On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. F-11468-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Stern and Coburn.
Defendants Mohammad Kazem Mojtahedi ("Mohammad"), Shahin Doukt Mojtahedi ("Shahin") and Sam Mojtahedi ("Sam") appeal from an order of the Chancery Division entered on October 13, 2006, granting defendant Sun Trading LLC's ("Sun Trading") motion for distribution of surplus funds and directing the clerk to pay out the sum of $714,761.81 plus accrued interest to Sun Trading. The judgment was based on a written opinion of Judge Peter E. Doyne filed on the same date as the order.
Plaintiff, World Savings Bank, held the first mortgage on property owned by Mohammad and Shahin Mojtahedi in Saddle River. A second mortgage was subsequently given to Mohammad and Shahin's son, Sam.
On May 19, 1995 Sun Trading obtained a final judgment in an action it commenced against Mohammad and Sam and their respective corporations. Subsequently, a foreclosure action was commenced by World Savings Bank resulting in a final judgment and Sheriff's sale of the Saddle River property. This appeal deals with Sun Trading's endeavor to obtain the surplus funds from the foreclosure sale in the amount of $714,761.81.
On this appeal, appellants contend:
POINT I SUN TRADING HAS NO RIGHTS IN THE SECOND MORTGAGE BECAUSE IT IS EQUITABLY OWNED BY JAFAR[, SAM'S UNCLE]
POINT II JAFAR'S OWNERSHIP OF THE SECOND MORTGAGE IS NOT NEGATED BY NEW JERSEY'S RECORDING STATUTES
A. SUN TRADING HAD ACTUAL NOTICE OF JAFAR'S INTEREST AND THEREFORE LACKS THE RIGHTS OF A JUDGMENT CREDITOR WITHOUT NOTICE
B. SUN TRADING SUFFERED NO INJURY AS A RESULT OF THE UNRECORDED TRUST AND IS NOT ENTITLED TO BENEFIT FROM THE VOIDANCE STATUTE POINT III OUR RULES PROHIBIT THE AWARD OF SURPLUS FUNDS TO SUN TRADING ABSENT JAFAR'S JOINDER TO THE ACTION
In essence, appellants argue that, because the Sheriff's sale provided enough funds to satisfy plaintiff World Savings Bank, the holder of the second mortgage is entitled to the surplus. They reason that, although Sam could not obtain the funds because he is a judgment debtor, the mortgage was beneficially owned by his uncle Jafar, a person against whom no judgment had been entered in favor of Sun Trading, and Sam was only a trustee. According to defendants, "[i]t is fundamental that a judgment creditor may not execute upon property held by a judgment debtor in a representative capacity only[,]" and the failure to record "[t]he trust relationship" does not affect the result.
Appellants contend that Sun Trading cannot collect the surplus funds, because it had actual notice of the trust relationship. Appellants further contend that "even if Sun Trading had lacked notice of the trust relationship, and even if the [v]oidance [s]tatute had some application to this dispute, voidance of the trust would be permissible only if Sun Trading had given up something of value in a mistaken belief as to the actual identity of the second mortgage's owner." Finally, defendants ...