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Fort Lee Savings & Loan Association v. Libutti

Decided: June 30, 1969.

FORT LEE SAVINGS & LOAN ASSOCIATION, A NEW JERSEY CORPORATION, PLAINTIFF,
v.
JOSEPH R. LIBUTTI, A/K/A JOSEPH R. LIBUTTI, JR. AND JOANNE LIBUTTI, A/K/A JOAN LIBUTTI, HIS WIFE, DEFENDANTS, AND MITCHELL, HUTCHINS & CO., INC., A DELAWARE CORPORATION, DEFENDANT-APPELLANT, AND JOSEPH LIBUTTI AND EDITH LIBUTTI, HIS WIFE, JOSEPH DESIERVO AND VIOLA DESIERVO, HIS WIFE, PEOPLES TRUST CO. OF BERGEN COUNTY, A CORPORATION OF NEW JERSEY, HORIZON HOUSE MANAGEMENT CORP., A NEW JERSEY CORPORATION, AND ALLEN CARPET SHOPS, INCORPORATED, A NEW JERSEY CORPORATION, DEFENDANTS-RESPONDENTS



Goldmann, Kolovsky and Carton. Carton, J.A.D. (dissenting).

Per Curiam

[106 NJSuper Page 212] On December 3, 1964 defendants Joseph R. LiButti and Joanne LiButti, husband and wife, executed a purchase money bond and mortgage to secure a loan of

$42,000 at 6%. They defaulted in installment payments and, following a foreclosure judgment entered July 17, 1967, the property was ordered sold. The sale resulted in a surplus of $18,440.12, which was deposited with the court.

The LiButtis were tenants by the entirety of the property in question. Defendant Mitchell, Hutchins & Co., Inc., had recovered a judgment on April 27, 1964 in the amount of $5,570.49 and costs against Joseph LiButti -- this prior to the execution of the bond and mortgage mentioned. Mitchell, Hutchins applied to the court for payment of its judgment out of the surplus. That application was eventually denied on the basis of Servis v. Dorn, 76 N.J. Eq. 241 (Ch. 1909), and the decision of this court in Dorf v. Tuscarora Pipe Line Co., Ltd., 48 N.J. Super. 26 (1957) (dictum, at page 32).

In Servis Vice-Chancellor (later Chancellor) Walker held (76 N.J. Eq., at page 243) that surplus money arising from a foreclosure sale of real property held by the entirety "stands in the place of the land itself in respect to liens thereon or vested rights therein." The holding of that case has withstood the test of time. See Morris v. Glaser, 106 N.J. Eq. 585, 592 (Ch. 1930), affirmed o.b. 110 N.J. Eq. 661 (E. & A. 1932); Vineland S. & L. Ass'n v. Felmey, 12 N.J. Super. 384, 392 (Ch. Div. 1951); Danes v. Smith, 30 N.J. Super. 292, 301-302 (App. Div. 1954). See also, 4 Pomeroy, Equity Jurisprudence (5 th ed. 1941), § 1167, p. 495; 7 N.J. Practice (Clapp, Wills and Administration) (3 d ed. 1962), § 1781, p. 521, and Annotation, "Estate by entirety in personal property," 64 A.L.R. 2 d 8, 60 (1959).

We agree with the Chancery Division judge that Mitchell, Hutchins is not presently entitled to satisfaction of its judgment out of the principal of the surplus monies. The principal will be held under the control of the court to await severance of the estate by the death of Joseph or Joanne LiButti, "when it will or will not become available * * * accordingly as the judgment debtor [Joseph] survives

or dies before the other tenant by entirety [Joanne]." Servis v. Dorn, above, 76 N.J. Eq., at page 245.

Affirmed.

CARTON, J.A.D. (dissenting). For an indefinite period, possibly stretching into the distant future, the challenged order removes from the reach of the judgment creditor the husband's share of that fund which in justice ought to be applied against his valid indebtedness. Inasmuch as the ultimate ownership of the proceeds of sale is made to depend upon the hazard of survivorship inherent in tenancies by the entirety, that order compounds the injustice by making any expectation of recovery highly fanciful. It establishes an exception to the salutary rule that tenancies by the entirety may not exist in personal property and by means of a fiction extends in new form a type of tenancy whose values has been widely questioned even so far as it applies to real property. Furthermore, it imposes upon the court system an unwarranted burden of administering the funds and supervising their investment until such time as one of the spouses dies.*fn1

At the time of the foreclosure of the mortgage resulting in the $18,000 "surplus," the LiButti property was encumbered by other mortgages totaling $48,000 and by four other judgment liens in the amount of $8,000. The existence of

this imposing lien indebtedness against the property eliminated for all practical purposes any reversionary interest either the husband or wife may have had in that surplus. These circumstances underscore the inherent injustice and the utter unreality of the entry of an order which consigns the funds to the legal and economic limbo of "await(ing) ...


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