Opinion
DOCKET NO. A-5400-12T2
02-11-2015
ALI LALA, Plaintiff-Respondent, v. DEBORAH BURPEE and ROBERT BURBEE, WIFE AND HUSBAND, AND THE STATE OF NEW JERSEY, Defendants, and ALICIA TANSKI, Defendant-Appellant.
Scott T. Schweiger, attorney for appellant. Frank J. Martone, P.C., attorneys for respondent (Nicholas J. Purcell, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Nugent and Carroll. On appeal from Superior Court of New Jersey, Chancery Division, Gloucester County, Docket No. F-15288-09. Scott T. Schweiger, attorney for appellant. Frank J. Martone, P.C., attorneys for respondent (Nicholas J. Purcell, on the brief). The opinion of the court was delivered by NUGENT, J.A.D.
In this residential mortgage foreclosure action, defendant Alicia Tanski, a former "tenant" in the foreclosed residence and the mother of the foreclosed mortgagor, appeals the Chancery Division Order that declared the lease between Tanski and her son a sham and directed that a writ of possession include Tanski. Having considered Tanski's arguments in light of the record and controlling law, we conclude there is a factual dispute about the validity of the lease that could not be resolved on the motion record before the court. Accordingly, we reverse and remand for a hearing.
The briefs and pleadings, including the foreclosure judgment, refer to appellant as "Alicia" Tanski. Deeds and other documents in the record refer to her as "Alice" Tanski.
Tanski has since vacated the residence. This appeal is not moot, however, because if plaintiff Ali Lala violated the New Jersey Foreclosure Fairness Act, N.J.S.A. 2A:50-69 to -71, Tanski is entitled to statutory penalties. N.J.S.A. 2A:50-70(f) and -71(c).
We glean the following facts from the certifications and documentary evidence submitted by the parties during motion practice before the trial court. The subject residential property is located in Deptford and once belonged to Tanski's parents. Upon the death of Tanski's mother, the mother's executrix conveyed the property to Tanski and her sisters; the sisters conveyed it to Tanski; and Tanski conveyed it to her son and daughter-in-law, defendants Robert Burpee and Deborah Burpee.
On the day Tanski deeded the property to the Burpees, February 28, 2007, they borrowed $170,000 to purchase it, signed a note evidencing the debt, agreed to repay the loan in monthly installments, and signed a mortgage on the property. Three days later, defendant Robert Burpee, as landlord, entered into a lease with Tanski, as tenant, for the property. The term of the lease was "indefinitely" and yearly rent was $2,400; $200 a month plus utilities. Additionally, in May 2007, Tanski gave her son two checks, each for $7500, to "supplement the rental monies."
The Burpees defaulted on the loan on September 1, 2008, one year and five months after purchasing the property. GRP Loan, LLC, the original plaintiff, filed a foreclosure action on May 14, 2009. While the foreclosure proceedings were pending, defendant Robert S. Burpee filed a bankruptcy petition. GRP obtained relief from the bankruptcy stay to foreclose on the Deptford property. During the ensuing foreclosure proceedings, the mortgage was assigned to Ali Lala who was substituted in as plaintiff in the foreclosure action. The foreclosure complaint was also amended to name Tanski as a defendant. In April 2012, default was entered against defendants Deborah Burpee and Tanski. A final foreclosure judgment was entered on May 22, 2012. Later that year, in September, plaintiff Lala and his wife purchased the property at a sheriff's sale.
Lala claims that on January 23, 2013, his lawyer sent a "Notice to Tenants" as required by the New Jersey Foreclosure Fairness Act (Fairness Act), N.J.S.A. 2A:50-69 to -71. It is undisputed that Lala did not post the notice at the residence as required by the Fairness Act. Although he claimed the notice was sent by regular and certified mail as required by the Fairness Act, he could not produce the receipt for the certified mailing.
Lala attempted, unsuccessfully, to collect rent from Tanski. His attempt to collect rent resulted in the exchange of accusations between the parties and letters between counsel that exacerbated rather than quelled the parties' dispute. The dispute resulted in Lala filing a motion seeking to have the lease between Tanski and Burpee declared a sham and to have her evicted. Tanski opposed the motion and cross-moved for sanctions under the Fairness Act.
In an oral opinion following argument on the motions, the court denied Lala's motion and granted Tanski's cross-motion. Acknowledging that the lease between Tanski and her son was "very favorable," the court nonetheless did "not believe it [could] be considered a sham lease." Noting that it was a lease Lala did not want to be "straddled with[,]" the court informed the parties that plaintiff's remedy was in Landlord Tenant Court "and not in having a lease which the parties [had] complied with for many years declared a sham." Cautioning that Lala "must take care and must proceed carefully as a landlord[,]" the court denied his application to have Tanski included in a writ of possession.
The court also found that defendant had not complied with the Fairness Act. The court directed Lala to immediately comply with the act and provide appropriate notices to Tanski. The court restrained Lala from going to the property without providing reasonable notice. The court reiterated that Tanski "needs to be recognized as a tenant" and that Lala was required to proceed accordingly. The court informed Tanski's attorney that he could submit a form of order and certification of services with respect to damages and counsel fees.
Lala moved for reconsideration and Tanski cross-moved for sanctions. In a supporting certification, Lala's counsel acknowledged that "[o]ur office failed to have the Notice to Tenant posted on the property, but that is the only violation of the Foreclosure Fairness Act that was committed." Relying on the holding in Sec. Pac. Nat'l Bank v. Masterson, 283 N.J. Super. 462, 463 (Ch. Div. 1994), that "[b]efore a person may be deemed a tenant within the purview of [the Anti-Eviction Act] the validity of the lease upon which [the] person relies must be established," Lala argued that the lease between Burpee and Tanski was a sham and therefore Tanski was not a tenant entitled to the protection of the Fairness Act.
Tanski opposed the motion for reconsideration. The court granted the motion for reconsideration, reversed its previous decision, declared the lease to be a sham, and ordered that a writ of possession "shall be issued . . . to include Alice Tanski, and any person found to be in possession of the mortgaged property under Alice Tanski, authorizing the Sheriff . . . to remove them from the subject property. . . ." In a written statement of reasons supporting its decision, the court found that the lease at issue, entered into between a parent and child for a perpetual term and "a rental amount below carrying charge[s,]" was not a bona fide lease and therefore Tanski was not entitled to the protections of the Fairness Act. The court relied on Sec. Pac. Nat'l Bank, supra, 283 N.J. Super. at 468-470. Tanski appealed from the implementing order.
Following Tanski's filing of the notice of appeal, Lala moved to dismiss the appeal as moot. We denied Lala's motion.
Tanski also filed a motion to stay enforcement of the court's order pending appeal, which defendant opposed. The parties' certifications included photographs of the property. Some of the photographs depicted the second floor of the property "stripped" to its floor and wall studs. Lala's attorney wrote a letter supplementing his opposition to Tanski's motion and asserted that the photographs "show that Ms. Tanski has permitted waste to occur at the property during her occupancy."
On appeal, Tanski argues that because the term "tenant" is not defined in the Fairness Act, "the [c]ourt must look to the plain definition as provided by [Black's Law Dictionary]." Tanski asserts that "[Black's Law Dictionary] defines 'tenant' as (a) 'one who holds or possesses lands or tenements by any kind of right . . . ,' (b) 'one who holds lands of another; one who has the temporary use and occupation of real property owned by another . . . ,' or (c) 'one who occupies another's land or premises in subordination to such other's title and with []assent, express or implied. . . .'" Lala opposes the appeal and relies, as he did in the trial court, on Sec. Pac. Nat'l Bank, supra.
We begin by noting that the Sec. Pac. Nat'l Bank case was decided in 1994, prior to the effective date of the Fairness Act. More significantly, in that case the court decided that the lease was a sham only after a trial at which, among other things, the lessee admitted that he had signed the lessors' — his daughters' — names to the lease pursuant to a power of attorney. He made the disclosure after his daughters had informed the court that he was attempting to perpetrate a fraud and that they never entered into a lease agreement with him. The court did note that "even absent the [parties'] admissions, there was ample evidence in [the] case for this court to have found the lease to be a 'sweetheart' deal and consequently to have invalidated it on that ground." Id. at 470.
The New Jersey Foreclosure Fairness Act, L. 2009, c.296, §§ 1-3, became effective February 16, 2010.
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Here, there were several reasons the court should not have reversed its initial ruling without an evidentiary hearing to resolve certain disputed issues. First, the court decided the motion for reconsideration without explaining why it was unable to conclude in the first instance that the lease was a sham, yet so concluded on reconsideration. The court did not explain what probative, competent evidence it failed to consider when it initially denied the motion. See D'Atria v. D'Atria, 242 N.J. Super. 392, 401 (Ch. Div. 1990).
Next, based on Lala's understanding when he directed his attorney to serve the notice required by the Fairness Act, he violated the act. One violation was technical; his attorney did not post the notice at the residence. However, there was also a dispute about whether his attorney had properly mailed the notice as required by the act. And there was a sharp dispute about whether Lala attempted to compel Tanski to sign a lease in violation of the Fairness Act. Those admitted and disputed violations were not resolved by the trial court because it determined the act did not apply if the lease were a sham. But the court did not explicitly address whether Sec. Pac. Nat'l Bank should control legislation enacted more than fifteen years after the case was decided.
Lastly, the court could not have concluded that the lease was a sham in the absence of any evidence about how it came about. When the court ruled on the original motion it found that the parties had complied with the lease for many years. That may be so. If the court believed that the lease was actually executed on March 1, 2007, and that Tanski "complied with" its terms through the foreclosure proceedings, which were not even commenced until more than two years after Tanski signed the lease, then it is difficult to understand how the lease was a sham that negated the protections and policies of the Fairness Act. And if the court on reconsideration did not believe that the lease had been complied with for many years, the court did not explain the factual basis for that conclusion. It is difficult to discern how such a conclusion could have been reached without the court making credibility determinations.
The certifications of the parties raised several other factual disputes that required resolution before the court could determine that the lease was a sham lease and therefore Tanski was not entitled to the protections of the Fairness Act. One such dispute was whether Tanski had use of the entire property. If so, the fact that she was paying rent that covered neither the mortgage payments nor the taxes would certainly be probative of whether the lease was a sham. On the other hand, if her understanding with her son was that she would live on the first floor only while work was performed on the upstairs, then there may be another explanation for the amount of rent she was paying. Moreover, the court did not evaluate Tanski's averment that in addition to the monthly rent she had paid her son $15,000. Her claim required a credibility determination and an assessment of whether, under all of these circumstances, paying rent in that amount was indeed a "sweetheart deal."
In that regard, the Chancery Division recognized in Sec. Pac. Nat'l Bank that
had this court found the lease to have been entered into at [arm's] length and otherwise valid, this court's inquiry would not have ended there. The next step would have been to determine whether the lease represented the fair rental value of the property or was an improvident deal from the perspective of the mortgagor. If this court had determined that the proffered lease in this case was valid but called for payments at below the fair rental value of the property, the lease would have been subject to an upward adjustment in the payments to reflect the fair rental value pursuant to the procedure outlined by the Chase Manhattan [v. Josephson, 135 N.J. 209 (1994)] Court.
[Ibid.]
For the foregoing reasons, we reverse the court's order and remand for the trial court to resolve, following a hearing, whether plaintiff violated the Fairness Act and, if so, the appropriate sanctions.
Reversed and remanded.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION