According to a recent decision by the New Jersey Appellate Division, lenders, in advertising a foreclosure sale, are obligated to disclose prior lien amounts that are “nearly correct.” The Court found that a 22% difference between the advertised amount of a prior lien and the lien’s actual amount is not “nearly correct.”

In Wells Fargo Bank, N.A. v. Young, the lender initially scheduled a foreclosure sale without knowledge of, or without disclosing, a mortgage having priority that secured the subject property. Subsequently, when the successful bidder at the sale discovered the prior mortgage, the lender and bidder consented to vacate the sale.

In March 2017, the lender scheduled a second sheriff’s sale and disclosed a prior mortgage in the amount of $232,000 “as of March 12, 2003.” The same bidder was again successful at the second sale. The bidder later discovered, however, that the amount owed under the prior mortgage was $284,644.00, and moved to vacate the second sale.

The motion judge ruled that the bidder was not entitled to vacate the sale because the bidder was aware of the prior mortgage and failed to exercise its own due diligence in ascertaining the current amount due.

On appeal, the Appellate Division noted that N.J.S.A. 2A:61-16, which provides for relief to a bidder at sale on showing a defect in title or lien or encumbrance on property sold, requires “a reasonable description of the . . . liens or encumbrances therein with the approximate amount of such liens and encumbrances, if any, be inserted in the notices and advertisements.” The Appellate Division looked to the dictionary to define “approximate” and found that Merriam-Webster defines the term as “nearly correct or exact: close in value or amount but not precise,” citing “Approximate, Merriam-Webster Online Dictionary (last visited Apr. 1, 2019). Applying this definition, the Appellate Division found that the $52,633.78 difference between the advertised amount and the actual amount owed (a 22% difference) to be not “nearly correct” or “close in value.” The Court ruled that the notice therefore did not constitute an “approximate” amount in accordance with N.J.S.A. 2A:61-16.

The Appellate noted, however, that whether to vacate the sale was a discretionary decision on the part of the motion judge. The lender argued that because the bidder had knowledge of the prior mortgage, the bidder had a duty to make a reasonable inquiry into the lien amount, and presumably therefore the motion judge did not abuse her discretion. The Appellate Division found it important that the lender did not deny that it knew the “nearly correct” amount of the lien, and did not provide a reason for not providing that amount until after the second sheriff’s sale. The Court also found that it was unclear whether the bidder could have discovered the approximate value on its own. The Court found that the record required clarification on whether, under the circumstances, it would be an abuse of discretion to vacate the sale, and remanded the case to the lower court to develop a more complete record.

Although the Young decision is a bit muddled by the particular circumstances of the case, the decision is helpful in providing at least some guidance for what courts may consider sufficiently “approximate” in advertising foreclosure sales.

The decision in Wells Fargo Bank, N.A. v. Young, No. A-1124-17T2 (App. Div. April 11, 219) is available at: https://www.njcourts.gov/attorneys/assets/opinions/appellate/unpublished/a1124-17.pdf?c=QIX

To discuss creditors’ rights matters with this article’s author, please contact:

Jonathan P. Vuotto, Esq.
jpv@mcandrewvuotto.com