On appeal from the Superior Court of New Jersey, Law Division, Hunterdon County, Docket No. L-449-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted December 7, 2011
Sapp-Peterson and Ostrer.
The opinion of the court was delivered by OSTRER, J.S.C. (temporarily assigned).
This appeal presents the novel issue whether the stream of payments due a homeowner under a home equity conversion mortgage, also known as a reverse mortgage, is subject to execution and garnishment for the benefit of judgment creditors of the homeowner. The trial court determined the payments were beyond the reach of the judgment creditors, and denied their motion to compel the mortgagee to comply with a writ of execution. We reverse, reasoning the mortgagee's obligation to make monthly payments to defendant, the judgment debtor, is properly construed to be a "debt" against which plaintiffs, the judgment creditors, may obtain an order directing execution and garnishment under N.J.S.A. 2A:17-50 and -63 and Rule 4:59-1(c). We remand for the court to determine the percentage of the debt properly subject to execution. N.J.S.A. 2A:17-56.
The facts are undisputed. Plaintiffs filed a complaint in July 2007 against defendant seeking damages arising out of an automobile accident. Defendant was an uninsured driver. He sought a trial de novo after an unfavorable arbitration award, but the case settled after a pre-trial conference. Defendant consented to entry of judgment against him for $400,000 on April 16, 2009.
Two months before settling the case, defendant entered into the reverse mortgage with Wells Fargo Bank, N.A. (Wells Fargo). Defendant, then almost eighty-five years old, gave Wells Fargo, a mortgage on his Lambertville house in an amount "up to" $360,000. Although we will analyze the terms of the transaction in greater detail below, suffice it to say here that Wells Fargo agreed to pay defendant $959.01 for as long as he lived and resided in his house.
Plaintiffs discovered the existence of the mortgage in the course of post-judgment supplementary discovery. Defendant's other income consisted of monthly Social Security benefits and a modest Pennsylvania public employee pension. On plaintiffs' behalf, the Hunterdon County Sheriff served a writ of execution dated June 1, 2010, on Wells Fargo, levying against "monies due to defendant from a reverse mortgage from Wells Fargo Home Mortgage." After Wells Fargo refused to comply, plaintiffs filed a motion in aid of litigants' rights on November 23, 2010, seeking an order compelling Wells Fargo to withhold the monies due defendant under the reverse mortgage and pay them over to the sheriff.
Plaintiffs argued Wells Fargo's obligation to pay defendant $959 a month was a "debt due," and therefore subject to garnishment under N.J.S.A. 2A:17-63.*fn1 Alternatively, plaintiffs argued they were entitled to an order compelling defendant, as judgment debtor, to pay over his reverse mortgage receipts in regular installments, pursuant to N.J.S.A. 2A:17-64. Wells Fargo argued its monthly payments to defendant should not be deemed property subject to garnishment under Rule 4:59-1.
In a written decision dated March 4, 2011, the court agreed the regular payments from Wells Fargo to defendant were not subject to garnishment under N.J.S.A. 2A:17-63, nor to an order for installment payments under N.J.S.A. 2A:17-64. The court reasoned the reverse mortgage payments to defendant were properly characterized as loans from Wells Fargo to defendant, secured by the mortgage on the house, and repayable upon defendant's death or other events described in the transactional documents. Thus, Wells Fargo was not indebted to defendant; rather, defendant was indebted to Wells Fargo.
The court rejected plaintiffs' arguments that the reverse mortgage payments should be subject to execution because it was simply a means of "freeing up" defendant's interest in the equity of the home; or, alternatively, the payments were, in substance, a form of an annuity that should be subject to execution. The court also held that because Wells Fargo's payments to defendant were loans subject to repayment, they did not constitute "income" subject to an installment order under N.J.S.A. 2A:17-64.
On appeal, plaintiffs ...