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Arne v. Liotta

313 N.J. Super. 616, 713 A.2d 572 (App. Div. 1998)

MORTGAGES; DEFICIENCIES; STATUTE OF LIMITATIONS —The one year statute of limitations governing mortgage deficiency actions against homeowners requires that the debtor or debtor’s family actually reside in the home; domicile, alone, is inadequate.

A married couple acquired a thirty-four acre tract of land. They then obtained a construction mortgage, partly to pay for the land acquisition and partly to pay for construction of a personal residence. They ran short of money and took an additional, private mortgage loan. This allowed them to obtain permanent financing. The permanent financing required them to replace the private mortgage with one secured by a separate parcel. After repeated restructuring of the private mortgage, it finally was replaced with a second mortgage on the original private residence.

The homeowners defaulted on the first mortgage and the lender foreclosed on the property, cutting off the second, private lender. Fourteen months later, the private lender sued its borrower for the amount of the unpaid loan. The debtor asserted that the one year statute of limitation for deficiency actions under the New Jersey Mortgage Foreclosure Act barred recovery. In its response, the creditor sought to rely on the provision of the Mortgage Foreclosure Act that restricts the one year limitation period to 1-4 multiple dwellings in which the owner or the owner’s immediate family resides at the time of institution of proceedings to collect the debt. At issue was whether or not the debtors resided in the house when the collection action was filed.

The relevant facts were: well before the action was commenced, the debtor advised the private lender of a prospective job transfer to Texas and also that a realtor had been directed to sell the property. Thirteen months before the filing of the foreclosure action, the debtor applied for, and received, a Texas driver’s license. Several months later, the debtor registered his private automobile in Texas. He also wrote to the private lender advising that he had expected the house to be sold and that additional prospects for purchase were being considered. His mail forwarding orders ceased well before the collection action was filed. Notwithstanding those acts, the debtor testified that his assignment in Texas was a temporary “two year rotational assignment.” Although he and his family went to Texas, they left everything in their house except for some clothes and kept the utilities connected. The family also returned to New Jersey to spend vacations in the house. When the debtor visited his employer’s New Jersey office, he stayed in the house.

With those facts in mind, the Court focused on the statutory use of the word “resides.” In its analysis, it opined that the statutory reference to residence is not the equivalent of “domicile” and that the two terms are not to be treated as convertible terms absent specific indication of legislative intent to that effect. In its view, to allow the debtor’s interpretation, which makes “residence” synonymous with “domicile,” would be inconsistent with the statutory language and contrary to the legislative intent to protect resident-debtors from being ejected from their homes. The Court was also unwilling to allow property owners living outside of their homes to insulate themselves from deficiency actions through an assertion of their intention to return to their residence.


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