Skip to main content

Besler v. Coluccio

A-2213-09T2 (N.J. Super. App. Div. 2011) (Unpublished)

LIS PENDENS — Even though the proceeds of a personal loan may be used by the borrower to acquire real property, where the borrower did not have the power to grant a mortgage on that real property, the lender is not entitled to file a lis pendens in connection with its attempts to collect the loan.

A creditor made a personal loan to a debtor who intended to use the proceeds as part of his purchase of a 50% interest in real estate businesses. One business purchased a property. As part of the transaction, the debtor personally executed a mortgage note, a security agreement, and a guaranty and suretyship agreement under which the debtor personally guaranteed the loan. There was no indication that he was acting as an agent for the business entity. Though the mortgaged property was referenced in the documents, the debtor never personally purchased the property and the mortgage was never recorded. Instead, the property was acquired by two business entities a year and a half later. Both entities were partially owned by a corporate member who received the creditor’s proceeds from the debtor to fund its capital contribution to both entities.

The creditor sued the debtor and the business entities, seeking an equitable lien and mortgage against the premises owned by the business entities. It also filed a notice of lis pendens against the properties. On summary judgment, the lower court dismissed the complaint against the business entities, and discharged the notices of lis pendens. It concluded that there was no evidence that the business entities intended to give the creditor any interest in their respective properties. The entities did not own the properties at issue when the mortgage was executed between the creditor and debtor. Further, the creditor testified that the mortgage was intended to be a personal loan to the debtor, and the debtor had no ability at that time to personally convey a security interest in property that he did not own.

The Appellate Division affirmed, holding that the creditor did not loan any money to, or enter into any contract with, the business entities. Neither the note nor the mortgage agreement between debtor and creditor indicated the debtor was acting in anything but a personal capacity.

66 Park Street • Montclair, New Jersey 07042
tel: 973-783-3000 • fax: 973-744-5757 •