GMAC Mortgage, LLC v. Tamilynn Willoughby (076006) (Monmouth and Statewide, 165 A.3d 787

Background

In 2006 Willoughby obtained a mortgage from GMAC, defaulted, and GMAC obtained a foreclosure judgment; a Sheriff’s sale was scheduled but stayed for mediation.
In May 2010 the parties executed a Judiciary form “Foreclosure Mediation Settlement Memorandum” handwritten by GMAC’s counsel providing a "trial to permanent modification": $6,000 down, monthly payments of $1,678.48 for 12 months, and a promise that if all trial payments were made GMAC would “make modification permanent.” The form stated the mediation settlement would be "final, binding and enforceable."
The mediator checked boxes on the Completion Report indicating a “Provisional Settlement – No Need to Reschedule Mediation (Case Not Dismissed)” and “Loan Modification.” Willoughby paid the down payment and made all trial payments ($58,790.69 total over 16 months).
Beginning June 2011 GMAC’s servicer sent multiple new modification proposals with materially different terms; Willoughby did not sign them but made higher payments for a time; GMAC later returned a payment and referred the loan to foreclosure. Insurance proceeds for Hurricane Sandy were received by GMAC for damage to the property.
The chancery court denied Willoughby’s pro se motion to enforce the May 2010 agreement, ordered further mediation, and later refused to vacate the Sheriff’s sale; the Appellate Division affirmed. The Supreme Court granted certification.

Issues

Issue	Plaintiff's Argument (GMAC)	Defendant's Argument (Willoughby)	Held
Whether the May 2010 mediation memorandum created an enforceable, permanent modification or a provisional agreement	The May 2010 memorandum was provisional; continued negotiations and subsequent unsigned proposals show no final meeting of minds and no binding permanent modification	The May 2010 memorandum set definite terms and expressly provided that completion of trial payments would make the modification permanent; she complied, so it became binding	The Court held the May 2010 memorandum was an enforceable, permanent modification once Willoughby satisfied the contingent trial-payment condition
Whether Willoughby voluntarily abandoned the May 2010 agreement or there was a novation	GMAC contends later negotiations and Willoughby’s counteroffer/down payment in 2012 demonstrate abandonment or novation	Willoughby argues she never signed any superseding modification and therefore did not agree to extinguish the 2010 agreement	The Court found no novation or voluntary abandonment; she never executed documents replacing the 2010 agreement
Whether courts should enforce mediated settlements reached under the Foreclosure Mediation Program	GMAC asserts form/Completion Report language supports provisional nature and further mediation	Willoughby and amici argue enforcing mediated settlements is essential to Program goals and fairness to homeowners	The Court emphasized strong public policy favoring enforcement of mediated settlements and reversed lower courts for failing to enforce the agreement
Appropriate remedy given Sheriff’s sale occurred	GMAC argues sale may moot specific performance and that accounting/credits were unnecessary	Willoughby seeks enforcement or relief accounting for payments and insurance proceeds	The Court remanded for chancery court to craft equitable relief; specific performance barred if purchaser was bona fide, but damages and accounting are available

Key Cases Cited

Morgan v. Sanford Brown Inst., 225 N.J. 289 (de novo review of contract interpretation)
Atalese v. U.S. Legal Servs. Grp., L.P., 219 N.J. 430 (contract interpretation principles)
Kieffer v. Best Buy, 205 N.J. 213 (give contract terms plain and ordinary meaning; drafting construed against draftsman)
Willingboro Mall, Ltd. v. 240/242 Franklin Ave., L.L.C., 215 N.J. 242 (mediation and enforcement of signed/handwritten mediated agreements)
Weichert Co. Realtors v. Ryan, 128 N.J. 427 (terms must be sufficiently definite)
West Caldwell v. Caldwell, 26 N.J. 9 (ascertainable performance requirement for contracts)
In re Estate of Miller, 90 N.J. 210 (ambiguity construed against draftsman)
Pacifico v. Pacifico, 190 N.J. 258 (party-drafted contract language considered against draftsman)
Gonzalez v. Wilshire Credit Corp., 207 N.J. 557 (context of foreclosure crisis and homeowner vulnerability)
Dean v. Anderson, 34 N.J. Eq. 496 (specific performance may be barred where bona fide purchaser acquired property)
Marioni v. 94 Broadway, Inc., 374 N.J. Super. 588 (equitable remedies analysis)
Wells Reit II--80 Park Plaza, LLC v. Director, Div. of Taxation, 414 N.J. Super. 453 (definition and effect of novation)