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Panetta v. Equity One

May 1, 2007

JOSEPH PANETTA, PLAINTIFF-APPELLANT,
v.
EQUITY ONE, INC., DEFENDANT-RESPONDENT.
ANNE COVEY, PLAINTIFF-APPELLANT,
v.
EQUITY ONE, INC., DEFENDANT-RESPONDENT, AND JOSEPH D. CORVAIA, HOWARD W. SMITH AND JOHN DOE(S), DEFENDANTS.



On certification to the Superior Court, Appellate Division, whose opinion is reported at 378 N.J. Super. 298 (2005).

SYLLABUS BY THE COURT

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

In this appeal, the Court must determine whether a conveyance of real property that makes no mention of an abutting riparian grant can be construed under N.J.S.A. 46:3-16 to include that grant as an appurtenance.

Several generations of the Francis family owned property located at 633 Point Avenue, Brick Township, which consisted of an upland lot designated as Block 934, Lot 23.01 and a riparian grant separately designated as Block 934, Lot 23.03 on the municipal tax map. The riparian grant was created in 1928, and was recorded in the Ocean County Clerk's Office. As of 1992, the property was owned by Rowina Schoener Francis and her son George Francis. On April 6, 1992, they deeded the property to themselves and to George's wife Carolyn Francis. That deed specifically included and described the upland lot and the riparian grant as tract one and tract two, respectively.

In 1995, George applied for a loan from Equity One, Inc., using the property as security. During the application process, Rowina, George and Carolyn deeded their interest in the upland property to George and Carolyn. That deed did not mention the adjacent riparian grant, but only described the property as Lot 23.01, Block 934 on the tax map and also contained a metes and bounds description of only the upland lot.

Equity One agreed to lend George $220,000. As security for the loan, George and Carolyn executed a mortgage on property that was described exactly as it had been in the 1995 deed -- as Lot 23.01, Block 934 and also as 633 Point Avenue. Although the mortgage documents provided that all improvements, easements, appurtenances, and fixtures were included, no mention of the riparian grant (Lot 23.03) was contained therein.

George thereafter defaulted on the loan, and Equity One foreclosed on the mortgage. A sheriff's sale occurred on June 24, 1997. The sheriff's deed contained the same description of the encumbered property as the 1995 deed. Equity One was the successful bidder and thus acquired title to the mortgaged property. Subsequently, Equity One received three separate offers to purchase the property. On July 25, 1997, Equity One rejected all prior offers and initiated a closed bidding process limited to the three prior bidders. Joseph Panetta submitted a bid of $255,000 with no other conditions or terms. Dennis and Dorothy McKenna submitted a bid of $287,000 and described the property as including both the upland lot and the riparian grant. Anne Covey's bid was for $280,000 and included a statement that the bid was for the property, with the riparian grant incorporated therein. While Covey was informed that her bid was the highest, the following day the attorney for Equity One, believing a mistake had been made, advised all parties that Equity One would reopen the bidding process on an open competitive basis.

The three bidders filed separate complaints, which were consolidated. The trial judge concluded that Panetta had submitted the only conforming bid and ordered specific performance in favor of Panetta. Covey appealed. In an unpublished opinion, the Appellate Division remanded the case to the trial judge for further findings. The trial judge determined that George Francis intentionally excluded the riparian grant in securing the mortgage and that Equity One was unaware of the grant. The judge further held that nothing requires that a riparian grant follow the upland property as a matter of law. Therefore, he again awarded specific performance to Panetta. Covey appealed.

In a published opinion, the Appellate Division reversed the judgment of specific performance in favor of Panetta. Panetta v. Equity One, 378 N.J. Super. 298 (App. Div. 2005). The panel held that the riparian grant was included in the 1995 conveyance. Panetta and Covey then each filed a petition for certification. This Court granted both petitions.

HELD: A riparian grant is a conveyance in fee simple of real property. As such, without specific mention in the deed or other evidence that the parties intended its inclusion, a riparian grant will not pass as appurtenant to another distinct parcel.

1. At the heart of this case is the 1995 deed. Covey argues that the deed transferred the riparian grant as a matter of law and that, when George and Carolyn secured the mortgage, the riparian grant was therefore also included. (pp. 13-14)

2. The Appellate Division broadly interpreted N.J.S.A. 46:3-16 to sweep in all property interests contained within or deemed appended to a parcel of real property. In particular, the panel found that the riparian grant was appurtenant to the upland lot under N.J.S.A. 46:3-16 and that it passed with the deed to the upland lot because that deed did not explicitly exclude it. (p. 14)

3. The Appellate Division failed to distinguish between a riparian right and a riparian grant, which are not identical and are not similarly governed by N.J.S.A. 46:3-16. This case centers on a riparian grant of real property identified on the tax map as distinct from the upland lot. That separate designation, which the Appellate Division viewed as inconsequential, is in fact critical. (pp. 14-15)

4. A riparian right is a license or privilege to access and make reasonable use of water. Riparian lands are lands lying along the banks of a stream or water body. A riparian grant is the method by which the State conveys riparian lands to its citizens. A riparian grant is not limited to an upland owner but may, after being offered by the State to the upland owner, be granted to persons who are unconnected to the upland property. A riparian grant is no different from any other conveyance of land. (pp. 15-18)

5. Covey argues that deed language shows a riparian grant is not like other conveyances because, if separated from the uplands, it reverts to the State. Covey misapprehends the import of the language. Such clauses are placed in deeds in the event that the initial claim of upland ownership turns out to be false. The requirement of upland ownership only inheres in the initial transaction with the State. A riparian grant is the conveyance of real property divided from the uplands by a fixed boundary, no different from any other conveyance of land. (pp. 18-20)

6. A riparian right not expressly mentioned in a deed can be appurtenant, but a riparian grant cannot. A contrary conclusion would allow a party to claim an ownership interest in a stranger's riparian lands as "appurtenant" to his own and would place in jeopardy the stability of titles to real property throughout the State. The trial judge specifically found that the parties did not intend the 1995 deed or subsequent mortgage to include the riparian grant, and no party challenged that finding as a basis for certification. (pp. 20-23)

7. The law governing mortgages leads to the same conclusion. Generally, if property is not expressly included in the instrument's description, it will not be covered by the mortgage. Here the mortgage did not reference the riparian grant either expressly or obliquely. (pp. 23-25)

8. George and Carolyn received only the upland property in the 1995 deed, which secured the Equity One mortgage. Equity One only foreclosed on the upland lot in the sheriff's sale. Thus, Panetta, who bid on the uplands and did not attempt to include the riparian grant, was the only responsive bidder at the without-reserve auction. He has an enforceable contract with Equity One and is entitled to specific performance. (p. 25)

The judgment of the Appellate Division is REVERSED and the trial judge's order of specific performance to Panetta is REINSTATED.

CHIEF JUSTICE ZAZZALI and JUSTICES LaVECCHIA, ALBIN, WALLACE, RIVERA-SOTO and HOENS join in JUSTICE LONG's opinion.

The opinion of the court was delivered by: Justice Long

Argued January 3, 2007

The primary issue in this appeal is whether a conveyance of real property that makes no mention of an abutting riparian grant can be construed under N.J.S.A. 46:3-16 to include that grant as an appurtenance. Unlike a riparian right, which is a license or privilege, a riparian grant is a conveyance in fee simple of real property. As such, without specific mention in the deed or other evidence that the parties intended its inclusion, a riparian grant will not pass as appurtenant to another distinct parcel.

I.

Beginning in 1943, several generations of the Francis family owned the property located at 633 Point Avenue, Brick Township, which consisted of an upland lot designated as Block 934, Lot 23.01 and a riparian grant separately designated as Block 934, Lot 23.03 on the municipal tax map. The riparian grant was created in 1928 and was recorded in Deed Book 781, page 481, in the Ocean County Clerk's Office.

As of 1992, the property was owned by Rowina Schoener Francis and her son George Francis. On April 6th of that year, Rowina and George deeded the property to themselves and to George's wife Carolyn Francis. That deed specifically included and described the upland lot and the riparian grant as tract one and tract two, respectively.

Several years later, in 1995, George was operating a business that was struggling financially. As a result, he applied for a loan from Equity One, Inc. (Equity One), using the property as security. During the application process, George, Carolyn, and Rowina deeded their interest in the upland property to George and Carolyn. That deed, dated March 22, 1995, did not mention the adjacent riparian grant (Lot 23.03) but only described the property as Lot 23.01, Block 934 on the tax map and also contained a metes and bounds description of only the upland lot as provided by the title company.

On March 23, 1995, Equity One agreed to lend George $220,000. As security for the loan, George and Carolyn executed a mortgage in favor of Equity One on property that was described exactly as it had been in the 1995 deed --- as Lot 23.01, Block 934 on the tax map and also as 633 Point Avenue. Although the mortgage documents included the language "TOGETHER WITH all the improvements now or hereafter erected on the property, and all easements, appurtenances, and fixtures now or hereafter a part of the property," no mention of the riparian grant (Lot 23.03) was contained therein.

George thereafter defaulted on the loan. Equity One foreclosed on the mortgage, and a sheriff's sale occurred on June 24, 1997. The sheriff's deed contained the same description of the encumbered property as the 1995 deed, including a metes and bounds description of the upland lot only. Equity One was the successful bidder and thus acquired title to the mortgaged property.

Subsequently, Equity One received separate offers to purchase the property from Joseph Panetta, Dennis and Dorothy McKenna, and Anne Covey. Panetta offered to buy the property for $220,000 and Equity One made a counteroffer of $235,000. Panetta agreed to the increased purchase price, and on July 16, 1997, the attorney for Equity One prepared a contract to that effect. Panetta signed the contract and ...


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