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Home Mark Homes, Inc. v. Huddy


April 7, 2008


On appeal from the Superior Court of New Jersey, Chancery Division, Ocean County, Docket No. C-269-03.

Per curiam.


Argued: January 30, 2008

Before Judges Axelrad, Payne and Messano.

In December 30, 1986, appellant James Huddy purchased three pieces of property located on Tanager Way in Brick Township, referenced as Block 1422, Lot 29, paying $150,000 for the largest parcel and $1 each for the two smaller, odd-shaped adjoining parcels. He obtained the purchase price from his sister, defendant Marianne Lipa, who took the funds from her daughter Joanne's custodial college account, and secured the loan with a mortgage on the property. The description of the mortgage only covered the large parcel, which scrivener's error persevered, but there appears to be no dispute that the parties intended the mortgage to encumber all three parcels. Appellant defaulted on the loan and on May 27, 1994, executed a deed to Lipa mirroring the description in the mortgage, stating both that it was "made in Lieu of Foreclosure" and "given as security under the Mortgage from James A. Huddy and/or his assigns to Marianne Lipa [.] . . ." Lipa recorded the deed on March 18, 1997.

In 1995 Lipa gave appellant written authority to "represent the property" to obtain subdivision approval, and in an August 24, 2001 document, she declared that James was an equitable owner of the property and would be responsible for paying fees in connection with the subdivision approval. The minor subdivision approval was granted on October 3, 2001.

In January 2002, appellant negotiated a contract whereby plaintiff, Home Mark Homes, Inc. (HMH), purchased the subject property from appellant's adult son, Justin, for $450,000. The January 4, 2002 contract provided that Justin was the seller of the property, although title was never in his name, and an addendum to the contract permitted the $60,000 deposit to be released to appellant and Justin, or Justin and his assigns. The closing did not occur as scheduled, on or before March 29, 2002.

On October 7, 2002, appellant and his sister resolved their dispute over the potential rights appellant had in the subject property by negotiating, through counsel, a comprehensive settlement agreement, consisting of a general release, an affidavit of insolvency, and a buy-back agreement. The documents were signed by appellant, his wife, and Justin; and by Lipa, her husband, and two daughters, Joanne and Violet. The settlement was intended to allow appellant to repurchase the property from Lipa, satisfy the principal mortgage debt, and then sell the property to HMH for the agreed upon amount, expressly conditioned on appellant's timely payment. Relying on the affidavit of insolvency signed by the Huddys, the Lipa family forgave the interest owed by appellant on all monies advanced to him, which included the original $150,000 loan, taxes on the property and insurance. The agreement expressly acknowledged appellant's indebtedness to the Lipas, and that the debt was secured by legal title to the property in the name of Marianne and Joanne Lipa. It required Lipa to advance certain funds on behalf of appellant in connection with the subdivision approval. It also required Lipa to convey the property to appellant for reconveyance to HMH in accordance with the agreement between Justin and HMH in return for payment by appellant of the sum of $275,544.58 plus all amounts advanced. In the event the money was not received by December 15, 2002, the agreement would be null and void. Appellant defaulted on the agreement, and it was extended to February 15, 2003, at which time appellant again defaulted.

On August 19, 2003, HMH filed this action against Lipa, Justin, Marianne (individually and as custodian for Joanne), and the Huddys' attorney,*fn1 in part seeking to enforce the contract and compel conveyance of the property. On September 19, 2003, HMH, the Huddys, and the Lipas executed an addendum to the Justin-HMH agreement providing, in part, for the closing to occur on or before December 22, 2003, at which time appellant and his wife would convey the subject property to HMH, and the suit would be dismissed against all parties with prejudice. However, appellant had allowed the minor subdivision approval given on January 8, 2003 to lapse as he did not perfect it within 190 days as required by the Municipal Land Use Act. N.J.S.A. 40:55D-54. For that or other reasons, the conveyance to HMH did not occur. Appellant received a one-year extension of the subdivision approvals on February 25, 2004.

On February 20, 2004, and March 5, 2004, the trial court heard argument on HMH's motion to enforce the settlement agreement and obtain title to the property, and appellant's cross-motion for summary judgment. The court postponed determination of these issues for further factfinding. On June 30, 2004, Lipa executed a deed conveying her interest in the large tract to HMH for the sum of $297,300, purportedly to recoup the money she had loaned to appellant. In September of 2004, appellant filed an amended pleading, asserting as a cross-claim against Lipa that she breached her mortgage agreement by selling the property without notice, denying him his equitable right of redemption, and failing to expose the property to general sale to obtain its maximum price. Appellant counterclaimed against HMH that it breached the January 2002 sales agreement and tortiously interfered with the mortgage contract between appellant and his sister.

On November 29, 2005, HMH moved for summary judgment. Its motion was granted by order dated May 16, 2006, directing the property deed given by Lipa to HMH to be amended to include all three parcels, judgment to be entered against appellant and his son in the amount of the $60,000 deposit funds released to them plus interest, and appellant's counterclaim against HMH to be dismissed. In an oral decision the court held: (1) appellant and his son breached the settlement agreement with Lipa, as amended, by failing to pay the settlement funds; (2) appellant breached the second addendum by permitting the subdivision approval to lapse and by failing to disclose that it had lapsed, excusing HMH's performance of conditions relating to that approval; and (3) Lipa had the right to convey the property to HMH to recoup her loan upon appellant's default of his obligation. This appeal ensued.

Huddy asserts the following arguments on appeal: (1) the trial court abused its discretion by finding the May 27, 1994 deed constituted a deed in lieu of foreclosure and by concluding as a matter of law that appellant did not hold an equitable interest in the property, and that Lipa had an absolute right to divest her interest in the property as she deemed fit, thereby impeding appellant's ability to exercise his equitable right of redemption; (2) genuine issues of material fact should have precluded the court from granting summary judgment in favor of HMH and dismissing all causes of action asserted by appellant; and (3) the trial court committed reversible error by refusing to grant appellant's reasonable request for an extension to file opposition to summary judgment, especially considering the gravity of the health concerns faced by both appellant and his wife. In reviewing the record in light of the applicable law, we discern neither an abuse of discretion by Judge Lynch Ford nor a misapplication of law, and affirm.

The second and third points raised by appellant are without sufficient merit to warrant extended discussion in a written opinion. R. 2:11-3(e)(1)(E). On November 30, 2005, HMH filed its motion for summary judgment with supporting certifications, including Lipa's; numerous exhibits, including a substantial number of transcript pages from the depositions of appellant and Justin; and documentary evidence and maps. On December 16, 2005, appellant informed the court he strongly opposed the summary judgment motion and set forth a chronology of his and his wife's health-related problems, requesting a reasonable delay, and noting his intention to proceed with counsel. The court accommodated appellant's request because she waited until May 16, 2006 to render her decision on HMH's summary judgment motion. In the intervening five months, however, appellant neither retained counsel nor filed any response. It is noteworthy that despite appellant's health problems, his adult son Justin, who was an alleged party to the HMH agreement and presumably has an interest identical to that of his father, never submitted any opposition to HMH's motion. Appellant neither submitted documentation nor certifications disputing the motion record before the court. The evidence submitted by HMH was not opposed. Appellant cannot now argue with vague allegations that there is a factual dispute as to whether HMH breached the contract.

We are satisfied HMH presented an ample record upon which the court could make a ruling. Based on our review of the record, we are further satisfied summary judgment was properly granted as a matter of law in favor of HMH and appellant's cross-claims were properly dismissed. It is undisputed that in 1986 appellant received a $150,000 loan from his sister to purchase the property that is the subject of the litigation, secured by a mortgage, which he never paid. Although the language of the 1994 deed is somewhat ambiguous as it contains a reference both to "Lieu of Foreclosure" and "security," it seems likely the parties intended for appellant to release his interest in the property to Lipa. As she already had a mortgage on the majority tract of land and had the right to foreclose upon appellant's default in 1994, it would be redundant for appellant to give her the deed as a security device.

We recognize, however, that subsequent to that deed, appellant and his sister took actions that bring into question whether appellant still maintained an equitable interest in the property, at least for purposes of a summary judgment motion. The parties clarified ownership, however, by execution of their comprehensive settlement agreement on October 7, 2002. The substantial consideration for the release is clearly revealed by Lipa's certification in which she stated that she and her family agreed to receive only the money loaned over the years to her brother, and to waive almost sixteen years of interest in excess of $250,000. Appellant deposed that the affidavit of insolvency was executed for IRS purposes as confirmation that he could not pay any interest.

Under the agreement, appellant had the opportunity to buy back the property if he paid the sum of $275,544.58 plus all monies advanced by December 15, 2002, extended to February 15, 2003. The documents expressly provided the agreement would be null and void if he did not make timely payment. Appellant deposed he was aware of these terms and if the payments were not timely made he would have no further interest in the property and the buy-back agreement would be null and void. Appellant admitted he did not make the payment to his sister by the extended date. Thus, under the terms of the parties' comprehensive settlement, the buy-back agreement became null and void; appellant had no further interest in the property, equitable or otherwise; and Lipa had the legal right to sell the property to whomever she chose.

The "clogging doctrine" is inapplicable to the facts of this case. "[I]t is recognized that a mortgagor may at any time after the execution of the mortgage, by a separate and distinct transaction, sell or release his equity of redemption to the mortgagee." Smith v. Shattls, 66 N.J. Super. 430, 437 (App. Div. 1961). Even assuming the 1994 deed was an equitable mortgage, the parties' comprehensive October 2002 settlement agreement, negotiated by counsel and made many years after the initial default, resulted in the release of appellant's rights to the property. As part of that agreement, appellant was twice given the opportunity to buy the property back, in effect, the opportunity afforded by a right of redemption, and twice failed to exercise it.

We do not view the fact that Lipa joined in the September 19, 2003 addenda to Justin's agreement with HMH, enabling appellant and his wife to convey the property, as an acknowledgement that appellant had an equitable interest in the property at that time. Under the totality of the circumstances, Lipa's actions were merely a vehicle to facilitate closing of title and receipt of proceeds from the sale in satisfaction of appellant's outstanding loan, as well as to obtain dismissal of the pending litigation. As had occurred numerous times before, when appellant failed to fulfill his obligations under the contract, Lipa had the right to convey her interest in the property to HMH.


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