The Pipes, The Pipes Are . . . Frozen! (Or, Who Is Liable For Property Damage While Home Buyer And Home Seller Wait For The Final Check To Clear?)

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

Frozen pipe (pd)Although the temperature today is supposed to reach 90 degrees, this post is about frozen pipes. More specifically, pipes in a house that is under contract for sale that freeze and cause property damage after the scheduled, but not completed, closing, but before the buyer takes possession of the home. In a case like that, who is liable for the damage?

In Bianchi v. Ladjen, plaintiff was under contract to buy a home. It was an all cash sale, no mortgage was involved. The closing was scheduled for New Year's Eve. Plaintiff performed a walk through on the morning of the closing and reported no damage to, or issues with, the home. The closing could not be completed as scheduled, however, because plaintiff did not wire the balance of the purchase price to the title company prior to the closing as he had been instructed to do. Instead, plaintiff brought a certified check to the closing. As a result, the parties entered into an escrow agreement, which provided that the title company would hold  "all closing proceeds" and the "Deed & Keys" in escrow until the check cleared.

This is where it gets tricky.  

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Borrower Cannot Abandon Germane Defense To Foreclosure And Later Sue For Damages Based On That Defense

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

Foreclosure (PD)
It is always helpful when a court lets you know up front what its decision is all about. This was the case in Adelman v. BSI Financial Services, Inc., where the Appellate Division began its decision as follows: "A defendant in a foreclosure case may not fail to diligently pursue a germane defense and then pursue a civil case against the lender alleging fraud by foreclosure." Definitely not burying the lede (or is it burying the "lead"?).

In Adelman, plaintiff was the executrix of the estate of her deceased husband, Norman. Before they were married, Norman entered into a loan with his lender that was secured by a mortgage on his home. Three years later, the loan went into default, and six months after that, the lender filed a foreclosure complaint. Norman offered no defense to the complaint, and default was entered. Three months after that, he began discussing the possibility of a loan modification with the lender. However, Norman's chances for a successful modification ended when he could not make the first payment under the proposed modification and when a title search revealed five other liens on the property. 

Months later, final judgment of foreclosure was entered. Norman did not object to the entry of final judgment. One year after that, the property was sold at sheriff's sale, and nine months after the sale, the lender filed a motion to remove Norman from the property. Only then, for the first time, did Norman argue, in a motion to stay his removal from the property, that the foreclosure was improper because the loan modification cured the default. The court denied this motion. Plaintiff appealed but then withdrew the appeal. Ultimately, shortly after Norman passed, and more than five years after the loan went into default, plaintiff vacated the property. 

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When Is Possession Not Really Possession? (And By “Possession” I Mean In The “Mortgagee In Possession” Sense Of The Word)

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

Lenders are often faced with a dilemma when dealing with property that is in foreclosure and has been abandoned by the borrower. A lender must, under New Jersey law, maintain the property "to such standard or specification as may be required by state law or municipal ordinance." Also, the lender has an obvious interest in protecting the value of its collateral. But the lender does not want to take "possession" of the property and be deemed a "mortgagee in possession," because that would impose upon the lender the duty of a "provident owner," which includes the duty to manage and preserve the property, and which subjects the lender to liability for damages to the property and damages arising out of torts that occur on the property. Unfortunately, the point at which a lender takes "possession" of property is not entirely clear. I have written about this before, and the Appellate Division's recent opinion in Woodlands Community Association, Inc. v. Mitchell provides some additional guidance, which should be helpful to lenders.

In Woodlands, defendant was the assignee of a note and mortgage related to a unit in plaintiff's condominium development. The unit owner defaulted on the loan and vacated the unit. At the time, the unit owner was not only delinquent on his loan payments, but also owed "substantial sums" to the association for "unpaid monthly fees and other condominium assessments." After the unit owner vacated the unit, defendant changed the locks and winterized the property. (As the Appellate Division noted, "[w]interizing entails draining the  pipes, turning off the water and setting the thermostat for heat to protect the pipes.") After the unite owner vacated the unit, plaintiff sued him to recover the delinquent fees. It later amended its complaint to include the lender, "alleging that [[the lender] was responsible for the association fees as it was in possession of the property."

Both parties moved for summary judgment. The trial court granted plaintiff's motion, holding that defendant was a mortgagee in possession and therefore was liable for the maintenance fees. On the key of issue of what it meant to be in "possession" of the unit, the trial court held as follows: "[D]efendant held the keys, and no one else [could] gain possession of the property without [defendant's] consent. This constitutes exclusive control, which indicates the status of mortgagee in possession." Defendant appealed. 

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You Can’t Cross Examine A Map!

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

Drug free zone (pd)In a case decided earlier last week, State v. Wilson, the New Jersey Supreme Court answered an interesting Constitutional Law question: Whether the admission into evidence of a map showing the designated 500-foot  "drug free zone" around a public park violated an accused's right, under both the U.S. Constitution and New Jersey Constitution, to be "confronted with the witnesses against him." The court held that maps like this do not violate the Confrontation Clause and, if properly authenticated, are admissible. The problem in Wilson, however, was that the map was not properly authenticated as a public record, therefore it was inadmissible hearsay. 

The Sixth Amendment to the U.S. Constitution provides that, "[i]n all criminal prosecutions, the accused shall enjoy the right . . . to be confronted with the witnesses against him." The New Jersey Constitution contains an almost identical provision. "The Confrontation Clause affords a procedural guarantee that the reliability of evidence will be tested 'in a particular manner' through the crucible of cross-examination." As interpreted by the U.S. Supreme Court, the Confrontation Clause provides that a "testimonial statement against a defendant by a non-testifying witness is inadmissible . . . unless the witness is unavailable and the defendant had a prior opportunity to cross-examine him or her." The threshold issue, therefore, is whether a statement is "testimonial."

The U.S. Supreme Court has "labored to flesh out what it means for a statement to be 'testimonial.'" It eventually arrived at the "primary purpose" test, which asks whether a statement has the primary purpose of "establishing or proving past events potentially relevant to a later criminal prosecution." If it does, then it is testimonial. If not, then it is not. For example, the U.S. Supreme Court has held that statements made to police to assist them in responding to an "ongoing emergency," rather than to create a record for a future prosecution, are not testimonial. 

The New Jersey Supreme Court has wrestled with this "primary purpose" test as well. For example, in one case, police sent a defendant's blood to a private laboratory after a fatal car crash. Approximately 14 analysts performed a variety of tests on the blood. A supervisor at the lab then wrote a report concluding that the defendant's blood contained traces of cocaine and other drugs and that this "would have caused the defendant to be impaired an unfit to operate a motor vehicle." The State sought to admit the report, or statements from it, into evidence. The court refused, holding that the report was testimonial because its primary purpose was to "serve as a direct accusation against the defendant." Similarly, the court held, in a separate case, that the statements in an autopsy report were testimonial because the autopsy was conducted after a homicide investigation had begun, after the defendant was a suspect, and after he had spoken to police, and because the autopsy was conducted in the presence of the lead State investigator. Thus, the court held, the "primary purpose of the report was to establish facts for later use in the prosecution."

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In Case You Ever Find Yourself Fighting With Your Wife Over Your Ferraris . . .

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

Ferrari (pd)Right. I never do either. But if you do (or think you might in the future) then you might want to know about Durrani v. Wide World of Cars. In that case, plaintiff sued a car dealership and her ex-husband's former lawyers for delivering two Ferraris to her ex-husband, allegedly in violation of an order entered in their divorce action.

As the trial court described it, when plaintiff and her ex-husband were married, they lived an "extravagant lifestyle." Among other things,  they owned "twenty-five luxury cars worth approximately one million dollars, boats and properties." Of these assets, however, plaintiff was only on the title of two cars (and not the Ferraris). Nonetheless, during their divorce proceeding, plaintiff sought "exclusive possession" of the Ferraris, which were titled and registered to her ex-husband and stored at the defendant dealership's facilities. Consistent with this claim, plaintiff's counsel sent a letter to the dealership requesting that it not release or transfer the Ferraris to anyone, including plaintiff's ex-husband, and threatening to hold the dealership liable for damages if it did. At the end of the letter, counsel asked the dealership to agree to abide by the demand and indicated that if it did not agree, plaintiff would "immediately seek to serve [the dealership] with a court order." The dealership did not respond.

Around the same time plaintiff's counsel sent this letter, the family part entered an order in the divorce proceeding preventing either party from dissipating, selling, etc. any assets of the marriage, and specifically identified the Ferraris in a list of assets to which this restraint applied. Plaintiff's counsel sent a copy of the order to the dealership, purportedly placing it on notice of the terms.

 

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Lease “Signed Under Protest” Not Binding (And Have You Ever Heard Of “Grumbling Acceptance”?)

Sign contract(Pd)
What happens if a tenant signs a lease but writes "signed under protest" under the signature? According to the Appellate Division, it means the lease is not binding. More importantly, perhaps, the Appellate Division has never heard of the contract theory known as "grumbling acceptance." If this is one that you did not cover in law school, join the club.

In Bergenline Property Group, LLC v. Coto, defendant was a longtime tenant of premises owned by plaintiff. There was an oral lease between the parties for most of the tenancy. But, in 2013, plaintiff served a notice to quit on defendant, requiring defendant to sign a written lease and pay a security deposit or vacate the property. Defendant refused and plaintiff served another notice to quit, requiring defendant to vacate the property for refusing to agree to reasonable changes to the terms of the lease. Defendant did not vacate and plaintiff filed an eviction complaint.

At the hearing on plaintiff's eviction complaint, the parties agreed to allow the court to determine the reasonableness of several provisions in the proposed lease and modify the lease as necessary. The court did just that, issuing a written opinion that modified some of the terms of the lease. Despite defendant's prior agreement to be bound by the court-modified lease, defendant refused to sign it. Plaintiff then moved for a judgment of possession. At the hearing on that request, the court gave defendant another chance to sign the lease. In response, Defendant first delivered a lease with a signature that was not witnessed and a post-dated check for the security deposit. Plaintiff refused to accept both. Defendant then delivered a lease, signed by defendant and witnessed by defendant's counsel, and a money order for the security deposit. However, directly below defendant's signature on the lease appeared the words "signed under protest." Plaintiff refused to accept this lease as well, but gave defendant one more chance to come to plaintiff's counsel's office and sign the lease. Defendant was apparently driven to plaintiff's counsel's office, but refused to leave the car or execute a new lease.

Plaintiff then renewed its request for a judgment of possession. Defendant opposed the motion, arguing, among other things, that the "signing under protest" language did not change the document, and stating, "parenthetically," that if plaintiff was "offended" by that language, plaintiff could strike it. The court entered the judgment of possession, finding that, by placing the "signing under protest" language on the lease, there was no meeting of the minds, and therefore no binding contract. As a result, defendant failed to sign the lease and violated the court's order requiring her to do so.

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New Jersey Supreme Court Answers Burning Question: When is a converted garage a “building” under New Jersey’s Anti-Eviction Act?

When my wife and I lived in Hoboken, one of our favorite restaurants was Court Street. It is located on the corner of Sixth Avenue and Court Street. We went there at least once a week for most of the time we lived in Hoboken. (Great food, good atmosphere, a little off the beaten path. You should check it out.) Little did I know at the time that we were looking out from the restaurant onto a "building" that was the subject of a long-running landlord-tenant dispute that was only recently resolved by the New Jersey Supreme Court.

I used quotation marks around "building" because the issue in Cashin v. Bello was whether the word "building" as used in the Anti-Eviction Act denotes a single, unattached physical structure or whether it includes all structures owned by an individual that are located on the same parcel of land. This issue was more than just semantics to the parties involved because if the Supreme Court endorsed the former then defendant could be evicted, but if it endorsed the latter, then defendant could stay. Unfortunately for the tenant, the Supreme Court endorsed the former.

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