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The Regency Tower Condominium Association, Inc. v. Catalano

A-2495-97T3 (N.J. Super. App. Div. 1999) (Unpublished)

MORTGAGES; LIENS—Mortgages placed on a property in favor of entities owned by the property owner can be set aside if they serve to defraud later lienholders.

A condominium association was involved in a lengthy litigation with a unit owner. During the course of the litigation, the unit owner encumbered its property with various mortgages granted to related corporate parties. The condominium association sought to have the mortgages declared void and canceled as of record in connection with its action to foreclose condominium liens on the unit. The lower court found that the mortgages could not take priority over the condominium association’s liens because to allow that to happen would allow a unit owner to create artificial encumbrances on the property, thereby depriving true creditors from foreclosing their liens. Consequently, the lower court disregarded the corporate entities because they were being used a shield behind which injustice was sought to be done by those who controlled the corporations. “Where the corporate form is used by individuals for the purpose of evading the law, or for the perpetration of fraud, the courts will not permit the legal entity to be interposed to defeat justice.” Consequently, the lower court set aside the mortgages and the Appellate Division affirmed that ruling.


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