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N.J. Superior Court, Appellate Division REAL PROPERTY – Co-tenants – Mortgage – Accounting Capital Finance Company of Delaware Valley Inc. v. Asterbadi et al, A-0243-06T1; Appellate Division; opinion by Gilroy , J.A.D.; decided and approved for publication February 19, 2008. Before Judges S.L. Reisner, Gilroy and Baxter. On appeal from the Chancery Division, Cape May County, C-100-05. [Sat below: Judge +.] DDS No. 34-2-9694 [16 pp.] On Aug. 17, 1993, defendant and her husband, Nabil, acquired title to a single-family residence (the property) by a sheriff’s deed, following a foreclosure action brought by a second mortgagee. The property was purchased for $208,000, subject to the first mortgage lien in the amount of $450,000. The Asterbadis then obtained a mortgage loan in the amount of $526,400, secured by a mortgage lien on the property. The proceeds of the loan were used to satisfy the original first mortgage and to pay part of the balance due to the sheriff. In the interim, CIT Group obtained a judgment against Nabil Asterbadi only for $2,286,009.97. Plaintiff Capital Finance Company then purchased Nabil’s interest in the property at a sheriff’s sale for the sum of $551,100, subject to defendant’s ownership interest; the first mortgage lien and the second mortgage. Plaintiff notified defendant that it had acquired her husband’s interest in the property and filed a complaint seeking a partition by sale of the property, an accounting, and an appointment of a rent receiver. The trial judge determined that defendant and her husband had acquired title to the property as tenants by the entirety and that on the sheriff’s sale, their interests were converted to tenants in common with right of survivorship and denied plaintiff’s application for partition of the property. The trial judge granted plaintiff’s application for an accounting of defendant’s possession of the property, directed plaintiff and defendant to establish a fair rental value for the property and directed plaintiff to account to defendant for payments of real estate taxes, municipal assessments and insurance premiums on the property. The trial judge then rendered a decision addressing the parties’ responsibilities for payments made on the first and second mortgages. The judge denied defendant’s request that plaintiff account for payments made on the first mortgage. The judge found that the Asterbadis had acquired the property for cash and there was no purchase money mortgage attendant to it. Both Mr. and Mrs. Asterbadi were individual obligors and Mrs. Asterbadi was responsible for any costs attendant to the mortgage. The trial judge found that it would be “fundamentally unfair” to impose on plaintiff the responsibility to account for the repayment of the equity when that property belonged to and was held by the Asterbadis. As to the second mortgage, the judge determined that both parties were equally obligated and directed that plaintiff account to defendant for any monies paid against that mortgage. The court denied defendant’s motion for reconsideration. On appeal, defendant argued that the trial court erred in failing to find that a co-tenant must account to a fellow co-tenant for mortgage interest and principal payments and that it based its decision on incorrect facts. On its cross-appeal plaintiff argued that Capital Finance was entitled to an order for partition by sale of the property and there was no basis to support defendant’s argument that the trial court’s findings of fact should be reversed. Held:The Appellate Division found that the trial court was mistaken in its presumption that the mortgage loan was a mortgage refinance loan rather than a purchase money mortgage loan. Where partition was denied, plaintiff, as an ousted co-tenant, was obligated to account to defendant for principal and interest paid on the pre-existing purchase money mortgage. The Appellate Division remanded the matter to the trial court. Addressing plaintiff’s cross-appeal, the Appellate Division concluded that the trial judge correctly determined that defendant and her husband acquired title as tenants by the entirety; that plaintiff held title to the property with defendant as tenants in common as measured by the lives of defendant and her husband; and plaintiff was not entitled to a partition of the property. The Appellate Division next addressed defendant’s appeal. Defendant argued that the trial court erred in denying her request that plaintiff account for one-half of the principal and interest that she paid on the first mortgage. Defendant contended that the court mistakenly presumed that the mortgage loan was a mortgage refinance loan taking out equity, rather than a purchase money mortgage loan. Defendant contended that although she had not presented the court with the closing statement showing the disbursement of the loan proceeds on her original motion, she did present such documentation in support of her motion for reconsideration, together with her husband’s certification confirming that the loan proceeds were used only for the purposes of paying off the pre-existing first mortgage and purchase monies owed to the sheriff. The Appellate Division found that, on the motion for reconsideration, the trial judge erred by not considering defendant’s husband’s certification and the closing statement. Defendant had presented the additional evidence in furtherance of her argument that the judge had formed his decision on an incorrect basis. The newly submitted evidence would have led the trial judge to conclude that defendant and her husband used the loan to preserve the property, rather than to take equity out of the property. The Appellate Division determined that, like the second mortgage, plaintiff was obligated to account to defendant for principal and interest paid on the first mortgage. When plaintiff bought the husband’s interest at the sheriff’s sale, plaintiff became a co-tenant with defendant, the nondebtor spouse, and was aware of the existence of the first mortgage. Defendant’s continued possession of the property equated to an ouster of plaintiff; thus, she was accountable for one-half of the imputed rental value of the property subject to an offset for any payments made to preserve it. – By Debra McLoughlin For appellant/cross-respondent – William F. Ziegler (Holston, MacDonald, Uzdavinis, Eastlack, Ziegler & Lodge; Ziegler and Samuel J. Myles on the brief). For respondent/cross-appellant – Anne S. Cantwell (Dembo & Saldutti; Cantwell, Leon D. Dembo and William F. Saldutti III on the brief).

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