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Schwartz v. Grunwald

Decided: April 24, 1980.

DAVID SCHWARTZ, PLAINTIFF,
v.
ABRAHAM GRUNWALD AND PHILIP TANNENBAUM, DEFENDANTS



Haines, J.s.c.

Haines

This case involves the interpretation of our lis pendens statutes. Nineteen counties in New Jersey adhere to one interpretation and one to another; one is ambivalent. I have decided that 20 of these counties are wrong. The problem has not been discussed in any prior opinion.

Grunwald sued Schwartz. Schwartz responded by filing an answer and counterclaim in which he alleged an interest in certain real property owned by Grunwald, with reference to which he filed a notice of lis pendens. The notice was entitled in the suit brought by Grunwald and recorded before the counterclaim was filed in the action. Later Grunwald sold the property described in the notice to Tannenbaum, whose title searches did not reveal the notice. It had been indexed by the Clerk of Atlantic County in the name of Schwartz only and not in the name of Grunwald, who held record title. Schwartz brings the present action to set aside the conveyance. Tannenbaum claims that he had no actual notice and moves to dismiss the complaint against him on the ground that the notice of lis pendens of record in the Clerk's office was not constructive notice to him of the suit between Grunwald and Schwartz.

N.J.S.A. 2A:15-6 governs the filing of notices of lis pendens and provides:

In every action, instituted in any court of this state having civil jurisdiction, . . . the object of which is to enforce a lien, other than a mechanic's lien, upon real estate or to affect the title to real estate or a lien or encumbrance thereon, plaintiff or his attorney shall, after the filing of the complaint, file in the office of the county clerk or register of deeds and mortgages, as the case

may be, of the county in which the affected real estate is situate, a written notice of the pendency of the action, which shall set forth the title and the general object thereof, with a description of the affected real estate. No notice of lis pendens shall be filed under this article in an action to recover a judgment for money or damages only. [Emphasis supplied.]

Tannenbaum argues that this statute, as indicated by the underlined words, permits the filing of a notice of lis pendens by a plaintiff only, that it must be filed after the complaint (and only the complaint, not a counterclaim) is filed. This literal reading of the statute is to be rejected when it does not lead to a sensible result. Schierstead v. Brigantine , 29 N.J. 220, 231 (1959) (quoting Judge Learned Hand: "There is no surer way to misread any document than to read it literally.").

At common law, when property was the subject of litigation neither party to the suit could convey the property and adversely affect the rights of the other property. This was the doctrine of lis pendens. Wood v. Price , 79 N.J. Eq. 620 (E. & A.1911). The doctrine is said to have been promulgated by Sir Francis Bacon in 1618, while he was Lord Keeper of the Great Seal. Mabee v. Mabee , 85 N.J. Eq. 353, 357 (Ch.Div.1915). The rule was explained in Haughwout and Pomeroy v. Murphy , 22 N.J. Eq. 531 (E. & A.1871):

A suit in chancery, duly prosecuted in good faith, and followed by a decree, is constructive notice to every person who acquires from a defendant, pendente lite , an interest in the subject matter of the litigation, of the legal and equitable rights of the complainant as charged in the bill and established by the decree.

The effect of a successful litigation in subordinating the title of a purchaser pending a litigation, to the rights of the complainant as established in the suit, is not derived from legislation. It is a doctrine of courts of equity, of ancient origin, and rests not upon the principles of the court with regard to notice, but on the ground that it is necessary to the administration of justice that the decision of the court in a suit should be binding, not only on the litigant parties, but also upon those who acquire title from them during the pendency of the suit. Such a purchaser need not be made a party, and will be bound by the decree which shall be made [at 544-545; citations omitted]

The common law rule applied to plaintiffs and ...


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