Appellate Division Quotes Lucinda Williams, Orders Trial Court To Take Closer Look At Whether Debt Was Fully Satisfied

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

Add this to the list of things you never want to hear a court say about your performance during a case: "defendants' presentation of evidence certainly gave voice to the song lyric, 'when nothing makes any sense, you have a reason to cry.'" (It is a lyric from a Lucinda Williams song if you were curious.) But this was the Appellate Division's conclusion in Brunswick Bank & Trust v. Heln Management, LLC, a case that was making its second appearance before the Appellate Division (after an earlier remand) and was sent back to the trial court for a third round.

The issue in Brunswick Bank was relatively straightforward. Plaintiff and defendants entered into five loans. The loans were secured by mortgages on several properties owned by defendants. After defendants defaulted on the loans, plaintiff sued and obtained a judgment against defendants. Plaintiff then filed foreclosure actions against defendants, seeking to foreclose on the mortgages it held against defendants' properties. It received final judgments of foreclosure in these cases as well. Some of these properties were then sold, which "provided rolling compensation for [plaintiff] against all defendants' obligations."

At some point during this "rolling" sale of mortgaged properties, defendants moved to stay all pending foreclosure proceedings, arguing that plaintiff was "over-capitalized" – i.e., it was going to collect more than it was entitled to collect under its judgment. Defendants then moved to have the judgment deemed satisfied, arguing that plaintiff had already recovered — through its collection efforts — the full amount of the judgment. The trial court granted the motion but held that two pending foreclosures could proceed. The trial court further acknowledged that it had the power to "prevent a windfall" to plaintiff, but that the record was "too muddled" to decide whether this was the case.

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Thank You, Captain Obvious — It Is Improper To Throw Your Records In A Dumpster In Advance Of A Lawsuit

by: Peter J. Gallagher (@pjsgallagher)

When most litigators hear the term “spoliation” nowadays, they probably think of emails, servers, document retention policies, and back-up tapes. But the Appellate Division recently reminded us that old-fashioned spoliation is still alive and well (and improper).

In Hess Corporation v. American Gardens Management Company, plaintiff sued various single-purpose entities with which plaintiff had contracted to sell oil and gas. Plaintiff also sued the individual owner of all of these entities, which were essentially judgment proof, arguing that it was entitled to pierce the corporate veil and hold him liable because he had co-mingled funds and fraudulently conveyed and diverted assets from the various corporate entities for his personal use.

During discovery, plaintiff served the individual defendant with a document request. The individual defendant failed to respond and his answer was stricken. He later moved to reinstate his answer, first arguing that he could not answer the discovery request without implicating his Fifth Amendment right against self incrimination (which the court rejected) and then claiming that he did not have many of the documents requested. Based on the latter, the court vacated its prior order and reinstated his answer.

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Appellate Division to Foreclosing Lenders: “Do Less” Because If You Do More You Might Make Yourself Liable For Damages

by: Peter J. Gallagher (@pjsgallagher)

There is a scene in the movie "Forgetting Sarah Marshall" where the main character goes to a surf instructor to teach him how to surf. The lesson is not that helpful because, among other things, the instructor gives the main character advice that is impossible to follow, like: "Don't do anything. Don't try to surf. Don't do it. The less you do the more you do." And, then later: "try less" and "do less."

I was reminded of this decision when I read the Appellate Division's recent opinion in McRoy v. Eskander. In that case, the Appellate Division held that a lender was not a mortgagee in possession and therefore could not be liable for injuries sustained by someone who slipped and fell on the sidewalk in front of the property. The reason the lender could not be deemed a mortgagee in possession was because it had done almost nothing to maintain the property in the 18 months after it obtained a final judgment of foreclosure.

In McRoy, plaintiff slipped and fell on snow and ice in front of a four-unit apartment building that was owned by Defendant Eskander. At the time of plaintiff's fall, however, the building had been vacant for approximately 18 months. Eskander had defaulted on his loan with Bank of America ("BofA"), which led BofA to foreclose on its mortgage on the property. BofA obtained final judgment of foreclosure but had not proceeded to a sheriff's sale at the time of plaintiff's fall. Once final judgment of foreclosure was entered, Eskander stopped maintaining the property. Except for performing yard work once, BofA did not maintain the property either. It did periodically inspect the property to ensure it was vacant and, to protect its collateral, it paid the real estate taxes and a water bill.

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Slip Sliding Away: NJ Supreme Court Rules That Condominium Has No Duty To Clear Snow And Ice From Public Sidewalks

by: C. John DeSimone, III

It has long been settled common law that commercial landowners have a duty to clear snow and ice from public sidewalks abutting their land, but that residential landowners have no similar duty (Stewart v. 104 Wallace Street). In Luchejko v. City of Hoboken, decided on July 27, 2011, the New Jersey Supreme Court described the commercial/residential dichotomy as a bright-line rule. Commercial landowners have a common law duty to clear snow and ice from abutting public sidewalks, residential landowners do not. The Luchejko Court held that a residential condominium building, because it is residential, does not have a common law duty to clear snow and ice from abutting public sidewalks. The Court found that the form of the property ownership, in this case, a corporate condominium entity, did not subject the Association to the same liability that would have fallen on a commercial landowner. In doing so the Court affirmed the dismissal of the plaintiff's personal injury action at summary judgment. The Court also held that the management company, as the agent of the Association, owed no duty to the plaintiff and affirmed its dismissal.

Sewer Service Stunting Growth

by: Katharine A. Muscalino

If the economy and local land use regulations didn’t make development hard enough, some counties and municipalities have discovered the New Jersey Department of Environmental Protection’s June 2009 Water Quality Management Rules as another technique to inhibit growth and property development in New Jersey. The Water Quality Management Rules require counties, and some municipalities, to closely examine sewer service within their borders, and limit expansion of that service when possible. Counties have applied the DEP’s rules to remove undeveloped properties from the sewer service areas in their wastewater management plans, and to limit demand from sewered properties to the gallonage they currently produce.

Holmdel has taken the Water Quality Management Rules a step farther in its attempts to limit the possibilities for the redevelopment of the Alcotel-Lucent corporate campus, by arguing that the campus should not only be limited to its existing gallonage, but that sewer service should be limited to the existing corporate buildings’ footprints. This limitation would not only cap the size of the future development and its sewer service demand, but would also significantly limit the potential for new uses, and particularly residential use, on the site. If Holmdel succeeds in this aggressive wastewater management planning, it will have serious ramifications for the future of the property and its marketability.

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