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Feliciano v. Ciman

A-0353-0675 (N.J. Super. App. Div. 2008) (Unpublished)

DEEDS; FRAUD; PUNITIVE DAMAGES — Punitive damages may be awarded in a suit against someone who fraudulently induces another to convey property, but if the original property owner is a willing participant who enters into a transaction in order to avoid creditors, an award of punitive damages may be denied based on the doctrine of unclean hands.

A mortgagor, who owned his own condominium unit, was unable to make his mortgage payments and the mortgagee brought a foreclosure action. The mortgagor became romantically involved with an employee of his who had prior experience in the mortgage industry. Following her advice, the business owner declared bankruptcy four times in an attempt to avoid having to pay off the mortgage, but the mortgagee eventually succeeded in obtaining a foreclosure judgment. The mortgagee then successfully bid for the property at a sheriff’s sale. The mortgagor sought to repurchase the property and agreed on a price with the mortgagee. The employee then advised the mortgagor that due to his credit, the mortgagee might have been reluctant to transfer title to the property to him and recommended that title to the property be transferred to her daughter. The mortgagor then paid the amount due for the purchase price and title to the condominium was placed in the employee’s daughter’s name.

About a year later, after not receiving payment representing one-half of the condominium’s rental value from the mortgagor, the daughter later conveyed the property to her mother, and the mortgagor and his employee ended their personal and professional relationships. The employee then sought the return of monies that were used to help the mortgagor repurchase the condominium. She, then holding title to the condominium, refinanced the property without informing her ex-lover, the mortgagor, and did not disclose the fact that her ex-lover had in interest in the property. She then brought, and prevailed in, a landlord-tenant action against the her ex-lover for non-payment of rent.

The ex-lover, as the former owner, subsequently sued his ex-employee and her daughter seeking full title to the condominium as well as compensatory and punitive damages. He claimed that the monies given to him by his ex-employee were loans and she argued that her contribution was an investment in an interest in the condominium. She and her daughter counterclaimed for unpaid rent, and for compensatory and punitive damages. The daughter argued that she became involved with the purchase with the expectation that she would receive one-half of the condominium’s rental value from her mother’s ex-lover. The lower court found that the original owner was entitled to either compensatory damages or full title to the property, but the amount due to him was to be reduced by the amount considered a loan for the purchase of the property. The lower court also awarded punitive damages to him.

On appeal, the Appellate Division pointed out that appellate reviews were deferential to the lower courts which are in a better position to determine the facts and assess the credibility of witnesses. Here, it found that the lower court’s award of compensatory damages or the value of the condominium was supported by the facts on the record, but found that the punitive damages were not appropriate.

The Court pointed out that punitive damages can be awarded against a party that commits an egregious act. It found that although the actions of the ex-lover and her daughter were egregious, the man was a willing participant by agreeing to place the property in his ex-lover’s daughter’s name in order to avert the possibility that the he would not receive title to the condominium. On that basis, the Court dismissed the lower court’s award of punitive damages according to the doctrine of unclean hands, a principle that denies relief to a party that materially contributed to its own losses through wrongful acts in a transaction. On the other hand, it affirmed the award of compensatory damages and dismissed the daughter’s claim for unpaid rent since she was found to have no ownership interest in the condominium unit.

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