In a case that required the court to interpret a statutory amendment from 30 years ago—and which saw a young litigator make his first appellate argument in New Jersey in a dispute among his relatives—the Appellate Division held that a third-party creditor can’t go after land owned jointly by spouses.
Before the enactment of N.J.S.A. 46:3-17.4 in 1988, “case law in our state had authorized courts to compel the partition and sale of a spouse’s interests in property held in a tenancy by the entirety, in instances where equitable considerations justified such a remedy,” the Appellate Division said Tuesday in Jimenez v. Jimenez, a published decision.
“Despite the apparent equities favoring plaintiffs, we agree with defendant that [the statute] precludes the partition and forced sale of the real property because defendant and his wife own it as tenants by the entirety,” Judge Jack Sabatino wrote for the court.
Susan Schleck Kleiner, representing the plaintiffs, said she brought the “really unusual” case up to the Appellate Division because the trial court, though ruling against her, urged it.
The collection effort was “somewhat of a novel approach, but we were going after the only [known] property in New Jersey,” Kleiner said.
Nicholas R. Jimenez, involved as both counsel and a relative in the yearslong family dispute, said the case has been difficult, but the decision is “going to be helpful moving forward.”
The court “by publishing this decision wanted to make it clear the exact effect of that statute,” said Jimenez, who is admitted in New Jersey but whose practice is based in Pittsburgh. “There hasn’t been a lot of case law on the topic—maybe because it’s something you just can’t do.”
What one “just can’t do,” as Jimenez put it, but which the plaintiffs tried to do, was to enforce a settlement against the defendant by compelling the sale of a piece of real estate owned by the defendant and his wife.
According to the court, the 30-acre, undeveloped property in Mansfield has been owned since 2006 by defendant Raul Anibal Jimenez and his wife Gwyn Jimenez as tenants by the entirety—where property is held by spouses jointly via a written instrument. It’s “‘a form of joint property ownership available only to spouses,’” the court noted, quoting from case law.
In December 2011, the plaintiffs filed suit seeking repayment of debt incurred via a line of credit and also of money invested in a joint venture, according to the panel. The plaintiffs are three relatives of Raul, including his father. The underlying dispute centered around proposed development of the Mansfield property, Kleiner noted.
The parties in February 2014 entered a settlement requiring Raul to pay $225,000, collection of which would be stayed until later that year. When the collection date passed without payment, the plaintiffs began collection efforts in Pennsylvania, where Raul lives, and elsewhere, eventually filing a motion in New Jersey’s Law Division in November 2016 to compel the partition and sale of the Mansfield tract.
In January 2017, Middlesex County Superior Court Judge Vincent Leblon ruled—”with some reluctance,” the Appellate Division noted—that while a forced partition and sale of real estate could be done under pre-1988 case law, that was no longer allowed given the adoption of N.J.S.A. 46:3-17.4. The statute provides that “neither spouse may sever, alienate, or otherwise affect their interest in the tenancy by entirety during the marriage or upon separation without the written consent of both spouses.”
Leblon indeed was reluctant, according to a transcript of the Jan. 6, 2017, hearing obtained by the Law Journal. “I’m constrained by the statute to deny your application,” Leblon, ruling from the bench, said of the plaintiffs’ motion. “I think you probably should take an appeal, and see if the Appellate Division can give you any relief. Maybe they can think of a way around it, but it may be that it’s just the legislature that has to address it and correct what appears to be an aberration in the law[.]”
Kleiner argued that the property, because it is vacant land, could be subject to a forced sale notwithstanding the statute, but to no avail; and Nicholas Jimenez pointed out that various cases cited in favor of a forced sale predated the 1988 amendment, according to the transcript.
Ruling Tuesday on the plaintiffs’ appeal, Sabatino, joined by Appellate Division Judges Mitchel Ostrer and Lisa Rose, nevertheless affirmed Leblon, reasoning that there would have been “ little point for the Legislature to have enacted Section 17.4 if it only intended to continue established principles of case law regarding tenancies by the entirety.”
Cases predating the 1988 law, such as the state Supreme Court’s 1976 ruling in Newman v. Chase, provided that a creditor could reach real property held by the entirety if, in the judge’s discretion, there were equitable reasons for it.
“As the motion judge in this case rightly noted, but for the Legislature’s adoption of N.J.S.A. 46:3-17.4, the court would have possessed the equitable authority recognized in Newman v. Chase to consider directing the partition of these spouses’ interests in the vacant Mansfield property,” Sabatino wrote, noting that the property is not the marital residence, the underlying dispute involved the property in some way, and the plaintiffs had tried other collection measures without success.
Still, Sabatino said, if the statute were read a different way, ”a free-wheeling spouse, by amassing such individual debt, could detrimentally ‘affect’ the other spouse’s interests in their co-owned property.”
The court said no published guidance from a New Jersey court existed, but looked to other jurisdictions interpreting New Jersey law, such as the U.S. District Court for the Eastern District of Pennsylvania in In re Wanish in 2016.
The panel also looked to the Appellate Division’s 2006 decision in Capital Fin. Co. of Del. Valley v. Asterbadi, where the court held that in tenancy by the entirety, “neither tenant may force the involuntary partition of the subject property during the marriage.”
Kleiner, a Metuchen solo, said she and the clients will consider petitioning the New Jersey Supreme Court for review.
“The equities favored my client—the equities still favor my client—but I guess the statute doesn’t,” she said. “There should be a remedy for people like my clients.”
Nicholas Jimenez, who represented Raul, his father, noted that the underlying dispute dates back to the time before he attended college and law school. Jimenez was admitted in 2015.
“I’m a litigation attorney, but this is a little different, being a postjudgment enforcement action,” said Jimenez, a New Jersey native and associate at Zimmer Kunz in Pittsburgh who had previously argued appeals in Pennsylvania’s Superior Court, but never before in New Jersey. “This was a little bit of a research project last summer.”
A victory, Jimenez said, is “never really that happy in a family dispute like this, but I think it is the right result.”