On appeal from the Superior Court of New Jersey, Chancery Division, Probate Part, Middlesex County.
Approved for Publication October 21, 1997.
Before Judges Dreier, Keefe and Wecker. The opinion of the court was delivered by Dreier, P.j.a.d.
The opinion of the court was delivered by: Dreier
The opinion of the court was delivered by
Defendant F. Howard Zahn, one of the executors of the Estate of Charles A. Zahn, appeals by leave granted from an interlocutory order directing it to pay all costs associated with the note and mortgage of property which was formerly held in joint tenancy between plaintiff, Nina Fichter, and the decedent. In 1994, Charles A. Zahn ("Zahn") bought a single-family house located in Jamesburg, New Jersey, and took title in his own name. In part payment of the purchase price of the house, Zahn executed a promissory note in his name to NatWest Home Mortgage Corporation for $120,000, secured by a first purchase-money mortgage on the real estate. Thereafter, Zahn entered into a relationship with plaintiff, and they lived together in the house until his death the following year.
In November 1995, upon discovering that he was seriously ill, Zahn conveyed title to the house to plaintiff and himself as joint tenants with a right of survivorship. According to plaintiff, Zahn informed her prior to the transfer that after his death, she was "to become the sole owner of the house, free and clear of any liens or encumbrances."
Zahn died December 27, 1995, leaving a will which named his brother, defendant F. Howard Zahn, and his friend, Philip H. Shore, executors of his estate. Pursuant to the will, Zahn directed his named executors to "pay all of my just debts and funeral expenses as soon as practicable after my death." He then bequeathed his entire estate to his two children, Tasha A. Zahn and Heather N. Zahn. Zahn had not changed his will to name plaintiff as a beneficiary. Zahn's will was admitted to probate on February 14, 1996.
Following his death, NatWest Home Mortgage Corporation notified plaintiff that payments under the mortgage loan were delinquent and foreclosure proceedings would commence if the payments were not satisfied. To prevent foreclosure, plaintiff paid the mortgage on the house and subsequently sought reimbursement from Zahn's estate. When defendant refused, plaintiff filed this action seeking reimbursement for payments made on the mortgage.
Plaintiff claimed she qualified for exoneration from the mortgage and the underlying note, and she was not subject to the nonexoneration provisions of N.J.S.A. 3B:25-1, which provides:
When property subject to a mortgage or security interest descends to an heir or passes to a devisee, the heir or devisee shall not be entitled to have the mortgage or security interest discharged out of any other property of the ancestor or testator, but the property so descending or passing to him shall be primarily liable for the mortgage or secured debt, unless the will of the testator shall expressly or impliedly direct that the mortgage or security interest be otherwise paid.
Plaintiff argued that since she was not an heir or devisee within the definition of N.J.S.A. 3B:25-1, and Zahn's will did not expressly direct her to satisfy the mortgage or security interest underlying the house, she was not responsible for paying such debts from the value of the property or from her own assets. Therefore, she could look to the estate for reimbursement for any payments made on the mortgage.
Defendant filed an answer and counterclaim claiming the applicability of N.J.S.A. 3B:25-1 and that plaintiff is solely and personally responsible for paying the debt as well as her share of the New Jersey transfer inheritance tax and attorney's fees.
The trial court found that the nonexoneration statute applied only to heirs and devisees, and since plaintiff was neither, repayment of the mortgage was not her responsibility. In so holding, the court characterized Zahn's act of conveying title to himself and plaintiff as joint tenants as "a gift of a property to her subject to the payment of the mortgage by Mr. Zahn." Consequently, the court ordered defendant to pay all costs associated with the note and mortgage of the Jamesburg property, and held that plaintiff was entitled to reimbursement from defendant for any payments made on the mortgage debt. We note, however, that the conveyance could just as ...