Case Law Summaries

Alaska Seaboard Partners Limited Partnership v. Leone

• Opinion Date: June 21, 2001
• Real Property Law
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LIENS; JOINT VENTURES—A recorded joint venture agreement may be a lien or encumbrance on the property which is the subject of the joint venture agreement.

As part of the development of a vacant lot for purpose of constructing a single-family home, a developer entered into a joint venture agreement with a financial partner. The joint venture agreement was recorded at a time when two prior mortgages were on record. Although the joint venture agreement prohibited further financing of the property, an additional mortgage was obtained. The house was constructed and then sold, but the proceeds were used only to pay off the two prior mortgages and there were no distributions made in accordance with the joint venture agreement. The buyers defaulted on their acquisition mortgage and the property was subjected to a foreclosure sale. After a series of transfers, the respective buyer’s title insurance company conducted a title search and discovered the joint venture agreement. Following an agreement among various parties, the sale took place and all of the post-foreclosure owners agreed to commence an action to quiet title. A sum of money was placed in escrow by the title insurance company to satisfy any obligations that might exist by reason of the joint venture agreement. In court, the title insurance company argued that the joint venture agreement was a lien or encumbrance on the profits of the joint venture, but not on title to the property. Its position was predicated on the definition of the term “mortgage” and it asserted that the lien proposed by the joint venture agreement was not a mortgage. The Court did not dispute that argument, but pointed out that “not every lien on the property is in the form of a mortgage.” It then upheld the lower court’s reasoning “that a lien has been created since the agreement fell within the type of instruments contemplated by N.J.S.A. 46:1-16, restricting [the developer’s] ability to freely alienate or encumber the subject property without [the financing party’s] consent.”

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