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Lieberman v. Arzee Mid-State Supply Corp.

November 14, 1997


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

Approved for Publication November 19, 1997.

Before Judges Dreier, P. G. Levy and Wecker. The opinion of the court was delivered by Wecker, J.A.D.

The opinion of the court was delivered by: Wecker

The opinion of the court was delivered by


Defendant Arzee Mid-State Supply Company appeals from a final judgment in favor of plaintiffs Mark Lieberman and Edward Jones, restraining Arzee from executing upon certain real property now owned by plaintiffs. Arzee claims the right to execute on the property to enforce a money judgment against John Wahl, deceased, who was a prior owner of plaintiffs' property. We conclude that Arzee's judgment attached to the property because the judgment was docketed before recordation of a deed conveying the judgment debtor's property to plaintiffs' grantor. We further conclude that neither Arzee's unsuccessful suit to void an allegedly fraudulent conveyance from John Wahl to William Wahl, nor the subsequent conveyance from William Wahl to plaintiffs, cut off Arzee's lien on the property. We therefore reverse.

Arzee was a supplier to Premium Siding and Windows, Inc., a company owned by John Wahl. On July 23, 1993, Arzee obtained a default judgment against Premium and John Wahl. That judgment was docketed on August 5, 1993, thereby creating a lien on real property owned by Wahl, including the Maple Shade property where Premium conducted business. On July 16, 1993, one week before Arzee obtained the judgment against him, John Wahl conveyed the Maple Shade property by deed to his brother, William Wahl. The deed was not recorded until August 9, 1993, four days after Arzee's judgment was docketed.

One year after the conveyance, and after John Wahl's death, Arzee learned that William Wahl was about to transfer the Maple Shade property to Lieberman and Jones. Arzee then instituted suit in Burlington County against William Wahl and the Estate of John Wahl, seeking to void the transfer to William as a fraudulent conveyance and to enjoin William's conveyance to plaintiffs herein. Arzee joined William Wahl's title insuror, Fidelity National Title Insurance Company of Pennsylvania, in that suit, claiming third party beneficiary status. The Chancery Division Judge in Burlington County denied Arzee's request to restrain William Wahl's pending conveyance to Lieberman and Jones, on condition that the seller place $30,000 in escrow, an amount sufficient to satisfy Arzee's judgment in the event Arzee proved the fraudulent conveyance. Lieberman and Jones thereafter closed on the purchase from William Wahl. The Chancery Judge granted summary judgment dismissing Arzee's claim against Fidelity. The final judgment dismissed Arzee's complaint, included a determination that the conveyance from John to William Wahl had not been fraudulent, *fn2 and released the escrowed funds to William. Arzee took no appeal.

On May 1, 1996, a post-judgment consent order was entered *fn3 in Arzee's original, Middlesex County Law Division case against John Wahl. The consent order permitted the Sheriff of Burlington County to post a writ of execution on the Maple Shade property. Lieberman and Jones promptly brought this action to vacate the consent order and to restrain Arzee and the sheriff from any action to enforce Arzee's judgment against the Maple Shade property.

The Law Division Judge defined the issues to counsel as follows:

If [the Burlington County Chancery Judge] was in error, the relief was certainly an application to the Appellate Division. But if, in fact, the ultimate result of what he did was to release the only assets and the only funds that you had available to collect on your judgment, doesn't that effectively dispose of the case? And how do I now resurrect it without, in essence, upsetting the case? I am really concerned about the Entire Controversy Doctrine.

In a subsequent letter opinion this Judge explained his reasons for granting summary judgment to Lieberman and Jones, vacating the consent order, and prohibiting enforcement of Arzee's judgment as a lien against the Maple Shade property. The Judge concluded that the order escrowing $30,000 from the proceeds of the sale of the property "was dispositive on the right to levy against the property." Because he inferred that Arzee had had the opportunity to litigate that issue, the Judge concluded that Arzee was collaterally estopped from relitigating, and "furthermore, Arzee is barred from levying on Lieberman and Jones's property by reason of the entire controversy doctrine . . . .[under Cogdell v. Hospital Center of Orange ]."

We first address Arzee's lien in relation to John Wahl and William Wahl, plaintiffs' grantor. In New Brunswick Savings Bank v. Markouski, 123 N.J. 402, 587 A.2d 1265 (1991), the Supreme Court explained the rights of a judgment creditor with respect to real property owned by the judgment debtor.

To establish a lien against a judgment debtor's real property, a creditor need only enter a judgment in the records of the Superior Court; a levy and execution on real property owned by the judgment debtor are not required. . . . The judgment is a binding judicial determination of the rights and duties of the parties to the action and, when recorded on the docket of the Clerk of the Superior Court, functions as notice of the debtor-creditor relationship. See Jones v. Parker, 107 N.J. Super. 235, 240, 258 A.2d 26 (App.Div. 1969) ("The purpose of [the] recording ...

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