Opinion
DOCKET NO. A-1063-14T3
03-29-2016
FLUSHING SAVINGS BANK, FSB, Plaintiff-Respondent, v. ANIBAL J. CRESPO and FIRST AMERICAN TITLE INSURANCE COMPANY, Defendants, and VCAR REALTY, LLC and VIVIAN CRESPO, Defendants-Appellants.
Robert A. Skoblar, attorney for appellants. Sandelands Eyet, LLP, and Charles A. Gruen, attorneys for respondent (William C. Sandelands and Geoffrey C. Jacobson, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Reisner and Leone. On appeal from the Superior Court of New Jersey, Chancery Division, Hudson County, Docket No. F-11956-12. Robert A. Skoblar, attorney for appellants. Sandelands Eyet, LLP, and Charles A. Gruen, attorneys for respondent (William C. Sandelands and Geoffrey C. Jacobson, on the brief). PER CURIAM
Defendants Vivian Crespo (Vivian) and VCAR Realty, LLC (VCAR) appeal from a final judgment of foreclosure in favor of plaintiff Flushing Savings Bank, FSB (Flushing Savings), arguing there was an issue of material fact with regard to whether Flushing Savings knew of Vivian's lis pendens claim. As that issue is irrelevant due to the earlier-filed notice of settlement, we affirm.
Because Anibal J. Crespo (Anibal) was also a defendant, we will refer to both Mr. and Mrs. Crespo by their first names. We will refer to Vivian and VCAR collectively as "defendants," because Anibal and First American Title Insurance (First American) are not active in this appeal.
I.
While Vivian and Anibal were married, they acquired a commercial property located in West New York (the property). They divorced in January 2001. In 2004, Vivian sought to vacate or modify the judgment of divorce (JOD), and her motion for modification was granted. Litigation surrounding the modification lasted seven years. As part of the extended divorce proceedings, Anibal moved to compel Vivian to deed the property to him as required by the JOD, and for permission to refinance the property. On June 16, 2006, the Family Part granted his requests and ordered Vivian to execute the necessary documents. On June 27, 2006, Vivian deeded her interest in the property to Anibal. Vivian also provided affidavits that there were no pending lawsuits, judgments, or other legal obligations which could be enforced against the property.
Anibal then contracted with Flushing Savings to refinance the mortgage on the property. The property was held in escrow while the refinancing was pending. On December 8, 2006, First American filed a notice of settlement acknowledging a mortgage commitment between Flushing Savings and Anibal. The mortgage closing was held on December 22, 2006.
On December 20, 2006, two days prior to the closing, Vivian forwarded a notice of lis pendens on the property to the county clerk for filing. The lis pendens was recorded on January 5, 2007. The mortgage was recorded on January 17, 2007.
On February 1, 2012, Anibal defaulted on the note and mortgage. On March 9, 2012, Vivian obtained a money judgment against Anibal in the ongoing divorce litigation of more than $700,000 in retroactive alimony and child support payments and associated fees. Rather than make payments under both the JOD and the mortgage, Anibal fled the jurisdiction.
On May 18, 2012, Flushing Savings filed a foreclosure complaint against Anibal and Vivian. On May 31, 2012, the Family Part ordered that, to satisfy the money judgment in the divorce proceeding, Anibal's title in the property be transferred to Vivian or an entity she chose; Vivian chose VCAR.
Apparently VCAR, is an entity formed by Vivian and her children to take ownership of the property. In February 2013, Flushing Savings subsequently amended its complaint to add VCAR and later First American.
Flushing Savings filed a motion for summary judgment, and defendants filed a cross-motion to file an answer out of time and to dismiss. On April 29, 2014, Presiding Judge Hector Velazquez of the Chancery Division granted Flushing Savings' motion for summary judgment and denied defendants' cross-motion. The judge found that Flushing Savings had no actual or constructive knowledge of the 2006 lis pendens that could create priority over the mortgage, that Vivian ratified the refinance transaction through her actions providing the affidavits, and that she was thus estopped from asserting the mortgage was not the valid first lien. On October 16, 2014, the Chancery Division entered a final judgment of foreclosure on the property against defendants. Vivian and VCAR appeal.
II.
Defendants argue the trial court should not have granted summary judgment. They assert that whether Flushing Savings knew of Vivian's lis pendens claim when it recorded a Notice of Settlement was an issue of material fact.
Summary judgment is appropriate when "pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged." R. 4:46-2. Courts make this determination while considering the evidence "in the light most favorable to the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995). When reviewing a grant of summary judgment, appellate courts implement the same standard as the trial court and review its decision de novo. Henry v. New Jersey Dep't of Human Servs., 204 N.J. 320, 330 (2010). We must hew to this standard of review.
This case involves the interplay of two statutory schemes in effect in 2006 concerning property interests. At that time, New Jersey's relevant recording statutes were N.J.S.A. 46:21-1 and 22-1 (2006). "By those enactments, New Jersey is considered a 'race-notice' jurisdiction, which means that as between two competing parties the interest of the party who first records the instrument will prevail so long as that party had no actual knowledge of the other party's previously-acquired interest." Cox v. RKA Corp., 164 N.J. 487, 496 (2000).
Effective May 1, 2012, N.J.S.A. 46:26A-1 to -12 replaced these recording statutes. L. 2011, c. 2017, § 2. The Senate Community and Urban Affairs Committee reported the new recording statutes reflect "the same approach as the existing law." Senate Community and Urban Affairs Committee, Statement to Senate Bill No. 88 (Dec. 8, 2011). New Jersey is still a race-notice state. Sovereign Bank v. Gillis, 432 N.J. Super. 36, 43 (App. Div. 2013).
The New Jersey Notice of Settlement Act, N.J.S.A. 46:16A-1 to -5 (2006), allowed parties to a settlement conveying an interest through a mortgage to file an instrument, the notice of settlement, that would provide constructive notice and protect the interests in anticipation of the settlement. See Mezey v. United Jersey Bank, 254 N.J. Super. 19, 22 (App. Div. 1992). "After the filing of a notice of settlement, any person claiming title to, an interest in or a lien upon the real estate described in the notice" is "deemed to have acquired said title, interest or lien with knowledge of the anticipated settlement and shall be subject to the terms, conditions and provisions of the deed or mortgage between the parties" if that is filed within forty-five days from the filing of the notice of settlement. N.J.S.A. 46:16A-4, -5 (2006).
Also effective May 1, 2012, N.J.S.A. 46:26A-11 replaced the Notice of Settlement Act. L. 2011, c. 2017, § 1. --------
A lis pendens is notice of a pending lawsuit affecting real estate. N.J.S.A. 2A:15-6. "Unless and until a notice of lis pendens is filed . . . no action . . . shall, before final judgment entered therein, be taken to be a constructive notice to a bona fide purchaser or mortgagee of, or a person acquiring a lien on, the affected real estate." N.J.S.A. 2A:15-8.
In this case, the Notice of Settlement was filed on December 8, 2006, before Vivian's December 20, 2006 lis pendens, establishing the priority of the former over the latter. "[U]pon the recording of [the] notice of settlement, [defendants] and the rest of the world were given constructive notice of" Anibal's mortgage agreement with Flushing Savings. See Marioni v. 94 Broadway, Inc., 374 N.J. Super. 588, 612 (App. Div.), certif. denied, 183 N.J. 591 (2005). Moreover, the mortgage with Flushing Savings was timely recorded on January 17, 2007, within the notice of settlement's forty-five day period which ended January 22, 2007.
Defendant recorded her lis pendens on January 7, 2007, during the forty-five-day period during which the Notice of Settlement gave her constructive notice of Flushing Savings's prior interest. Under N.J.S.A. 46:16A-5 (2006), "[a]ny lien filed during said 45 days shall attach to the premises described in the notice immediately upon the expiration of the 45 days, provided the premises have not been conveyed[.]" Because the mortgage interest in the property was conveyed during the forty-five day period, Vivian's lis pendens did not attach to that interest, and any interest defendants thereafter acquired through the Family Part action was subordinate "to the terms, conditions and provisions of the deed or mortgage between the parties." N.J.S.A. 46:16A-4, -5 (2006). Therefore, Flushing Savings' interest in the property as the mortgagee was protected from Vivian's lis pendens.
Defendants argue that Flushing Savings received constructive notice of her claims in the divorce action and of the lis pendens before the mortgage was recorded. Defendants' arguments are meritless. First, the divorce action itself could not "be constructive notice" to a mortgagee of the property "[u]nless and until a notice of lis pendens is filed." N.J.S.A. 2A:15-8. Second, the lis pendens could not provide effective notice because it was recorded after the notice of settlement. The very purpose of the Notice of Settlement "Act is to protect prospective buyers or mortgagees from acquiring deficient title because of the appearance of an intervening lien between the time" the notice of settlement is filed "and the conveyance documents are recorded." Mezey, supra, 254 N.J. Super. at 26.
In any event, defendants' argument that Flushing Savings had notice of her claims is based on the role of Anibal's attorney at the December 22, 2006 settlement. Defendants argue that Anibal's use of the same attorney for both the divorce modification litigation and the refinancing settlement, and the listing of the attorney as the settlement agent on a HUD-1 Settlement Statement created an issue of material fact as to whether the attorney was Flushing Savings' agent, thereby imputing his actual notice to Flushing Savings. By contrast, the trial court ruled that the attorney was not the agent of Flushing Savings, which was represented by its own counsel.
We need not resolve for whom Anibal's attorney was serving as an agent at the time of the settlement. See generally Clients' Sec. Fund of the Bar of N.J. v. Sec. Title & Guar. Co., 134 N.J. 358, 374-76 (1993) (considering whether an attorney for a party refinancing a property who is designated as the closing attorney becomes an agent for the lender). The attorney's participation in the December 22, 2006 settlement, and the December 13, 2006 letter to Anibal's attorney from Vivian's attorney saying he was preparing a lis pendens, came after the December 8, 2006 filing of the notice of settlement, and thus could not show that Flushing Savings had notice before the filing. Cf. Marioni, supra, 374 N.J. Super. at 613 (finding "Lindner became a contract purchaser of the property at a time when he had actual notice that plaintiff also held such an interest," so Linder's subsequently-filed notice of settlement could not defeat plaintiff's claim); Mezey, supra, 254 N.J. Super. at 22, 26-28 (finding a genuine issue of material fact whether the bank "file[d] a notice of settlement notwithstanding its actual knowledge of another's prospective unrecorded interest adverse to that which it is about to acquire"). Thus, we find this argument to be lacking sufficient merit to warrant further discussion. R. 2:11-3(e)(1)(E).
III.
Next, defendants argue that Flushing Savings had unclean hands at closing because it knew at that time of Vivian's interest in the property. However, the lis pendens had not yet been recorded. It is true the first recorded interest in real estate takes priority "only so long as [the first recorder] had no actual notice of an innocent party's adverse interest." Mezey, supra, 254 N.J. Super. at 26. Yet the evidence shows Flushing Savings had neither constructive nor actual knowledge of Vivian's interest at the only relevant time, when Flushing Savings filed its Notice of Settlement. See id. at 27 (holding that "actual notice of an adverse claim of an innocent person should defeat the interest of a party who, harboring such knowledge, nevertheless files a notice of settlement"). Because Flushing Savings did not have unclean hands at that time, we reject defendants' argument.
IV.
Defendants challenge the trial court's ruling that, because Vivian participated in the refinancing by providing affidavits, she "ratified the re-finance loan and is now estopped from asserting that the Plaintiff's mortgage is not a valid first lien." Defendants argue that Vivian did not ratify the refinancing because her signing of the affidavits was compelled by court order. We need not reach this issue, as it is clear Flushing Savings' mortgage interest took priority over defendants' claims, regardless of whether defendants are estopped.
Defendants argue that foreclosure is unjust because Anibal failed to pay the child support and alimony obligations imposed in the 2012 judgment. However, Anibal's failure to pay the 2012 judgment has no bearing on Flushing Savings' mortgage loan to Anibal in 2006 pursuant to a notice of settlement filed without knowledge of any competing interest. "[T]he stability of titles requires the judiciary to follow the course that 'will best support and maintain the integrity of the recording system'" by "preventing others from successfully challenging [the] interest" of such a party. Mezey, supra, 254 N.J. Super. at 26 (quoting Palamarg Realty Co. v. Rehac, 80 N.J. 446, 453 (1979)). Defendants' remaining claims are also without sufficient merit to warrant further discussion. R. 2:11-3(e)(1)(E).
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION