CONSTRUCTION & REAL ESTATE BLOG

Limiting Foreclosures to the Holder of the Original Note

by Gary Nissenbaum | Jun 17, 2014

If someone wants to foreclose on property, should they be required to prove that they are the holder of the mortgage, i.e. the mortgagee? That question has plagued New Jersey for a number of years. It has resulted in many court battles, including 46 orders to show cause since April of 2012 that were filed for the purpose of correcting foreclosures that had been filed with erroneous documentation.

A proposed statute (which has not yet reached the Governor’s desk) would seek to correct some of these problems. Most notably, it would require that a mortgagee who was foreclosing produce documentation proving that it was the holder of the original note. Under that proposed law (S-1346) there would be an enhanced standard for proving that the mortgagee was the owner of the note. Further, mortgage servicers would need to provide contact information, and if they did not, any payments that went to the wrong person or entity would nevertheless be deemed valid.

The bill was voted out of the Senate Community and Urban Affairs Committee on May 19, 2014.

What is a Quit Claim Deed and How is it Used?

by Gary Nissenbaum | May 29, 2014

How do you sell something you don’t know if you own? That may sound like a nonsensical question, but there are many situations in which it comes up under the law.

The typical example is with respect to real estate. Many times the real estate records do not tell the whole story about who has an interest in the property. Sometimes there is a dispute about ownership. Other times people may have proprietary rights that are not necessarily related to actual ownership of the land, but instead may relate to how it is used (or restrictions on that use).

The law has come up with a way of dealing with such situations. It is called a quit claim conveyance. It means that the person will convey whatever interest they may have, whether or not they can define it.

One of the more interesting ways this is currently used has to do with the assignment of intellectual property. Often someone might be involved in a group project that results in creating a trademark, copyright or other such property rights. In such a situation the parties will often create a company that they jointly own and have everyone sign a quit claim transfer assigning any rights they may have, known or unknown, to that company.

A quit claim conveyance or transfer is a powerful tool for those involved in legal situations that may involve a level of obscurity or ill-defined rights.

What are the Requirements for a Business to Recover Damages Under the Theory of Quasi-Contract?

by Gary Nissenbaum | May 22, 2014

May an architect who draws up plans at the request of someone considering a land purchase recover the reasonable value of the services, if there is no written contract. That was the issue before the Court in Israel Design Group v. Chabad of the Shore, Superior Court of New Jersey, Appellate Division, Docket No. A-6008-11T3 (July 9, 2013).

In that case, the plaintiff was an architectural firm which developed plans for a synagogue. The synagogue had requested the plans because it was considering purchasing property for expansion. There was no contract; nevertheless, the parties did not dispute that the plaintiff had provided the plans.

The Court determined that, even though there was no written contract, the plaintiff would be permitted to recover under the doctrine of quasi-contract. “Quasi-contractual liability ‘rests on the equitable principle that a person should not be able to enrich himself unjustly at the expense of another.’” Wichert Co. Realtors v. Ryan, 128 N.J. 427, 437 (1992).

While this common law theory is not something that serves as a substitute for a contract, it is a useful tool for those asserting a damage claim in the absence of a written agreement.

Can a Subcontractor Collect Money it is Owed Without Providing Evidence of Why it is Owed that Sum?

by Gary Nissenbaum | Feb 5, 2014

When asserting damages under the New Jersey Prompt Pay Act, what evidence should be submitted to the Court? That issue was discussed in United States v. APS Contracting, Inc., CIV. 11-779-KMW, 2013 WL 530576 (D.N.J. Feb. 11, 2013).

In that case, Plaintiff, Cardinal Contracting Company, LLC, filed a motion for final judgment by default against Defendant A.C.C. Construction, LLC (“ACC”) and to amend the pleading. No opposition was filed.

Plaintiff had sued Defendants APS Contracting, Inc. Fidelity and Deposit Company of Maryland and ACC. Plaintiff alleged that ACC entered into a subcontract with Plaintiff wherein Plaintiff was the sub-subcontractor and was to provide a portion of the labor and material required for the construction project of a Combined Maintenance Facility at the Fort Dix United States Army Installation.

Plaintiff performed under the contract and ACC failed to pay.

The Plaintiff filed suit against ACC for breach of contract and violations of the New Jersey Prompt Payment Act. Defendant ACC was properly served but failed to answer the complaint or otherwise enter an appearance in the case. The Clerk of the Court entered default against Defendant ACC, and Plaintiff filed a motion seeking final judgment by default.

The Court noted that the New Jersey Prompt Payment Act provides that,

“[i]f a … subsubcontractor has performed in accordance with the provisions of its contract with the … subcontractor and the work has been accepted …, and the parties have not otherwise agreed in writing, the prime contractor shall pay to its subcontractor and the subcontractor shall pay to its subsubcontractor within 10 calendar days of the receipt of each periodic payment, final payment or receipt of retainage monies, the full amount received for the work of the … subsubcontractor based on the work completed or the services rendered under the applicable contract.” N.J. Stat. Ann. § 2A:30A–2(b). “If a payment due pursuant to the provisions of this section is not made in a timely manner, the delinquent party shall be liable for the amount of money owed under the contract, plus interest at a rate equal to the prime rate plus 1%.” N.J. Stat. Ann. § 2A:30A–2(c). Further, “the prevailing party shall be awarded reasonable costs and attorney fees.” N.J. Stat. Ann. § 2A:30A–2(f).

United States v. APS Contracting, Inc., CIV. 11-779-KMW, 2013 WL 530576 (D.N.J. Feb. 11, 2013)

So far so good. The problem arose when the Plaintiff sought to prove its damages. Plaintiff proffered a very terse certification stating that Defendant failed to pay $74,002.50 and that interest was calculated pursuant to the Prompt Pay Act. Further Plaintiff certified as to $30,808.00 in attorneys fees.

The Court found that Plaintiff was entitled to final judgment but did not enter that judgment. It ruled that Plaintiff had submitted insufficient evidence to support its claim for damages. It required Plaintiff to provide evidence in the form of an affidavit with supporting documentation for each aspect of the damages claimed.

Can a Tenant Pay Rent in Advance and Then Stop Payment on the Check if He Decides to Terminate the Lease?

by Gary Nissenbaum | Feb 5, 2014

If a lease provides for a rent due date and the rent is paid in advance, is it reimbursable if the lease is thereafter terminated? That issue was considered by the New York State Court of Appeals in Eujoy Realty Corp. v. Van Wagner Communications, LLC 2013 WL 6164508 (Nov. 26, 2013).

In that case, the lease explicitly provided that the tenant would pay the rent in advance for a full year. The lease also provided that the landlord was not required to return any of the rent if it was terminated for any reason. In 2007, the tenant paid $96,000+ for a full year of rent in advance. However, the tenant claimed that the payment was sent in error and that it wanted to terminate the lease.

The Judge ruled that rent paid in advance is not recoverable if the lease is terminated prior to completion of the term. The exception would be if the lease were to provide otherwise. In this case, it did not.

The Court also explained that the tenant was a “sophisticated and counseled” business, and thus it could have bargained for what it wanted when drafting the lease. Therefore, the Court would not require the money to be reimbursed.

Will the Economic Loss Doctrine Bar a NJ Negligence Claim if That Would Result in the Plaintiff Having No Remedy at All?

by Gary Nissenbaum | Jan 28, 2014

Will the economic loss doctrine bar a claim for negligence if by doing so, the plaintiff will be left without a remedy? That issue was addressed in Spectraserv, Inc. v. The Middlesex County Utilities Authority et als., Superior Court of New Jersey, Law Division, Docket No. L-2577-07 (July 25, 2013).

In that case, the parties were disputing whether there should be damages with respect to the construction of a sludge pasteurization facility in Sayerville, New Jersey. The Defendant argued that the negligence claim relating to that construction was barred by the economic loss doctrine.

In its opinion, the Court began by discussing the nature of the doctrine itself. It explained that a tort (e.g., fraud or negligence) claim and a contract claim usually cannot be brought under New Jersey law for the same facts. The plaintiff usually must choose one or the other.

“Economic loss can take the form of either direct or consequential damages.” Spring Motors Distribs. v. Ford Motor Co., 98 N.J. 555, 566 (1985). “A direct economic loss includes the loss of the benefit of the bargain, i.e., the difference between the value of the product as represented and its value in its defective condition.” Ibid. (emphasis omitted). “Consequential economic loss includes such indirect losses as lost profits.” Ibid.

As the Third Circuit has aptly noted, “[u]nder New Jersey [*19] law, the economic loss doctrine defines the boundary between the overlapping theories of tort law and contract law by barring the recovery of purely economic loss in tort.” Travelers Indem. Co. v. Dammann & Co., 594 F.3d 238, 244 (3d Cir. 2010) (internal quotation and formatting marks omitted). “The purpose of the rule is to strike an equitable balance between countervailing public policies that exist in tort and contracts law.” Ibid. (internal quotation and formatting marks omitted). Our Supreme Court has observed that “the purpose of a tort duty of care is to protect society’s interest in freedom from harm, i.e., the duty arises from policy considerations formed without reference to any agreement between the parties[]” whereas “[a] contractual duty, by comparison, arises from society’s interest in the performance of promises.” Spring Motors, supra, 98N.J. at 579.

Id. at 15.

However, in Spectraserv, the Court was confronted with an interesting twist (a “case of first impression”). The issue was whether the doctrine would still be applied if the result would be to bar anyclaim. In other words, if the doctrine barred a negligence claim and there were no other claim available to the plaintiff, would it still apply?

The answer was that the Court found it did not have to reach that issue. It found that there was another claim that could be brought: a breach of contract claim. Therefore, while the Court acknowledged that there suggesting that the application of the doctrine would be prevented if there were no other remedy, here there was another remedy. Therefore, in this case, the doctrine would be applied.

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