Valley National Bank v. J. Ronald Meier , 437 N.J. Super. 401 ( 2014 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0305-13T1
VALLEY NATIONAL BANK, Successor
by Merger to Bergen Commercial
Bank,
Plaintiff-Respondent,
APPROVED FOR PUBLICATION
v. September 26, 2014
J. RONALD MEIER, APPELLATE DIVISION
Defendant-Appellant,
and
GREGORIA MEIER,
Defendant.
___________________________________________________
Argued September 16, 2014 – Decided September 26, 2014
Before Judges Fisher, Nugent and Manahan.
On appeal from the Superior Court of New
Jersey, Chancery Division, Atlantic County,
Docket No. F-063285-09.
Bruce H. Dexter argued the cause for
appellant (Dexter & Kilcoyne, attorneys; Mr.
Dexter and Virginia Kilcoyne, on the brief).
David Neeren argued the cause for respondent
(Udren Law Offices, P.C., attorneys; Mr.
Neeren, on the brief).
The opinion of the court was delivered by
FISHER, P.J.A.D.
In this appeal, we consider the ramifications for a later
foreclosure action when, six years earlier, defendant J. Ronald
Meier, owner with his wife of the foreclosed property, paid off
the first mortgage loan and, rather than obtain a discharge of
the mortgage, received an assignment. We agree with the
Chancery judge that, in these circumstances, the mortgage had no
further validity.
The critical facts are undisputed. In 1999, defendant and
his wife purchased the Ventnor property in question with the
proceeds of a $168,000 loan from Community Bank of Bergen County
the repayment of which was secured by a purchase money mortgage.
Defendant was the president, chief executive officer and
chairman of the board of Community Bank, which later merged with
plaintiff Valley National Bank.
In 2005, defendant and his wife obtained a $100,000 home
equity loan from Community Bank that was also secured by a
mortgage on the Ventnor property. In 2007, defendant paid the
entire amount due on the 1999 loan, and, in exchange, Community
Bank provided defendant with a written assignment, which he
recorded, of the 1999 mortgage.1 Defendant claimed in the trial
1
In opposing the motion that gave rise to the order under review,
defendant, who was then unrepresented, failed to provide the
court with any opposing papers; the facts he presented at oral
(continued)
2 A-0305-13T1
court – no affidavit or certification to this effect was
provided – that he paid off this debt with "premarital assets."2
In 2009, plaintiff Valley National Bank filed a complaint
against defendant and his wife, as well as the holder of a later
$15,000 mortgage, seeking foreclosure of the 2005 home equity
loan. The complaint made no mention of the 1999 mortgage
defendant paid off in 2007. A final judgment by default was
entered in plaintiff's favor on August 22, 2012, and plaintiff
purchased the property at a sheriff's sale on January 3, 2013.
On April 1, 2013, approximately three months after the
sheriff's sale, defendant demanded payment from plaintiff of
$149,838.06 – the amount paid by defendant to Community Bank in
2007 – plus $53,019.20, which was asserted to be accrued
interest, presumably since defendant paid the principal amount
to Community Bank in 2007. After investigating, plaintiff
(continued)
argument regarding his reasons for paying off the 1999 mortgage
loan, therefore, were not properly supported. Notwithstanding,
like the Chancery judge, we assume for present purposes that
defendant's assertions are true. For example, defendant claimed
he paid off the mortgage because federal banking regulations
precluded him from having his bank hold more than one mortgage
on his property. There is no sworn statement or evidential
material to support that this was his intention.
2
We are told defendant and his wife were divorced. The record
does not disclose when this occurred nor does the record suggest
how the parties' property, including the Ventnor property in
question, was distributed.
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demanded that defendant agree to a discharge of the mortgage.
When defendant refused, plaintiff moved for a divestiture of the
assignment of mortgage.
As we have observed, defendant filed no written response to
plaintiff's motion. On the return date, the Chancery judge
permitted the unrepresented defendant to argue his position and
then adjourned the matter to allow additional time for the
retention of counsel and a response from defendant in accordance
with court rules. Defendant appeared on the adjourned return
date without counsel, and the judge ruled in plaintiff's favor.
In his oral decision, the experienced Chancery judge
concluded that defendant's receipt of an assignment of the
mortgage in 2007 – when he was a director of the bank – was
"troubling," and that the circumstances "might well support a
referral of this matter to the Department of Banking and
Insurance." He concluded that the record demonstrated the
mortgage had been fully satisfied in 2007, was no longer legally
viable, and the assignment was consequently unenforceable. By
order dated August 2, 2013, the judge divested defendant of the
mortgage and assignment and declared defendant had no further
interest in or claim to the property.
In appealing, defendant argues, first, that the assignment
was valid and the mortgage still viable and, second, that
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because plaintiff did not question or contest the 1999
mortgage's viability prior to entry of final judgment, the order
under review should be barred by the entire controversy
doctrine, or the doctrines of waiver, estoppel and laches. The
second argument, which was not posed in the trial court, is so
devoid of merit as to be unworthy of further discussion in a
written opinion. R. 2:11-3(e)(1)(E). It suffices to say that
the parameters of Rule 4:50 are broad enough to permit plaintiff
relief in this extraordinary circumstance, and that the
equitable doctrines upon which defendant relies were designed to
prevent, not perpetuate, fraud and inequity.3
As to defendant's first point, we agree with the Chancery
judge that it would be inequitable to conclude that defendant is
entitled to payment from plaintiff pursuant to the assigned
mortgage. Defendant's argument to the contrary is based on a
misreading of well-established principles of law.
Our analysis must start with the indisputable premise that,
in the eyes of the law, a mortgage is extinguished by operation
of law when full payment is made by a mortgagee and accepted by
3
Defendant never responded to the complaint or otherwise put
plaintiff on notice of his claim to rights emanating from the
assigned mortgage until after entry of the foreclosure judgment
and after the property was transferred through a sheriff's sale.
That circumstance speaks for itself as a response to defendant's
claim that equitable principles preclude the relief plaintiff
seeks.
5 A-0305-13T1
the mortgagor. See, e.g., 12 Thompson on Real Property §
101.03(c) at 414 (Thomas ed., 2d ed. 2008). There is no dispute
that Community Bank was the holder of the mortgage when, in
2007, defendant tendered all that was due on the debt.
Normally, in such an instance, the borrower would be entitled to
a discharge of the mortgage, and have that event recorded so the
mortgage would no longer encumber the property. Here, defendant
fully paid off the debt with what he claims were his own
premarital assets, and Community Bank – of which defendant was
then president, chairman of the board, and chief executive
officer – took the unusual step of providing defendant with an
assignment of the mortgage, which defendant recorded.4
In arguing that the mortgage remained viable because of the
assignment, defendant chiefly relies upon the proposition
expressed by our Supreme Court that "[a]n assignment of a
4
We again observe that the source of the funds used to pay off
the 1999 loan and defendant's intention in obtaining an
assignment instead of the mortgage's discharge are not supported
by any sworn statement. The Chancery judge gave defendant ample
opportunity to support his arguments in the manner proscribed by
the rules, but defendant failed to do so. Although it would
have been appropriate for the judge to have considered the
motion unopposed, we find no error in the judge's generosity in
assuming the truth of defendant's allegations, and we will do
likewise because what defendant argues presents no obstacle to
our affirmance of the judge's order. But to be clear – since
defendant's ex-wife has not appeared in the proceedings in this
court or the trial court – the claim that premarital funds were
used was never established.
6 A-0305-13T1
mortgage to one of two tenants in common . . . does not
discharge it." Estate of Colquhoun v. Estate of Colquhoun, 88
N.J. 558, 565 (1982) (internal citation omitted). He also
correctly argues that although they held the property by way of
a joint tenancy, defendant and his wife were – as to each other
– tenants in common. Newman v. Chase, 70 N.J. 254, 259 (1976).
These principles, however, only define whether or to what extent
defendant was entitled to reimbursement from his wife for his
having paid off the mortgage with what he alleges to be
premarital assets. These principles do not rationally support
the argument that the assigned mortgage continued to burden the
property in any other respect, let alone recoil upon Community
Bank or its successors.
To be sure, Estate of Colquhoun suggests that a payment of
a loan with premarital assets with a concomitant assignment of
an underlying mortgage may preserve cotenants' rights and
obligations. We need not, and do not, however, opine on whether
or to what extent defendant's 2007 payoff of the 1999 mortgage
reserved in him the right to seek reimbursement from his wife;
assuming that issue has not already been resolved elsewhere,5 it
5
Recognizing that defendant represented to the trial court that
he and his wife were divorced, it is difficult for us to imagine
that any claims they may have possessed against each other or
(continued)
7 A-0305-13T1
is not presented here. Nevertheless, because Estate of
Colquhoun constitutes the centerpiece of defendant's argument,
we find it necessary to recount its circumstances to illustrate
how that case does not govern the disposition of this appeal.
In Estate of Colquhoun, a married couple purchased property
in part with funds provided by their son, Robert, who took back
a $51,000 mortgage; $35,000 was due by August 31, 1974, which
was timely paid, and the $16,000 balance was to be paid to
Robert in equal monthly installments over the following twenty-
five years. 88 N.J. at 560-61. Four years later, Robert
assigned his interest in the mortgage to his father as a gift.
Id. at 561. The husband died four months after receiving the
assignment; his will disinherited his wife and their two sons,
leaving his estate to his brothers and sisters in Scotland.
Ibid. The wife died seven months after her husband; she left a
will, which directed that neither her husband nor her son,
Robert, was to benefit from her estate. Ibid. The wife's
estate contracted to sell the property but was stymied by the
existing $16,000 mortgage purportedly held by the husband's
estate by way of the assignment and that estate's claim for
payment, ibid., leading to a suit to determine the liability of
(continued)
their respective interests in the Ventnor property have not
already been finally determined.
8 A-0305-13T1
the wife's estate, if any, on the mortgage, Estate of Colquhoun
v. Estate of Colquhoun, 177 N.J. Super. 491, 495 (App. Div.
1981).
The trial judge granted summary judgment, concluding that
the wife's estate was liable for the entire $16,000 balance
together with interest. Estate of Colquhoun, supra, 88 N.J. at
562. We reversed, finding that "well-settled and long
established principles of equity compel the extinguishment of
the mortgage in these circumstances." Estate of Colquhoun,
supra, 177 N.J. Super. at 496. Specifically, in relying on
Grober v. Kohn, 47 N.J. 135, 149 (1966), which held that "[c]o-
owners of property, as such, have a 'confidential relation' with
respect to certain aspects of their common interests," we held
that this duty
prohibits a cotenant from acquiring an
undisclosed adverse interest in the common
property for his own benefit, and if he has
acquired such an interest, he will be deemed
to have done so for the benefit of all
cotenants, subject only to their obligation
to make a pro rata contribution to the
acquisition cost, if any.
[Estate of Colquhoun, supra, 177 N.J. Super.
at 497.]
We found this general principle to have antecedents as old as
Weller v. Rolason, 17 N.J. Eq. 13, 19 (Ch. 1864) and Rothwell v.
Dewees, 67 U.S. 613, 618, 17 L. Ed. 309, 311 (1863), which
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relied on the rule as having been "very fully laid down" to the
same effect by Chancellor James Kent, who authored the landmark
"Commentaries on American Law" in the early nineteenth century.
See also Breitman v. Jaehnal, 99 N.J. Eq. 243, 245-46 (Ch.
1926), aff’d o.b., 100 N.J. Eq. 559 (E. & A. 1927). Our Supreme
Court reversed our determination in Estate of Colquhoun, not
because this ancient rule had lost its vitality, but because the
Court found the unique circumstances presented should be
controlled by the parties' intentions. 88 N.J. at 565.
In examining vastly different circumstances, we rely upon
the well-established principles mentioned above and hold that
any interest in the property conveyed to defendant by the
assignment related only to defendant's claim, which he was
required to assert within a reasonable time, see Estate of
Colquhoun, supra, 88 N.J. at 566; Breitman, supra, 99 N.J. Eq.
at 245-46, against his wife for reimbursement of her fair share
of his payment from allegedly non-marital assets. As to all
others, defendant's satisfaction of the debt underlying the 1999
mortgage caused a merger of that mortgage with defendant and his
wife's ownership of the fee. Stated another way, absent the
assignor and assignee's contrary intention, merger is presumed
when the greater and lesser interests in property are joined in
the same person or entity. See Anthony L. Petters Diner, Inc.
10 A-0305-13T1
v. Stellakis, 202 N.J. Super. 11, 18 (App. Div. 1985); Estate of
Colquhoun, supra, 177 N.J. Super. at 498; Gimbel v. Venino, 135
N.J. Eq. 574, 576 (Ch. 1944); Thompson on Real Property, supra,
§ 101.03(e) at 419-20. Here, no contrary intention was
expressed or is reasonably inferable from the circumstances; the
1999 mortgage merged in the marital partnership's ownership of
the Ventnor property. Estate of Colquhoun hardly suggests a
different approach because the Supreme Court in that case merely
found the presumption of a merger was overcome by a contrary
intention. 88 N.J. at 565.
Here, it is enough to observe that defendant failed to show
that Community Bank intended that the mortgage might be used to
interfere with its position as the holder of the 2005 home
equity mortgage, or otherwise. Indeed, it would be difficult to
characterize defendant's alleged intention in obtaining the
assignment as anything short of a fraud on Community Bank or its
shareholders and successors. We therefore conclude that
defendant's payment in full of the remaining debt on the 1999
loan extinguished the mortgage insofar as anyone but his wife
was concerned regardless of the mortgage's assignment to him.6
6
The same result is compelled when considering that defendant, as
assignee, only obtained such rights and privileges possessed by
the assignor. See Gotlib v. Gotlib, 399 N.J. Super. 295, 313
(App. Div. 2008); Gerrold v. Penn Title Ins. Co., 271 N.J.
(continued)
11 A-0305-13T1
The order under review is affirmed.
(continued)
Super. 50, 54 (App. Div. 1994). Once it received payment in
full, Community Bank had no further interest in the property;
accordingly, it conveyed nothing when it assigned the mortgage
to defendant.
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