Today was a signficant victory for our client in a legal battle with Wells Fargo over an improperly filed foreclosure action. In a scathing oral decision, a Morris County Chancery Judge dismissed Wells Fargo's foreclosure complaint with prejudice, concluding that Wells Fargo violated New Jersey's Entire Controversy Doctrine, Res Judicata, and other equitable legal doctrines by deliberately failing to join two ripe defaulted mortgages in a single foreclosure suit.
Holding both a first and second mortgage against our client's property, Wells Fargo deliberately chose to sue only on the second mortgage. After securing a final judgment in that action, Wells Fargo proceeded with a sheriff's sale and the property was bought by a third party bidder. After the sale, the third party bidder agreed to sell the property back to an LLC formed by our client. The sale was memorialized in a settlement agreement with Wells Fargo that contained broad release language encompassing dismissal of any and all claims, debts, contracts, loans, etc. that Wells Fargo had from the beginning of the world to the end of time, including all claims that Wells Fargo could have brought in the initial foreclosure action. The foreclosure court approved the settlement agreement and signed an order to that effect.
In reliance on the settlement agreement, our client took back title to the property in the name of his newly formed LLC and borrwed $800,000 with a new lender to fund the purchase price and renovations. So far, all good.
Except that two years later, Wells Fargo improvidently filed a new foreclosure action based on the first mortgage. It was undisputed tha the first mortgage loan was in default when Wells Fargo filed its initial foreclosure action on the second mortgage.
After a several hour contested hering, the Morris County Chancery Judge dismissed Wells Fargo's newly filed foreclosure complaint with prejudice and ordered the discharge of Wells Fargo's first mortgage.