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Chase Manhattan Mortgage Corporation v. Spina

325 N.J. Super. 42, 737 A.2d 704 (Ch. 1999)

CONDOMINIUMS; LIENS—The superpriority granted to certain condominium liens does not give them priority over mortgage liens that were of record before April 1, 1996.

The question presented to the Court was whether a condominium association’s lien, perfected after the effective date of N.J.S. 46:8B-21 (April 1, 1996) has priority over a first mortgage recorded and perfected prior to the enactment of that Act. The Act provided that condominium associations have a lien with a limited priority over prior recorded mortgages and other liens up to the six-month period prior to the recording of the lien. Both the mortgagee and the Association agreed that the statute had an effective date of April 1, 1996 and that the Historical Statutory note stated that the Act “shall not apply to or affect liens perfected prior to the effective date.” The mortgagee argued that the statute could not be applied retroactively, because to do so would violate both the United States Constitution and the New Jersey Constitution as far as it impairs established bargained-for property rights. The condominium association argued that the statute applied prospectively to condominium association liens only, such that all association liens recorded after the effective date would receive a first priority over a prior recorded mortgage, regardless of when the mortgage was recorded. “In other words, the Association contends the Act is to be applied prospectively for the Association but retroactively against the first mortgagee.” At the outset, the Court stated that “[i]t is well established that courts and legislatures are loath to apply the effect of a statute retroactively.” Statutes “will not be given retroactive effect unless they are so clear, strong, and imperative that no other meaning can be annexed to them, or unless the intent of the legislature cannot otherwise be satisfied.” The mortgagee argued that the use of the word “liens” indicated that the legislation was ineffective as to any prior recorded liens and not specifically condominium association liens. The association, however, argued that the term “liens” was intended to apply only to condominium association liens perfected prior to the effective date. The language of the statute in question provides that “[t]his act shall take effect on the first day of the third month next following enactment, and shall not apply to or affect liens perfected prior to the effective date.” According to the Court, the word “lien” is a “generic” term “that includes in its definition any ‘claim, encumbrance, or charge or in property for payment of some debt, obligation or duty’ whether acquired by contract or by operation of law.’” The Act applied to all “liens” without any further specificity. This indicated a clear, non-ambiguous intent to apply the law to all liens, regardless of type, necessary including the mortgagee’s lien. “Additionally, there exists no language which even suggests retroactive application to liens perfected prior to the enactment of this law.” Case law has given every indication that a vested property interest in mortgaged property is granted to a mortgagee. Consequently, the rights of a mortgagee are more than a “mere expectation” of the continuance of existing laws. Further, a change in law by statute may trigger the “Contract Clause” of the United States Constitution. In such cases, careful scrutiny must be given to avoid such retroactive affect. Lastly, the statute, upon its effective date, granted a condominium association, for the first time, the right to enjoy the new priority over other liens, including mortgages filed prior to the association lien. “For practical purposes, this was a newly created property interest for the condominium association.” The “state-granted property interest relied upon by [the mortgagee], however, was one established long before any consideration was given to a condominium association lien.” In conclusion, the Court held that N.J.S. 46:8B-21 “applies only prospectively to all liens and no priority is given under this statute to any lien, regardless of type, recorded and perfected prior to the effective date of the statute.”


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