KATHLEEN PFEIFER VS. GINA M. MCLAUGHLIN (F-031992-15, MONMOUTH COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court."
Although it is posted on the internet, this opinion is binding only on the
parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1519-16T3
KATHLEEN PFEIFER,
Plaintiff-Appellant,
v.
GINA M. MCLAUGHLIN, MR.
MCLAUGHLIN, husband of Gina
M. McLaughlin,
Defendants-Respondents,
and
MORTGAGE ELECTRONIC
REGISTRATION SERVICES, INC., as
nominee for SOVEREIGN BANK,
Defendant.
___________________________________
Argued April 11, 2018 – Decided August 31, 2018
Before Judges Fuentes, Manahan and Suter.
On appeal from Superior Court of New Jersey,
Chancery Division, Monmouth County, Docket No.
F-031992-15.
Michael P. O'Grodnick argued the cause for
appellant (Savo, Schalk, Gillespie,
O'Grodnick & Fisher, PA, attorneys; Michael
P. O'Grodnick, of counsel and on the brief).
Michael D. Mezzacca argued the cause for
respondents (Bourne, Noll & Kenyon, attorneys;
Michael D. Mezzacca, of counsel and on the
brief).
PER CURIAM
In this mortgage foreclosure action, plaintiff Kathleen
Pfeifer appeals from the order of the Chancery Division, General
Equity Part, that dismissed her complaint against defendants Gina
M. McLaughlin, and her husband. The judge held plaintiff filed
this foreclosure action against defendants beyond the time period
established by the statute of limitations and also failed to
properly record the mortgage. In reaching this decision, the
judge retroactively applied the six-year statute of limitations
codified in N.J.S.A. 2A:50-56.1. We reverse. The judge erred
when she retroactively applied the six-year limitation period in
N.J.S.A. 2A:50-56.1. Consistent with this court's holding in
Security Nat. Partners Ltd. Partnership v. Mahler, 336 N.J. Super.
101, 108 (App. Div. 2000), at the time plaintiff commenced this
foreclosure action, the limitations period to file a residential
mortgage foreclosure was twenty years.
Plaintiff also argues the judge erred in dismissing the
foreclosure action because defendants were not aware of the
existence of the recorded mortgage. Because the judge granted
summary judgment before these parties could be included in the
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suit, a remand is necessary to permit defendant to file a third
party action against these parties.
I
On July 26, 2007, the Owens executed a note confirming a loan
from the Pfeifers in the amount of $53,000 plus interest, with a
maturity date of July 26, 2008. To secure payment of the note,
the Owens executed a non-purchase money mortgage on the real
property listing the Pfeifers as the mortgagees/creditors, subject
to satisfaction of the note. The mortgage was recorded with the
Clerk of Monmouth County on September 21, 2007. The property used
as collateral for the loan is a residential property located in
the Borough of Highlands in Monmouth County; it was conveyed to
Joanne Gillikin (maiden name of Joanne Owen) by deed dated March
3, 1987. Joanne Gillikin legally changed her name to Joanne Owen
in 1991 after she married Claude Owen.
The mortgage identifies the debtors as Claude Owen and Joanne
Owen and describes the mortgaged property as previously conveyed
to "Joanne Gillikin, unmarried by deed from James V. Higgins,
unmarried dated 03/03/1987, recorded 03/16/1987 . . . ." The
mortgage instrument contains a default clause that allows the
Pfeifers to declare the Owens in default on the note and mortgage
if the Owens: (1) failed to make any payments by the due dates;
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(2) failed to keep any other promises in the mortgage; or (3) "the
ownership of the [p]roperty is changed for any reason."
The mortgage did not provide for a straight amortization of
the loan. It contained a "balloon payment" clause; the Owens pay
$507.92 per month until July 26, 2008, at which time all sums due
were to be paid in full. The Pfeifers, as mortgagees, also had
the right to foreclose upon default. Michael D. Pfeifer died on
November 18, 2011, leaving his widow plaintiff Kathleen L. Pfeifer
as the sole owner of the promissory note.
The Owens defaulted by failing to make the payment due on May
26, 2008, and by failing to make the balloon payment due under the
note by July 26, 2008. On January 7, 2009, the Pfeifers filed a
foreclosure action against the Owens. On September 13, 2013, the
Foreclosure Unit in the Superior Court Clerk's Office
administratively dismissed the complaint without prejudice for
lack of prosecution. See R. 4:64-8.
On November 17, 2010, the Owens transferred the title to the
property by deed to defendant "Gina M. McLaughlin, unmarried, and
Virginia V. [McLaughlin] . . . ." The deed was recorded on May
23, 2011 and re-recorded on June 3, 2011 through the Monmouth
County Clerk's Office. The deed lists the grantors as "Joanne
Gillikin Owen and Claude Owen, wife and husband . . . .” A number
of other documents, including the contract of sale, a limited
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power of attorney, and an affidavit of title also identify the
seller/grantor as Joanne Owen.
Defendant's title insurer, Stewart Title Company of Central
Jersey (Stewart Title), performed a chain of title, liens, and
judgment search using the grantor/grantee index. The searcher ran
the county search based on the name of the grantee, Joanne
Gillikin, which revealed her 1987 mortgage. In a certification
submitted by Kathleen Lockwood, a principal of Stewart Title, she
averred that she became aware that Joanne Gillikin "had been
married and was then known as Joanne Gillikin Owen and the deed
[to] Gina McLaughlin was prepared accordingly."
Lockwood also averred that she performed a civil judgment
search of Joanne Gillikin Owen using only "Owen" as her last name
"as she could have had a judgment entered against her after she
had been married." Lockwood claimed, however, that
any mortgage she may have entered into would
have to, in order to be recorded properly,
recite that Joanne Gillikin, as the title
holder, was mortgaging the property. In this
case, no such recitation was made and,
therefore, the searcher did not locate the
mortgage with the standard search of the
grantor indexes.
Consequently, the title search did not list plaintiff's recorded
mortgage as an exemption to the title policy. The only exception
listed was Gillikin's 1987 mortgage.
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At the closing conveying title to the property from the Owens
to defendant, plaintiffs' mortgage was not paid from the proceeds
of the sale; the mortgage remained a lien on the property because
it was not discharged of record. The affidavit of title Owen
signed did not disclose plaintiff's mortgage. In her affidavit
of title signed on November 17, 2010, and in a certification
submitted to the General Equity Judge on July 22, 2016, defendant
certified that she did not have any knowledge of the mortgage.
On September 8, 2015, plaintiff filed a foreclosure complaint
against defendant. Plaintiff also filed a notice of lis pendens
on November 25, 2015, which was recorded at the Monmouth County
Clerk's Office on the same day. Defendant filed her responsive
pleading on January 1, 2016, in which she alleged that she had no
knowledge of the mortgage or note and denied any legal
responsibility for this debt.
Plaintiff moved for summary judgment six months after joinder
of issue. While plaintiff's summary judgment motion was pending,
defendant moved to file a third-party complaint against the Owens
and Stewart Title. Defendant also filed her own motion for summary
judgment. On September 29, 2016, the matter came before the
General Equity Judge for oral argument on the parties' cross-
motions for summary judgment. The judge granted defendant's motion
for summary judgment and dismissed plaintiff's foreclosure action
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as a matter of law. The judge also denied defendant's motion for
leave to file a third-party complaint.
The judge's oral decision addressed the two principal issues
raised by the parties in their summary judgment motions: (1)
whether plaintiff's foreclosure action was barred by the statute
of limitations; and (2) whether plaintiff properly recorded the
mortgage, thereby giving record notice to defendant of its
existence as a lien on the property.
The judge explained the basis for her decision as follows:
[T]he [c]ourt finds that N.J.S.A. 2A:50-56.1
is defined as six years from the maturity date
set forth in the mortgage or the note. In
this case the plaintiff's mortgage had a
maturity date of July [26], 2008. Six years
from that date is July [26], 2014. This action
was not filed until September [8], 2015, and
the statute provides that no suit is to be
filed following the earliest of the 6, 36 or
20-year time periods of sections a, b, or c.
So the [c]ourt finds that this action is
barred by the six-year statute of limitations.
. . . .
[I]f that were not correct, I think we have
to go on to the other issue of whether or not
Gina McLaughlin is a bonafide purchaser. The
plaintiff's mortgage was given by Owen
. . . as opposed to the record title holder
who was Gillikan. So . . . there's an argument
that it was not recorded . . . properly so
therefore it was not found by the searcher and
it was not listed on the title commitment
issued in the purchase of the property. The
plaintiff had an obligation to see the proper
recording of her mortgage and she did not. I
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think we have to consider the title or the
search statutes under N.J.S.A. 46:26(a)-1
. . . and they talk about documents and
recording.
[S]o in this case because the plaintiff's
mortgage was indexed under Owen instead of
Gillikan, it was not indexed in accordance
with the recording statute. N.J.S.A.
46:26(a)-8 sets forth what has to be recorded
when indexed. And the plaintiff's mortgage
was indexed under Owen therefore if it was
indexed under Owen the plaintiff caused the
lien to be absent from the chain of title and
therefore the defendant was entitled to rely
on public records . . . So here the conveyance
by Owen is an interest but it has no effect
against McLaughlin because there was no
evidence that there was a mortgage.
The judge thereafter denied plaintiff's motion for
reconsideration and discharged the mortgage and lis pendens.
Plaintiff now appeals the orders granting defendant's motion for
summary judgment, denying her motion for reconsideration, and
discharging the mortgage and lis pendens.
II
This court reviews the grant of summary judgment de novo,
without affording any deference to the motion judge's legal
conclusions. Nicholas v. Mynster, 213 N.J. 463, 478 (2013). We
use the same standards relied on by the motion judge. Globe Motor
Co. v. Igdalev, 225 N.J. 469, 479 (2016). Those standards are
codified in Rule 4:46-2(c) and we need not restate them here. We
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are satisfied there are no issues of material fact in dispute and
the matter is ripe for final adjudication as a matter of law.
The Legislature enacted N.J.S.A. 2A:50-56.1, our current
statute of limitations relative to residential mortgage
foreclosures, effective August 6, 2009. It provides:
An action to foreclose a residential mortgage
shall not be commenced following the earliest
of:
(a) Six years from the date fixed for the
making of the last payment or the maturity
date set forth in the mortgage or the note,
bond, or other obligation secured by the
mortgage, whether the date is itself set forth
or may be calculated from information
contained in the mortgage or note, bond, or
other obligation, except that if the date
fixed for the making of the last payment or
the maturity date has been extended by a
written instrument, the action to foreclose
shall not be commenced after six years from
the extended date under the terms of the
written instrument;
(b) Thirty-six years from the date of
recording of the mortgage, or, if the mortgage
is not recorded, 36 years from the date of
execution, so long as the mortgage itself does
not provide for a period of repayment in
excess of 30 years; or
(c) Twenty years from the date on which the
debtor defaulted, which default has not been
cured, as to any of the obligations or
covenants contained in the mortgage or in the
note, bond, or other obligation secured by the
mortgage, except that if the date to perform
any of the obligations or covenants has been
extended by a written instrument or payment
on account has been made, the action to
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foreclose shall not be commenced after 20
years from the date on which the default or
payment on account thereof occurred under the
terms of the written instrument.
[N.J.S.A. 2A:50-56.1.]
Distilled to its essence, a foreclosure action must be commenced
by the earliest of: (1) six years from the date of maturity; (2)
thirty-six years from the date of recording or execution; or (3)
twenty years from the date of default by the debtor. Ibid.Prior to the enactment of N.J.S.A. 2A:50-56.1, there was no
statutorily defined period of limitation for bringing a
residential foreclosure action. N.J.S.A. 2A:50-56.1 supplemented
the Fair Foreclosure Act, N.J.S.A. 2A:50-53 to -73, by codifying
a statute of limitations for residential foreclosure actions.
Before N.J.S.A. 2A:50-56.1, case law established a twenty-year
time limit, relying on the statutory time limit set forth for
adverse possession actions. See Mahler, 336 N.J. Super. at 108.
Based on this, plaintiff argues she had twenty years from the time
of default to institute a foreclosure action.
Plaintiff argues the sponsor statement of N.J.S.A. 2A:50-56.1
supports her legal position. The statement provides:
The bill, in part, codifies the holding in
[Mahler, 336 N.J. Super. at 108], which
applied a 20-year statute of limitations to a
residential mortgage foreclosure action based
on a default due to nonpayment. In its
decision, the court noted that since there is
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currently no statute of limitations expressly
applicable to mortgage foreclosures in these
situations, courts have resorted to drawing
analogies to adverse possession statutes which
bar rights of entry onto land after 20 years.
This bill would resolve the uncertainties
surrounding this area of law by providing a
specific statute of limitations of 20 years
from the date of default by the debtor.
Our Supreme Court recently reaffirmed the following bedrock
principles of statutory construction:
[T]he starting point of all statutory
interpretation must be the language used in
the enactment. We construe the words of a
statute in context with related provisions so
as to give sense to the legislation as a whole.
If the plain language leads to a clear and
unambiguous result, then our interpretative
process is over. We rely on extrinsic
evidence of legislative intent only when the
statute is ambiguous, the plain language leads
to a result inconsistent with any legitimate
public policy objective, or it is at odds with
a general statutory scheme.
[Spade v. Select Comfort Corp., 232 N.J. 504,
515 (2018) (internal citations omitted).]
Here, the language and meaning of N.J.S.A. 2A:50-56.1 are
plain, and therefore this court's role is to enforce it according
to its terms. We discern no legal basis to turn to extrinsic
evidence. N.J.S.A. 2A:50-56.1(a) imposes a six-year statute of
limitations on all residential foreclosure actions if six years
from the date fixed for the making of the last payment or the
maturity date set forth in the mortgage is the earliest of the
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three possible dates in the statute. Under this mortgage, the
Owens were required to pay $507.92 per month until July 26, 2008,
at which time all sums due were to be paid in full. The Owens
defaulted by failing to make the payment due on May 26, 2008, and
by failing to pay all sums due under the note by July 26, 2008.
Therefore, July 26, 2008 was the maturity date because all sums
were required to be paid in full by that date.
In accordance with N.J.S.A. 2A:50-56.1, there were three
possible deadlines for the filing of a foreclosure action, and the
statute requires filing by the earliest date. The maturity date
of the mortgage was July 26, 2008, and six years from that date
was July 26, 2014. The mortgage was recorded on September 21,
2007, nearly a year before the effective date of N.J.S.A. 2A:50-
56.1.
Although the six-year statute of limitations language is
clear, the issue here is whether the Legislature intended that it
should be applied retroactively to plaintiff's complaint under
these circumstances. Applying settled principles of statutory
construction related to this retroactivity issue, we are satisfied
that the Legislature did not intend a retroactive application.
New Jersey courts have stated that statutes generally should
be given prospective application. Gibbons v. Gibbons, 86 N.J.
515, 521 (1981). A two-part test is used to determine whether a
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statute may be applied retroactively. In re D.C., 146 N.J. 31,
50 (1996). Courts look to (1) "whether the Legislature intended
to give the statute retroactive application" and (2) "whether
retroactive application of that statute will result in either an
unconstitutional interference with 'vested rights' or a 'manifest
injustice.'" In re D.C., 146 N.J. at 50 (quoting Phillips v.
Curiale, 128 N.J. 608, 617 (1992)). The Supreme Court in In re
D.C. specified the circumstances that would warrant retroactive
application:
(1) where the Legislature has declared such
an intent, either explicitly or implicitly;
(2) where the statute is curative; and (3)
where the expectations of the parties warrant
retroactive application. However, even if a
statute is found to apply retroactively based
on those factors, under the second prong of
the basic test, retroactive application must
not "result in 'manifest injustice' to a part
adversely affected by such application."
[In re D.C., 146 N.J. at 50-51 (internal
citations omitted)].
"The Legislature's expression of intent to apply a statute
retroactively 'may be either express, that is, stated in the
language of the statute or in the pertinent legislative history,
or implied, that is, retroactive application may be necessary to
make the statute workable or to give it the most sensible
interpretation[.]'" Johnson v. Roselle EZ Quick, LLC, 226 N.J.
370, 388 (2016) (alteration in original) (citing Gibbons, 86 N.J.
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at 522). The courts may infer a prospective intent when the
Legislature is silent on an issue because of the "knowledge that
courts generally will enforce newly enacted substantive statutes
prospectively," absent a clear expression of contrary intent from
the Legislature. Ibid. (citing Maeker v. Ross, 219 N.J. 565, 578
(2014)). Without a clear expression of contrary intent, a statute
that relates to substantive rights and changes settled law will
be applied prospectively. Ibid. (citing Phillips, 128 N.J. at
617).
A statute can be considered curative when it "amends a
previous law which is unclear or which does not effectuate the
actual intent of the Legislature in adopting the original act."
In re D.C., 146 N.J. at 51 (quoting Schiavo v. John F. Kennedy
Hosp., 258 N.J. Super. 380, 385 (App. Div. 1992)). A curative
statute will "remedy a perceived imperfection in or misapplication
of a statute" and helps explain or clarify the existing law. Ibid.It "may clarify, but may not change, the meaning of existing law."
Johnson, 226 N.J. at 388 (citing Schiavo, 258 N.J. Super. at 386-
87). Finally, courts consider the parties' reasonable
expectations as to the law. Id. at 389 (citing James v. N.J.
Mfrs. Ins. Co., 216 N.J. 552, 573 (2014)).
The main reason N.J.S.A. 2A:50-56.1 cannot be applied
retroactively is that it is not curative. An amendment to a
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statute is curative when it corrects or cures a judicial
misinterpretation of an existing statute. Olkusz v. Brown, 401
N.J. Super. 496, 503 (App. Div. 2008). It "can be given
retroactive effect if it is designed merely to carry out or explain
the intent of the original statute." Ibid. (quoting Kendall v.
Snedeker, 219 N.J. Super. 283, 287 (App. Div. 1987)). Here,
N.J.S.A. 2A:50-56.1 "does not clarify or expand upon a preexisting
statutory provision;" the statute of limitations in residential
foreclosure actions was previously established by case law, not
any statutory provision. Id. at 503. Therefore, N.J.S.A. 2A:50-
56.1 did not cure a misinterpretation of an existing statute or
carry out the intent of a previous statute. Instead, it
established a statutory provision for statutes of limitations in
foreclosure actions that must be applied prospectively.
Here, the General Equity Judge erred in applying N.J.S.A.
2A:50-56.1 retroactively. The statute does not explicitly state
it applies retroactively and there is no extrinsic evidence the
Legislature implicitly intended retroactive application. The
statute does not clarify an existing statute or cure a judicial
misinterpretation of an existing statute. Therefore, plaintiff's
foreclosure action is subject to a twenty-year period of
limitations. Plaintiff's foreclosure action is not barred by
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N.J.S.A. 2A:50-56.1. We therefore do not need to address
plaintiff's remaining arguments.
Reversed and remanded. We do not retain jurisdiction.
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