By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Estate Planning Attorney
Having a real Estate Mortgage is pretty typical for homeowners in New Jersey. Most people try to pay theirs off so they have more money to spend and won’t lose their property to foreclosure. But when a person is a wealthy real estate developer whose corporation owns and develops homes for sale, what happens if you promise to pay off a mortgage as a gift to your significant other (not wife, significant other), and then change your mind? Well, in the case of Jennings v. Cutler, 288 N.J. Super. 553 (1996), a jilted girlfriend sued her then ex-boyfriend and his corporation demanding the value of the mortgage she was gifted.
The facts showed that the boyfriend had been taking care of her bills. She had originally asked for $250,000 in cash worried about what she would do if something were to happen to him. Instead of giving her cash, he gave her a $150,000 mortgage in one of his development homes. He wrote a letter to her attorney, stating that he wished to gift her the $150,000 mortgage, but that she “would only receive this gift at the settlement of” the property, and asked the attorney to draft an agreement that would guarantee this payment. The attorney drafted a note and mortgage in the property, and it was signed and notarized by the boyfriend and the plaintiff (as a corporate officer of his corporation who boyfriend could sign the document to the property). He even had one of his real estate agents explain what the mortgage meant to the plaintiff. The couple split up after the property was sold, and when the ex was looking for the $150,000, he never gave it to her, so she sued.
Our Appellate Division agreed with the trial court in holding that the mortgage was validly gifted to the plaintiff, and that she should have been paid the $150,000. The letter he wrote to the attorney, along with him asking his real estate agent to explain the mortgage to her, showed his intent to make a gift with the mortgage as a security. The court further held that the interest she was given in the property allowed the mortgage to be deliverable, a critical element necessary to establish whether there was a gift made. Finally, the paperwork which was personally delivered to her and notarized, was in her possession. All of these facts showed a relinquishment of the defendant’s control over the mortgage to the plaintiff, and the Court ruled it to be a valid gift subject to the money being paid to plaintiff.
The evidence here was overwhelming that a gift was made. The defendant wrote a letter stating his gift to the plaintiff of $150,000 in a mortgage on the property. It was executed as such, and he took great lengths to ensure that this was done. It is also not surprising that the court held that plaintiff’s possession of the paperwork evidenced a full delivery of the mortgage. The courts have held in the past that when transferring property, possession of a deed by the person whom the deed was intended for created a presumption that the transfer was complete. It seems logical to do the same thing here. So no surprises by the Courts here.
To discuss your NJ Estate Planning matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at email@example.com. Please ask us about our video conferencing consultations if you are unable to come to our office.