claim, both property owners had the ability to advance a fair market value objection during the sheriff’s sales proceedings under Rule 4:65-5, but West Pleasant waived that option in the Consent Order and the other owner failed to object. The Court declines to expand the equitable application of fair market value credit to permit the affirmative relief that was awarded here. (pp. 26-27) The judgment of the Appellate Division is REVERSED and the matter is REMANDED for entry of judgment consistent with this opinion.CHIEF JUSTICE RABNER and JUSTICES ALBIN, PATTERSON, FERNANDEZ-VINA, SOLOMON, and TIMPONE join in JUSTICE LaVECCHIA’s opinion. 3 SUPREME COURT OF NEW JERSEY A- 1 September Term 2019 082981 West Pleasant-CPGT, Inc., Plaintiff-Respondent, v. U.S. Home Corporation, d/b/a Lennar Homes, Defendant-Appellant. On certification to the Superior Court, Appellate Division. Argued Decided March 3, 2020 July 8, 2020Bruce D. Greenberg argued the cause for appellant (Lite DePalma Greenberg, attorneys; Bruce D. Greenberg, on the briefs).Deborah A. Plaia argued the cause for respondent (Deborah A. Plaia, on the briefs).Robert M. Washburn argued the cause for amicus curiae New Jersey Builders Association (Flaster Greenberg, attorneys; Robert M. Washburn, of counsel and on the brief). 1 JUSTICE LaVECCHIA delivered the opinion of the Court. Under current New Jersey statutory law, a creditor who forecloses uponthe mortgage of a debtor may bring a deficiency action against th at debtor ifthe foreclosure action does not generate sufficient funds to satisfy the debt,including interest and costs. See N.J.S.A. 2A:50-2. In response, the debtormay seek a fair market value credit, or a determination of the property’s valueand award of the difference between that value and the debt owed, should thatvalue exceed the debt. See N.J.S.A. 2A:50-3. Here, the Court considerswhether a fair market value credit can be sought in the absence of a deficiencyaction or similar proceeding as a means for a debtor to obtain a moneyjudgment against a creditor. In this appeal, defendant-petitioner is a creditor that foreclosed on twocommercial properties, purchased the properties at sheriff’s sales conductedwithout any objection by the debtors, and never pursued a deficiency actionagainst the sole debtor that came to hold assigned rights encompassing bothproperties. This creditor seeks review of a money judgment obtained by theplaintiff debtor through a later-in-time action claiming a right to fair marketvalue credit on the properties. 2 During bankruptcy proceedings, which interrupted and delayed theforeclosure proceedings, the bankruptcy court concluded that the properties’combined appraised value was less than the debt owed to the creditor,dismissed the bankruptcy proceedings, and returned the parties to their stateremedies. The resumed foreclosure processes and sheriff’s sales concluded,without objection, not long thereafter. Months later, the debtor brought thisafter-the-fact action seeking a monetary judgment against the creditor for fairmarket value credit based on newly calculated appraisals of the propertieslooking back at the time of the sheriff’s sales. Consideration of fair market value credit has a role in preventingwindfalls to creditors when a creditor forecloses on property and pursues adeficiency claim. A defensive claim for fair market value credit may beinvoked to prevent a creditor from recovering more than the debt permitted.Alternatively, under our court rules, a debtor has the right to object to thesheriff’s sale and may affirmatively raise a fair market value credit at thattime; this debtor, however, failed to avail itself of that option. The award ofan affirmative money judgment against the creditor in the instantcircumstances was in error. Informed by New Jersey’s statutory foreclosure process, we concludethat the use of fair market value credit by this debtor to obtain a money 3 judgment against a creditor -- in the absence of a deficiency claim threatenedor pursued or any objection being raised at the time of the sheriff’s sales -- isinconsistent with sound foreclosure processes and, moreover, inequitable inthe circumstances presented. The most that should have happened, in equity,was the extinguishment of any cognizable deficiency on the creditor’sjudgment -- a result to which defendant accedes. We decline to countenance this debtor’s affirmative use of fair marketvalue credit to obtain an after-the-fact money judgment against a creditorabsent a timely objection to the sheriff’s sale, a creditor’s claim for deficiency,or some other aspect of ongoing creditor collection activity, which can providea proper basis for the debtor’s invocation of a court’s equitable powers. Thosecircumstances are not present here. The judgment of the Appellate Division isreversed, and the matter is remanded for action consistent with this opinion. I. A. We begin with the transactional and litigation background to the civilaction from which this appeal arises. On August 9, 2005, West Pleasant-CPGT, Inc. (West Pleasant), Four G’sLand, LLC (Four G), and U.S. Home Corporation (U.S. Home) entered into acontract whereby U.S. Home agreed to purchase two contiguous tracts of land 4 in Jackson, New Jersey, in exchange for the purchase price of $8,400,000.West Pleasant owned one tract (the West Pleasant Property) and Four G ownedthe other (the Four G Property). Under the contract, West Pleasant and Four G intended to gain approvalfor a subdivision plan to develop forty-two residential lots. The contract alsorequired West Pleasant and Four G to provide certain development approvalsto U.S. Home. Pursuant to the contract, U.S. Home paid West Pleasant andFour G three advances, totaling $1,510,000. As security for the advances,West Pleasant executed a mortgage and note on the West Pleasant Property inthe amount of $1,500,000. Four G did not execute a mortgage on the Four GProperty. In August 2006, after a dispute arose over West Pleasant and Four G’ssatisfaction of their contractual development obligations, U.S. Home soughtthe contract’s termination and return of its $1,510,000 advance. The partiessubmitted the dispute to arbitration. 1. Arbitration On December 5, 2007, an arbitration panel returned an award in favor ofU.S. Home in the amount of $1,510,000, plus interest. The panel found thatWest Pleasant and Four G failed to satisfy their development obligations underthe contract and were jointly and severally liable for the advances U.S. Home 5 had paid. On April 2, 2008, a trial court confirmed the arbitration award,terminated the contract, and ordered West Pleasant and Four G to pay U.S.Home $1,510,000, plus interest. The Appellate Division affirmed thejudgment on March 6, 2009. When the judgment was not satisfied, U.S. Home commencedforeclosure actions against the properties. The following actions interruptedthe progress of the foreclosure proceedings, which were automatically stayed. 2. Bankruptcy proceedings On January 4, 2010, West Pleasant filed for Chapter 11 bankruptcy.Approximately two months later, Four G also filed under Chapter 11 forbankruptcy. In West Pleasant’s bankruptcy action, U.S. Home filed a motion todismiss and for relief from the automatic stay related to the West Pleasant andFour G Properties. U.S. Home and West Pleasant executed a Consent Orderon June 8, 2010 (the Consent Order), which resolved the motion to dismiss andthe motion for relief from the automatic stay with respect to the West PleasantProperty. In addition to dismissing West Pleasant’s bankruptcy proceeding,West Pleasant waived in the Consent Order a fair market valuation and itsright to object to a sheriff’s sale of the West Pleasant Property due to thejudgment debt owed to U.S. Home. West Pleasant agreed to “forever waive, 6 release and discharge [U.S. Home] . . . from any and all claims, claims forrelief, demands, costs, damages, liabilities, and obligations, in law or inequity,” in relation to the present matter. In Four G’s bankruptcy action, U.S. Home sought relief from theautomatic stay with respect to the Four G Property, on which there was nomortgage. The bankruptcy court conducted an evidentiary hearing on June 4,2010 to address whether there was any equity in the Four G Property. U.S.Home presented expert testimony regarding the value of both the Four G andWest Pleasant Properties. Four G failed to present any expert testimony afterits retained expert withdrew due to a conflict of interest. U.S. Home’s expert, Peter Maher, who appraised the Four G and WestPleasant Properties as of April 2010, testified that the Four G Property had afair market value of $806,000 and the West Pleasant Property had a fair marketvalue of $412,500. The court issued its decision on June 9, 2010. The court determinedMaher to be a highly qualified appraiser and found no reason not to accept hisvaluation of the Properties. The court concluded that the Four G Property’svalue was $806,000 and the West Pleasant Property’s value was $412,500.Because the total debt owed -- more than $1,600,000 -- exceeded the totalvalue of the collateral of $1,218,500, the court determined that there was no 7 equity in the Four G Property. Accordingly, the court granted relief from theautomatic stay and permitted U.S. Home to “return to state court and exerciseall of its rights under the laws of the State of New Jersey.” Thereafter, onSeptember 28, 2010, the court dismissed Four G’s bankruptcy. 3. Foreclosure and Sheriff’s Sales As noted, U.S. Home had filed its foreclosure action against WestPleasant on April 14, 2008. Following West Pleasant’s and U.S. Home’s entryinto their Consent Order, U.S. Home completed its foreclosure proceedingagainst West Pleasant on November 5, 2010, obtaining a foreclosure judgment,plus costs and fees, in the amount of $1,705,470.90. U.S. Home executed first on the Four G Property, which was sold atsheriff’s sale on December 7, 2010. U.S. Home was the only bidder andpurchased the property for $100. After the sale, U.S. Home’s deficiencytotaled $1,736,808.87. On January 25, 2011, the West Pleasant Property was sold at sheriff’ssale. Again, U.S. Home was the only bidder, and it purchased the property for$100. After that sale, U.S. Home’s deficiency totaled $1,734,485.40. U.S. Home never proceeded with any deficiency action against WestPleasant or Four G. Nonetheless, West Pleasant and Four G commenced theaffirmative litigation that gave rise to this appeal. 8 B. On July 14, 2011, West Pleasant and Four G filed the instant complaintin the Law Division of Superior Court seeking a declaration against U.S. Homethat the arbitration award was fully satisfied, as well as compensation “in theamount of the excess fair market value of the properties obtained bydefendant[] U.S. Home over the amount of its outstanding judgment.” Four Gthen assigned its rights to West Pleasant, and West Pleasant, individually andas assignee of Four G, filed a second amended complaint seekingcompensatory damages, among other relief, and asserting a claim for abuse ofprocess. In April 2014, the trial court held that a trial was necessary to determinethe value of the Four G Property as of December 7, 2010, the date of thesheriff’s sale for that property. As a result of that proceeding, the court valuedthe property as worth $2,398,000 as of December 7, 2010. Then, in August 2016, the court conducted proceedings to determine thevalue of the West Pleasant Property as of January 25, 2011, the date of thesheriff’s sale for that property. On December 16, 2016, the trial court issuedits decision concerning the West Pleasant Property. The court determined that,as of the date of the sheriff’s sale, the value of the West Pleasant Property was$1,985,020. 9 The court also determined that it could not ignore the value that U.S.Home received from the sheriff’s sale of the Four G Property. According tothe trial court, when U.S. Home successfully levied on the Four G Property --which, again, it had valued at $2,398,000 -- U.S. Home “received a value inexcess of the outstanding judgment amount.” That determination spurred the court to conclude that the “foreclosure onthe West Pleasant parcel was without merit.” As a result, West Pleasant was“entitled to a credit for the fair market value of the property [U.S. Home]acquired in excess of the full judgment amount.” In a judgment entered onOctober 19, 2017, the trial court ordered U.S. Home to compensate WestPleasant in the amount of $2,299,088.23, which represented the trial court’sfair market value determination of $1,985,020 for the West Pleasant Property,plus interest.1 The court also dismissed West Pleasant’s abuse of processclaim. C. U.S. Home filed an appeal, and West Pleasant filed a cross-appeal. U.S.Home asserted that the credit to West Pleasant was barred or otherwise1 The trial court awarded West Pleasant a fair market value credit for the Four G Property and extinguished the arbitration award, but did not award a money judgment for the amount that the Four G Property’s fair market value exceeded the arbitration award. 10 precluded. West Pleasant sought a money judgment for the Four G Propertyand challenged the dismissal of its abuse-of-process claim. On May 2, 2019, in an unpublished opinion, the Appellate Divisionaffirmed in part and reversed in part. It affirmed the trial court’s dismissal ofplaintiff’s abuse-of-process claim. However, the Appellate Division’s analysisof the fair market value credit issue resulted in reversal and remand for furtherproceedings on that claim. First, the Appellate Division rejected the argument that the fair marketvalue credit claim was barred because West Pleasant failed to make a motionto set aside the sheriff’s sale on the West Pleasant Property under Rule 4:65-5.The Appellate Division agreed with the trial court’s view that Rule 4:65-5“pertains only to objections to the sale of the property, not the value of theproperty vis-à-vis the amount of the judgment sought to be satisfied.” The court also rejected U.S. Home’s argument that “a fair market valuecredit can be claimed only at a deficiency hearing” and that plaintiff wasprecluded from bringing an affirmative suit untethered from a deficiencyaction to obtain such credit. The Appellate Division stated that “[r]eliefthrough equitable principles is especially applicable in this case where [U.S.]Home was both a foreclosing mortgagee on the West Pleasant tract and ajudgment creditor of Four G[].” The court explained that, “by executing on 11 both tracts, [U.S. Home] realized more than a double recovery when, insatisfaction of its debt of approximately $1.7 million, it received land valued atover $4 million.” As the court observed, equity should not aid a creditor that“seeks to protect a windfall by refraining from instituting a deficiency action,”thereby recovering property which is worth far in excess of what it is owed. The Appellate Division did not credit the argument that by agreeing tothe broad language of the Consent Order before the bankruptcy court, WestPleasant “intended to forgo any future claim for fair market value credit.” TheAppellate Division held that, although the Consent Order barred West Pleasantfrom pursuing a fair market value credit claim on the West Pleasant Property ,that did not control the analysis for the Four G Property. Because Four G was not a party to the Consent Order, the AppellateDivision separately considered whether “the doctrines of res judicata andcollateral estoppel barred West Pleasant from relitigating the value of the FourG[] tract because the Bankruptcy Court had valued it after an evidentiaryhearing.” The Appellate Division agreed with West Pleasant’s argument thatthe issues decided by the bankruptcy court and the trial court were different.Accordingly, the Appellate Division held that preclusion doctrines did notapply, and it refused to apply judicial estoppel. 12 In sum, the Appellate Division concluded the following: U.S. Home’spurchase of the West Pleasant Property, as appraised by the trial court as of thedate of its sheriff’s sale on January 25, 2011, satisfied U.S. Home’s judgment;under the Consent Order, West Pleasant waived any right to seek a fair marketvalue credit on that property; however, as assignee of Four G, West Pleasantwas owed a fair market value credit for the Four G Property. Therefore, theAppellate Division remanded the matter to the trial court for furthercalculations finalizing the monetary judgment to be awarded to West Pleasantfor fair market value credit on the Four G Property.2 We granted U.S. Home’s petition for certification, 239 N.J. 82 (2019),and amicus curiae status to the New Jersey Builders Association (NJBA). II. A. 1. According to U.S. Home, fair market value credits are available only toprevent a “double recovery” or “windfall” that results from the creditor ormortgagee obtaining a property and collecting, or seeking to collect, a moneyjudgment “arising out of the same default that led to the sale of that same2 The Appellate Division directed the trial court to calculate the amount due U.S. Home on the date it acquired the West Pleasant Property. 13 property.” Therefore, U.S. Home argues that because it did not pursue adeficiency judgment following its acquisition of the properties, no fair marketvalue credit may be awarded. U.S. Home describes the damages awarded here as unprecedented andunwarranted. Even if a fair market value credit may apply outside of adeficiency action, U.S. Home argues, equity does not support awarding WestPleasant a fair market value credit in light of the Consent Order it signedconcerning the West Pleasant Property and, further, because U.S. Homeexecuted on the Four G Property first. U.S. Home also maintains that the Appellate Division misappliedappropriate preclusion principles by adopting the trial court’s -- rather than thebankruptcy court’s -- valuation of each property. According to U.S. Home,after West Pleasant took assignment of Four G’s rights, West Pleasant shouldnot have been allowed to relitigate the bankruptcy court’s valuation of$806,000 for the Four G Property in the trial court. 2. The NJBA asserts that the Legislature evidenced in N.J.S.A. 2A:50-3 itsintent to limit fair market value credits to deficiency actions and contends thatthe decision to extend fair market value credits to cases outside of a deficiency 14 action is inconsistent with that legislative intent, prior Appellate Divisiondecisions, and decisional law and commentary. According to the NJBA, lenders have relied on previous holdings and, inpractice, have elected not to pursue a deficiency action to avoid a fair marketvalue credit. The Appellate Division’s holding “undoes the previouspredictability upon which lenders had relied,” in amicus’s view. Further, if a new collateral action affirmatively seeking fair market valuecredit is to be available in equity to debtors who do not face a deficiencyaction, the NJBA asserts that a debtor should not be permitted to use it as a“weapon” to obtain a money judgment against its creditor. It argues that, atmost, a court should declare that the debtor’s remaining debt on the judgmenthas been satisfied. B. West Pleasant asserts that fair market value credits are not limited todeficiency actions. Even in the absence of express statutory authorization, itclaims that the Appellate Division appropriately invoked its inherent equitableauthority to prevent U.S. Home’s windfall. According to West Pleasant, U.S. Home “chose to execute on the FourG[] [P]roperty first rather than foreclose on the West Pleasant [P]roperty ,” andso it claims that the equities lie in its favor concerning fair market value credit. 15 U.S. Home’s advance was over-collateralized and, as a result, “U.S. Homerealized more than a double recovery.” Additionally, West Pleasant, as assignee of Four G’s rights, argues thatit was not precluded from litigating the value of each property before the trialcourt because the acts complained of, the theory of recovery, and the materialfacts alleged before the bankruptcy court and the trial court were not the same .The issue before the trial court was the credit amount for the fair market valuedetermined by the properties’ values at the time of the sheriff’s sales; incontrast, the issue before the bankruptcy court was U.S. Home’s motion forrelief from the automatic stay under Four G’s bankruptcy petition. III. This dispute centers on the importance of a deficiency action -- or, moreprecisely, the lack of any deficiency action -- to the award of a fair marketvalue credit. See N.J.S.A. 2A:50-3. To answer that question, we examine theLegislature’s purpose in enacting a fair market value credit and whether thatpurpose is present in this case. We also consider relevant equitable principles. A. Legislative History Beginning in 1880, a deficiency decree following the foreclosure of amortgage was prohibited by statute. L. 1880, c. 170; see also Myron C.Weinstein, Law of Mortgages, 30A N.J. Practice Law Series § 39.1 (2d ed. 16 2019). That same statute, however, permitted the mortgagee to foreclose onthe mortgage first and then proceed on the bond for any deficiency to satisfythe debt owed. L. 1880, c. 170. In 1881, the Legislature amended the statuteto provide that the mortgagee must, in all cases, foreclose on the mortgage firstbefore proceeding against the bond for a deficiency. L. 1881, c. 147. It was not until 1933 that the Legislature provided the option for amortgagor to seek a fair market value credit in a deficiency action. See L.1933, c. 82. The 1933 amendment stated that all proceedings to collect said debt shall be, first, to foreclose the said mortgage, and if at the sale of the mortgaged premises under said foreclosure proceedings the said premises should not sell for a sum sufficient to satisfy said debt, interest and costs, then and in such case it shall be lawful to proceed on the bond for the deficiency . . . . [T]he obligor or obligors in said bond may file an answer in the suit on said bond disputing the amount of such deficiency, in which event both parties may introduce in evidence at the trial, testimony of the fair market value of the mortgaged premises at the time of the sale under said foreclosure proceedings, and the court, sitting with or without a jury, shall determine the amount of said deficiency by deducting from said debt the amount assessed as the fair market value of said premises . . . . [L. 1933, c. 82.] The 1933 amendment was enacted “[i]n an attempt to deal with theproblem of large deficiency judgments resulting from the almost total collapse 17 of the real estate market during the Great Depression.” Weinstein, § 39-1.During that time, “collapsed economic conditions had destroyed all market forreal estate and made it impossible to secure anything beyond a nominal bid at ajudicial sale.” 79-83 Thirteenth Ave., Ltd. v. DeMarco, 44 N.J. 525, 534(1965). A 1935 amendment, which was “held unconstitutional as applied tomortgages which antedated the statute,” Weinstein, § 39-1, further explainedthat the fair market value credit was a response to a serious public emergencythat had resulted in the “abnormal disruption in economic and financialprocesses, the abnormal credit and currency situation in the State and Nation,the abnormal deflation of real property values and the curtailment of incomesby unemployment and other adverse conditions,” L. 1935, c. 88. After multiple changes to the statutory scheme, see Weinstein, § 39-1(discussing the statutory history), the statutes in their present form provide thatafter the foreclosure of a mortgage, if the foreclosure action fails to generate“an amount sufficient to satisfy the debt, interest and costs,” the creditor maybring a deficiency action on the bond or note within three months, N.J.S.A.2A:50-2 to -2.1. It is in response to the creditor’s initiation of the deficiency action thatthe debtor may file an answer in the action for deficiency, disputing the amount of the deficiency sued for. In that 18 event both parties may introduce evidence as to the fair market value of the mortgaged premises at the time of the sale thereof in the foreclosure action, and the court, with or without a jury, shall determine the amount of such deficiency, by deducting from the debt secured the amount determined as the fair market value of the premises. [ N.J.S.A. 2A:50-3 (emphasis added).] The history of N.J.S.A. 2A:50-3 supports that the Legislature includedthe fair market value credit as a protection for mortgagors in deficiency actionsto use as a shield, not as a sword. See Michael T. Madison, et al., 2 Law ofReal Estate Financing § 12:73 (Dec. 2019). As stated by this Court, N.J.S.A.2A:50-3 “is indicative of a broad legislative policy that mortgagors should notbe personally liable for more than the difference between [the fair marketvalue of the property] and the mortgage debt.” DeMarco, 44 N.J. at 535.Thus, “[a] claim that no personal liability exists, e.g., that the fair market valueof the property exceeds the mortgage debt, is a personal defense which isproperly asserted in the deficiency action.” Citibank, N.A. v. Errico, 251 N.J.Super. 236, 248 (App. Div. 1991). B. Sheriff’s Sale The mortgagor is not left without a remedy. The mortgagor may objectto the sheriff’s sale under Rule 4:65-5 and seek a fair market value credit atthat time. 19 In DeMarco, the Court addressed whether non-statutory equitable reliefwas available to the debtor at a time when N.J.S.A. 2A:50-3 did not includenotes. 44 N.J. at 535. The Court recognized that non-statutory relief wasavailable but limited it to a fair market value credit by objection to thesheriff’s sale. Ibid. The Court reasoned that “the evidence can there bepromptly presented in a court of equity and especially since the appropriaterelief may be the ordering of a resale which could not well be done months oreven years later by the law court in the deficiency suit.” Ibid.; see alsoNatovitz v. Bay Head Realty Co., 142 N.J. Eq. 456, 464 (E. & A. 1948)(recognizing that “the mortgagor could have had credit for the fair marketvalue of the mortgage security in the foreclosure proceeding, if it had chosento exercise the right,” but declining to excuse the mortgagor’s “failure to maketimely application for this relief,” which was attributed to the mortgagor’s“ignorance or dispair”). IV. A. That background is relevant for present purposes, even though certainmortgages are exempt from the “foreclosure first” rule -- the requirement to“first foreclose on a mortgage before seeking entry of judgment on a note.”First Union Nat’l Bank v. Penn Salem Marina, Inc., 190 N.J. 342, 351 (2007); 20 see N.J.S.A. 2A:50-2.3. Specifically, an exemption exists where “the debtsecured is for a business or commercial purpose other than a two-family, three-family or four-family residence in which the owner or his immediate familyresides.” N.J.S.A. 2A:50-2.3(a). Thus, creditors are not required to follow theforeclosure-first sequence with respect to commercial property. Thatexemption, however, does not prevent the debtor from objecting at a sheriff’ssale. Although commercial mortgages are exempt from the statutorilyrequired order of proceeding -- and although West Pleasant failed to object tothe sheriff’s sale -- a court may consider equitable, “analogous nonstatutoryrelief” in the form of fair market value credit in appropriate circumstances.See DeMarco, 44 N.J. at 534-35. For example, although the statutory scheme does not apply to judgmentcreditors, equitable principles grant a court “the inherent power to prevent apotential double recovery or windfall to the judgment creditor who . . . mayprofit on the purchase of the property at the foreclosure sale (if purchased forless than fair market value), [and] who also seeks to obtain satisfaction of hisjudgment.” Morsemere Fed. Sav. & Loan Ass’n v. Nicolaou, 206 N.J. Super. 637, 645 (App. Div. 1986); see also Errico, 251 N.J. Super. at 247. 21 But, “in all cases, equity follows the law.” Berg v. Christie, 225 N.J. 245, 280 (2016). “[E]quity will generally conform to established rules andprecedents, and will not change or unsettle rights that are created and definedby existing legal principles.” Dunkin’ Donuts of Am., Inc. v. MiddletownDonut Corp., 100 N.J. 166, 183 (1985). Thus, the legislative purposes of the fair market value credit under N.J.S.A. 2A:50-3 have informed the Court’s equity jurisdiction where thestatute would not otherwise apply. See DeMarco, 44 N.J. at 534-35; see alsoFirst Union, 190 N.J. at 351 (looking to statutory scheme when analyzing acommercial loan). Those purposes -- to protect the mortgagor from a largedeficiency judgment and liability for more than the difference between the fairmarket value of the property and the mortgage debt -- are not present here. New Jersey courts that have equitably applied a fair market value credit,where statutorily it otherwise would have not applied, have done so when thecreditor is seeking a deficiency judgment. See Errico, 251 N.J. Super. at 240(involving a suit for a deficiency judgment following a foreclosure);Morsemere, 206 N.J. Super. at 644 (finding the case was “analogous to thatwhere a deficiency arises on a note or mortgage”); Resolution Tr. Corp. v.Berman Indus., Inc., 271 N.J. Super. 56, 63-64 (Law Div. 1993) (involving adeficiency proceeding); see also Borden v. Cadles of Grassy Meadows II, 22 LLC, 412 N.J. Super. 567, 584-91 (App. Div. 2010) (canvassing relevant caselaw). Courts in other states have done likewise. See, e.g., Key Bank of Mainev. Holman, 657 A.2d 775, 776 (Me. 1995) (holding that the mortgagor was notentitled to a fair market value credit where the mortgagee did not seek adeficiency judgment because a fair market value credit applies only where “(1)the mortgagee is the purchaser at the public sale and (2) the mortgagee seeks adeficiency judgment” (emphasis added)). The Appellate Division’s decision in MMU of N.Y., Inc. v. Grieser, 415 N.J. Super. 37 (App. Div. 2010), on which West Pleasant relies, isdistinguishable. The creditor in Grieser had sold the property to a third partywithout crediting the sale price to the deficiency owed by the debtor; thecreditor had also continued to pursue the debtor following the sale of theproperty by executing on six other properties owned by the debtor. 415 N.J.Super. at 41. In that case, the Appellate Division applied equitable principlesand held that the debtor was entitled to a fair market value credit. Thecreditor’s continued pursuit of recovery against the debtor distinguishes thatcase from these circumstances. 33 To the extent that the Appellate Division here relied on Brunswick Bank & Trust v. Heln Management LLC, 453 N.J. Super. 324 (App. Div. 2018), we find that case of no help to West Pleasant’s position. In that matter, the debtors actively sought to stay foreclosure proceedings being pursued by the 23 B. Here, U.S. Home has not sought a deficiency judgment against WestPleasant or pursued West Pleasant for collection in other ways. U.S. Homeconceded at oral argument that it has waived its judgment against WestPleasant “because of the passage of time and because of the position that U.S.Home has taken throughout this litigation that they’re not pursuing thedeficiency judgment.” 4 In this action in which West Pleasant seeks equitable relief, the positionof U.S. Home must be viewed with clear eyes. After the bankruptcyproceedings ended and the automatic stays were lifted, the foreclosureprocesses recommenced. The judgment owed U.S. Home remained unpaid.And, U.S. Home now had, in hand, bankruptcy-court-approved appraisalsshowing that the properties, in combination, did not exceed the amount of thecreditor on numerous properties, raising in those settings the issue of overcollateralization and a request for credit. 453 N.J. Super. at 328-29. The debtors’ objections to allowing the foreclosure and sheriff’s sales to proceed place those circumstances in contrast to what occurred here. Moreover, even there, the Appellate Division rejected any claim to require a money judgment to debtors if the fair market value of property purchased by the creditor at sheriff’s sale exceeded the shortfall owed on the debt. Id. at 333 & n.9. 4 In explaining its reasons for not pursuing a deficiency judgment, U.S. Home cited a desire to end dealings with litigious adversaries and to not “throw good money after bad.” 24 unsatisfied judgment. They also had, in hand, the Consent Order with WestPleasant in which West Pleasant waived any claim to fair market value crediton the West Pleasant Property. There is no fault to be found in U.S. Home’s proceeding to the sheriff’ssales and obtaining the properties with nominal bids when no one else bid.Nor can fault be found in the decision to go forward by executing first on theFour G Property. It was appraised at the higher amount of $806,000 andrepresented the bulk of the combined value of the two properties, the WestPleasant Property having been appraised as having a fair market value of$412,500. Even in combination, those appraisals did not cover the amountowed on the debt. The sheriff’s sales concluded without any objection everhaving been raised by either Four G or West Pleasant. In sum, U.S. Home didnothing untoward in proceeding as it did to obtain the Four G and WestPleasant properties. 55 The Appellate Division, relying on Brunswick Bank, mistakenly concluded that U.S. Home’s purchase of the West Pleasant Property satisfied its judgment. That could not be correct because U.S. Home purchased the West Pleasant Property second-in-time. Under the reasoning of Brunswick Bank -- and if this matter had a deficiency-action setting or like ongoing collection activity on the debt generated by the creditor -- the only issue to be considered following the sale of the Four G Property would be whether U.S. Home could proceed against the West Pleasant Property. However, as the Appellate Division recognized, West Pleasant waived, under the Consent Order, any right to challenge the sheriff’s sale or seek a fair market value credit on that property. 25 All that took place months before the instant complaint was filed andwithout any deficiency claim being pursued by U.S. Home. This remarkableproceeding in which a debtor brought an after-the-fact affirmative claim forfair market value and obtained a money judgment against the creditor is asunprecedented and unwarranted as it was argued to be. Cf. Evergreen Bank v.D & P Justin’s, Inc., 544 N.Y.S.2d 244, 246 (App. Div. 1989) (reversing theportion of a trial court decision that had “mistakenly employed the fair andreasonable market value rule, available as a shield for the protection of themortgagor under [the relevant New York statute] where the premises are soldfor less than market value, as a sword in [a] surplus money proceeding so as tocreate surplus moneys when none in fact exist” and noting that, “[h]ad [the]defendants felt the sale price of [the parcel] to be inadequate, their remedy wasto move to set aside the sale”). Public policy generally favors finality in the foreclosure process. Adebtor has the ability to seek a fair market value credit by objecting to thesheriff’s sale. After the time for objecting to the sheriff’s sale has passed,unless a deficiency action or other collection activity is pursued, later claimsfor fair market value credit should not be permitted to generate endlesslitigation. The amicus cautions that the later and affirmative litigation use offair market value credit -- to support after-the-fact suits for money damages by 26 debtors when the foreclosure process has been completed and deficiencyactions are not pursued -- would have the untoward consequence of unsettlingthe stability and predictability of lending and equity markets involved incommercial real estate. Amicus advises that such a step would cause negativerepercussions for lenders and borrowers alike. The instant use of fair market value credit, approved here in thejudgment under review, far exceeds the prior equitable applications thatfurthered the legislative purpose to fair market value credit recognized by thestatutory scheme. And prior to filing this affirmative claim, both Four G andWest Pleasant had the ability to advance a fair market value objection duringthe sheriff’s sales proceedings under Rule 4:65-5, but West Pleasant waivedthat option in the Consent Order and Four G failed to object. We decline toexpand the equitable application of fair market value credit to permit theaffirmative relief that was awarded here. V. The judgment of the Appellate Division is reversed. The matter isremanded for entry of a judgment declaring the debt satisfied, as conceded byU.S. Home, and dismissing the claim for compensatory damages. 27 CHIEF JUSTICE RABNER and JUSTICES ALBIN, PATTERSON, FERNANDEZ-VINA, SOLOMON, and TIMPONE join in JUSTICE LaVECCHIA’s opinion. 28