Case Title: Panetta v. Equity One

Citation: 

Docket Number: a-2-06

State: new-jersey

Court: New Jersey Supreme Court

Date: 2007-05-01T00:00:00Z

Document:
(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). Several generations of the Francis family owned property located at 633 Point Avenue, Brick Township, which consisted of an upland lot designated as Block 934, Lot 23.01 and a riparian grant separately designated as Block 934, Lot 23.03 on the municipal tax map. The riparian grant was created in 1928, and was recorded in the Ocean County Clerk s Office. As of 1992, the property was owned by Rowina Schoener Francis and her son George Francis. On April 6, 1992, they deeded the property to themselves and to George s wife Carolyn Francis. That deed specifically included and described the upland lot and the riparian grant as tract one and tract two, respectively. In 1995, George applied for a loan from Equity One, Inc., using the property as security. During the application process, Rowina, George and Carolyn deeded their interest in the upland property to George and Carolyn. That deed did not mention the adjacent riparian grant, but only described the property as Lot 23.01, Block 934 on the tax map and also contained a metes and bounds description of only the upland lot. Equity One agreed to lend George $220,000. As security for the loan, George and Carolyn executed a mortgage on property that was described exactly as it had been in the 1995 deed -- as Lot 23.01, Block 934 and also as 633 Point Avenue. Although the mortgage documents provided that all improvements, easements, appurtenances, and fixtures were included, no mention of the riparian grant (Lot 23.03) was contained therein. George thereafter defaulted on the loan, and Equity One foreclosed on the mortgage. A sheriff s sale occurred on June 24, 1997. The sheriff s deed contained the same description of the encumbered property as the 1995 deed. Equity One was the successful bidder and thus acquired title to the mortgaged property. Subsequently, Equity One received three separate offers to purchase the property. On July 25, 1997, Equity One rejected all prior offers and initiated a closed bidding process limited to the three prior bidders. Joseph Panetta submitted a bid of $255,000 with no other conditions or terms. Dennis and Dorothy McKenna submitted a bid of $287,000 and described the property as including both the upland lot and the riparian grant. Anne Covey s bid was for $280,000 and included a statement that the bid was for the property, with the riparian grant incorporated therein. While Covey was informed that her bid was the highest, the following day the attorney for Equity One, believing a mistake had been made, advised all parties that Equity One would reopen the bidding process on an open competitive basis. The three bidders filed separate complaints, which were consolidated. The trial judge concluded that Panetta had submitted the only conforming bid and ordered specific performance in favor of Panetta. Covey appealed. In an unpublished opinion, the Appellate Division remanded the case to the trial judge for further findings. The trial judge determined that George Francis intentionally excluded the riparian grant in securing the mortgage and that Equity One was unaware of the grant. The judge further held that nothing requires that a riparian grant follow the upland property as a matter of law. Therefore, he again awarded specific performance to Panetta. Covey appealed. In a published opinion, the Appellate Division reversed the judgment of specific performance in favor of Panetta. Panetta v. Equity One, 378 N.J. Super. 298 (App. Div. 2005). The panel held that the riparian grant was included in the 1995 conveyance. Panetta and Covey then each filed a petition for certification. This Court granted both petitions. HELD: A riparian grant is a conveyance in fee simple of real property. As such, without specific mention in the deed or other evidence that the parties intended its inclusion, a riparian grant will not pass as appurtenant to another distinct parcel. At the heart of this case is the 1995 deed. Covey argues that the deed transferred the riparian grant as a matter of law and that, when George and Carolyn secured the mortgage, the riparian grant was therefore also included. (pp. 13-14) The Appellate Division broadly interpreted N.J.S.A. 46:3-16 to sweep in all property interests contained within or deemed appended to a parcel of real property. In particular, the panel found that the riparian grant was appurtenant to the upland lot under N.J.S.A. 46:3-16 and that it passed with the deed to the upland lot because that deed did not explicitly exclude it. (p. 14) The Appellate Division failed to distinguish between a riparian right and a riparian grant, which are not identical and are not similarly governed by N.J.S.A. 46:3-16. This case centers on a riparian grant of real property identified on the tax map as distinct from the upland lot. That separate designation, which the Appellate Division viewed as inconsequential, is in fact critical. (pp. 14-15) A riparian right is a license or privilege to access and make reasonable use of water. Riparian lands are lands lying along the banks of a stream or water body. A riparian grant is the method by which the State conveys riparian lands to its citizens. A riparian grant is not limited to an upland owner but may, after being offered by the State to the upland owner, be granted to persons who are unconnected to the upland property. A riparian grant is no different from any other conveyance of land. (pp. 15-18) Covey argues that deed language shows a riparian grant is not like other conveyances because, if separated from the uplands, it reverts to the State. Covey misapprehends the import of the language. Such clauses are placed in deeds in the event that the initial claim of upland ownership turns out to be false. The requirement of upland ownership only inheres in the initial transaction with the State. A riparian grant is the conveyance of real property divided from the uplands by a fixed boundary, no different from any other conveyance of land. (pp. 18-20) A riparian right not expressly mentioned in a deed can be appurtenant, but a riparian grant cannot. A contrary conclusion would allow a party to claim an ownership interest in a stranger s riparian lands as appurtenant to his own and would place in jeopardy the stability of titles to real property throughout the State. The trial judge specifically found that the parties did not intend the 1995 deed or subsequent mortgage to include the riparian grant, and no party challenged that finding as a basis for certification. (pp. 20-23) The law governing mortgages leads to the same conclusion. Generally, if property is not expressly included in the instrument s description, it will not be covered by the mortgage. Here the mortgage did not reference the riparian grant either expressly or obliquely. (pp. 23-25) 8. George and Carolyn received only the upland property in the 1995 deed, which secured the Equity One mortgage. Equity One only foreclosed on the upland lot in the sheriff s sale. Thus, Panetta, who bid on the uplands and did not attempt to include the riparian grant, was the only responsive bidder at the without-reserve auction. He has an enforceable contract with Equity One and is entitled to specific performance. (p. 25) The judgment of the Appellate Division is REVERSED and the trial judge s order of specific performance to Panetta is REINSTATED. CHIEF JUSTICE ZAZZALI and JUSTICES LaVECCHIA, ALBIN, WALLACE, RIVERA-SOTO and HOENS join in JUSTICE LONG s opinion. SUPREME COURT OF NEW JERSEY A-2/ 3 September Term 2006 JOSEPH PANETTA, Plaintiff-Appellant, v. EQUITY ONE, INC., Defendant-Respondent. ANNE COVEY, Plaintiff-Appellant, v. EQUITY ONE, INC., Defendant-Respondent, and JOSEPH D. CORVAIA, HOWARD W. SMITH and JOHN DOE(S), Defendants. Argued January 3, 2007 Decided May 1, 2007 On certification to the Superior Court, Appellate Division, whose opinion is reported at 378 N.J. Super. 298 (2005). Christopher J. LaMonica argued the cause for appellant Joseph Panetta. George Dougherty, Michael S. Morris and Anne Covey, pro se, argued the cause for appellant Anne Covey (Covey & Associates and Katz & Dougherty, attorneys). Michael J. Milstead argued the cause for respondent (Milstead & Associates, attorneys). Michael J. Fasano argued the cause for amicus curiae New Jersey Land Title Association (Lomurro, Davison, Eastman & Munoz, attorneys). Jeffrey A. Oshin; Joshua A. Burkhardt and Kurt R. Bachman, members of the Indiana bar, submitted a brief on behalf of amicus curiae National Auctioneers Association (Hardin, Kundla, McKeon & Poletto, attorneys). JUSTICE LONG delivered the opinion of the Court. The primary issue in this appeal is whether a conveyance of real property that makes no mention of an abutting riparian grant can be construed under N.J.S.A. 46:3-16 to include that grant as an appurtenance. Unlike a riparian right, which is a license or privilege, a riparian grant is a conveyance in fee simple of real property. As such, without specific mention in the deed or other evidence that the parties intended its inclusion, a riparian grant will not pass as appurtenant to another distinct parcel. [Ibid.] Covey moved for reconsideration on the contract issues, which the Appellate Division denied. Panetta and Covey then each filed a petition for certification. Panetta challenged the Appellate Division s determination that the riparian grant was included in the deed for the upland lot as a matter of law. Covey challenged the Appellate Division s decision to invalidate her contract on the grounds of confusion. We granted both petitions. Panetta v. Equity One, Inc., 187 N.J. 80 (2006); Covey v. Equity One, Inc., 187 N.J. 80 (2006). We also granted amicus curiae status to the New Jersey Land Title Association and to the National Auctioneers Association. The Appellate Division broadly interpreted that statute to sweep in all property interests that may arguably be contained within or deemed appended to a parcel of real property, whether tangible or intangible. Panetta, supra, 378 N.J. Super. at 312. In particular, the panel declared that the riparian grant was appurtenant to the upland lot under N.J.S.A. 46:3-16 and that it passed with the deed to the upland lot because that deed did not explicitly exclude it. Id. at 315. In ruling as it did, the Appellate Division failed to distinguish between a riparian right and a riparian grant. A riparian right is the right of a riparian landowner to make reasonable use of adjacent water and is facially included in N.J.S.A. 46:3-16. A riparian grant is a separate estate in land. Contrary to the Appellate Division s view, riparian rights and grants are not identical and are not similarly governed by N.J.S.A. 46:3-16. This case centers on a riparian grant of real property identified on the tax map as distinct from the upland lot. That separate designation, which the Appellate Division viewed as inconsequential, is in fact critical. [Water and Water Rights, supra, at 1290 (emphasis added); see also Black s Law Dictionary 1352 (8th ed. 2004) (defining riparian-rights doctrine as [t]he rule that owners of land bordering on a waterway have equal rights to use the water passing through or by their property ).] In essence, a riparian right is a license or privilege to access and make reasonable use of water. See Black s Law Dictionary 1352 (8th ed. 2004); see also Grobart v. N. Jersey Dist. Water Supply Comm n, 142 N.J. Eq. 60, 66 (Ch. 1948) (holding riparian right is not ownership of water, only right to use flow). Riparian lands are lands lying along the banks of a stream or water body. Water and Water Rights, supra, at 1290; Black s Law Dictionary 893-94 (8th ed. 2004). The State owns in fee simple all lands that are flowed by the tide up to the high-water line or mark. O Neill v. State Highway Dep t., 50 N.J. 307, 323 (1967). A riparian grant, in turn, is the method by which the State conveys riparian lands to its citizens. See N.J.S.A. 12:3-7; N.J.S.A. 12:3-10; Dickinson v. Fund for Support of Free Public Sch., 95 N.J. 65, 79 (1983) (recognizing legislative authorization for Tidelands Resource Council to convey and lease riparian lands). Like other conveyances, a riparian grant is not limited to an upland owner but may, after being offered by the State to the upland owner, be granted to persons who are unconnected to the upland property. N.J.S.A. 12:3-23. In Hoboken v. Pennsylvania Railroad Co., the United States Supreme Court explained the nature of a riparian grant: [T]he title and interest of the state in these shore lands [is] a distinct and separate estate, to be dealt with and disposed of in accordance with the terms of the statutes; first, by a sale and conveyance to the riparian owner himself, or to his assignees; and, second, in case of his neglect to take from the state its grant on the terms offered, then to a stranger, who, succeeding to the state s title, would have no relation to the adjacent riparian owner, except that of a common boundary. . . . . [T]he title under the New Jersey grants is not only of a new estate, but in a new subject divided from the upland or riparian property by a fixed and permanent boundary . . . . [Such grants are] of the estate in the land, and not of a mere franchise or incorporeal See footnote 2 hereditament. . . . [U]nder these grants the land conveyed is held by the grantees on the same terms on which all other lands are held by private persons under absolute titles, and every previous right of the State of New Jersey therein, whether proprietary or sovereign, is transferred or extinguished, except such sovereign right as the State may lawfully exercise over all other private property. [ 124 U.S. 656, 690-91, 8 S. Ct. 643, 654-55, 31 L. Ed. 543, 552 (1888).] In short, a riparian grant is the conveyance of real property divided from the uplands by a fixed boundary, no different from any other conveyance of land. See Buzby v. Rose, 114 N.J. Eq. 580, 586 (Ch. 1933) (adjoining riparian tract is distinct and separate estate ); Moore v. Ventnor Gardens, Inc., 105 N.J. Eq. 730, 735 (Ch. 1930) (observing that mortgage of land abutting water does not include separate riparian grant), aff d o.b., 109 N.J. Eq. 132 (E. & A. 1931); see also 29 New Jersey Practice, Law of Mortgages 5.7, at 42 (Myron C. Weinstein) (2d ed. Supp. 2005) (defining riparian grant as tract of land entirely separate and distinct from uplands). Covey s argument to the contrary is simply not correct. She contends that a riparian grant is not like other conveyances. In support, she cites the following language from the original 1928 deed to the Metedeconk Company, the predecessor in title to the Francis family: And Also Provided, that if the said The Metedeconk Company is not the owner of the land adjoining the land under water hereby granted, then and in that event this instrument and conveyance, so far as the same binds the State, and all covenants herein on the part of the State, shall be void as affecting any part or parts of said land which joins land not owned by the said The Metedeconk Company. Covey argues that the deed language shows that a riparian grant is a lesser interest in property because, if separated from the uplands, it reverts to the State. Covey misapprehends the import of that language. Its purpose is not to proscribe severance of the riparian lands from the uplands, but to condition the grant on compliance with the statutory requirement that when riparian lands are sold by the State they must first be offered to the upland owner. See N.J.S.A. 12:3-23. The clauses are placed into the deeds to cause reverters to the State in the event that the initial claim of upland ownership turns out to be false. See Ocean City Ass n v. Shriver, 64 N.J.L. 550, 565-66 (E & A 1900) (holding riparian grant conditioned on ownership of uplands by initial grantee and subject to invalidation if grantee is not owner); In re Tideland s License 96-0114-T, 326 N.J. Super. 209, 216 (App. Div. 1999) (same); Hous. Auth. of Atl. City v. State, 188 N.J. Super. 145, 149-50 (Ch. Div. 1983) (stating grant contingent upon actual upland ownership). Covey relies on language in Karam v. Department of Environmental Protection to support her contrary view. 308 N.J. Super. 225, 239-40 (App. Div. 1998), aff d o.b., 157 N.J. 187, cert. denied, 528 U.S. 814, 120 S. Ct. 51, 145 L. Ed. 2d 45 (1999). To the extent that Karam can be read to suggest that a riparian grant cannot be severed from the upland property, it is incorrect. As we have said, the requirement of upland ownership only inheres in the initial transaction with the State, which is required by statute first to offer the riparian grant to the upland owner. After the initial conveyance, a stranger to the uplands may own the riparian grant. We repeat, therefore, that a riparian grant is the conveyance of real property divided from the uplands by a fixed boundary, no different from any other conveyance of land. (1) a description of the real estate sufficient to identify it, the nature of the interest, the fact of the transfer and the identity of the transferor and the transferee are established in a writing signed by or on behalf of the transferor; or (2) the transferor has placed the transferee in possession of the real estate as a result of the transaction and the transferee has paid all or part of the consideration for the transfer or has reasonably relied on the effectiveness of the transfer to the transferee's detriment. [N.J.S.A. 25:1-11(a) (emphasis added).] Generally, if property is not expressly included in the instrument s description, it will not be covered by the mortgage. See 29 New Jersey Practice, supra, 3.16 at 124; see also Buzby, supra, 114 N.J. Eq. at 585 (noting lands subsequently acquired by riparian grant not included in description of mortgage and not included in lien of mortgage); Moore, supra, 105 N.J. Eq. at 735 (holding lien of mortgage extended no further than land described therein, not inclusive of abutting riparian tract); Rutgers v. Kingsland, 7 N.J. Eq. 178, 190 (Ch. 1848) (noting complainant can sell, by virtue of mortgage, only lands included within described boundaries), aff d, 7 N.J. Eq. 658 (E. & A. 1851). Here the mortgage did not reference the riparian grant either expressly or obliquely. Moreover, we note that prior to a foreclosure sale, a sheriff must give signed notice of the time and the place of the sale by public advertisement and that the notice must include an actual description of the property including either a diagram of the premises or a concise statement indicating the municipality, the tax lot and block and where appropriate, the street and street number, and the dimensions of the premises, as well as the number of feet to the nearest cross street. N.J.S.A. 2A:61-1 (emphasis added). Here, the only description of the property in the sheriff s sale notice was what was contained in 1995 deed - the upland lot. Thus, more could not have been included in the sale. SUPREME COURT OF NEW JERSEY NO. A-2/3 SEPTEMBER TERM 2006 ON CERTIFICATION TO Appellate Division, Superior Court JOSEPH PANETTA, Plaintiff-Appellant, v. EQUITY ONE, INC., Defendant-Respondent. Anne Covey, Plaintiff-Appellant, v. EQUITY ONE, INC., Defendant-Respondent. DECIDED May 1, 2007 Chief Justice Zazzali PRESIDING OPINION BY Justice Long CONCURRING/DISSENTING OPINIONS BY DISSENTING OPINION BY