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Fravega v. Security Savings and Loan Association

Decided: October 14, 1983.

ARTHUR H. FRAVEGA AND MARY S. FRAVEGA AND JAMES L. BOURGEOIS AND EILEEN BOURGEOIS, PLAINTIFFS,
v.
SECURITY SAVINGS AND LOAN ASSOCIATION, A SAVINGS AND LOAN ASSOCIATION DOING BUSINESS IN THE STATE OF NEW JERSEY, AND MULTI-SERVICE CORPORATION, ITS SUBSIDIARY, A CORPORATION OF THE STATE OF NEW JERSEY; AND RONALD SEAGRAVES; JOHN KELLY AND BART SPEZIALI, INDIVIDUALLY AND IN THEIR CAPACITIES AS OFFICERS AND EMPLOYEES OF MULTI-SERVICE CORPORATION AND/OR SECURITY SAVINGS AND LOAN ASSOCIATION, DEFENDANTS



Gibson, J.s.c.

Gibson

This action requires an interpretation of the recent amendment to the lis pendens statute, N.J.S.A. 2A:15-7. Plaintiffs' suit seeks to set aside certain conveyances of real estate which they claim defendants procured by fraud and on terms which render them unconscionable. Notices of lis pendens were filed concurrently with the action and defendants now move to have them discharged. Raised by this motion are questions of procedure and substance which do not appear to have been resolved by any reported decision.*fn1

N.J.S.A. 2A:15-7 was amended on December 13, 1982 and became effective 60 days thereafter. As indicated by the legislative history it was passed in response to a concern over the lack of procedural safeguards in the previous statute as well as its possible constitutional deficiencies. See Chrysler Corp. v. Fedders Corp., 519 F. Supp. 1252 (D.N.J.1981), rev'd 670 F.2d 1316 (3 Cir.1982); United S. & L. Ass'n. v. Scruggs, 181 N.J. Super. 52, 58-59 (Ch.Div.1981); Senate Judiciary Committee Statement

to Substitute for Senate Bill 918 (1982).*fn2 Under the amendment, the obligations and remedies which attach upon the filing of a notice of lis pendens vary depending on the nature of the claim. For example, if plaintiff's claim arises out of a written instrument which appears of record or one which was executed by the defendant and identifies the real estate, there are no procedural changes and anyone seeking a discharge is left to the same remedies as had previously existed; that is, awaiting a decision on the merits or moving for a determination that the action is one for damages only.*fn3 See Polk v. Schwartz, 166 N.J. Super. 292, 298 (App.Div.1979). In all other cases, plaintiffs are now required to serve copies of the notice of lis pendens and complaint upon defendant within three days of filing, following which any party affected may move to discharge. In the event of such an application, the determination of the court will depend on "whether there is a probability that final judgment will be entered in favor of the plaintiff sufficient to justify the filing or the continuation of the notice of lis pendens." N.J.S.A. 2A:15-7(b). It is plaintiff's burden to establish such probability. Ibid. It is this latter section of the statute which forms the basis of defendants' application here.

The initial questions raised by this motion are procedural. The first involves the nature of the hearing and whether affidavits or live testimony are required; the second is whether the court is required to weigh the competing proofs or accept the plaintiffs' proofs as true, such as in the case of a motion on the pleadings. R. 4:6-5; R. 4:46. Although the statute does not speak directly to these issues, a recent rule amendment makes it clear that such a motion is to be determined on the pleadings,

affidavits and "testimony taken by leave of court. . . ." R. 4:63A (effective Sept. 12, 1983); see also R. 1:6-6. As to the framework within which the proofs are to be examined, both the statute and the court rule appear to contemplate an evaluation of the proofs as opposed to an acceptance of pleadings as true. By couching the standard in terms of probabilities, N.J.S.A. 2A:15-7(b), and allowing cross-examination in those instances where testimony is permitted, R. 1:6-6, it seems clear that the court must engage in a weighing process regarding the persuasiveness of the proofs presented. The fact that the statute speaks in terms of burden of proof is further support for such a conclusion.

On a substantive level, the framework within which the proofs are to be evaluated has changed and, as indicated, the statute now requires that plaintiff show that there is a "probability that final judgment will be entered in favor of plaintiff sufficient to justify the filing or continuation of the notice of lis pendens." N.J.S.A. 2A:15-7(b). Although there are no reported cases which have yet interpreted this language, the legislative history and the prior case law make it clear that the purpose of the statute was to prevent the unfair use of lis pendens which creates a hardship on the owners of real estate where the alleged interest in the property is uncertain or problematical. See BJI Corp. v. Larry W. Corp., 183 N.J. Super. 310 (Ch.Div.1982); Senate Judiciary Committee Statement, supra. As was pointed out in describing the impact of the former statute, the very filing of a notice of lis pendens "destroys the ability of a property holder to convey marketable title if the litigant has any possibility of success." Emphasis supplied. Chrysler Corp. v. Fedders Corp., supra at 1260. Clearly then, by couching the burden in terms of "probability" rather than possibility the Legislature intended to elevate the standard by which plaintiffs' proofs would be measured.

The word "probability" has been defined as "the quality or state of being probable". Webster's Third New International [192 NJSuper Page 219] Dictionary (1971) 1806. "Probability" may also be used in the statistical sense; that is, as a way of expressing the relative frequency of an event. Ibid; see also Random House Dictionary of the English Language (Unab. ed. 1967) 1146. The word "probable" is defined as "that [which] can reasonably and fairly convincingly be accepted as true, factual or possible without being undeniably so." Ibid. The utilization of the word "probability" by the drafters of the statute, while not compelling, supports the view that what was intended was that the court uphold the filing of the notice of lis pendens in those situations where the proofs establish that it is probable or more likely than not that judgment will be entered for the plaintiff. On the other hand, it may be argued, as do plaintiffs, that the "more probable than not" standard is no different than a "preponderance of the evidence" and that standard was considered and rejected by the drafters of this statute.*fn4 It is true that the language in the original bill was couched in terms of "preponderance of the evidence" as opposed to "a probability that final judgment will be entered" etc. Contrary to the position plaintiffs urge, however, that history cannot be read to support a requirement of only a "minimal" showing by plaintiff in this setting. To read the statute in such a fashion would strip it of all substantive change. Cf. Polk v. Schwartz, supra. More logically, the explanation for the change lies in the coupling of the word "probability" with the phrase "sufficient to justify the filing or continuation of the notice. . . ." The Legislature appears to have chosen a standard which, although couched in terms of probability instead of possibility, requires the court to weigh the strengths of plaintiffs' case against the detriment imposed on defendant by reason of the filing of the notice of lis pendens. Such a weighing does not necessarily mean that plaintiff is relieved of showing that success on the merits is more probable than not; rather it would depend on the circumstances

of each particular suit and would obviously vary from case to case.*fn5

Although the above approach may sometimes pose difficulties in application, it appears to be the fairest reading of the statute. Any reading of the amendment which neglects to take into account the impact of the phrase "sufficient to justify the filing . . ." must assume that language to be superfluous. The normal rules of statutory construction require the opposite conclusion. Fiscella v. Nulton, 22 N.J. Super. 367, 372 (App.Div.1952). Nor is this approach without precedent. A similar ...


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