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Gibau v. Klein

329 N.J. Super. 227, 747 A.2d 316 (App. Div. 2000)

EQUITABLE DISTRIBUTION—If a creditor’s lien is not perfected until after a divorce judgment is entered, as by an execution to satisfy a judgment, the equitable distribution scheme is entitled to priority.

A divorce judgment provided that the husband “shall forthwith transfer and convey to plaintiff all of his right, title and interest in and to the former marital residence, ... .” Although the judgment was docketed, it was not recorded in the country clerk’s Book of Deeds. Seventeen years later, the wife contracted to sell the home. A judgment search revealed that money judgments had been taken against the husband after the entry of the final judgment of divorce. The buyer’s title company took the position that the judgments against the husband were liens on the property and refused to insure the title unless they were satisfied. The wife compromised the judgments, and in doing so was required to pay a sum of money. In a subsequent action against her husband and her own attorney, she alleged that the attorney negligently failed to record the judgment of divorce. In response, the attorney claimed that recording the divorce judgment was unnecessary because the transfer of title to the wife occurred automatically by operation of law, and the docketing of the judgment was notice to the world. The lower court held the judgments taken against the husband were not liens against the property that the wife was required to pay, and the wife appealed. At common law, money judgments did not constitute liens against real property. Judgment liens are creatures of statute. “It is by virtue of statute that money judgments become liens on real estate ‘from the time of the actual entry of such judgment on the minutes or records of the court.’ In order to become a lien, however, the real property must be ‘held’ by the judgment debtor.’” Therefore, the question was whether the husband still held an interest in the property when the judgments were taken against him. N.J.S. 2A:16-7 provides that: “When a judgment of the superior court shall be entered for a conveyance, release or acquittance of real estate or an interest therein and the party against whom the judgment shall be entered shall not comply therewith by the time appointed, or within 15 days after entry of the judgment if no time be appointed therein, the judgment shall be considered and taken, in all courts of the state to have the same operation and effect, and be available as if the conveyance, release or acquittance had been executed conformably to the judgment.” Consequently, “when a judgment triggering this statute is docketed, it becomes self-operative without the need for further action.” The final judgment of divorce in this case was docketed with the Clerk of the Court as authorized by law. “Thus, it is clear that, as between plaintiff and [her husband], plaintiff was the sole owner of the property from the fifteenth day after the judgment was entered.” According to the Appellate Division, however, this did not necessarily decide the question of whether the wife’s claim was superior to those of the judgment creditors. Under various provisions of the Recording Act, the legislature did not create a priority in favor of the litigants who benefitted from a judgment encompassed by the cited statute. In addition, the question of whether the docketing of the decree, standing alone, places the beneficiary of the statute in a superior position to creditors who thereafter obtain judgments against the losing party to the litigation had not been previously addressed in New Jersey courts. The defendant-attorney argued that recording of the judgment functioned as notice to the world and was a binding judicial determination of the rights and duties of the parties to the action. Therefore, under that theory, the judgment, when recorded, functioned as notice of the debtor-creditor relationship. Although this is clearly true with respect to money judgments, the effect of recording non-money judgments on third parties had not been directly addressed by New Jersey courts. There is a statute, N.J.S. 46:22-1, which gives judgment creditors a priority, but only against persons who claim an interest in the property under a “deed or instrument of the nature or description set forth in section 46:16-1 [one that was not recorded].” The wife argued, however, that the final divorce judgment did not fit within the category of “decrees… and… final judgments… which have been filed with the Clerk of the Superior Court… relating to or in any way affecting title to real estate” as described in N.J.S. 46:16-1.1. The Court agreed with the wife, but it felt compelled to look at the nature of the 1978 judgment. Here, the judgment was of a special nature, “ordering the equitable distribution of property and the equities it creates in the property.” It further stated that “the equities it creates in the non-debtor spouse have been long recognized in the state.” Consequently, it felt constrained to affirm the judgment on the review. The judgments taken against [the husband] after the divorce judgment was entered were not liens against the marital home. Accordingly, [the attorney’s] failure to record the divorce judgment in the book of deeds did not destroy the priority the divorce judgment afforded [the wife] as to subsequent judgment creditors of [her husband]. Consequently, the Court held that “[i]f the creditor’s lien is not perfected until after the divorce judgment is entered, as by an execution to satisfy a judgment, the equitable distribution scheme is entitled to priority, and the extent of the executing judgment creditor’s lien is limited to whatever interest in the property the debtor spouse has been accorded by the divorce judgment.” “[The Court’s] constraint [to affirm the judgment below] does not stem from any uncertainty we have in the legal analysis of plaintiff’s rights under the divorce judgment, but from the fact that [the wife] unfortunately chose to satisfy those judgments rather than contest the title company’s position.”


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