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Citicorp Mortgage Co. v. Klauder and Nunno Enterprises Inc.

Decided: November 23, 1992.

CITICORP MORTGAGE CO., INC., A DELAWARE CORPORATION, PLAINTIFF-RESPONDENT,
v.
KLAUDER AND NUNNO ENTERPRISES, INC., A NEW JERSEY CORPORATION, DEFENDANT-APPELLANT



On appeal from the Superior Court of New Jersey, Chancery Division, Cape May County.

Shebell, A.m. Stein, and Conley. The opinion of the court was delivered by Shebell, J.A.D.

Shebell

This is an appeal from the court-ordered discharge of a building contract filed with the Cape May County Clerk. Plaintiff, Citicorp Mortgage Co., Inc., filed a verified complaint and obtained an order to show cause in the Chancery Division, General Equity Part, against defendant Klauder and Nunno Enterprises, Inc. seeking the discharge of a building contract that was recorded against property securing a mortgage held by plaintiff. The chancery Judge entered an order directing the county clerk to discharge the building contract. We affirm.

On September 18, 1987, Hereford Associates, Inc. (Hereford) entered into a written contract with defendant for the construction of twenty-four condominium units in a condominium development called "Aqua Beach Condominiums," on property it owned in Cape May County. On January 14, 1988, the building contract was filed in the Office of the Clerk of Cape May County, indexed as Building Contract # 4766.

On January 31, 1989, Unit B 106 of the Aqua Beach project was sold to Robert Mitchell. Plaintiff provided Mitchell with a loan to purchase the unit. The loan was secured by a mortgage, dated January 31, 1989, on the property. The mortgage and deed were recorded on February 27, 1989. Garden State Title Insurance Agency did not include the recorded building contract in its title report. According to defendant, it was not aware of Mitchell's purchase until December 1990 when plaintiff asked defendant to discharge the building contract.

On May 31, 1989, defendant stopped working on the Aqua Beach project because Hereford failed to make payments as required under the building contract. Hereford filed a bankruptcy petition under Chapter 11 of the United States Bankruptcy

Code in the United States Bankruptcy Court for the District of New Jersey on April 6, 1990.

On March 22, 1990, plaintiff filed lis pendens # 7652 to foreclose on the mortgage secured by Unit B 106. In connection with the foreclosure action, plaintiff filed an action to have building contract # 4766 discharged from the property.

N.J.S.A. 2A:44-71 to -77 provides two methods for securing protection for the payment of labor and materials. Consolidated Precast, Inc. v. Action Builders Co., Inc., 190 N.J. Super. 92, 97, 461 A.2d 1214 (App.Div.), certif. denied, 94 N.J. 595, 468 A.2d 230 (1983). The claimant must satisfy all of the statutory requirements to create a valid mechanic's lien. Apex Roofing Supply Co. v. Howell, 59 N.J. Super. 462, 467, 158 A.2d 49 (App.Div.1960).

Under the first procedure, the claimant files a mechanic's notice of intention before supplying any labor or materials. N.J.S.A. 2A:44-71. A copy of the notice of intention must be served on the record owner of the property within five days of the filing. Id. Additionally, a lien claim must be filed within two years of the filing of the mechanic's notice of intention unless the time to file the lien claim has been extended by filing another notice of intention within that two-year period. Id. Finally, a lien claim and an action to enforce it must be filed within four months after the claimant last supplied labor or materials unless an appropriate extended period exists. N.J.S.A. 2A:44-91, 2A:44-98; see Chesebro-Whitman Co., Inc. v. Edenboro Apts., Inc., 86 N.J. Super. 422, 427, 207 A.2d 186 (App.Div.1965).

The second available procedure permits the filing of a construction contract against the property where the contract has been signed by the record owner. N.J.S.A. 2A:44-75. The statute provides that where labor and materials are supplied

under a written contract, signed by the record owner of the estate or interest in the land which is to be charged with a lien under this article, the building and the land on which it stands shall . . ...


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