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State v. Coven

February 11, 2009

STATE OF NEW JERSEY, PLAINTIFF-APPELLANT,
v.
LAWRENCE S. COVEN, DEFENDANT-RESPONDENT.



On appeal from the Superior Court of New Jersey, Law Division, Somerset County, Indictment No. 07-11-00166-S.

The opinion of the court was delivered by: Lisa, P.J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued January 12, 2009

Before Judges Lisa, Reisner and Alvarez.

By leave granted, the State appeals from an order dismissing four counts*fn1 in an indictment charging second-degree misapplication of entrusted property, in violation of N.J.S.A. 2C:21-15. These charges arose out of four mortgage refinance closings, for which defendant, then a licensed New Jersey attorney, served as the settlement agent. In each instance, defendant received loan proceeds from the new lender, and had an obligation to immediately pay off the mortgage being refinanced. Defendant did not pay off the original mortgages, but instead appropriated the proceeds to his own use. He continued making monthly payments to the original mortgage holders in order to conceal his misapplication of the funds. In time, in each case, the homeowners discovered defendant's misdeeds, and defendant eventually paid off in full each of the mortgages.

The indictment was returned on November 30, 2007, which was more than five years from each of the four settlements, but less than five years from when each of the old mortgages was paid off. Judge Edward M. Coleman granted defendant's motion to dismiss the four counts because the State failed to commence the prosecution within the five-year limitation period. The judge rejected the State's argument that misapplication of entrusted property is a continuing course of conduct offense that was not complete until the original mortgages were paid off. We agree with Judge Coleman and affirm.

These were the events forming the subject matter of the first count. Homeowners Mark and Susan Diana were refinancing their home in Watchung. Their home was encumbered by a mortgage due to United Trust Mortgage (United Trust) with a balance of $246,562.21. They arranged for a new mortgage with Chase Manhattan Mortgage (Chase) in the amount of $375,000. The closing took place on September 6, 2001. On September 11, 2001, after the passage of three business days under the homeowners' right of rescision, plus two weekend days, Chase wired into defendant's account the net mortgage proceeds, after withholding certain closing costs, of $372,273. Defendant was obligated to immediately pay off the United Trust mortgage. But he did not do so. Instead, he made monthly payments as they became due to United Trust, keeping that mortgage current in order to conceal his actions. Defendant used the mortgage proceeds for his own debts and expenses.

The Dianas did not know that the United Trust mortgage had not been paid off at the time of closing. They remained unaware until September 2002, when Mark Diana received a new coupon book from United Trust, which alerted him that something was wrong. He called defendant in October 2002. Defendant told him he would "try to coordinate a resolution with the bank." Sometime around October 10, 2002, the Dianas received a phone message from defendant that the situation had been "resolved." On December 27, 2002, they received confirmation from United Trust that the mortgage was paid in full. Records established that the mortgage was paid off on December 11, 2002.

We need not recount in detail the events involved in the other three transactions. They all followed a similar pattern. It is sufficient to set forth only the applicable dates and dollar amounts.

In count two, the homeowners obtained a new mortgage for $227,000, by which they would refinance their home and pay off their existing $225,645 mortgage. Settlement was held on October 31, 2001. On November 5, 2001, the new lender wired $227,416.39 into defendant's account. After the homeowners discovered that their original mortgage had not been paid off and contacted defendant, he eventually paid the original mortgage on November 13, 2003.

In count three, the homeowners borrowed $96,400 to refinance and pay off their existing $93,966.21 mortgage. Settlement was held on January 31, 2002. On February 5, 2002, the new lender wired into defendant's account $95,708.31. After being caught, defendant eventually paid off the original mortgage on April 22, 2004.

The fourth settlement was also held on January 31, 2002. The homeowners borrowed $105,600, of which $102,857.97 was to be paid to their original mortgage holder to satisfy that mortgage. On January 31, 2002, the new lender wired $102,834.73 into defendant's account. In this case, unlike the others, defendant was not obligated to immediately pay off the other mortgage, but was required by law to hold the funds for three business days (plus any intervening weekends) and then pay it off. However, defendant again failed to do so and made monthly mortgage payments until he was caught. He eventually paid off the original mortgage on April 6, 2004.

It appears undisputed that the funds in each case were wired into defendant's attorney trust account. See R. 1:21-6. The record does not disclose whether defendant ever transferred any or all of the funds out of the trust account into a personal account. The State did not present information in that regard to the grand jury. We can conceive of no reason why such information could not have been ascertained through investigation by examining defendant's bank records. Nevertheless, as we will ...


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