(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
Argued October 13, 1993 -- Decided April 13, 1994
STEIN, J., writing for a majority of the Court.
The issue on appeal is whether the 1986 amendment to N.J.S.A. 2A:18-61.3 of the Anti-Eviction Act,
which extended the Act's anti-eviction restrictions to "an owner's or landlord's successors in possession or
ownership," supersedes the Court's decision in Guttenberg Savings & Loan Ass'n v. Rivera, which held that
the Anti-Eviction Act did not protect tenants from eviction by a foreclosing mortgagee.
The Josephsons are month-to-month tenants against whom the Chancery Division entered an order for
possession in favor of Chase Manhattan Bank (Chase), the mortgagee foreclosing on the property that the
tenants occupy. The tenants contend that the amended Anti-Eviction Act prohibited the court from entering
an order for possession for Chase absent a showing of statutory good cause. Chase contends that the 1986
amendments to the Act should not be construed to overrule the holding in Guttenberg; had the Legislature
intended to overrule the Court's decision in Guttenberg, it would have expressed its intention to do so in
more explicit language. The Chancery Division held that the month-to-month tenancy predated the mortgage
and did not exempt the tenants from the holding in Guttenberg, and that the 1986 amendments to the Act
were not sufficiently specific to supersede Guttenberg's exclusion of foreclosing mortgagees.
On appeal, the Appellate Division affirmed the decision of the Chancery Division. The Appellate
Division determined that if the Legislature had intended to amend the statute to overturn the decision in
Guttenberg, that purpose would have been clearly expressed in the statutory language and reflected in the
legislative history. Absent legislative intent, the court concluded that Guttenberg's interpretation of the Anti-Eviction Act survived the 1986 amendments and, therefore, the Act did not prohibit a court from entering an
order of possession for a foreclosing mortgagee resulting in the eviction of tenants from the mortgaged
property.
The Supreme Court granted certification. Although the parties have resolved the underlying dispute,
the Court considers the questions presented because of their public importance.
HELD: N.J.S.A. 2A:18-61.3b applies the Anti-Eviction Act to foreclosing mortgagees and, thus,
supersedes the Court's decision in Guttenberg Saving and Loan Ass'n v. Rivera. As amended,
the Act protects tenants from eviction by foreclosing mortgagees irrespective of whether their
tenancy was established before or after the execution of the mortgage. The Court's holding will
be applied prospectively.
1. Under the common law, a mortgagee is entitled to possession of a mortgaged premises on default of
the loan secured by the mortgage. On default, the mortgagee has only a possessory interest, and obtains an
ownership interest in the property only when the mortgagee purchases the property at a foreclosure sale.
The mortgagee's possessory and ownership interests were encumbered by tenancies only to the extent that
the mortgagor's interests were so encumbered at the time of the mortgage. If the mortgagor's interest in the
property was subject to a tenancy at the time the mortgage was executed, the foreclosing mortgagee could
eject the tenant at the termination of the tenancy. The Anti-Eviction Act prohibited the common-law
ejectment of residential tenants or lessees simply because their tenancies or leases had expired. The landlord
could terminate the lease only by establishing good cause. (pp. 7-10)
2. In Guttenberg, the Court held that the Act did not apply to the foreclosing mortgagees holding a
mortgage that predated the tenants' leasehold interest. Because the Act's plain language did not include
reference to foreclosing mortgagees, the Court declined to construe the statutory language to encompass
mortgagees. (pp. 11-13)
3. Here, the tenants are protected by the Act, even under its pre-amendment interpretation in Guttenberg.
Where a tenant's interest predated the mortgage, that interest would not have been extinguished by the
mortgage default, and the mortgagee's interests would be subject to the tenancy. Thus, the Anti-Eviction Act
would apply to the mortgagee as a landlord. (pp. 13-17)
4.
The plain language of the statute encompasses both foreclosing mortgagees and purchasers at
foreclosure sales. The prohibition of N.J.S.A. 2A:18-61.3 of the removal of a tenant from the premises by
any order or judgment for possession by the owner's or landlord's successor in possession includes
foreclosing mortgagees seeking possession from tenants residing in the mortgaged premises. The purchaser
of the mortgaged lands at a foreclosure sale, including the mortgagee, succeeds to the estate the mortgagor
had at the time of the execution of the mortgage. Such a purchaser is the owner's or landlord's successor in
ownership and is encompassed by the plain language of the Act. That reading is consistent with the Act's
overall purpose of protecting blameless tenants from eviction. Moreover, the amended language of N.J.S.A.
2A:18-63.1 addresses many of the concerns raised in Guttenberg and reflects the Legislature's intent to
supersede Guttenberg's interpretation of the statute. In addition, the Act specifically exempts foreclosing
mortgagees from the treble-damage liability imposed for pretextual evictions; however, the Legislature did
not exempt foreclosing mortgagees from liability under the anti-eviction section of the Act. When the
Legislature sought to limit application of the Act in order specifically to protect foreclosing mortgagees, it
did so by enacting a specific exemption from provisions of the Act not intended to affect them,
demonstrating its recognition of the special concerns of foreclosing mortgagees. That it did not exempt
foreclosing mortgagees from the Act's anti-eviction provisions strongly suggests a legislative determination
that those provisions should apply to all successors in ownership or possession, including mortgagees. (pp.
17-28)
5. Although the application of the Act to foreclosing mortgagees may alter their contractual and common-law property rights, the effect on those interests do not infringe on constitutional contract protections or due
process. Enforcement of legislation that adversely affects property rights is valid when the public interest
being served clearly outweighs the impairment. There is a substantial public interest in preventing the
eviction of blameless tenants. The specific interest impaired by the application of the Act to mortgagees is
the possibility that the resale value of the residential property may be greater if the property were vacant.
That potential impairment is substantially outweighed by the public concerns the Act addresses. (pp. 28-32)
Judgment of the Appellate Division is REVERSED.
JUSTICE GARIBALDI, dissenting, in which JUSTICES CLIFFORD and POLLOCK join, is of the
view that the Court, relying on the ambiguous words "the owner's or landlord's successor in ownership or
possession," does away with the well-settled property rights of foreclosing mortgagees as well as the priorities
set forth in the New Jersey Recording Act. The Court ignores the legislative history of the 1986
amendments, abandons the relevant principles underlying Guttenberg, and erroneously finds a legislative
intent to overrule the unmistakably clear holding of Guttenberg. Such change should be achieved only where
there is a clear manifestation of legislative intent. Here, there is little evidence to support the majority's
conclusion that the Legislature intended the amended Anti-Eviction Act to apply to foreclosing mortgagees.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER and O'HERN join in JUSTICE STEIN's
opinion. JUSTICE GARIBALDI filed a separate dissenting opinion in which JUSTICES CLIFFORD and
POLLOCK join.
SUPREME COURT OF NEW JERSEY
A-
22 September Term 1993
THE CHASE MANHATTAN BANK,
a National Association
Plaintiff-Respondent,
v.
MR. AND MRS. SEYMOUR JOSEPHSON,
SHERRI BAGNELL and ROBERT
HANSELMANN,
Defendants-Appellants,
and
SAUL WERNER and GRACE WERNER,
MATTHEW STEINFELD, KIM
CAGLIARI, CORRINE McLAUGHLIN,
and ALEX CAPRIO,
Defendants.
Argued October 13, 1993 -- Decided April 13, 1994
On certification to the Superior Court,
Appellate Division, whose opinion is reported
at
261 N.J. Super. 428 (1993).
Susan R. Oxford, Assistant Deputy Public
Defender, argued the cause for appellants
(Zulima V. Farber, Public Advocate,
attorney).
Kenneth D. McPherson, Jr., argued the cause
for respondent (Waters, McPherson, McNeill,
attorneys; Mr. McPherson and Gregory J.
Castano, of counsel; Robert J. Donaher, on
the brief).
Melville D. Miller, Jr., argued the cause for
amicus curiae Legal Services of New Jersey.
(Mr. Miller, attorney; Mr. Miller and Stephen
St. Hilaire, on the brief).
Dennis R. Casale argued the cause for amicus
curiae New Jersey Bankers Association
(Jamieson, Moore, Peskin & Spicer,
attorneys).
Gregory C. Diebold submitted a brief on
behalf of amicus curiae Hudson County Legal
Services (Timothy K. Madden, Director,
attorney).
Judith Trachtenberg submitted a letter brief
on behalf of amicus curiae Non-Profit
Affordable Housing Network of New Jersey,
Inc.
The opinion of the Court was delivered by
STEIN, J.
The issue presented by this appeal is whether the Anti-Eviction Act, N.J.S.A. 2A:18-61.1 to -61.12, as amended by L.
1986, c. 138, protects tenants from eviction by foreclosing
mortgagees unable to establish any of the statutory grounds for
which eviction is authorized. See N.J.S.A. 2A:18-61.1. More
specifically, we consider whether the 1986 amendment to N.J.S.A.
2A:18-61.3, which extended the Act's anti-eviction restrictions
to "an owner's or landlord's successors in possession or
ownership," superseded this Court's decision in Guttenberg
Savings & Loan Ass'n v. Rivera,
85 N.J. 617 (1981), in which we
held that the Anti-Eviction Act did not protect tenants from
eviction by a foreclosing mortgagee.
Appellants are tenants against whom the Chancery Division
entered an order for possession in favor of Chase Manhattan Bank
("Chase"), the mortgagee foreclosing on the property that the
tenants occupy. They contend that the amended Anti-Eviction Act
prohibited the court from entering an order for possession for
Chase absent a showing of statutory good cause. Chase responds
that the 1986 amendments to the Act should not be construed to
overrule the holding in Guttenberg. It asserts that the
Legislature, had it intended to overrule our decision in
Guttenberg, would have expressed its intention to do so in more
explicit language.
The Appellate Division agreed with Chase's contention and
affirmed the Chancery Division.
261 N.J. Super. 428 (1993). The
court determined that if the Legislature had intended to amend
the statute to overturn the decision in Guttenberg, that purpose
would have been clearly expressed in the statutory language and
reflected in the legislative history. Absent such expression,
the court concluded, Guttenberg's interpretation of the Anti-Eviction Act survived the 1986 amendments and, therefore, the Act
did not diminish a court's authority to enter an order of
possession for a foreclosing mortgagee resulting in the eviction
of tenants from the mortgaged property.
We granted the tenants' petition for certification,
133 N.J. 439 (1993). Although the parties have resolved the underlying
dispute, we elect to consider and decide the questions presented
because of their public importance.See footnote 1 See In re J.I.S. Indus.
Serv. Co. Landfill,
110 N.J. 101, 104-05 (1988).
A summary of the facts underlying the litigation will provide a context for resolution of the issues. In April 1973, defendants Marion and Seymour Josephson, a married couple, moved into a single-family home in West Orange that was located on property owned by the Carteret School for Boys. The Josephsons had entered into a one-year written lease, which they had renewed annually until 1978, after which they continued their tenancy pursuant to an oral agreement to pay the same rent on a month-to-month basis.
In 1987, the Carteret School for Boys sold the property, including the Josephsons' residence, to Saul and Grace Werner. The Werners financed the purchase in part with a loan from Chase
Manhattan, secured by a mortgage and an assignment of rents and
leases. The deed and mortgage contained a standard clause
providing that the mortgagee would be entitled to possession on
default by the mortgagor.
The Werners subsequently defaulted on the loan, and Chase
filed a complaint in June 1990 to foreclose the mortgage. In
March 1991 the Werners settled with Chase by conveying a deed for
the property in lieu of foreclosure. Thus, Chase obtained not
only the possessory interest to which it had been entitled on the
Werners' default, but also became the owner of the property by
virtue of the deed from the Werners.
Because the three single-family homes on the property were
occupied by tenants paying from $550 to $560 monthly, rents
described by Chase as far below fair-market value, Chase obtained
leave to amend its complaint to add the tenants as defendants so
that it could evict them and obtain exclusive possession of the
property. In its complaint, Chase asserted that it had taken its
mortgage on the property subject to no encumbrances. The
Josephsons failed to answer the complaint and requested only that
Chase afford them additional time within which to secure adequate
alternative housing. Chase agreed and, instead of seeking a
default judgment and order for eviction, moved for summary
judgment and permitted the Josephsons to remain in their home
rent-free pending their relocation.
Approximately one month later, in January 1992, the Chancery
Division granted Chase's motion for summary judgment. Chase
continued to forbear in collecting rental income from the
Josephsons and permitted them additional time to relocate.
Subsequently, in February 1992, the Public Advocate, acting on
behalf of the Josephsons and other defendants, filed a motion in
the Chancery Division seeking reconsideration of its judgment
pursuant to Rule 4:49-2 or, alternatively, relief from its
judgment under Rule 4:50-1(f). (Chase's complaint originally
sought the eviction of other tenants as well as the Josephsons.
The Appellate Division dismissed the appeal with regard to those
other tenants because they had voluntarily surrendered possession
of the premises. 261 N.J. Super. at 433.) The Public Advocate
argued that the 1986 amendments to the Act made its provisions
applicable to evictions by foreclosing mortgagees.
Alternatively, the Public Advocate maintained that the Court's
holding in Guttenberg, supra,
85 N.J. 617, exempted foreclosing
mortgagees from the Act only with respect to tenancies that had
commenced subsequent to the mortgage and that because the
Josephsons' tenancy predated the execution of the mortgage, the
Act protected them from eviction.
The court denied the Josephsons' motion, finding first that
the fact that their oral month-to-month tenancy predated the
mortgage did not exempt them from our holding in Guttenberg, and
also that the 1986 amendments to the Act were not sufficiently
specific to supersede Guttenberg's exclusion of foreclosing
mortgagees. However, the court stayed execution of the judgment
for possession pending appeal and the Josephsons' payment to
Chase of both the past rent that Chase had excused and their
continuing rental obligations. The Josephsons tendered the
rental payments to Chase with assistance from the Homelessness
Prevention Program of the Department of Community Affairs.
Affirming the judgment of the Chancery Division, the
Appellate Division first determined that Guttenberg did not
afford an exemption under the Act to tenants without a lease
whose possession predated the mortgage. 261 N.J. Super. at 433-35. The court recognized, however, that if the 1986 amendments
superseded Guttenberg and applied the Act to mortgagees, the
distinction between a tenancy and a leasehold would be irrelevant
because the Act would protect tenants holding possession under
either interest. Id. at 435. The court concluded, however, that
the Josephsons were not protected because the language amending
the Act, although broad enough to encompass foreclosing
mortgagees, was not sufficiently precise in its reference to
mortgagees to support a finding that the Legislature intended to
overturn Guttenberg. Id. at 437-40.
A review of the law regarding the respective rights of mortgagees and tenants informs our consideration of the Anti-Eviction Act's application to foreclosing mortgagees. That review encompasses the common law prior to the Act, the changes
effected by the Act, interpretation of the Act by this Court in
Guttenberg, and the amendment of the Act in 1986.
The common law in New Jersey holds that a mortgagee is entitled to possession of mortgaged premises on default of the loan secured by the mortgage. See Guttenberg, supra, 85 N.J. at 626 (citing Dorman v. Fisher, 31 N.J. 13, 14 (1959), and Shields v. Lozear, 34 N.J.L. 496 (E. & A. 1869)). Except for that common-law entitlement, New Jersey follows a "lien" as opposed to a "title" theory of mortgages. Execution of the mortgage does not convey to the mortgagee title that is defeasible on payment of the secured debt, but rather confers on the mortgagee a lien on the property that secures the debt. See Sears, Roebuck & Co. v. Camp, 124 N.J. Eq. 403, 408 (E. & A. 1938); 29 New Jersey Practice, Law of Mortgages § 4, at 21 (Roger A. Cunningham & Saul Tischler) (1975) (hereinafter New Jersey Practice). Thus, on default, the mortgagee has only a possessory interest, and ownership of the premises remains subject to the mortgagor's equity of redemption. See Dorman, supra, 31 N.J. at 14 (stating that mortgagee is entitled to possession without first barring mortgagor's equity of redemption). In order to terminate the mortgagor's equity of redemption, the mortgagee must bring an action to foreclose the mortgage, N.J.S.A. 2A:50-2, obtain a writ of execution for sale of the mortgaged property, N.J.S.A. 2A:50-36, and sell the property on foreclosure, N.J.S.A. 2A:50-37. See
Carteret Sav. & Loan Ass'n v. Davis,
105 N.J. 344, 347-48 (1987).
The foreclosing mortgagee obtains an ownership interest in the
property only when the mortgagee purchases the property at the
foreclosure sale. See Guttenberg, supra, 85 N.J. at 630.
The scope of the possessory and ownership interests obtained
by the foreclosing mortgagee is determined by the mortgagor's
interests at the time the mortgage was executed. See Sears,
Roebuck, supra, 124 N.J. Eq. at 410. Thus, at common law, the
mortgagee's possessory and ownership interests were encumbered by
tenancies only to the extent that the mortgagor's interests were
so encumbered at the time of the mortgage.
At common law, the terms of the tenancy controlled the right
of the owner or landlord to eject the tenant, whether that
tenancy was a term of years or a periodic tenancy. Once the
tenancy expired and the tenant received proper notice, the
tenant's right to possession terminated and the landlord or owner
of the property could eject the tenant who attempted to hold
over. See Cornelius J. Moynihan, Introduction to the Law of Real
Property ch. 3, § 7 (2d ed. 1988) (hereinafter Moynihan).
That general principle was reflected in N.J.S.A. 2A:18-53a,
which, prior to passage of the Anti-Eviction Act in 1974,
established a summary action for possession that could be brought
to remove a tenant who held over and continued in possession of
premises after the expiration of the tenant's term. Therefore,
if the mortgagor's interest in the property was subject to a
tenancy at the time the mortgage was executed, the foreclosing
mortgagee could eject the tenant at the termination of the
tenancy. Guttenberg, supra, 85 N.J. at 626-27.
The Anti-Eviction Act, L. 1974, c. 49, ("the Act") dramatically changed the rights of landlords and owners by prohibiting the ejectment of residential tenants or lessees simply because their tenancies or leases had expired. See Moynihan, supra, at 88 n.1 (noting New Jersey statutory exception to common-law rule that tenant's right to occupancy ends with lapse of tenancy term). The Act provided in N.J.S.A. 2A:18-61.3 that residential tenants no longer could be evicted on termination of their tenancies unless the landlord established good cause for eviction. Good cause included various breaches of tenant responsibilities, such as failure to pay rent and disorderly behavior, see N.J.S.A. 2A:18-61.1.a to -61.1.f, -61.1n to -61.1p, as well as grounds based on owner circumstances, such as removal of property from residential use and conversion of the property from the rental market to cooperative or condominium ownership, see N.J.S.A. 2A:18-61.1.g to -61.1l. Section 4 of the Act stated: "No landlord may evict or fail to renew any lease of any premises * * * except for good cause as defined in [N.J.S.A. 2A:18-61.1]." See N.J.S.A. 2A:18-61.3, amended by L. 1986, c. 138, § 7.
In 1981, this Court considered whether a foreclosing mortgagee could obtain an order for possession against tenants holding leasehold interests in the mortgaged property created subsequent to the mortgage without complying with the requirements of the Anti-Eviction Act. Guttenberg, supra, 85 N.J. 617. We held that the Anti-Eviction Act did not apply to foreclosing mortgagees holding a mortgage that antedated the tenants' leasehold interest. We based that conclusion on several grounds. First, we observed that the Act's language focused on the landlord-tenant relationship, see id. at 623-25 (citing N.J.S.A. 2A:18-61.1 to -61.4), and that the proscription in section 4, N.J.S.A. 2A:18-61.3, against eviction or non-renewal except for good cause was addressed only to "landlords." 85 N.J. at 624.
The Court also declined to view the Act's references to "owners" as evidence that the Legislature intended to subject foreclosing mortgagees to the requirements of the Act. We observed that foreclosing mortgagees were not considered "owners" of property under the common law until they purchased the property at a foreclosure sale. Id. at 630. Moreover, we determined that even if the mortgagee were subsequently to purchase the property and become an owner, no landlord-tenant relationship would exist between the mortgagee and the tenants whose interests were established subsequent to the mortgage
because those interests previously would have been extinguished
by the default and foreclosure. Id. at 626-27, 630.
Because the Act's plain language did not include reference
to foreclosing mortgagees, the Court declined to construe the
statutory language to encompass mortgagees. Although the Act had
abridged long-standing property rights of landlords and property
owners in respect of their tenants and lessees, we were persuaded
that that result did not compel a finding that the Act had
similarly affected mortgagees' rights. In that connection, we
noted that the value of residential property to the landlord or
owner was principally derived from the income stream generated by
rentals, while the value of the same property to a mortgagee was
based primarily on its collateral value as security for a loan.
85 N.J. at 631. We observed that a mortgagee's interests might
be best served if the mortgagee could sell the property
unencumbered by tenancies. Id. at 633.
We also noted that application of the Act to foreclosing
mortgagees would have presented practical inequities that also
weighed against that interpretation. When Guttenberg was
decided, federal mortgage-insurance programs required mortgagees
to convey foreclosed property to the Federal Housing Authority
("FHA") in vacant condition. Id. at 631 (citing
45 Fed. Reg. 59,561, 59,563 (1980) (codified at 24 C.F.R. § 203.381 (1993))).
Thus, application of the Act to mortgagees would have conflicted
with the requirements of the federal mortgage-insurance programs,
potentially resulting in the loss of access to those programs for
New Jersey mortgagees and prospective home buyers. (We note that
the requirement that homes with federally-insured mortgages be
conveyed to the FHA in vacant condition has been amended. In
1991, the Department of Housing and Urban Development adopted
regulations that permit conveyance of occupied property if state
or local law prohibits the eviction of tenants by mortgagees.
See 24 C.F.R. § 203.670(b)(2) (1993).) Finally, we cited the
inequity of saddling mortgagees with various types of burdensome
leases improvidently entered into by the mortgagor subsequent to
execution of the mortgage. 85 N.J. at 632-33.
In 1986 the Legislature amended the Anti-Eviction Act, L. 1986, c. 138, by adding sections N.J.S.A. 2A:18-61.1a to -61.1f and amending N.J.S.A. 2A:18-61.3 and N.J.S.A. 2A:18-61.6. The stated purpose of the amendment was to enhance the Act's protections against the use of pretextual evictions to facilitate renovations that would justify higher rentals or achieve conversion of the building to cooperative or condominium status. See N.J.S.A. 2A:18-61.1a. The amendment focuses on pretextual evictions purportedly based on the retirement of property from residential use, N.J.S.A. 2A:18-61.1.h, or an owner's professed intent permanently to board up or demolish the property, N.J.S.A. 2A:18-61.1.g(1). The amendments to N.J.S.A. 2A:18-61.6 strengthen the Act's provisions imposing liability for pretextual or illegal evictions by extending the scope of the Act's
liability provisions to subsequent purchasers. The additions to
N.J.S.A. 2A:18-61.6c extend liability for pretextual evictions to
subsequent owners and require that those owners be informed of
their responsibilities or indemnified by previous owners.
Most relevant to the issues before us are the 1986
amendments to N.J.S.A. 2A:18-61.3. As originally enacted in L.
1974, c. 49, that provision in its entirety stated:
No landlord may evict or fail to renew
any lease of any premises covered by
[N.J.S.A. 2A:18-61.1] except for good cause
as defined in [N.J.S.A. 2A:18-61.1].
L. 1986, c. 138, § 7 amended N.J.S.A. 2A:18-61.3 by adding
subsection b, which expanded the Act's coverage to include not
only landlords but also "the owner's or landlord's successor in
ownership or possession." N.J.S.A. 2A:18-61.3 now reads:
a. No landlord may evict or fail to
renew any lease of any premises covered by
[N.J.S.A. 2A:18-61.1] except for good cause
as defined in [N.J.S.A. 2A:18-61.1].
b. A person who was a tenant of a
landlord in premises covered by [N.J.S.A.
2A:18-61.1] may not be removed by any order
or judgment for possession from the premises
by the owner's or landlord's successor in
ownership or possession except:
(1) For good cause in accordance with
the requirements which apply to premises
covered pursuant to [the Anti-Eviction Act];
or
(2) For proceedings in premises where
federal law supersedes applicable State law
governing removal of occupants; or
(3) For proceedings where removal of
occupants is sought by an authorized State or
local agency pursuant to eminent domain or
code enforcement laws and which comply with
applicable relocation laws pursuant to the
"Relocation Assistance Law of 1967," * * *
and the "Relocation Assistance Act[]" * * * .
Where the owner's or landlord's
successor in ownership or possession is not
bound by the lease entered into with the
former tenant and may offer a different lease
to the former tenant, nothing in this 1986
amendatory and supplementary act shall limit
that right.
The issue before us is whether the language amending N.J.S.A. 2A:18-61.3 extends application of the Anti-Eviction Act to foreclosing mortgagees.
As a preliminary matter, we note our agreement with the Josephsons' contention that they were protected by the Act even under our pre-amendment interpretation in Guttenberg. Our holding in that case addressed the circumstance in which the tenancy postdated the mortgage. The Josephsons contend that the Guttenberg holding implied that the Act protected tenants in possession pursuant to a tenancy that antedated the mortgage from eviction by the foreclosing mortgagee. The Appellate Division rejected that argument because it found that our holding in Guttenberg would apply only to a tenant under a written lease, not to a month-to-month periodic tenancy such as the Josephsons'. 261 N.J. Super. at 434-35.
A significant component of the Court's reasoning in Guttenberg was that the mortgage default extinguished tenancies created subsequent to the mortgage because the mortgagee's
possessory interest encompassed the possessory interest held by
the mortgagor when the mortgage was executed. 85 N.J. at 626-27.
We determined that because the default extinguished the tenancy,
the mortgagee was not a landlord and would not become a landlord
until the mortgagee became an owner of the property and
established a new tenancy with the occupants. Id. at 630.
Clearly, that reasoning would not apply if the tenancy had
antedated the mortgage. In that circumstance the tenant's
interest would not have been extinguished by the mortgage
default, and the mortgagee's interest would be subject to the
tenancy. Thus, the Anti-Eviction Act would apply to the
mortgagee as landlord.
Our cases regard "[a] month-to-month tenancy [as] a
continuing relationship that remains unabated at its original
terms until terminated by one of the parties." Harry's Village,
Inc. v. Egg Harbor Township,
89 N.J. 576, 583 (1982).
Accordingly, the Josephsons' month-to-month tenancy was a
continuing tenancy and not an interest that was re-established
each month. See Stamboulos v. McKee,
134 N.J. Super. 567, 570-71
(App. Div. 1975). Rather, it began in 1978 and remained in force
since its establishment nine years prior to the execution of
Chase's mortgage. When the Werners defaulted on their loan,
Chase's possessory interest was subject to the Josephsons'
tenancy. Accordingly, Chase stood in the relationship of owner
and landlord to the Josephsons and was subject to the provisions
of the Anti-Eviction Act in those capacities. We therefore
conclude that even prior to the 1986 amendments the Act would
have protected the Josephsons.
In deciding that the amendments to N.J.S.A. 2A:18-61.3 did not apply the Anti-Eviction Act to foreclosing mortgagees, the Appellate Division relied on both legislative history and the statutory language. First, the court determined that the stated purpose of the amendments, as revealed by the legislative history and the legislative findings in N.J.S.A. 2A:18-61.1a, was to curtail the use of pretextual evictions by residential-property owners seeking to convert either to high-income rental use or to condominium or cooperative ownership. 261 N.J. Super. at 436-39. Second, the court cited the Legislature's failure to refer specifically to "mortgagees" either in the statute or the legislative history. Id. at 437. The Appellate Division considered that omission to be especially significant in view of our conclusion in Guttenberg that the statute was not sufficiently specific to encompass mortgagees and that the Legislature would have used a more "straightforward approach" if it had intended to modify the established property rights of mortgagees. 261 N.J. Super. at 440 (quoting Guttenberg, supra, 85 N.J. at 627).
To determine the proper application of the amended Anti-Eviction Act, we begin our analysis with the statutory language. Ordinarily, we derive a statute's meaning by first looking to its
plain language. State v. Sutton,
132 N.J. 471, 479 (1993). If
the language's meaning is clear and unambiguous, it will be given
effect "absent any specific indication of legislative intent to
the contrary." Town of Morristown v. Woman's Club,
124 N.J. 605,
610 (1991) (emphasis added); see GE Solid State, Inc. v.
Director, Div. of Taxation,
132 N.J. 298, 307 (1993).
However, in determining whether contrary intent exists,
courts may examine whether a provision's plain meaning supports a
result that is consistent with the overall statutory scheme. See
State v. Brown,
22 N.J. 405, 415 (1956) (stating that legislative
intent and meaning of statute is derived from nature of subject
matter, contextual setting, and relationship to statutes in pari
materia as well as cognate statutes in order to create
"symmetrical system"). Further inquiry into a statute's intended
meaning is warranted, for example, where the plain meaning seems
inconsistent with the statutory scheme. See, e.g., State v.
State Troopers Fraternal Ass'n,
134 N.J. 393 (1993).
The plain language of N.J.S.A. 2A:18-61.3b encompasses both
foreclosing mortgagees and purchasers at foreclosure sales. As
noted earlier, supra at ___ (slip op. at 7), prior to default a
mortgagor is entitled to possession of the premises, and after
default the mortgagee is entitled to possession. To gain
possession, the mortgagee must obtain an order for possession
from the Superior Court, either in an action for possession
pursuant to N.J.S.A. 2A:35-1 or as part of the action to
foreclose the mortgage. Thus, the prohibition in N.J.S.A. 2A:18-61.3 of the removal of a tenant from the premises "by any order
or judgment for possession * * * by the owner's or landlord's
successor in * * * possession" would appear to include
foreclosing mortgagees seeking possession from tenants residing
in the mortgaged premises.
Moreover, "[t]he purchaser of the mortgaged lands at a
foreclosure sale," including the mortgagee, "'succeeds * * * to
the estate the mortgagor had at the time of the execution of the
mortgage.'" Sears, Roebuck, supra, 124 N.J. Eq. at 410 (quoting
Champion v. Hinkle,
45 N.J. Eq. 162, 165 (E. & A. 1888)). Such
a purchaser is, therefore, "the owner's or landlord's successor
in ownership" and would be encompassed by the plain language of
the statute. The Appellate Division's concession that the new
language in N.J.S.A. 2A:18-61.3b is "broad enough to include
mortgagees," 261 N.J. Super. at 439, is an understatement: the
Act, read literally, applies to mortgagees.
Furthermore, that reading of N.J.S.A. 2A:18-61.3b is
consistent with the Act's overall purpose of protecting blameless
tenants from eviction. See Statement attached to Assembly Bill
A-1586 (enacted by L. 1974, c. 49) ("[R]esidential tenants
frequently have been unfairly and arbitrarily ousted from housing
quarters in which they have been comfortable and where they have
not caused any problems." (emphasis added)) (hereinafter
Statement); 447 Assocs. v. Miranda,
115 N.J. 522, 527-28 (1989)
(quoting language from Statement, supra, and concluding that
Act's purpose was to protect tenants from arbitrary and unfair
evictions). In passing the Act the Legislature was responding to
"a critical shortage of rental housing space in New Jersey,"
Statement, supra, a situation that has not abated. See
Montgomery Gateway East I v. Herrera,
261 N.J. Super. 235, 241
(App. Div. 1992) ("The Anti-Eviction Act * * * protect[s]
residential tenants from the effects of what has become a
critical housing shortage."). Application of the Act to the
tenants of defaulting mortgagors would protect those tenants from
having to confront the devastating effects of eviction not
through any fault of their own but merely because they had rented
property from landlords that were either unwilling or unable to
meet their mortgage obligations.
Moreover, we presume that the Legislature is familiar with
existing judicial statutory interpretations. Brewer v. Porch,
53 N.J. 167, 174 (1969); County of Essex v. Commissioner, N.J. Dep't
of Human Servs.,
252 N.J. Super. 1, 11 (App. Div.), certif.
denied,
127 N.J. 553 (1991). That a statutory amendment uses
specific language to address concerns raised in prior judicial
interpretations of the amended statute suggests that the
Legislature considered those interpretations in drafting and
enacting the amendment. Cf. Data Access Sys., Inc. v. State,
63 N.J. 158, 166 (1973) (noting that where statutory language is
clear, extrinsic aids may supply "reassuring confirmation of
literally apparent meaning"). We believe that the amended
language of N.J.S.A. 2A:18-61.3 addresses many of the concerns
raised in Guttenberg and reflects the Legislature's intent to
supersede Guttenberg's interpretation of the statute.
In Guttenberg, the Court expressly stated that a mortgagee
had the right to possession on the mortgagor's default. 85 N.J.
at 626. More specifically, we observed that "the mortgagee, upon
default, could foreclose on the leasehold and obtain an order for
possession against the mortgagor's tenant." Id. at 626-27
(footnote omitted) (emphasis added). The language amending
N.J.S.A. 2A:18-61.3 fairly mirrors the Guttenberg language,
stating for the first time that a tenant "may not be removed by
any order or judgment for possession * * * by the owner's * * *
successor * * * in * * * possession." N.J.S.A. 2A:18-61.3b.
Furthermore, Guttenberg pointed out that a mortgagee would
become the mortgagor's successor in ownership only if and when
the mortgagee purchased the property at a foreclosure sale. We
there concluded that because the default had cut off the
subsequent leasehold and had given the mortgagee the right to
possession, the landlord-tenant relationship between the
mortgagee and tenant had already been severed by the time the
mortgagee had become an owner through the foreclosure-sale
purchase. 85 N.J. at 630. Once again, N.J.S.A. 2A:18-61.3b
specifically addresses that issue because it now forbids orders
for possession against "[a] person who was a tenant of a
landlord" in favor of "the owner's or landlord's successor in
ownership or possession." N.J.S.A. 2A:18-61.3b (emphasis added).
The Guttenberg decision also noted the practical problems
that would result from application of the Anti-Eviction Act to
foreclosing mortgagees. We observed in Guttenberg that homes
with federally-insured mortgages were required by federal
regulations to be conveyed to the federal agency in vacant
condition after foreclosure. Application of the Act to
foreclosing mortgagees would thus have created a conflict with
the federal requirements. 85 N.J. at 631-32. In our view, the
1986 amendments address those concerns, providing an exception to
the Act "[f]or proceedings in premises where federal law
supersedes applicable State law governing removal of occupants."
N.J.S.A. 2A:18-61.3b(2). Although amendments to federal
regulations have removed the vacancy requirement, supra at ___
(slip op. at 12), we infer that the exception in the 1986
legislation was designed to address the specific problem
described in Guttenberg.
We also noted in Guttenberg the inequity of saddling
mortgagees with unfavorable lease arrangements entered into by
their mortgagors. 85 N.J. at 632. The last paragraph of
N.J.S.A. 2A:18-61.3b addresses that problem by permitting a
mortgagee to offer a tenant a new lease when the mortgagee is not
bound by the previous one. Thus, the amendment provides that in
situations in which a mortgagor has entered into an unfavorable
lease subsequent to the execution of the mortgage, the mortgagee,
on default, is not bound by that lease and can offer the tenant a
new lease, presumably with more reasonable terms. Our dissenting
colleagues, however, overstate the significance of our reference
to this statutory authorization, attributing to the majority
opinion the conclusion that the mortgagee's "ability to
renegotiate the lease of a tenant in possession is some cure-all
or panacea," post at ___ (slip op. at 4). No such inference is
suggested or intended. The 1986 amendment simply confirms that
when an owner's or landlord's successor is not bound by the lease
with a prior tenant, the prohibition against eviction without
fault does not preclude renegotiation of the lease.
Amicus New Jersey Bankers Association argues that the Act
nevertheless prohibits mortgagees from evicting tenants who
refuse the new terms. We note, however, that N.J.S.A. 2A:18-61.1.f specifically permits eviction for refusal to pay lawful
rent increases that are not unconscionable. See 447 Assocs.,
supra, 115 N.J. at 530 (distinguishing "reasonableness"
requirement for lease-term change under N.J.S.A. 2A:18-61.1i from
more relaxed "unconscionability" standard for rent increases
under N.J.S.A. 2A:18-61.1.f). Although N.J.S.A. 2A:18-61.1.f
requires that such increases comply with local rent ordinances,
those ordinances are intended to permit an owner to receive a
fair and reasonable return on the property. Mayes v. Jackson
Township Rent Leveling Bd.,
103 N.J. 362, 367 (1986), cert.
denied,
479 U.S. 1090,
107 S. Ct. 1300,
94 L. Ed.2d 155 (1987).
We also expressed our concern in Guttenberg that application
of the Act to mortgagees would cause them either to forego
lending to rehabilitative projects or defer foreclosure in
situations in which the mortgaged property required renovations but was occupied, deciding instead to allow the owner to hold the property until it had deteriorated sufficiently to cause constructive eviction of the tenants. 85 N.J. at 632. We note initially that a strategy designed to force tenants out of a building by allowing it to become uninhabitable is not one that we should countenance by permitting its threatened use to influence our interpretation of the Act. More importantly, however, we observe that the Act does permit a good-cause eviction in situations in which property has been cited for housing-code violations and the owner seeks to board up the property because repair is economically unfeasible. See N.J.S.A. 2A:18-61.1.g(1). Furthermore, N.J.S.A. 2A:18-61.3b(1) makes that ground for eviction available to foreclosing mortgagees in their capacity as the owner's successor in possession or ownership, and N.J.S.A. 2A:18-61.6e exempts the purchaser of the vacant property at a foreclosure, execution, or bankruptcy sale from the treble-damages liability otherwise imposed by N.J.S.A. 2A:18-61.6c on a subsequent owner who prematurely returns the property to residential use. The purchaser at foreclosure is required only to provide the evicted tenants with notice of the property's return to residential use, see N.J.S.A. 2A:18-61.6e(4), a condition that is consistent with the housing rehabilitation purpose. That overall statutory scheme allows mortgagees to provide loans for the rehabilitation of housing without running
the risk of being saddled with the management of occupied and
unmarketable deteriorated housing.
Our conclusion that the Act, as amended, applies to
mortgagees is significantly influenced by the difference in the
Act's provisions concerning the treble-damage liability imposed
on owners or their successors for unlawful evictions, and the
provisions in respect of the treble-damage liability imposed on
owners or their successors pursuant to N.J.S.A. 2A:18-61.6c for
pretextual evictions. N.J.S.A. 2A:18-61.3, in conjunction with
N.J.S.A. 2A:18-61.6d -- the anti-eviction provisions -- and
N.J.S.A. 2A:18-61.6c -- the pretextual-eviction liability
provision -- impose liability on "owners," and their successors
in interest. (Specifically, N.J.S.A. 2A:18-61.3 prohibits
unlawful evictions by the landlord or by "the owner's or
landlord's successor in ownership or possession," and N.J.S.A.
2A:18-61.6d authorizes imposition of treble damages on those
prohibited from engaging in unlawful evictions. N.J.S.A. 2A:18-61.6d defines "owner" to include "lessee, successor owner and
lessee, and other successors in interest," and that definition
applies to owners subject to liability for pretextual evictions
under N.J.S.A. 2A:18-61.6c.)
Pursuant to the 1986 amendments, N.J.S.A. 2A:18-61.6e
exempts purchasers at a foreclosure sale from the pretextual-eviction treble-damage provisions of N.J.S.A. 2A:18-61.6c. Such
purchasers are typically foreclosing mortgagees. See Carteret
Sav. & Loan Ass'n, supra, 105 N.J. at 351 (citing ten-year study
of county foreclosure sales showing that 89" of sales resulted in
nominal-bid purchases by mortgagees); 30 New Jersey Practice,
supra, § 356, at 292 n.63; William C. Prather, Foreclosure of the
Security Interest, 1
957 U. Ill. L.F. 420, 427-30, reprinted in
Allan Axelrod et al., Land Transfer and Finance 267 (3d ed.
1986). The pretextual-eviction treble-damage liability imposed
by N.J.S.A. 2A:18-61.6c ordinarily applies to "an owner" or its
successor that returns property to residential use less than five
years after it had been boarded up or ostensibly retired from
residential use. Presumably, the Legislature concluded that a
foreclosing mortgagee who had no responsibility for the
pretextual removal of property from the residential market should
have no liability if the property were returned to the market
before the five-year statutory bar had expired.
By specifically exempting foreclosing mortgagees from the
treble-damage liability imposed by N.J.S.A. 2A:18-61.6c, the
Legislature demonstrated its understanding that foreclosing
mortgagees otherwise would be subject to that liability because a
foreclosing mortgagee was either "an owner," N.J.S.A. 2A:18-61.6c, a "successor owner," N.J.S.A. 2A:18-61.6d, or "other
successor[] in interest." Id. Because the Legislature
understood those terms to encompass foreclosing mortgagees, the
Legislature similarly must have understood that the phrase "an
owner's * * * successor in ownership or possession" -- the phrase
added to the amended language of N.J.S.A. 2A:18-61.3, the anti-eviction provision, -- also encompassed foreclosing mortgagees.
However, the Legislature did not exempt foreclosing mortgagees
from liability under the anti-eviction section of the Act.
Similarly, recent additions to the Anti-Eviction Act
demonstrate the Legislature's understanding that the amended
language in the anti-eviction provision encompasses foreclosing
mortgagees. On December 27, 1993, the Legislature added to the
Anti-Eviction Act sections N.J.S.A. 2A:18-61.1g and -61.1h. See
L. 1993, c. 342, §§ 3-4. N.J.S.A. 2A:18-61.1g authorizes
municipalities to enact ordinances that would require "the owner
of a structure" to pay relocation costs for tenants who are
evicted due to zoning or building-code enforcement, pursuant to
N.J.S.A. 2A:18-61.1.g(3). N.J.S.A. 2A:18-61.1h requires "the
owner" to make such payments in municipalities that have not
passed the ordinances authorized by N.J.S.A. 2A:18-61.1g. Both
new sections contain subsections that expressly exclude
foreclosing mortgagees. Subsection d of N.J.S.A. 2A:18-61.1g and
subsection e of N.J.S.A. 2A:18-61.1h each state: "For the
purposes of this section, the owner of a structure shall exclude
mortgagees in possession of a structure through foreclosure."
Furthermore, L. 1993, c. 342, § 2 amends the anti-eviction
provision, N.J.S.A. 2A:18-61.3, by adding a specific reference to
the new relocation-cost section enacted in L. 1993, c. 342, § 3.
Thus, when the Legislature exempted foreclosing mortgagees from
the relocation-cost liability imposed by the new sections, it
expressly considered the anti-eviction provision and excluded
foreclosing mortgagees from the term "owner" only for the
purposes of the new sections. Once again, no such exemption
would have been required had the Legislature believed that the
anti-eviction provision or the term "owner" as used throughout
the Act, see N.J.S.A. 2A:18-61.6d, did not encompass foreclosing
mortgagees.
Thus, when the Legislature sought to limit application of
the Act in order specifically to protect foreclosing mortgagees,
it did so by enacting a specific exemption from provisions of the
Act not intended to affect them, demonstrating its recognition of
the special concerns of foreclosing mortgagees. That it did not
exempt foreclosing mortgagees from the Act's anti-eviction
provisions strongly suggests a legislative determination that
those provisions should apply to all successors in ownership or
possession, including mortgagees.
Chase and amicus New Jersey Bankers Association have raised constitutional concerns about the modification of contract and property rights that may result from application of the amended Anti-Eviction Act to mortgagees that established their mortgage interests prior to the 1986 amendments. Although application of the Anti-Eviction Act to foreclosing mortgagees may alter their contract and common-law property rights, we are satisfied that the effect on those interests does not infringe on constitutional contract protections, see U.S. Const. art. I, § 10, cl. 1; N.J.
Const. art. IV, § 7, para. 3, or due process, see U.S. Const.
amends. V, XIV; N.J. Const. art. I, para. 1.
We have long recognized that "[r]estrictions on the use of
property, if in furtherance of a valid governmental purpose,
serve the public interest and are considered a proper exercise of
the police power even though they may result in some economic
disadvantage." New Jersey Ass'n of Health Care Facilities v.
Finley (In re Review of Admin. Promulgation of Health Care Admin.
Bd.: N.J.A.C. 8:30-14.1 through 8:30-14.6),
83 N.J. 67, 81,
appeal dismissed and cert. denied sub nom. Wayne Haven Nursing
Home v. Finley,
449 U.S. 944,
101 S. Ct. 342,
66 L. Ed.2d 208
(1980); see also Stuyvesant Town, Inc. v. Ligham,
17 N.J. 473,
483 (1955). All that is required is that the legislation be a
reasonable restriction that serves the public welfare. See State
v. Schmid,
84 N.J. 535, 561 (1980), appeal dismissed,
455 U.S. 982,
101 S. Ct. 2312,
68 L. Ed.2d 838 (1981). Enforcement of
legislation that adversely affects property rights is valid when
the public interest being served clearly outweighs the
impairment. See State, Dep't of Envtl. Protection v. Ventron
Corp.,
94 N.J. 473, 499 (1983); see also Phillips v. Curiale,
128 N.J. 608, 622 (1992) ("Fairly-debatable questions concerning the
need and propriety of the means used to meet the [public
interest] fall within the Legislature's police power * * * and
thus * * * '"[e]very reasonable presumption is to be made in
favor of the validity of the legislative act."'" (quoting Rothman
v. Rothman,
65 N.J. 219, 227 (1974) (quoting Reingold v. Harper,
6 N.J. 182, 194 (1951)))).
Given the continued shortage of residential housing and the
related threat of homelessness, the substantial public interest
in preventing the eviction of blameless tenants is indisputable.
The specific interest impaired by application of the Act to
mortgagees is the possibility that the resale value of
residential property may be greater in vacant condition than if
occupied by tenants. See Guttenberg, supra, 85 N.J. at 631. We
are convinced that the injury from that possible impairment is
substantially outweighed by the public concerns that the Act
addresses.
That conclusion is consistent with the established
constitutionality of the Act's restrictions on the rights of
property owners, see Puttrich v. Smith,
170 N.J. Super. 572, 575-76 (App. Div. 1979), because the Act's effect on an owner's
property interests is likely to be even greater than its effect
on the limited interest of a foreclosing mortgagee. See
Guttenberg, supra, 85 N.J. at 637 (Pashman, J., dissenting). The
value of the property to the mortgagee is primarily as
collateral, which is realized through sale of the property. The
opportunity to realize that sale value is also an interest held
by the conventional property owner. In addition, conventional
owners are confronted with eviction restrictions that affect
their ongoing use of the property. Thus, the restrictions on
property interests that were addressed in sustaining the
constitutionality of the Act affect mortgagees as well as owners.
Id. at 636.
We draw the same conclusion with respect to claims alleging
an unconstitutional impairment of contracts. In Edgewater
Investment Associates v. Borough of Edgewater,
103 N.J. 227
(1986), this Court considered a comparable challenge to the
Senior Citizens and Disabled Protected Tenancy Act, a statute
that increased protections for certain tenants beyond those
already provided by the Anti-Eviction Act. Id. at 232-33. We
agreed with the Appellate Division that the tenant protections
did not substantially impair contractual rights of property
owners and were reasonably related to the legitimate purpose of
providing protection to tenants. Id. at 234 (citing Edgewater
Inv. Assocs. v. Borough of Edgewater,
201 N.J. Super. 267, 278-80
(1985)). We now conclude that that reasoning applies as well to
the Anti-Eviction Act. We find no distinction of constitutional
significance between the dilution of the contractual rights of
mortgagees and those of owners resulting from the Act's
provisions that afford enhanced protection to tenants.
We therefore hold that N.J.S.A. 2A:18-61.3b applies the Anti-Eviction Act to foreclosing mortgagees, and thus supersedes the Court's decision in Guttenberg. As amended, the Act protects tenants from eviction by foreclosing mortgagees irrespective of
whether their tenancy was established before or after the
execution of the mortgage.
Although retroactive application of judicial decisions is
the general rule, Rutherford Educ. Ass'n v. Board of Educ.,
99 N.J. 8, 21 (1985), our holding will be applied only
prospectively, in view of "the uncertainty over the issue that
has persisted" since enactment of the 1986 amendments. Green v.
Auerbach Chevrolet Corp.,
127 N.J. 591, 601 (1992). Because the
exposure of mortgagees to liability for the past eviction of
tenants would be inequitable, we are satisfied that the interests
of justice will be best served by prospective application of our
decision.
The judgment of the Appellate Division is reversed.
Chief Justice Wilentz and Justices Handler and O'Hern join
in this opinion. Justice Garibaldi has filed a separate
dissenting opinion in which Justices Clifford and Pollock join.
SUPREME COURT OF NEW JERSEY
A-
22 September Term l993
THE CHASE MANHATTAN BANK,
a National Association
Plaintiff-Respondent,
v.
MR. AND MRS. SEYMOUR JOSEPHSON,
SHERRI BAGNELL and ROBERT HANSELMANN,
Defendants-Appellants,
and
SAUL WERNER and GRACE WERNER,
MATTHEW STEINFELD, KIM
CAGLIARI, CORRINE McLAUGHLIN,
and ALEX CAPRIO,
Defendants.
______________________________________
GARIBALDI, J., dissenting.
Today, the majority holds that the Anti-Eviction Act, as amended by L. l986, c. 38, applies to all foreclosing mortgagees holding a lien that was established prior to the leasehold of the tenant in possession. In so doing, the majority does precisely what this Court declined to do in Guttenberg Savings & Loan Ass'n v. Rivera, 85 N.J. 617 (1981) -- namely, extend the Anti-Eviction Act to foreclosing mortgagees without a clear legislative indication that such a construction reflects the Legislature's intent. Relying primarily on the ambiguous words, "the owner's or landlord's successor in ownership or possession," the Court sweeps away the well-settled property rights of foreclosing
mortgagees as well as the priorities set forth in the New Jersey
Recording Act, N.J.S.A. 46:2l-l to -4.
The Court achieves that surprising result by ignoring the
legislative history of the l986 amendments, by abandoning the
relevant principles underlying Guttenberg, and, ultimately, by
erroneously consigning to the Legislature an intent to overrule
our unmistakably clear holding in Guttenberg. I believe that we
should not accomplish by judicial fiat such sweeping changes of
that well-established principle. Indeed, we should achieve such
changes only in the face of a clear manifestation of the
Legislature's intent. Because little evidence supports the
majority's conclusion that the Legislature intended the amended
Anti-Eviction Act to apply to foreclosing mortgagees, I
respectfully dissent from the Court's holding.
To understand the wide-sweeping ramifications of the Court's ruling, I look no further than Maryland National Mortgage Corp. v. LittleJohn, 26l N.J. Super. 428 (App. Div. l993), a case argued before this Court with this case.
The facts in LittleJohn are simple. On January 28, l988, George and Gwendolyn Clapps purchased a single-family house in Irvington, and executed a purchase money mortgage for $58,200 on the same day. The mortgage was recorded on February 5, l988. On February l, l99l, the Clappses defaulted, and on November l2,
l99l, the mortgagee, Maryland National Mortgage Corporation,
filed a complaint seeking foreclosure and possession of the
property. A lis pendens was filed on December 9, l99l. After
Maryland National had filed both the complaint and the lis
pendens, LittleJohn entered into a lease with the Clappses to
become a tenant on January 3, 1992.
Under the majority's holding today, LittleJohn, who entered
into a lease with a defaulting mortgagor not only
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