## Facts

- A property owner executed a first mortgage to Citicorp Mortgage, Inc. and a second mortgage to another lender; the second mortgage was expressly subordinate to the first.
- The second mortgage was later assigned to three assignees, including L. Steven Pessin, and the assignment was recorded before Citicorp filed its foreclosure complaint.
- Citicorp foreclosed its first mortgage but named only the original second mortgagee, not the recorded assignees, because Citicorp was unaware of the assignment.
- Citicorp purchased the property at the sheriff’s sale and took title.
- After learning of the omitted assignees, Citicorp filed a separate strict foreclosure action to terminate the omitted junior interests.
- The trial court granted strict foreclosure but gave the omitted junior assignees a 60-day period to redeem by paying the amount due on the senior mortgage.
- Pessin appealed, contending that strict foreclosure improperly granted equitable relief to Citicorp as purchaser and conflicted with the recording act.

## Issues

1. Whether a senior mortgagee that purchased at its own foreclosure sale may obtain strict foreclosure against omitted junior mortgage assignees who were not joined in the original foreclosure.
2. Whether strict foreclosure conditioned on a right to redeem violates the recording act or improperly alters the junior assignees’ rights and lien priority.

## Decision

- The Appellate Division affirmed the judgment allowing strict foreclosure conditioned on a 60-day right of redemption for the omitted junior assignees.
- The court held that strict foreclosure is an appropriate equitable remedy when a junior lienholder is inadvertently omitted from a foreclosure, so long as the omitted party receives a reasonable opportunity to redeem by paying the senior debt.
- The court rejected the argument that recording of the assignment required Citicorp to satisfy the junior mortgage or otherwise elevated the junior lien over the first mortgage.

## Legal Principles

- In equity, strict foreclosure may be used to terminate an omitted junior lienholder’s interest after a prior foreclosure, provided the omitted lienholder is given a reasonable time to redeem by paying the senior mortgage indebtedness.
- Failure to join a junior encumbrancer in a foreclosure does not expand the junior lienholder’s rights or change lien priorities; the junior retains an equity of redemption consistent with its subordinate status.
- The recording act preserves recorded interests and priorities but does not convert a junior lien into a superior lien or require the senior mortgagee/purchaser to pay off the junior obligation as a condition of clearing title.
- An equitable remedy should, as nearly as practicable, restore the position the parties would have occupied had the omitted junior lienholder been properly joined in the original foreclosure.

## Conclusion

The court approved strict foreclosure as the equitable method to clear title after an inadvertent omission of junior assignees from a foreclosure, while protecting the omitted junior lienholders’ core protection—a reasonable opportunity to redeem by paying the senior mortgage debt—without altering established lien priorities.


Citicorp Mortg., Inc. v. Pessin, 570 A.2d 481 (N.J. Super. Ct. App. Div. 1990)