WOODLANDS COMMUNITY ASSOCIATION, INC. VS. ADAM T. MITCHELL(DC-2766-14, ATLANTIC COUNTY AND STATEWIDE)

• Court: New Jersey Superior Court Appellate Division
• Decided: June 6, 2017
• Docket: A-4176-15T2
• Status: Published

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-4176-15T2

WOODLANDS COMMUNITY ASSOCIATION, INC., APPROVED FOR PUBLICATION Plaintiff-Respondent, June 6, 2017

v. APPELLATE DIVISION

ADAM T. MITCHELL,

Defendant,

and

NATIONSTAR MORTGAGE, LLC, and U.S. BANK, N.A., Successor Trustee to Bank of America, N.A. as Successor to LaSalle Bank, N.A. as Trustee for the Merrill Lynch First Franklin Mortgage Loan Trust, Mortgage Loan Asset-Backed Certificate Series 2007-3,

Defendant-Appellant. ________________________________

Argued April 24, 2017 – Decided June 6, 2017

Before Judges Sabatino, Currier, and Geiger.

On appeal from the Superior Court of New Jersey, Law Division, Special Civil Part, Atlantic County, Docket No. DC-2766-14.

Kathleen Cavanaugh argued the cause for appellant (Sandelands Eyet LLP, attorneys; Robert D. Bailey, of counsel and on the briefs). Tiffany L. Byczkowski argued the cause for respondent (McGovern Legal Services, LLC; Ms. Byczkowski, on the brief).

The opinion of the court was delivered by

CURRIER, J.A.D.

We are asked to determine whether a lender's assignee that

takes possession of a condominium unit when the owner/mortgagor

has defaulted on the loan, and thereafter winterizes the unit

and changes the locks, is considered a "mortgagee in possession"

of that unit, responsible for the payment of condominium fees

and assessments. Because we conclude that those discrete

actions are not sufficient to render the lender's assignee a

mortgagee in possession of the unit, we reverse the entry of

summary judgment.

In March 2007, Adam Mitchell purchased a condominium unit

in a property managed by plaintiff, Woodlands Community

Association, Inc. (Association), and executed a mortgage

encumbering the unit. After several assignments not pertinent

to this matter, the mortgage was assigned in July 2013 to

defendant, Nationstar Mortgage LLC.

2 A-4176-15T2 Mitchell defaulted on his obligations under the mortgage

loan and vacated the unit.1 Mitchell also owed substantial sums

to the Association for the unpaid monthly fees and other

condominium assessments. Subsequent to his default, Nationstar

replaced the locks on the unit and winterized the property.2

The Association instituted an action in April 2014 against

Mitchell to recover the monthly maintenance association fees for

general services it had provided to the property.3 Several

months later, plaintiff amended its complaint to include

defendant, alleging that the lender's assignee was responsible

for the association fees as it was in possession of the

property.

Both plaintiff and defendant moved for summary judgment.

On April 19, 2016, the trial court granted summary judgment in

favor of the Association, determining that defendant was a

mortgagee in possession, and therefore, liable for the

maintenance fees. The trial judge reasoned that no genuine

issues of material fact existed as "[defendant held] the keys,

1 Final judgment was entered in the foreclosure action in December 2015. The parties advised at the time of oral argument on the appeal that the property had not been listed for sale. 2 "Winterizing" entails draining the pipes, turning off the water and setting the thermostat for heat to protect the pipes. 3 Plaintiff and Mitchell resolved their claims in May 2015.

3 A-4176-15T2 and no one else can gain possession of the property without

[defendant's] consent. This constitutes exclusive control,

which indicates the status of mortgagee in possession." The

judge also awarded attorney's fees. This appeal followed.

On appeal, defendant argues that changing the locks and

winterizing the condominium unit did not render it a mortgagee

in possession of the property. We agree.

Our "review of a trial court's grant of summary judgment is

de novo." Trinity Church v. Lawson-Bell, 394 N.J. Super. 159,

166 (App. Div. 2007). We must consider whether there are any

material factual disputes and, if not, whether the facts viewed

in the light most favorable to the non-moving party would permit

a decision in that party's favor on the underlying issue. See

Brill v. Guardian Life Ins., 142 N.J. 520, 540 (1995). "[T]he

legal conclusions undergirding the summary judgment motion

itself [are reviewed] on a plenary de novo basis." Estate of

Hanges v. Metro. Prop. & Cas. Ins., 202 N.J. 369, 385 (2010).

After default by a mortgagor on a property, the lender or

its assignee has "the right of possession, subject to the

mortgagor's equity of redemption." McCorristin v. Salmon Signs,

244 N.J. Super. 503, 508 (App. Div. 1990) (citing Guttenberg

Sav. & Loan Ass'n v. Rivera, 85 N.J. 617 (1981)). The

mortgagee, however, is not the owner of the property unless

4 A-4176-15T2 there is a foreclosure and sale of the premises to the

mortgagee. Guttenberg, supra, 85 N.J. at 630. If a mortgagee

is determined to be in possession of the property, then the

mortgagee is "liable for delinquent condominium common charges,

which had accrued against the property's legal owner, for

services furnished during the mortgagee's possession and control

of the premises." Woodview Condo. Ass'n, Inc. v. Shanahan,

391 N.J. Super. 170, 173 (App. Div. 2007).

Whether a mortgagee or its assignee is in possession is

determined on a case-by-case basis. "[T]he acts of a mortgagee

under the circumstances, determine whether or not possession and

management of the premises have been undertaken by the

mortgagee." Scott v. Hoboken Bank for Sav., 126 N.J.L. 294, 298

(Sup. Ct. 1941). In Scott, the bank mortgagee had taken over

the collection of the rents from the tenants and was paying the

bills and making repairs in the building. Id. at 296. The

Court found the bank had become a mortgagee in possession,

stating that when the mortgagee "take[s] out of the hands of the

mortgagor the management and control of the estate[,]" the

mortgagee becomes a mortgagee in possession. Id. at 298.

In Woodview, supra, 391 N.J. Super. at 174, the mortgagee

in possession had rented out the units and was collecting rents

on them. We found the mortgagee to be in control and possession

5 A-4176-15T2 of those units, and therefore, responsible for the monthly

condominium fees.

We must assess then whether defendant exercised the

necessary level of control and management over the property to

deem it a mortgagee in possession. Defendant here has not

occupied the unit, is not collecting rents or any other profits,

nor is it making repairs. It cannot be argued that defendant's

actions of winterizing the property and changing the locks were

the equivalent of the multitude of actions and responsibilities

undertaken by the mortgagees in Scott and Woodview.

Plaintiff contends, however, as did the trial judge, that

the sole act of changing the locks renders defendant a mortgagee

in possession as the action demonstrated that no one else could

enter the unit without the consent of defendant, thus conferring

upon it exclusive control. We disagree.

The use of the word "possession" in the designation

"mortgagee in possession" is somewhat misleading. See 30 New

Jersey Practice, Mortgages § 21.10, at 132 (Myron C. Weinstein)

(2d ed. 2000) (citing George E. Osborne, Handbook on the Law of

Mortgages § 162 (2d ed. 1970)) (stating that dominion and

control are more descriptive of a mortgagee in possession, not

actual possession). Indicia of control and management include

elements of possession, operation, maintenance, use, repair, and

6 A-4176-15T2 control of the property such as paying bills or collecting

rents. We are satisfied that the minimal efforts taken here by

defendant to secure its interest in the mortgaged property are

not sufficient to convert itself into a mortgagee in possession.

Defendant has not taken over the control and management of the

unit nor exercised the requisite dominion over the property

short of securing the unit.

Upon Mitchell's default on the mortgage, defendant was

required to protect its collateral, the value of its security.

See N.J.S.A. 46:10B-51 (obligating a lender or its assignee to

maintain a property in foreclosure proceedings "to such standard

or specification as may be required by state law or municipal

ordinance."). In addition to paying the insurance premiums and

real estate taxes, defendant sought to prevent damage to the

unit by winterizing the property and changing the locks. In

this situation, the mortgagee has taken on the costs and borne

the burden of the abandoned property. It has not availed itself

of the benefits of the Association, as plaintiff argues, but

rather its actions in protecting its security serve to benefit

the other homeowners. Incidents of vandalism or an occurrence

of frozen pipes in the vacant unit would likely lead to damage

to adjoining properties. Defendant here is not benefitting from

7 A-4176-15T2 the limited actions it has taken to secure its collateral; it is

simply protecting its rights.

Plaintiff argues alternatively that defendant is

responsible for the unpaid assessments under equitable theories.

In Woodview, supra, we advised that equitable considerations

supported our determination that the mortgagee in possession,

who was collecting rents on the two properties, should be

responsible for the condominium assessments. 391 N.J. Super. at

178. We stated: "In our view, having enjoyed the benefit of

these goods and services throughout his possession and control

of the premises, and consistent with the rights and duties of

mortgagees in possession generally, defendant suffers the burden

of their cost." Ibid. (emphasis added).

There was no dispute in Woodview as to the designation of

"mortgagee in possession." The only issue presented for

resolution was whether the mortgagee in possession was

responsible for the unpaid condominium fees. We are satisfied

that our conclusion today is consistent with Woodview as we have

deemed defendant not in possession or control of the property

and not a mortgagee in possession.

Nor are the equitable doctrines of unjust enrichment and

quantum meruit applicable in these circumstances. To establish

unjust enrichment, plaintiff must show that it expected

8 A-4176-15T2 remuneration from defendant at the time it performed or

conferred a benefit on defendant and that the retention of that

benefit without payment would be unjust. VRG Corp. v. GKN

Realty Corp., 135 N.J. 539, 554 (1994).

Recovery under quantum meruit similarly rests on the

principle that one party should not be allowed to be enriched

unjustly at the expense of another. Weichert Co. Realtors v.

Ryan, 128 N.J. 427, 437 (1992). Recovery under both of these

doctrines requires a determination that defendant has benefitted

from plaintiff's performance. It is undisputed that there was

no express contract in place between plaintiff and defendant for

the provision of services. Rather, the services furnished by

the Association are provided for the upkeep of the entirety of

the Association's property. Defendant was not a member of the

Association, and therefore, plaintiff could not have expected

remuneration from it. Without defendant being designated a

mortgagee in possession, we fail to see the basis of an implied

contract to satisfy the equitable doctrines. Cf. Essex Cleaning

Contractors, Inc. v. Amato, 127 N.J. Super. 364, 367 (App.

Div.), certif. denied, 65 N.J. 575 (1974) (finding that a

mortgagee determined to be in possession of the property "may be

liable for services rendered to him in connection with the

9 A-4176-15T2 property during his occupancy thereof on the basis of an express

or implied contract.").

We, therefore, conclude that the minimal actions taken by

defendant here in winterizing the unit and changing the locks do

not serve to deem it a mortgagee in possession and do not render

defendant responsible for the unpaid condominium fees and

assessments. Although not raised in the argument to the trial

court nor in the appellate briefs, plaintiff suggested to us at

the time of oral argument that we should impose some parameters

on defendant's conduct. For example, plaintiff suggests a

requirement that the mortgagee must place the defaulted unit up

for sale within a certain timeframe after the entry of a final

judgment of foreclosure. If a mortgagee is dilatory after the

entry of a final judgment of foreclosure in proceeding to sale

or has refused to go to sale on the unit, that conduct might

result in the imposition of responsibility for the Association

fees. While these arguments might bear some merit in a future

discussion, we decline the invitation to expand on our

conclusion on this record as it is void of any information

regarding the circumstances surrounding the foreclosure

proceeding or any events following the final judgment. See

Sklodowsky v. Lushis, 417 N.J. Super. 648, 657 (App. Div. 2011)

("An issue not briefed on appeal is deemed waived.").

10 A-4176-15T2 We reverse the ruling granting summary judgment to

plaintiff, and remand to the trial court for the entry of

summary judgment on defendant's motion.

Reversed and remanded. We do not retain jurisdiction.

11 A-4176-15T2