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Property Asset Management, Inc. v. Momanyi

A-2713-09T2 (N.J. Super. App. Div. 2011) (Unpublished)

FORECLOSURE; MARITAL RIGHTS — Ordinarily, a spouse’s right to joint possession is not extinguished by a judgment of foreclosure but those rights may depend on whether the mortgagee had actual knowledge of its mortgagor’s marital status at the time it accepted the mortgage without joining the other spouse.

A man acquired real property several weeks before getting married and obtained a purchase money mortgage loan to finance the purchase. The deed listed him as married even though the marriage did not take place until several weeks later. The wife claimed that she contributed funds towards the purchase price for the house. The husband, alone, then refinanced the existing mortgage and increased the size of the mortgage. The mortgage documents listed both husband and wife, but the husband stuck out his wife’s name and initialed the change in the document. The husband then executed a corrective deed to list himself as the property’s owner, and to list himself as unmarried. Sometime later, the husband vacated the house. His wife and their children continued to live there. The wife did not make the mortgage payments and, as a result, the lender instituted a foreclosure proceeding naming the husband and wife as defendants. The parties filed a divorce action, but it was dismissed for failure to prosecute. The lender received a final judgment of foreclosure by default. The wife successfully vacated the default judgment and filed an answer contesting the foreclosure. She alleged that she had a statutory right of joint possession in the property as provided for in N.J.S.A. 3B:28-3. The lower court granted the lender’s motion for summary judgment, and the wife appealed. The Appellate Division reversed.

In the appeal, the wife’s argued that, pursuant to N.J.S.A. 3B:28-3, she had a statutory right of continued occupancy that cannot be defeated by a foreclosure judgment. The lower court found that the wife could have enforced her right to joint possession by prosecuting her divorce case, and that her right to possession was extinguished when she failed to protect that right by proceeding with the divorce case. The Court disagreed, holding that the statutory right of joint possession can only be extinguished under certain circumstances: (a) by consent of both parties; (b) by the death of either party; (c) by judgment of divorce, separation or annulment; (d) by order or judgment extinguishing same; or (e) by voluntary abandonment of the principal matrimonial residence. It does not matter which spouse hold legal title when, once married, the property is occupied as the principal marital residence. If a spouse holding legal title sells the property without the other spouse’s consent, the other spouse’s right to possession is not extinguished. In fact, the Court noted that the statute is not only applicable to sales of the marital home, but also applies in the event of a default of a mortgage obligation incurred solely by the spouse holding title. The statute provides that the right to joint possession is subject to the lien of a mortgage if: (a) the mortgage is placed on the premises before title was acquired by the married individual; (b) the mortgage is placed on the premises before the marriage; (c) the mortgage is a purchase-money mortgage; or (d) both spouses executed the mortgage.

The Court found that none of the foregoing conditions applied in this case, so the question remained as to whether the final judgment of foreclosure had extinguished the wife’s right of joint possession. The Court rejected the wife’s argument that her statutory right of joint possession was superior to, and unaffected by, a foreclosure judgment. The question was whether the lender knew that the husband was married when he refinanced the mortgage. Actual knowledge of a mortgagor’s marital status is important when examining a lender’s role in accepting a mortgage without joining the other spouse. Thus, the Court found that the lower court had to determine whether the lender was aware of the husband’s marital status when the debt was incurred, and also had to determine if the wife acted in bad faith and slept on her rights when the divorce action was dismissed and by waiting such a long time to assert her rights.

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