Setting Priorities: When You Refinance A First Mortgage, Is It Still A FIRST Mortgage?

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Mortgage modification (pd)It is a question I have been asked a number of times over the past few years: If a lender refinances an existing mortgage, does the new lender step into the shoes of the old lender in terms of priority? In other words, if you refinance a first mortgage, does it remain a FIRST mortgage or is it a new mortgage that is junior to other mortgages that may have been recorded after the first mortgage? Granted this is not a question as weighty as, say, "what is the meaning of life?" but if you are a lender, it is an important one. I have written about this topic before, but the Appellate Division's recent decision in Ocwen Loan Services, Inc. v. Quinn, added a new wrinkle. In that case, the question was whether a refinanced first mortgage retains its first status over a life estate, as opposed to another mortgage or lien, that was recorded prior to the original mortgage.

In Ocwen, defendants conveyed their residential property to their daughter but retained a life estate in the property. (In other words, the daughter owned the property, but defendants could live there until they died.) One year later, defendants, their daughter, and her husband acquired a loan from plaintiff that was secured by a mortgage on the property. Two years after that, the daughter refinanced the mortgage for a higher amount. The title commitment that plaintiff obtained did not disclose the recorded life estates, so defendants were not required to sign the mortgage. Through the refinancing, the daughter, among other things, paid off the prior mortgage, which defendants had signed.

Two years later, the daughter defaulted on the refinanced mortgage and plaintiff foreclosed. The parties cross-moved for clarification on the status of defendants' life estate. Plaintiff argued that the life estate was subordinate to the refinanced mortgage, meaning defendants could not rely on it to stop the foreclosure. Defendants argued that the foreclosure had to be dismissed because "they did not sign the [refinanced] mortgage nor pledge their life estates in connection with the [ ] loan refinancing." 

Continue reading “Setting Priorities: When You Refinance A First Mortgage, Is It Still A FIRST Mortgage?”

On a warm summer’s evenin’, on a train bound for nowhere . . . is a dispute over insuring a stranger’s life

 by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Gambling

I know it is a little obvious, but I couldn't write a post about gambling without using lyrics from "The Gambler." Fortunately, the case this post discusses — Sun Life Assurance Co. of Canada v. U.S. Bank National Association — is anything but obvious. Sun Life involved gambling on another person's life but not in a Deer Hunter, Russian roulette kind of way. In Sun Life, the U.S. Court of Appeals for the Seventh Circuit addressed the enforceability of an insurance policy that insured a stranger's life.

In Sun Life, Judge Posner began his decision by discussing the common law principle that "forbids a person to own an insurance policy that insures someone else's life unless the policy owner has an insurable interest in that life." A wife can have an insurable interest in her husband's or children's lives, a creditor can have an insurable interest in a debtor's life, but "you cannot own an insurance policy on the life of a stranger who you happen to know is in poor health and likely to die soon." The reason is that, by doing so, you are essentially gambling on another person's life, and gambling contracts are generally unenforceable as a matter of public policy. 

Continue reading “On a warm summer’s evenin’, on a train bound for nowhere . . . is a dispute over insuring a stranger’s life”

Unless You Have Won The Lottery You Don’t Need To Read This Post

by: Peter J. Gallagher (@pjsgallagher)

The Appellate Division handed down a decision today that will never have any impact on my life. The case — In re. Petition of BofI Federal Bank to Assign Lottery Prize Payment Rights — was a consolidated appeal of four Law Division cases that denied BofI Federal Bank's request to assign certain lottery payments from four separate prize winners.

The appeal involved four winners of the Win for Life scratch off game. (As an aside, I have loyally played this game for years in both New York and New Jersey and never even come close to winning, unless scratching off two "LIFE" symbols seemingly every time means I am getting close.) Under the rules of the game, winners receive a guaranteed prize of $1 million payable in quarterly installments for 18 years and then quarterly payments for the rest of the winner's lifetime. For reasons not disclosed in the opinion, BofI (Bank of the Internet if you are curious) filed petitions seeking approval of the assignment of the last two years of the guaranteed quarterly payments.

 

Continue reading “Unless You Have Won The Lottery You Don’t Need To Read This Post”

New Jersey Supreme Court: Cell Phone Users Have Privacy Interest In Cell Phone Location Information

by:  Peter J. Gallagher

 

The New Jersey Supreme Court ruled today that police cannot access the location information revealed by your cell phone without first acquiring a warrant based on probable cause.  In State v. Earls, police were investigating a string of burglaries.  A court-ordered trace of a cell phone stolen in one of the burglaries led them to an individual at a bar in Asbury Park who told them that his cousin had sold him the phone.  The individual also told police that his cousin was involved in the burglaries and kept the stolen items in a storage locker that was rented by his cousin or his cousin’s girlfriend.  The next day, police located the girlfriend, went with her to the locker, and found various stolen items.  The next day, police learned that the girlfriend had disappeared, and that defendant had threatened her when he learned that she was cooperating with police.   After obtaining an arrest warrant for defendant, police began to search for him.  As part of this search, the police contacted T-Mobile to obtain information about the location of a cell phone that they believed defendant had been using.  This information eventually led them to a motel where defendant and his girlfriend were staying. 

Defendant was arrested and eventually indicted on several charges stemming from the burglaries.  He moved to suppress evidence seized at the motel where he was apprehended.  The trial court denied the motion, holding that police should have obtained a warrant before tracking defendant’s phone, but that the information was nonetheless admissible under the emergency aid exception to the warrant requirement (the emergency being the threat to defendant’s girlfriend’s safety).  Defendant pled guilty but appealed the suppression ruling.  The Appellate Division affirmed, but on different grounds, holding that defendant had no reasonable expectation of privacy in his cell phone location information. 

The Supreme Court reversed.  It began by discussing the advances in cell phone technology that now make it possible for providers to pinpoint the location of a cell phone within a matter of feet, and the fact that details about the location of a cell phone can provide an intimate picture of an individual’s personal life by revealing where people go and with whom they affiliate.  Under New Jersey law, individuals do not lose their right to privacy simply because they have to provide personal information like this to third parties to obtain services.  Thus, cell phone users reasonably expect that the private information that they (or, perhaps more accurately, their phones) transmit to cell phone providers about their location will remain private:

[C]ell phones are not meant to serve as tracking devices to locate their owners wherever they may be.  People buy cell phones to communicate with others, to use the Internet, and for a growing number of other reasons. But no one buys a cell phone to share detailed information about their whereabouts with the police . . . Citizens have a legitimate privacy interest in such information. Although individuals may be generally aware that their phones can be tracked, most people do not realize the extent of modern tracking capabilities and reasonably do not expect law enforcement to convert their phones into precise, possibly continuous tracking tools.

Accordingly, before police can obtain this information from a cell phone provider, they must obtain a warrant based on a showing of probable cause or qualify for an exception to the warrant requirement. 

In its decision, the Supreme Court noted that federal courts are split on whether a warrant is required before police can obtain information about an individual’s cell phone location.  However, it also noted that the New Jersey Constitution generally provides greater protection against unreasonable searches and seizures that the Fourth Amendment.  This decision further emphasizes the differences between New Jersey law and federal law, particularly as it relates to information that is revealed to third parties.