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In The Matter of The Estate Of Charles Zahn

305 N.J. Super. 260, 702 A.2d 482 (App. Div. 1997)

MORTGAGES; ESTATES; EXONERATION—A surviving joint tenant does not qualify for exoneration of a mortgage unless there is language in the will stating that the mortgage debt be paid out of the estate.

In 1994, a male purchaser bought a house, took title in his own name and executed a promissory note secured by a first mortgage on the property. Thereafter, the purchaser entered into a relationship with a woman and they lived in the house together. In 1995, the purchaser conveyed title to the house to the woman and himself as joint tenants with a right of survivorship. According to the woman, the purchaser informed her that after his death, she was to become the sole owner of the house, free and clear of any liens and encumbrances. However, the purchaser did not change his will to name her as a beneficiary and bequeathed his entire estate to his children. After his death, the company holding the mortgage notified the woman that payments under the mortgage loan were delinquent. To prevent foreclosure, she paid the mortgage and sought reimbursement from the decedent’s estate. When the estate refused, she filed an action for reimbursement, claiming she qualified for exoneration from the mortgage and underlying note, and was not subject to the New Jersey statutory nonexoneration provision (N.J.S.A. 3B-25-1) which provides, “when property subject to a mortgage descends to an heir or passes to a devisee, they shall not be entitled to have the mortgage discharged out of any other property…but the property so descending shall be primarily liable unless the will of the testator expressly or impliedly directs that the mortgage be otherwise paid.” The woman argued that since she was not an heir or devisee and the will did not direct her to satisfy the mortgage, she was not responsible for paying the debts and could look to the estate to satisfy the remaining balance of the mortgage and reimburse her for past payments she made on the mortgage. The estate claimed the nonexoneration provision was applicable and that she was solely responsible for past and future debt. The trial court held that the nonexoneration provision did not apply to her since she was not an heir or a devisee and that repayment of the mortgage was not her responsibility. It further held that decedent’s conveyance of title to himself and the woman as joint tenants was a gift of property to her, subject to payment of the mortgage by the decedent’s estate. It also directed the estate to pay all costs associated with the note and mortgage, including reimbursement for payments made by the woman. The estate appealed.

The Appellate Division examined the theory of exoneration as it evolved from common law and held that exoneration from mortgage encumbrances is only allowed for widows claiming their right to dower. The Court found no case law to support the trial court’s conclusion that a surviving joint tenant is entitled to request the estate to satisfy mortgage debts. The Appellate Division further held that the transfer of title was not a gift to the woman subject to payment of the mortgage by the decedent’s estate. It said that where the deed is silent with respect to an outstanding mortgage, the surviving tenant must take the property subject to the mortgage. Additionally, the fact that the woman is not an obligor on the promissory note means only that she is not liable for any deficiency. It does not mean she has no further obligation to pay the mortgage as a surviving joint tenant.

The Appellate Court also analyzed this case under the probable intent doctrine, which requires courts to construe wills “to ascertain and give effect to the probable intention of the testator.” A court looks at the entirety of a will in light of the surrounding facts and circumstances, and may look to extrinsic evidence to explain ambiguities. The Court found no ambiguity, only the woman’s statement that the decedent intended to make her the sole owner of the house free and clear of any liens or encumbrances. However, the Court found that this statement did not appear in the decedent’s will, the deed, or any other writing, and had serious parol evidence and reliability problems. It concluded by stating that the matter should be remanded to resolve the issue of decedent’s intention only if the woman could present additional evidence of the decedent’s intention to exonerate her from payment of the mortgage debt.


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