Opinion
DOCKET NO. A-0240-14T2
02-02-2016
BANK OF AMERICA, N.A., Plaintiff-Respondent, v. EINHORN CONSTRUCTION COMPANY, LLC, a New Jersey limited liability company, EDWARD EINHORN, as guarantor, CAROL KLEIN, as executrix of the ESTATE OF DAVID CHABIN a/k/a DAVID CHABAN, and PAULINE CHABIN a/k/a PAULINE CHABAN, Defendants.
Ralph Laks, appellant pro se. Wilson, Elser, Moskowitz, Edelman & Dicker LLP, attorneys for respondent (Daniel F. Flores, of counsel and on the brief; Tana Bucca, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges O'Connor and Suter. On appeal from Superior Court of New Jersey, Chancery Division, Atlantic County, Docket No. F-042540-10. Ralph Laks, appellant pro se. Wilson, Elser, Moskowitz, Edelman & Dicker LLP, attorneys for respondent (Daniel F. Flores, of counsel and on the brief; Tana Bucca, on the brief). PER CURIAM
Non-party Ralph Laks appeals from the denial of his motion to vacate a final judgment of foreclosure and to amend the foreclosure complaint to add him as a party defendant. We affirm the decision of the trial court.
In 2006, Laks and Einhorn Construction Company (the LLC) purchased a 13.50 acre property in Buena, Atlantic County that is the subject of this foreclosure action. They purchased this property from David and Pauline Chaban (the Chabans) for $250,000 and executed a $200,000 note and purchase money mortgage in favor of the Chabans, which then were recorded as liens. Edward Einhorn, the managing member of the LLC, individually guaranteed the note to the Chabans. The loan by the Chabans contemplated it would be made "subject and subordinate to a construction or building or permanent loan which may be hereafter placed upon the premises by any bank[.]" Laks and the LLC owned the property as tenants in common. Laks worked as a consultant to the LLC and is Einhorn's brother-in-law.
In 2007, the LLC sought additional financing from Bank of America, N.A. (the Bank) for a twenty-lot subdivision project. To accomplish this, as required by the Bank, Laks transferred the entirety of his interest in the property to the LLC for $1.00 on February 6, 2007. A deed reflecting this transfer was recorded.
The LLC executed a number of documents in connection with the $1.2 million loan and the $2.4 million line of credit extended to the LLC by the Bank. In favor of the Bank, the LLC executed a mortgage, assignment of leases and security agreement. The Bank's mortgage was recorded as a first lien. The LLC also executed a subordination agreement signed by the Chabans and the Bank wherein the Chabans subordinated their mortgage to the Bank's mortgage. Then, Laks, the LLC and the Chabans executed a mortgage modification agreement wherein the Chabans acknowledged they had agreed to subordinate their mortgage to that of the Bank. Laks remained obligated to the Chabans on the subordinated mortgage.
In 2010 when the LLC defaulted under the Bank's mortgage, the Bank filed a foreclosure action. A title search conducted by the Bank showed no lien or ownership interest by Laks. The defendants named in the lawsuit included the LLC, as the record owner and obligor under the mortgage; Einhorn, as guarantor; and the Chabans, as mortgagees. Laks was not included as a party in the lawsuit, although he was aware of it because he had obtained representation and was deposed.
A final judgment of foreclosure was entered in January 2014. That final judgment of foreclosure was appealed and since has been affirmed in an appeal brought by the LLC. Bank of Am., N.A. v. Einhorn Constr. Co., No. A-2925-13 (App. Div. July 30, 2015), certif. denied, 223 N.J. 356 (2015). While the appeal was pending, Laks sought to vacate the foreclosure judgment and to amend the complaint to include himself as a party defendant. He claimed to have an interest in the property both directly and as owner of an adjacent property that includes a sanitary sewer pump station used by the foreclosed property. Laks admitted he had no legal title to the property that is in foreclosure. His motion was denied by Judge Raymond Batten, who concluded that because Laks had no legal or equitable title to the property, he should not be added as a party or permitted to vacate the foreclosure judgment. Additionally, the trial court did not believe there was jurisdiction at that time because of the pending appeal. R. 2:9-1(a).
The issues presented on appeal are as follows:
Point 1. Whether Rule 2:9-1 deprived the trial court of any jurisdiction to render a substantive decision since the final judgment is currently being appealed.
Point 2. Whether Laks holds an interest in subject property.
We affirm Judge Batten's denial of Laks's motion to vacate the foreclosure judgment and to amend the complaint to add Laks as a party. Because these are legal issues, our review is de novo. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).
The trial judge properly found that at the time the matter was pending before him, he did not have jurisdiction because the underlying foreclosure had been appealed by the LLC. When an appeal is taken, "the supervision and control of the proceedings . . . shall be in the appellate court [but] . . . [t]he trial court . . . shall have continuing jurisdiction to enforce judgments and orders pursuant to R. 1:10 and as otherwise provided." R. 2:9-1(a). Laks's motion did not seek enforcement of an order or judgment. Therefore, his requests to vacate the underlying foreclosure judgment and to amend the complaint were beyond the trial court's jurisdiction at that time. Although we could remand this matter to the trial court now that the foreclosure appeal has been decided, we choose not to do so because the trial court also decided the extant legal issues which we would address de novo in any event. Manalapan Realty, L.P., supra, 140 N.J. at 376.
Laks is not a necessary party to the litigation. Laks sold his title and interest in the property when he deeded it to the LLC in 2007. That he remained obligated on the Chabans' mortgage did not give him an interest in the foreclosure of the Bank's notes or mortgage to which he was not a signatory. Not every involvement with a mortgaged property translates into an ability to contest its foreclosure. For example,
[t]he rule has long been settled that the maker of a bond secured by mortgage on property owned by him, and who has conveyed away the property absolutely is not a
necessary party to a foreclosure of the mortgage, though the complainant may join him as a party[.]Even earlier, our courts recognized
[Mut. Sav. Fund Harmonia v. Gunne, 110 N.J.L. 41, 54 (E & A 1933).]
that the mortgagor, having parted with his inter[e]st in the premises, was not a necessary or proper party to the bill. The proceeding is in rem. He cannot with safety be made a party . . . . An account may be taken without him. There is no reason why he should be made a party.This principle is equally relevant today because the mortgagor who has divested his interest in the property has no ability to redeem and thus does not require inclusion. Typically, a
[Vreeland v. Loubat, 2 N.J. Eq. 104, 105 (Ch. 1838).]
mortgagor has the right to satisfy the debt at any time before entry of judgment and thereafter under certain circumstances. This right is referred to as the right to redeem or the right of redemption.Plainly, Laks has no legal or equitable right to assert any ability to redeem the premises during or after foreclosure. He does not own it. He cannot assert fee ownership. He simply was not part of the Bank's notes or mortgage.
The right to redeem is the right of a mortgagor to reassert complete fee simple ownership of his property by paying the complete debt and any other charges assessed under the terms of the mortgage or under statutory provision. The right of redemption evolved as a right of the debtor in equity to prevent the loss of the property at any time before the judgment of foreclosure.
[Borough of Merchantville v. Malik & Son, LLC, 218 N.J. 556, 567 (2014) (citations omitted).]
The foreclosure rules do not assist Laks. Certainly as was done here, the Bank was required to conduct "a title search of the public record for the purpose of identifying any lienholder or other persons and entities with an interest in the property that is subject to foreclosure[.]" R. 4:64-1(a)(1). Then, the foreclosure complaint is to list the "names of all parties in interest whose interest is subordinate or affected by the mortgage foreclosure action. . . ." R. 4:64-1(b)(11). In the foreclosure context, "[t]he purpose of the joinder requirement is to make the foreclosure judgment res judicata as to the amount of the unpaid mortgage debt," and to protect the obligor, especially if he or she has sold the mortgaged property. Cent. Penn Nat'l Bank v. Stonebridge, Ltd., 185 N.J. Super. 289, 305-06 (Ch. Div. 1982) (citing Ledden v. Ehnes, 22 N.J. 501, 508-09 (1956)).
Laks was not a lien holder; the Chabans were and they were included as defendants. Laks did not have an interest affected by the mortgage foreclosure. He already had deeded away the property for which he had obligated himself by mortgage to the Chabans. The foreclosure of that property does not create some new interest for him in the land.
Laks is not entitled to relief under Rule 4:28-1. That rule provides:
A person who is subject to service of process shall be joined as a party to the action if (1) in the person's absence complete relief cannot be accorded among those already parties, or (2) the person claims an interest in the subject of the action and is so situated that the disposition of the action in the person's absence may either (i) as a practical matter impair or impede the person's ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or other inconsistent obligations by reason of the claimed interest.
[R. 4:28-1(a).]
Here, Laks's absence did not prevent complete relief to the Bank in the foreclosure action against the owners or other lien holders. Because he was not obligated on the Bank's mortgage, he could not exercise any right of redemption, Borough of Merchantville, supra, 218 N.J. Super. at 567; Vreeland, supra, 2 N.J. Eq. at 105, or become a defendant in a deficiency action by the Bank. His absence did not leave any of the existing defendants to incur any additional debt or face inconsistent obligations because of his absence.
That Laks owns adjacent property offering sewage service to the foreclosed property does not give him an interest in the litigation. In Lipman v. Shriver, 51 N.J. Super. 356, 362 (Law Div. 1958), the owners of a dominant estate that had an easement to draw water from the servient estate, which was being foreclosed, were not necessary parties to the foreclosure on the servient estate because the easement would not have been cut off by the foreclosure. Here, there is nothing in the agreements signed that addresses the sewer pump station or cuts off any rights or remedies pertaining to its use.
It should also go without saying that if Laks is not a party to the litigation, he has no right to vacate the final judgment or amend these pleadings. Rule 4:9-1, which allows pleadings to be amended under certain circumstances, only applies to "parties" to the litigation. Rule 4:50-1, which allows relief from an order or judgment in certain instances, is limited to a "party or the party's legal representative." As a non-party, Laks cannot obtain relief under these Rules.
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION