SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
A-1767-98T3
JOAN GIBAU,
Plaintiff-Appellant,
v.
ELEANOR H. KLEIN, ESQ. and
KLEIN AND SMOGER, PC,
Defendants-Respondents,
and
FRANK GIBAU,
Defendant.
_________________________________
Argued: February 14, 2000 - Decided: March
20, 2000
Before Judges Keefe, A.A. Rodríguez and Collester.
On appeal from Superior Court of New Jersey,
Law Division, Camden County.
Frances A. Hartman argued the cause for
appellant.
Mario A. Iavicoli argued the cause for
respondents.
The opinion of the court was delivered by
KEEFE, J.A.D.
This is a legal malpractice case in which plaintiff Joan M.
Gibau appeals from the entry of summary judgment in favor of
defendants Eleanor H. Klein, Esquire and Klein and Smoger, P.C.
(collectively referred to as Klein).See footnote 11 The appeal requires that
we determine whether the trial judge correctly held that Klein
was not liable as a matter of law for failing to record the final
judgment of divorce. In essence, the trial court found that
post-divorce judgments against plaintiff's former husband,
defendant Frank Gibau (Frank), did not become liens against the
marital home that passed to plaintiff by reason of the final
divorce judgment. Thus, plaintiff was not harmed by Klein's
failure to record the judgment. We affirm the judgment under
review, but for reasons other than those stated by the trial
judge.
The relevant facts are undisputed. Klein represented
plaintiff in divorce proceedings against Frank culminating in a
judgment of divorce filed with the Clerk of the Superior Court on
January 6, 1978. The judgment provided, among other things, that
Frank "shall forthwith transfer and convey to plaintiff all of
his right, title and interest in and to the former marital
residence, located at 106 Devon Road, Cinnaminson, New Jersey."
It is undisputed that Frank did not comply with the order and
that Klein did not record the final judgment in the book of deeds
in Burlington County, where the property was located.
In 1995, plaintiff entered into a contract to sell the
former marital home to a third party. A judgment search revealed
that money judgments were taken against Frank after the entry of
the final judgment of divorce. The title company engaged by the
purchaser of plaintiff's property took the position that the
judgments against Frank were liens on the property and refused to
insure the title unless they were satisfied.See footnote 22 In light of that
development, plaintiff authorized her attorney to compromise the
judgments. The attorney was successful in reducing the amount
owed on the judgments, but plaintiff was required to pay $22,500
out of the proceeds of the sale to satisfy the balance of the
judgments against Frank.
Plaintiff then instituted this suit against Klein and Frank.
The essence of plaintiff's complaint against Klein was that Klein
negligently failed to record the judgment of divorce in the
Burlington County book of deeds. On the day trial was scheduled
to commence, Klein raised the issue now under review. Klein
claimed that recording the divorce judgment was unnecessary
because the transfer of title to plaintiff occurred automatically
by operation of law, and the docketing of the judgment was notice
to the world. The trial judge adjourned the trial and ordered
the parties to file briefs. After considering the parties'
briefs and entertaining oral argument, the judge dismissed the
case finding, essentially, that the judgments taken against Frank
were not liens against the property that plaintiff was required
to pay. Accordingly, nothing Klein did or failed to do caused
damage to plaintiff. This appeal followed.
At common law, money judgments did not constitute liens
against real property. Judgment liens are creatures of statute.
Joseph Harris & Sons, Inc. v. Van Loan,
23 N.J. 466, 470 (1957).
It is by virtue of statute that money judgments become liens on
real estate from the time of the actual entry of such judgment
on the minutes or records of the court. N.J.S.A. 2A:16-1. In
order to become a lien, however, the real property must be held
by the judgment debtor[.] New Brunswick Sav. Bank v. Markouski,
123 N.J. 402, 412 (1991)(emphasis added). It is axiomatic that
if the Cinnaminson property was not held by Frank at the time
the judgments against him were taken, they were not liens on
plaintiff's property. The question, therefore, is whether Frank
still held an interest in the property when the judgments were
taken against him.
As noted earlier, Frank failed to comply with the final
judgment of divorce and forthwith transfer and convey his
interest in the Cinniminson property to plaintiff. N.J.S.A.
2A:16-7 provides that:
When a judgment of the superior court shall
be entered for a conveyance, release or
acquittance of real estate or an interest
therein, and the party against whom the
judgment shall be entered shall not comply
therewith by the time appointed, or within 15
days after entry of the judgment if no time
be appointed therein, the judgment shall be
considered and taken, in all courts of the
state to have the same operation and effect,
and be available as if the conveyance,
release or acquittance had been executed
conformably to the judgment.
When a judgment triggering this statute is docketed, it becomes
self-operative without the need for further action. See King v.
Greene,
30 N.J. 395, 398 (1959)(holding that where the court
ordered the wife to execute a deed to herself and her husband as
tenants by the entirety, and she failed to do so, the decree was
self-operative and had the effect of making the husband a
tenant by the entirety).
The final judgment of divorce in this case was docketed with
the Clerk of the Superior Court as authorized by law. N.J.S.A.
2A:16-12. Thus, it is clear that, as between plaintiff and
Frank, plaintiff was the sole owner of the property from the
fifteenth day after the judgment was entered. But that does not
necessarily decide the question of whether plaintiff's claim is
superior as to third parties, such as judgment creditors. Unlike
various provisions of the Recording Act, see, e.g., N.J.S.A.
46:16-1.1 and N.J.S.A. 46:21-1, the Legislature did not create a
priority in favor of litigants who benefitted from a judgment
encompassed by N.J.S.A. 2A:16-7. Nor did King, supra, address
the question of whether the docketing of the decree, standing
alone, places the beneficiary of the statute in a superior
position to creditors who thereafter obtain judgments against the
losing party to the litigation.
Klein argues that docketing the judgment resulting from
proceedings to which N.J.S.A. 2A:16-7 applies is sufficient
notice to subsequent judgment creditors and purchasers for value
without notice. Klein relies upon New Brunswick Sav. Bank,
supra, to argue that the recording of the judgment functions as
notice to the world. Indeed, in that case, the Court said that
[t]he judgment is a binding judicial determination of the rights
and duties of the parties to the action and, when recorded on the
docket of the Clerk of the Superior Court, functions as notice of
the debtor-creditor relationship. New Brunswick Sav. Bank,
supra, 123 N.J. at 411 (citation omitted). Klein, however, over
reads the Court's statement. In the passage just quoted, the
Court was discussing the effect of recording money judgments.
Id. at 411-12.
The effect of recording non-money judgments, such as the one
obtained by plaintiff in this case, in terms of notice to third
parties is quite another matter. In Sonderman v. Remington
Const. Co., Inc.,
244 N.J. Super. 611, 616 (App. Div. 1991),
aff'd,
127 N.J. 96 (1992), this court held, in a different but
analogous context, that a purchaser for value was required to
search not only the docket book for money judgments, but also all
dockets and records resulting from non-money judgments for liens
on real estate. That is essentially what Klein claims should
occur here. The Supreme Court, however, disagreed with us. It
held that our statement [was] at odds with current searching
practice, and that, irrespective of whether a search of docketed
non-money judgments could reveal the existence of a judgment
affecting real property, the Court saw no reason to impose a
greater responsibility on title searchers than is imposed by
standard practice. Sonderman v. Remington Const. Co., Inc.,
127 N.J. 96, 110 (1992). Accordingly, it concluded that an order
vacating an in rem foreclosure judgment must be recorded in the
same manner as a deed in order to give notice to subsequent
purchasers for value. Ibid.
Plaintiff claims, essentially, that as to judgment
creditors, her right is not superior unless the instrument giving
her sole title to the property was recorded. Plaintiff asserts
that Klein's failure to record the judgment of divorce in the
Burlington County book of deeds resulted in voiding the transfer
occasioned by the operation of N.J.S.A. 2A:16-7 with respect to
the subsequent recorded judgments against Frank.
In making that argument, she relies, in part, upon the
provisions of N.J.S.A. 46:22-1. Her reliance on that statute,
however, is misplaced. The statute indeed gives judgment
creditors a priority, but only against persons who claim an
interest in the property under a deed or instrument of the
nature or description set forth in section 46:16-1 [that was not
recorded] . . . in the office of the county recording officer in
which the affected real estate . . . is situate[.] Ibid.; see
also N.J.S.A. 46:21-1 (providing that recorded deeds or
instruments of the nature or description set forth in section
46:16-1 . . . shall, from that time, be notice to all subsequent
judgment creditors, purchasers and mortgagees). The divorce
judgment entered in 1978 is not one of the deeds or instruments
described with specificity in N.J.S.A. 46:16-1 a to e, nor is it
an instrument that may have been or may be directed by any
statute to be acknowledged or proved and recorded under the more
generic wording of subparagraph f. Plaintiff admitted as much at
oral argument before us.
Plaintiff contends, however, that the final divorce judgment
does fit within the category of decrees . . . and . . . final
judgments . . . which have been filed with the Clerk of the
Superior Court . . . relating to or in any way affecting title to
real estate as described in N.J.S.A. 46:16-1.1. The statute
provides that such judgments
may be recorded as deeds of conveyance in the
office of the county recording officer of the
county wherein the real estate is situate,
and shall be indexed in the names of the
parties to the cause as set forth in the [ ]
judgment . . . which when recorded shall from
that time be notice to all subsequent
judgment creditors, purchasers and mortgagees
of the existence and contents thereof.
[Ibid.]
Undoubtedly, the purpose of the statute is to provide a mechanism
for recording instruments affecting title to property that do not
meet the formality of acknowledgment or proof as is required for
the documents identified in N.J.S.A. 46:16-1a to f. We agree
with plaintiff that the final divorce judgment could have been
recorded pursuant to N.J.S.A. 46:16-1.1, and the recording would
have provided notice to judgment creditors.See footnote 33 Klein argues that
the use of the permissive phrase may be recorded in N.J.S.A.
46:16-1.1 makes the choice of recording optional. The argument
is, however, clearly without merit in light of the Supreme
Court's holding in Sonderman, supra, 127 N.J. at 110. Stated
simply, if the judgment affecting title to real property is not
recorded, it may not serve as notice to subsequent purchasers for
value or judgment creditors. 'Generally speaking, and absent
any unusual equity, a court should decide a question of title
such as this in the way that will best support and maintain the
integrity of the recording system.' Sonderman, supra, 127 N.J.
at 108 (quoting Palamarg Realty Co. v. Rehac,
80 N.J. 446, 453
(1979)).
Therefore, we would end the discussion at this point, as the
parties' briefs have done, and reverse the judgment in Klein's
favor, if the 1978 judgment was other than a judgment affecting
the equitable distribution of marital property. The special
nature of a judgment ordering the equitable distribution of
property, and the equities it creates in the non-debtor spouse
have been long recognized in this State. See Sisco v. New Jersey
Bank, N.A.,
158 N.J. Super. 111 (App. Div. 1978). For example,
in Sisco, the judgment directed the marital property to be sold
with 60" of the net proceeds to be distributed to the wife and
40" to the husband. Id. at 114. After the equitable
distribution judgment was entered, a bank took a judgment against
the husband, which it perfected by a writ of execution and levy
on the husband's interest in the property. Ibid. The bank
claimed that its lien was on the husband's fifty percent interest
in the property because the judgment made the parties tenants in
common. Id. at 122. This court disagreed. We held:
In this case the provision in the judgment
was for the sale of the marital home, with
the net proceeds to be divided 60" to the
former wife and 40" to the other spouse.
This was tantamount to a conveyance to the
wife, upon the termination of the tenancy by
the entirety, of an undivided 60" interest in
the realty as a tenant in common, to be
realized, however, from the net proceeds of
the sale of the property. To the extent
necessary to secure that interest pending the
sale, the divorce judgment imposed an
equitable lien in plaintiff's favor upon the
judgment debtor's right, title and interest
in the marital home.
[Ibid.]
Thus, the court held that a levying judgment creditor of the
debtor spouse acquires no greater rights in the property than
those of the debtor spouse. Ibid. (citation omitted).
The Court's holding in Freda v. Commercial Trust Co.,
118 N.J. 36 (1990) does not affect the viability of Sisco. In Freda,
the Court agreed that [u]nder principles of equitable
distribution, a wife may properly receive the marital home as
part of her share of the marital assets. Id. at 46. The
question was what effect did a mortgage on the husband's interest
in the tenancy by the entirety, recorded and perfected long
before the judgment of equitable distribution, have on the
judgment transferring title to the wife. The Court held that
such prior liens against the husband cannot be destroyed by the
transfer of the marital home from the debtor spouse to the non
debtor spouse. Ibid. Rather, the wife takes the property
subject to the judgment. The judgment creditor's rights,
however, are subject to the wife's right of survivorship. Id. at
48-49. While Freda, like Sisco, does not address the question of
notice to subsequent judgment creditors of the husband, it adds
to our understanding that an equitable distribution judgment
substantially alters the normal incidents of title.
As this court recently observed:
[O]ne of the consequences of the court's
power to equitably distribute the marital
assets accorded by N.J.S.A. 2A:34-23 is the
supercession of that automatic conversion [of
the tenancy by the entirety to a tenancy in
common], leaving to the court the
determination of what the parties' respective
post-divorce interests in the former tenancy
by the entirety will be.
[Vander Weert v. Vander Weert,
304 N.J.
Super. 339, 346 (App. Div. 1997) (citing
Sisco, supra, 158 N.J. Super. at 122).]
Here, as in Freda, the Family Court judge determined that
considerations of equity required the plaintiff to have sole
title to the marital property after divorce. Accordingly, Frank
had no interest in the Cinnaminson property after the judgment of
divorce was entered. Indeed, the Vander Weert court would have
extinguished a judgment lien recorded against the debtor husband,
but not perfected before the divorce judgment was entered. It
held:
[I]f the creditor's lien is not perfected
until after the divorce judgment is entered,
as by an execution to satisfy a judgment, the
equitable distribution scheme is entitled to
priority, and the extent of the executing
judgment creditor's lien is limited to
whatever interest in the property the debtor
spouse has been accorded by the divorce
judgment.
[Id. at 346-47.]
It distinguished its holding from Freda, by noting that the lien
in Freda had been perfected before the judgment of divorce in
that case, whereas the hypothetical judgment under discussion in
Vander Weert was docketed, but not perfected before the judgment
of divorce was entered. Id. at 347.
It is abundantly clear, therefore, that the judgments in
this case, which were not even docketed before the divorce
judgment was entered, did not constitute a lien on the marital
home since the property was not held by Frank at the time the
judgments were taken. Our holding here, which is limited to
judgments entered for equitable distribution of property in
dissolution cases, does no violence to the Recording Act. On the
remote chance that a creditor of Frank conducted a title search
before extending credit to him, the creditor would have at least
discovered that Frank's interest in the Cinniminson property was
at no time greater than a tenancy by the entirety. We agree with
the Vander Weert court that in such circumstances "a bona fide,
commercially reasonable . . . lender would be hardly likely to
regard the interest of only one of the tenants by the entirety as
viable--security the pre-divorce value of that interest is
entirely too speculative and hence too minimal." Vander Weert,
supra, 304 N.J. Super. at 348.
In conclusion, we are constrained to affirm the judgment
under review. The judgments taken against Frank after the
divorce judgment was entered were not liens against the marital
home. Accordingly, Klein's failure to record the divorce
judgment in the book of deeds did not destroy the priority that
the divorce judgment afforded plaintiff as to subsequent judgment
creditors of Frank. Our constraint does not stem from any
uncertainty we have in the legal analysis of plaintiff's rights
under the divorce judgment, but from the fact that plaintiff
unfortunately chose to satisfy those judgments rather than
contest the title company's position.
Affirmed.
Footnote: 1 1 Defendant Frank Gibau did not appear in the matter and
default was entered against him.
Footnote: 2 2 Apparently, Frank did transfer his interest in the
property to plaintiff sometime in December 1991. The judgments
against him, however, were docketed between the entry of the
final judgment of divorce and the 1991 transfer.
Footnote: 3 3 This statute was the underpinning of the Court's
discussion in Sonderman, supra, where the Court held that it was
imperative that a judgment vacating an in rem foreclosure
judgment must be recorded in the same manner as a deed in order
to serve notice to subsequent purchasers and judgment creditors.
127 N.J. at 110.