WOODLANDS COMMUNITY ASSOCIATION, INC. VS. ADAM T. MITCHELL(DC-2766-14, ATLANTIC COUNTY AND STATEWIDE) ( 2017 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-4176-15T2
WOODLANDS COMMUNITY
ASSOCIATION, INC.,
APPROVED FOR PUBLICATION
Plaintiff-Respondent, June 6, 2017
v. APPELLATE DIVISION
ADAM T. MITCHELL,
Defendant,
and
NATIONSTAR MORTGAGE, LLC,
and U.S. BANK, N.A., Successor
Trustee to Bank of America,
N.A. as Successor to LaSalle
Bank, N.A. as Trustee for the
Merrill Lynch First Franklin
Mortgage Loan Trust, Mortgage
Loan Asset-Backed Certificate
Series 2007-3,
Defendant-Appellant.
________________________________
Argued April 24, 2017 – Decided June 6, 2017
Before Judges Sabatino, Currier, and Geiger.
On appeal from the Superior Court of New
Jersey, Law Division, Special Civil Part,
Atlantic County, Docket No. DC-2766-14.
Kathleen Cavanaugh argued the cause for
appellant (Sandelands Eyet LLP, attorneys;
Robert D. Bailey, of counsel and on the
briefs).
Tiffany L. Byczkowski argued the cause for
respondent (McGovern Legal Services, LLC;
Ms. Byczkowski, on the brief).
The opinion of the court was delivered by
CURRIER, J.A.D.
We are asked to determine whether a lender's assignee that
takes possession of a condominium unit when the owner/mortgagor
has defaulted on the loan, and thereafter winterizes the unit
and changes the locks, is considered a "mortgagee in possession"
of that unit, responsible for the payment of condominium fees
and assessments. Because we conclude that those discrete
actions are not sufficient to render the lender's assignee a
mortgagee in possession of the unit, we reverse the entry of
summary judgment.
In March 2007, Adam Mitchell purchased a condominium unit
in a property managed by plaintiff, Woodlands Community
Association, Inc. (Association), and executed a mortgage
encumbering the unit. After several assignments not pertinent
to this matter, the mortgage was assigned in July 2013 to
defendant, Nationstar Mortgage LLC.
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Mitchell defaulted on his obligations under the mortgage
loan and vacated the unit.1 Mitchell also owed substantial sums
to the Association for the unpaid monthly fees and other
condominium assessments. Subsequent to his default, Nationstar
replaced the locks on the unit and winterized the property.2
The Association instituted an action in April 2014 against
Mitchell to recover the monthly maintenance association fees for
general services it had provided to the property.3 Several
months later, plaintiff amended its complaint to include
defendant, alleging that the lender's assignee was responsible
for the association fees as it was in possession of the
property.
Both plaintiff and defendant moved for summary judgment.
On April 19, 2016, the trial court granted summary judgment in
favor of the Association, determining that defendant was a
mortgagee in possession, and therefore, liable for the
maintenance fees. The trial judge reasoned that no genuine
issues of material fact existed as "[defendant held] the keys,
1
Final judgment was entered in the foreclosure action in
December 2015. The parties advised at the time of oral argument
on the appeal that the property had not been listed for sale.
2
"Winterizing" entails draining the pipes, turning off the water
and setting the thermostat for heat to protect the pipes.
3
Plaintiff and Mitchell resolved their claims in May 2015.
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and no one else can gain possession of the property without
[defendant's] consent. This constitutes exclusive control,
which indicates the status of mortgagee in possession." The
judge also awarded attorney's fees. This appeal followed.
On appeal, defendant argues that changing the locks and
winterizing the condominium unit did not render it a mortgagee
in possession of the property. We agree.
Our "review of a trial court's grant of summary judgment is
de novo." Trinity Church v. Lawson-Bell, 394 N.J. Super. 159,
166 (App. Div. 2007). We must consider whether there are any
material factual disputes and, if not, whether the facts viewed
in the light most favorable to the non-moving party would permit
a decision in that party's favor on the underlying issue. See
Brill v. Guardian Life Ins., 142 N.J. 520, 540 (1995). "[T]he
legal conclusions undergirding the summary judgment motion
itself [are reviewed] on a plenary de novo basis." Estate of
Hanges v. Metro. Prop. & Cas. Ins., 202 N.J. 369, 385 (2010).
After default by a mortgagor on a property, the lender or
its assignee has "the right of possession, subject to the
mortgagor's equity of redemption." McCorristin v. Salmon Signs,
244 N.J. Super. 503, 508 (App. Div. 1990) (citing Guttenberg
Sav. & Loan Ass'n v. Rivera, 85 N.J. 617 (1981)). The
mortgagee, however, is not the owner of the property unless
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there is a foreclosure and sale of the premises to the
mortgagee. Guttenberg, supra, 85 N.J. at 630. If a mortgagee
is determined to be in possession of the property, then the
mortgagee is "liable for delinquent condominium common charges,
which had accrued against the property's legal owner, for
services furnished during the mortgagee's possession and control
of the premises." Woodview Condo. Ass'n, Inc. v. Shanahan,
391 N.J. Super. 170, 173 (App. Div. 2007).
Whether a mortgagee or its assignee is in possession is
determined on a case-by-case basis. "[T]he acts of a mortgagee
under the circumstances, determine whether or not possession and
management of the premises have been undertaken by the
mortgagee." Scott v. Hoboken Bank for Sav., 126 N.J.L. 294, 298
(Sup. Ct. 1941). In Scott, the bank mortgagee had taken over
the collection of the rents from the tenants and was paying the
bills and making repairs in the building. Id. at 296. The
Court found the bank had become a mortgagee in possession,
stating that when the mortgagee "take[s] out of the hands of the
mortgagor the management and control of the estate[,]" the
mortgagee becomes a mortgagee in possession. Id. at 298.
In Woodview, supra, 391 N.J. Super. at 174, the mortgagee
in possession had rented out the units and was collecting rents
on them. We found the mortgagee to be in control and possession
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of those units, and therefore, responsible for the monthly
condominium fees.
We must assess then whether defendant exercised the
necessary level of control and management over the property to
deem it a mortgagee in possession. Defendant here has not
occupied the unit, is not collecting rents or any other profits,
nor is it making repairs. It cannot be argued that defendant's
actions of winterizing the property and changing the locks were
the equivalent of the multitude of actions and responsibilities
undertaken by the mortgagees in Scott and Woodview.
Plaintiff contends, however, as did the trial judge, that
the sole act of changing the locks renders defendant a mortgagee
in possession as the action demonstrated that no one else could
enter the unit without the consent of defendant, thus conferring
upon it exclusive control. We disagree.
The use of the word "possession" in the designation
"mortgagee in possession" is somewhat misleading. See 30 New
Jersey Practice, Mortgages § 21.10, at 132 (Myron C. Weinstein)
(2d ed. 2000) (citing George E. Osborne, Handbook on the Law of
Mortgages § 162 (2d ed. 1970)) (stating that dominion and
control are more descriptive of a mortgagee in possession, not
actual possession). Indicia of control and management include
elements of possession, operation, maintenance, use, repair, and
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control of the property such as paying bills or collecting
rents. We are satisfied that the minimal efforts taken here by
defendant to secure its interest in the mortgaged property are
not sufficient to convert itself into a mortgagee in possession.
Defendant has not taken over the control and management of the
unit nor exercised the requisite dominion over the property
short of securing the unit.
Upon Mitchell's default on the mortgage, defendant was
required to protect its collateral, the value of its security.
See N.J.S.A. 46:10B-51 (obligating a lender or its assignee to
maintain a property in foreclosure proceedings "to such standard
or specification as may be required by state law or municipal
ordinance."). In addition to paying the insurance premiums and
real estate taxes, defendant sought to prevent damage to the
unit by winterizing the property and changing the locks. In
this situation, the mortgagee has taken on the costs and borne
the burden of the abandoned property. It has not availed itself
of the benefits of the Association, as plaintiff argues, but
rather its actions in protecting its security serve to benefit
the other homeowners. Incidents of vandalism or an occurrence
of frozen pipes in the vacant unit would likely lead to damage
to adjoining properties. Defendant here is not benefitting from
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the limited actions it has taken to secure its collateral; it is
simply protecting its rights.
Plaintiff argues alternatively that defendant is
responsible for the unpaid assessments under equitable theories.
In Woodview, supra, we advised that equitable considerations
supported our determination that the mortgagee in possession,
who was collecting rents on the two properties, should be
responsible for the condominium assessments. 391 N.J. Super. at
178. We stated: "In our view, having enjoyed the benefit of
these goods and services throughout his possession and control
of the premises, and consistent with the rights and duties of
mortgagees in possession generally, defendant suffers the burden
of their cost." Ibid. (emphasis added).
There was no dispute in Woodview as to the designation of
"mortgagee in possession." The only issue presented for
resolution was whether the mortgagee in possession was
responsible for the unpaid condominium fees. We are satisfied
that our conclusion today is consistent with Woodview as we have
deemed defendant not in possession or control of the property
and not a mortgagee in possession.
Nor are the equitable doctrines of unjust enrichment and
quantum meruit applicable in these circumstances. To establish
unjust enrichment, plaintiff must show that it expected
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remuneration from defendant at the time it performed or
conferred a benefit on defendant and that the retention of that
benefit without payment would be unjust. VRG Corp. v. GKN
Realty Corp., 135 N.J. 539, 554 (1994).
Recovery under quantum meruit similarly rests on the
principle that one party should not be allowed to be enriched
unjustly at the expense of another. Weichert Co. Realtors v.
Ryan, 128 N.J. 427, 437 (1992). Recovery under both of these
doctrines requires a determination that defendant has benefitted
from plaintiff's performance. It is undisputed that there was
no express contract in place between plaintiff and defendant for
the provision of services. Rather, the services furnished by
the Association are provided for the upkeep of the entirety of
the Association's property. Defendant was not a member of the
Association, and therefore, plaintiff could not have expected
remuneration from it. Without defendant being designated a
mortgagee in possession, we fail to see the basis of an implied
contract to satisfy the equitable doctrines. Cf. Essex Cleaning
Contractors, Inc. v. Amato, 127 N.J. Super. 364, 367 (App.
Div.), certif. denied, 65 N.J. 575 (1974) (finding that a
mortgagee determined to be in possession of the property "may be
liable for services rendered to him in connection with the
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property during his occupancy thereof on the basis of an express
or implied contract.").
We, therefore, conclude that the minimal actions taken by
defendant here in winterizing the unit and changing the locks do
not serve to deem it a mortgagee in possession and do not render
defendant responsible for the unpaid condominium fees and
assessments. Although not raised in the argument to the trial
court nor in the appellate briefs, plaintiff suggested to us at
the time of oral argument that we should impose some parameters
on defendant's conduct. For example, plaintiff suggests a
requirement that the mortgagee must place the defaulted unit up
for sale within a certain timeframe after the entry of a final
judgment of foreclosure. If a mortgagee is dilatory after the
entry of a final judgment of foreclosure in proceeding to sale
or has refused to go to sale on the unit, that conduct might
result in the imposition of responsibility for the Association
fees. While these arguments might bear some merit in a future
discussion, we decline the invitation to expand on our
conclusion on this record as it is void of any information
regarding the circumstances surrounding the foreclosure
proceeding or any events following the final judgment. See
Sklodowsky v. Lushis, 417 N.J. Super. 648, 657 (App. Div. 2011)
("An issue not briefed on appeal is deemed waived.").
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We reverse the ruling granting summary judgment to
plaintiff, and remand to the trial court for the entry of
summary judgment on defendant's motion.
Reversed and remanded. We do not retain jurisdiction.
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