SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION DOCKET NO. A-2719- 21 ERIC GOLDFINE, TRUSTEE OFTHE ERIC GOLDFINE SELFEMPLOYED RETIREMENT PLAN AND TRUST, Plaintiff-Respondent,

v. DISTINGUISHED HOMES, LLC, Defendant, and KURZ CAPITAL, LLC, Defendant-Appellant.

Submitted December 11, 2023

– Decided January 16, 2024 Before Judges Sabatino and Marczyk. On appeal from the Superior Court of New Jersey,Chancery Division, Morris County, Docket No. F010294

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NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court. " Although it is posted on the internet, this opinion is binding only on the parti es in the case and its use in other cases is limite d. R. 1:36- 3.2 A- 2719

- 21 Coffey & Associates, attorneys for appellant (Grego ry Joseph Coffey, of counsel and on the briefs; Richar d Joseph Dewland, on the briefs). Anthon y Andreas Boyadjis, attorney for respondent.
PER CURIAM Defendant Kurz Capital, LLC ("Kurz Capital") appeal s from the trial court's May 28, 2020 order granting plaintiff Eric Goldfine Self-Employed Retirement Plan and Trust ("SERPT") summary judgmen t. Kurz Capital further appeals from the court's April 28, 2021 denial of i ts motion for reconsideration. Kurz Capital also challenges the court's February 7 , 2022 order granting SERPT's motion to discharge the lis pendens and den ying Kurz Capital's motion for a constructive trust. Kurz Capital further app eals the court's May 5, 2022 final judgment of

foreclosure in favor of SERPT. Based on our review of the record and the applicable legal principles, we affi rm. I. In August 2014, Kurz Capital entered into a l oa n and first purchase money mortgage agreement ("Kurz agreement") with defendan t Distinguished Homes, LLC (" Distinguished Homes ") and its individual members, Dimitrios Angelis and Dushyanth Surakanti, for the purchase and renov ation of a residential property in Chatham ("Chatham property"). Pursuant to the agr eement, Kurz3 A- 2719

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Capital agreed to loan Distinguished Homes up to $1 ,400,000. 1 Kurz Capital wired the loan's first installment, consisting of $ 850,000, in August 2014. The Kurz agreement also dictated that the loan was to be the firs t and only mortgage and lien on the property. However, the Kurz agreem ent was never recorded with the Morris County Clerk's Office, as Distinguished Homes only provided their signatures in a facsimile format. 2 Between May 2015 and October 2018, Distinguished Ho mes executed four promissory notes and mortgages with SERPT tota ling $975,000. The mortgages were also secured by the Chatham property and were properly recorded soon after they were executed. The mortga ges contained a provision for default and acceleration of the outstanding pri ncipal in the event an action or proceeding is commenced against Distinguished Ho mes. The first of these promissory notes and mortgages was executed in May 2015, for the amount of $500,000. As part of this initial agreement, Angel is and Surakanti also signed a "Borrower's Acknowledgement No Liens" in which th ey certified that there

1 In return, Distinguished Homes agreed to repay th is amount, with twelve percent interest and two percent of the eventual sa le price of the property, within one year.

2 Kurz Capital asserts it tried to obtain physical si gnatures from Distinguished Homes but was unable to do so after several attempt s.4 A- 2719

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were "currently no open liens" for the property. T he second agreement was executed in September 2017, for the amount of $250,000. Prior to signing this September agreement, Angelis edited a clause in the agreement. Specifically, paragraph eighteen was amended from "[t]hat no [s]ub ordinate [f]inancing shall be placed on the subject property without the written consen t of the Mortgagee" to "[t]hat no recorded [s]ubordinate [f] inancing shall be placed on the subject property without the written consent of the Mortgag ee." (Emphasis added). The third agreement was executed on May 10, 2018, for $ 100,000. The fourth agreement was executed on October 31, 2018, for the amount o f $125,000. The third and fourth agreement did not have the previou s amendment to paragraph eighteen. From November 5, 2015 to December 22, 2015, Angelis renegotiated his mortgage terms for several properties with Kurz Cap ital. These changes included an alteration to the interest rate (from t welve percent to eight percent ) and revised the sell-by date to December 1, 2016, for all properties. Despite these changes, Kurz Capital was never made aware of Distinguished Homes' mortgage agreements with SERPT. Kurz Capital belie ved, as per the Kurz agreement with Distinguished Homes, that its mortga ge and lien was the only5 A- 2719

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agreement of its kind for the property. Angelis al so did not tell SERPT of the pre-existing Kurz Capital agreement. In May 2018, because Distinguished Homes did not repay Kurz Capital in accordance with its agreement, Kurz Capital served Distinguished Homes with

a notice of default and acceleration and demand ed the loan be repaid in its entirety within thirty days. In July 2018, Disting uished Homes had still not repaid the load, and Kurz Capital issued another no tice of default and acceleration. Having still not received its loan repayment, on De cember 14, 2018, Kurz Capital filed a complaint in the Law Div ision against Distinguished Homes and SERPT. Specifically, the complaint alleged that Kurz Capital had a first purchase money mortgage agreement with Distin guished Homes and priority over any other encumbrance. It further al leged Distinguished Homes ' actions were fraudulent, in breach of contract, a b reach of the implied covenant of good faith and fair dealing, and committed in ba d faith. SERPT maintained that the agreement between Kurz Capital and Disting uished Homes did not represent a mortgage agreement as the document did not have a legal description6 A- 2719

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of the property, was not notarized or witnessed upo n signing, and was not recorded or acknowledged by the Morris County Court Clerk's office. 3 On June 4, 2019, SERPT filed an action in foreclosu re. On May 28, 2020, the trial court entered an order granting summary j udgment in SERPT's favor. On April 28, 2021, the trial court denied Kurz Capi tal's motion for reconsideration. On February 7, 2022, the trial co urt entered an order granting
SERPT's mo tion to discharge Kurz Capital's lis pendens and de nied Kurz Capital's motion for the imposition of a constructi ve trust. A final judgment in foreclosure was subsequently entered on May 5, 2022

. 4 This appeal followed.
II. Kurz Capital raises several issues on appeal. Firs t, it argues there were disputed issues of material fact regarding SERPT's knowledge concerning Kurz's Capital's mortgage that should have preclude d the entry of summary judgment. Kurz Capital further contends the trial court erred in discharging the

3 SERPT was eventually dismissed from the Law Divisio n case. The court denied Kurz Capital's motion for summary judgment a s to Distinguished Homes

. Otherwise, the status of the Law Division action is not clear from the record. The orders on appeal before us are from the foreclo sure action, not the Law Division case.

4 The Chatham property was the subject of a sheriff's sale conducted by the Morris County Sheriff's Office on July 7, 2022.7 A- 2719

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lis pendens because it still has a probability of s uccess on the fraudulent inducement claim against Distinguished Homes. Last ly, Kurz Capital asserts the trial court erred by not imposing a constructiv e trust on the funds received by SERPT and Distinguished Homes in the sale of the Chatham property.
A. Kurz Capital argues material and disputed fact ques tions exist regarding SERPT's knowledge regarding Kurz Capital's pre-existi ng first purchase money mortgage agreement , which represents a meritorious defense to the forec losure action that should not have been determined by the court on a summary judgment motion. Kurz Capital further contends its pre-exis ting purchase money agreement with Distinguished Homes "represents an equi table vendee's lien" on the Chatham property. 5 Kurz contends SERPT had actual or constructive notic e of its pre-existing mortgage. More particularly, i t argues SERPT had constructive knowledge of the Kurz agreement becaus e during the negotiation

5 Kurz only references the term "vendee's lien" in it s reply brief. However, its initial brief does cite to Cox v. RKA Corp. , 164 N.J. 487 (2000), for the same principle. Specifically, it asserts it had a vendee's lien, and that is generally superior to that of a mortgagee with notice of the vendee's interest. Kurz further contends that in light of this equitable principle encompassed by a vendee l ien, it does not matter whether its agreement with Disti nguished Homes was an actual mortgage or that it did not meet the formali stic requirements of a mortgage.8 A- 2719

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and drafting of the second mortgage agreement betwe en SERPT and Distinguished Homes , an agent of Distinguished Homes amended a provisi on of the contract which read "no [s]ubordinate [f]inanci ng shall be placed on the subject property without the writte n consent of the Mortgagee" and added language stating that "no recorded [s]ubordinate [f ]inancing shall be placed on the subject property without the written consent of the Mortgagee ." (E mphasis added). Kurz Capital contends this amendment sugge sts a prior unrecorded interest existed on the property and raises a quest ion of fact as to whether SERPT had actual or constructive knowledge that other fin ancing may have existed, and therefore SERPT did not have the authority to forec lose on the Chatham property. Accordingly, it asserts summary judgment was inappropriate. SERPT counters that Kurz Capital has no mortgage, g iven that the Kurz
ag reement was not acknowledged, notarized, witnessed, or recorded. Moreover, the unauthorized amendment to the September 18, 201 7 SERPT mortgage that Kurtz Capital extensively relies in its appeal, "ca n have but one meaning: that prospectively, prior to obtaining subordinate finan cing in the future, [ Distinguished Homes ] need ed [SERPT's] written consent

. . . ." 6 SERPT further

6 SERPT notes there is no argument made that this lan guage would have any impact on SERPT 's initial mortgage of $500,000 made two years prior to the September 18, 2017 mortgage.9 A- 2719

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notes there is nothing in this clause to indicate t here was a prior unrecorded mortgage on the property. Lastly, SERPT contends K urz Capital has not provided any authority that knowledge of a prior un recorded loan will preclude a mortgage holder from foreclosing. Our Supreme Court in Cox v. RKA Corp. noted, "New Jersey is considered a 'race-notice' jurisdiction, which mean s that as between two competing parties the interest of the party who fir st records the instrument will prevail so long as that party had no actual knowled ge of the other party's previously-acquired interest." 164 N.J. at 496. A vendee's lien is created, through the doctrine of equitable conversion, when a purchaser of real property has advanced partial payment of the purchase price to the vendor, who subsequently defaults on the contract. The lien gi ves the purchaser the right to recoup the value of the benefit he or she bestowed on the seller out of the real property itself, which stands as security for the r epayment of purchase money paid. Id. at 518 (Stein, J., concurring in part).

The overarching goal of the vendee's lien is to ens ure that a vendee may have the opportunity to recoup hi s or her investment in real property. That a vendee's l ien is superior to liens of other purchasers who have purchased with knowledge of the vendee's equitable interest is a basic principle of property law.10 A- 2719

- 21 Id. at 519 (citing 29 N.J. Practice, Law of Mortgag es § 101, at 374 (Roger A. Cunningham & Saul Tischler) (1975)). We review a grant of summary judgment by applying t he same legal standard as the motion judge. Townsend v. Pierre, 221 N.J. 36, 59 (2015). We must determine whether there is a "genuine issue as to any material fact" when the evidence is "viewed in the light most favorable to the non-moving party . . . ." Davis v. Brickman Landscaping, Ltd. , 219 N.J. 395, 405-06 (2014) (first quoting R. 4:46 -2(c); then quoting Brill v. Guardian Life Ins. Co. of Am. , 142 N.J. 520, 540 (1995)). The "trial court's inte rpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference" and are reviewed de novo. Est. of Hanges v. Metro. Prop. & Cas. Ins. Co., 202 N.J. 369, 382-83 (2010). We rev iew a trial court's decision to grant or deny an ensuing motion for reconsiderat ion for an abuse of discretion. Cummings v. Bahr, 295 N.J. Super. 374, 389 (App. Di v. 1996). The trial court initially granted SERPT's summary j udgment motion finding D istinguished Homes defaulted on its mortgage, and SERPT was entitled to foreclose. Additionally, SERPT had a r ight to foreclose because it had priority over Kurz Capital's interest. Because of a subsequent deposition, the court considered Kurz Capital's motion for reco nsideration, which set forth11 A- 2719

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the same arguments above with respect to the amendm ent of paragraph eighteen, putting SERPT on notice of a prior loan from Kurz Capital. The trial court noted it previously determined ther e was no constructive notice of Kurz Capital's interest because Kurz Capi tal did not record its mortgage. The court observed Kurz Capital was now arguing there was actual or constructive notice based on the changes to the cl ause made at the September
2017 mortgage cl osing and the fact that SERPT's corporate represent ative stated he would have stricken the clause if he was at the closing. The court determined the fact that SERPT's representative being present at the mortgage closing, coupled with the corporate representative stating he w ould not have allowed the change, was insufficient to create a fact issue for purposes of summary judgment as to whether SERPT knew of a prior unrecorded mort gage on the property. The court stated this additional information did not de monstrate SERPT had knowledge of the Kurz Capital agreement with D istinguished Homes . We agree. Although Kurz Capital may have had a vendee lien stemming fr om its agreement with Distinguished Homes, we are satisfie d the trial court properly granted summary judgment. The court correctly dete rmined SERPT had priority over Kurz Capital as there is no indication SERPT h ad actual or constructive knowledge of Kurz Capital's interest. We are unconvinced the change to the12 A- 2719

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September 2017 mortgage agreement

— relied upon by Kurz Capital

— should have alerted SERPT that there was some prior undisc losed lien or other financing that could impact SERPT's interest. Rath er, the amendment is logically read to indicate that going forward D isting uished Homes had a n obligation to obtain consent prior to obtaining rec orded financing. Moreover,
D istinguished Homes executed a "Borrower's Acknowledgement No Liens" o n May 1, 2015

— in advance of the initial May 10, 2015 mortgage agr eement between D isting uished Homes and SERPT

— in which it represented there were "currently no open liens" for the property.
B. We next address Kurz Capital's argument the trial c ourt erred in discharging the lis pendens on the subject property because Kurz C apital continued to maintain a probability of success on t he merits against the
D istinguished Homes and its individual partners on its fraudulen t inducement claim. Kurz Capital points to a portion of the Law Division court 's opinion in which that court acknowledged it had established sufficient evidence to support a claim for fraudulent inducement against Distingui shed Homes. The trial court here noted the foreclosure matter h ad been resolved, and SERPT appeared to be seeking a lis pendens for the separate Law Divisio n13 A- 2719

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action against Distinguished Homes, where SERPT had already been dismissed. The court noted Kurz Capital should have sought this relie f in the Law Division action, but given that case only involved a claim for money damages, relief was unlikely in any event. The court ultimately denied the application. N.J.S.A. 2A:15-6 allows a party to file and record a lis pendens in order to enforce a lien or affect title to real estate. However, under this statute, "[n]o notice of lis pendens shall be filed . . . to recov er a judgment for money or damages only." Ibid. There were no remaining claims in the foreclosure action when Kurz Capital filed the underlying motion to di scharge the lis pendens. In addition, its only claims against Distinguished Homes were for m oney damages in the Law Division action as the claim against SER PT had already been dismissed. We also agree the foreclosure claims we re previously adjudicated. In short, the trial court correctly discharged Kurz Capital's lis pendens.
C. Lastly , Kurz Capital argues the trial court erred in failin g to impose a constructive trust on the funds SERPT and Distingui shed Homes received from the sale of the property. "A constructive trust is a remedial device through which the 'conscience of equi ty ' is expressed; it will be imposed when a person ha s acquired possession of or title to property under c ircumstances which, in good14 A- 2719

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conscience, will not allow the property's retention ." Thompson v. City of Atl. City, 386 N.J. Super. 359, 375-76 (App. Div. 2006) (quoting Flanigan v. Munson, 175 N.J. 597, 608 (2003)) , aff'd as modified, 190 N.J. 359 (2007). "In imposing a constructive trust, a court must find th at a 'wrongful act' caused the property to come into the hands of the recipient an d that the recipient will be

' unjustly enriched ' if it is not returned." Id. at 376 (quoting Flan igan, 175 N.J. at 608); see also D'Ippolito v. Castoro, 51 N.J. 58 4, 588 (1968) (explaining the

two -step test and "that a constructive trust will be i mpressed in any case where to fail to do so will result in an unjust enrichmen t" but requires a finding of "some wrongful act" on the part of the property rec ipient). "In that circumstance, the court of equity converts the reci pient into a trustee and requires that he account for the res in whatever manner the court deems fair and just. " Thompson, 386 N.J. Super. at 376. The suitabili ty of imposing a constructive trust must be established "by clear, d efinite, unequivocal and satisfactory evidence." Gray v. Bradley, 1 N.J. 10 2, 104 (1948). The trial court denied the request for a constructi ve trust noting that all issues in the foreclosure action had already been f ully adjudicated, and the application for a constructive trust was improperly brought in the foreclosure action. The court further noted that if Kurz Capit al was seeking equitable15 A- 2719

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interim relief in the form of a constructive trust "it may do so in the [pending] Law Division action [where that court] is empowered to grant" such equitable relief. In short, Kurz Capital had another avenue of relief separate from the foreclosure action. The wrongful act to which Kurz Capital points is Di stinguished Homes ' concealment of the funding it received from Kurz Ca pital when seeking to obtain loans from other parties, in particular, SERPT. Kurz Capital claims Distinguished Homes gained an unjust financial gain through this act of deception. Kurz Capital does not allege any wrongful ac ts on behalf of SERPT. Even if Distinguished Homes committed the requisite "wrongful act" under the D'Ippolito test, SERPT was not unjustly enriched by said act. As the trial court found, and we now affirm, SERPT was entitled to foreclose on the pro perty. We discern no misapplication of discretion by the tria l court in denying Kurz Capital's motion for a constructive trust. To the extent we have not specifically addressed an y of the parties' remaining arguments, we conclude they lack sufficie nt merit to warrant discussion in a written opinion. R. 2:11 -3(e)(1)(E). Affirmed.