Court Opinion

ID: 9900286
Source: CourtListenerOpinion
Date Created: 2023-11-18 22:08:36.767665+00
Date Added: 2024-06-11T09:21:03.539101
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF
                   THE TAX COURT COMMITTEE ON OPINIONS

    KUNESCH, IAN M.,                                   TAX COURT OF NEW JERSEY
                                                       DOCKET NOs.: 007226-2013; 007942-
                                                       2014; 003388-2015; 003298-2016;
                 Plaintiff,
                                                       000657-2017; 000823-2018; 002702-
          v.                                           2019
    ANDOVER TWP.,
                                                              Approved for Publication
                 Defendant.                                      In the New Jersey
                                                                 Tax Court Reports

               Dated: July 29, 2021

               Jeffery D. Gordon for plaintiff (Archer & Greiner, PC, attorney).

               Fred Semrau and Robert J. Rossmeissl for defendant (Dorsey & Semrau, LLC,
               attorney).

BIANCO, J.T.C.

       This shall serve as the court’s formal opinion concerning a motion to dismiss for lack of

standing brought by defendant, Andover Township (“Township”). The Township initially filed

motions for summary judgment, but after hearing arguments, the court, on the record, more

accurately characterized them as motions to dismiss for lack of standing. This was not disputed

by counsel.

       The present matters arise out of several New Jersey Property Tax appeals brought by

plaintiff, Ian Kunesch (“Mr. Kunesch”). The Township disputes that Mr. Kunesch is an aggrieved

taxpayer within the meaning of N.J.S.A. 54:3-21, given that he executed a deed in lieu of

foreclosure to his bank, which stripped him of standing to institute the within tax appeals. For

reasons described more fully below, the court concludes that the Township’s motions are without

*
merit, and Mr. Kunesch has standing to proceed in each tax appeal. Accordingly, the Township’s

motions to dismiss are denied.

                           PROCEDURAL HISTORY AND FACTS

       In 2006, Mr. Kunesch was the owner of certain property designated as Block 73, Lot 6 in

Andover Township, New Jersey (“Property”). That same year, he mortgaged the Property with

Sussex Bank (“Bank”) as security for a commercial loan. On March 30, 2009, Mr. Kunesch

entered into various agreements with the Bank that included a Note, Mortgage, and Mortgage

Modification Agreement (“Agreement 1”) that modified the prior agreement from 2006. Along

with these agreements, Mr. Kunesch provided the Bank a Deed in Lieu of Foreclosure (“1st Deed

in Lieu”) at the time of signing with the intent that, in the event he defaulted on payment, the Bank

could take title to the Property by recording the Deed in Lieu of Foreclosure without having to go

through the process of a foreclosure. Under Agreement 1, Mr. Kunesch would make monthly

payments to the Bank that would be comprised of principal, interest, and tax escrow which was to

be used for the payment of real estate taxes. In other words, Mr. Kunesch would make his tax

payments on the Property to the Bank which escrowed his payments and the Bank then paid those

taxes on his behalf to the Township when due.

       In 2011, Mr. Kunesch entered into another Mortgage Modification Agreement

(“Agreement 2”) with the Bank and again used the Property as collateral. Like Agreement 1, Mr.

Kunesch executed a second Deed in Lieu of Foreclosure (“2nd Deed in Lieu”) similar to the first.

The intent of Agreement 2 and the 2nd Deed in Lieu is disputed by the Township. The Township

asserts that “the 2011 Deed in Lieu was valid and operative against Plaintiff, a mortgagor, as of

the date it was executed and notarized: March 9, 2011.” However, Mr. Kunesch asserts he entered

into Agreement 2 and the 2nd Deed in Lieu with the understanding that the Bank would have

                                                 2
security for its loan, and Mr. Kunesch would continue to own the Property until he defaulted. It

was his further understanding that the portions of Agreement 1 that were not modified by

Agreement 2 would remain in effect, and that the only way the Bank would be able to obtain

ownership of the Property was if he defaulted on the loan. If he defaulted, Mr. Kunesch was then

given 90 days to resolve the issue, and if unable to do so, the Bank would record the deed and take

ownership without needing to go through a foreclosure action.

       From 2011-2019, Mr. Kunesch maintained and operated the Property as a golf course. He

was also listed as the owner of the Property on the Township’s records and applied for various

permits related to the Property, which were granted. Mr. Kunesch filed local property tax appeals

for the years 2013-2019.       In 2019, Mr. Kunesch defaulted on his mortgage payments.

Consequently, the Bank recorded the 2nd Deed in Lieu on April 5, 2019.

       Mr. Kunesch filed for Chapter 7 bankruptcy in May of 2019. His bankruptcy petition did

not list the 2013-2019 local property tax appeals as an asset on his list of assets and claims. His

stated reason for the omission was because he did not realize that he was supposed to list the tax

appeals in the bankruptcy filing with his list of assets. Furthermore, when asked if anyone owed

him money at Mr. Kunesch’s 341 Meeting of Creditors (“341 Meeting”) 1, Mr. Kunesch testified

that everything he owned and owed was included in the petition and that no one owed him money.

The Bankruptcy Court issued its Order on August 30, 2019 discharging $1,177,215.19 of Mr.

Kunesch’s debts, and as of September 6, 2019, the bankruptcy matter was closed. Mr. Kunesch

then realized his omission of the 2013-2019 local property tax appeals from his bankruptcy petition

1
  A 341 Meeting is mandated by Section 341 of the federal Bankruptcy Code. The meeting permits
the bankruptcy trustee to review the debtor’s petition and schedules with the debtor, and then
requires the debtor to answer questions under penalty of perjury about the debtor’s conduct,
property, liabilities, financial condition, and any other matter that may affect the administration of
the case or the debtor’s right to discharge. See 11 U.S.C. § 341 (2018).
                                                  3
after the fact and notified his bankruptcy attorney who then informed the Bankruptcy Trustee

(“Trustee”) of the omission. The Trustee investigated the matter and decided not to reopen the

bankruptcy proceeding to administer the tax appeals as an asset.

        The Township filed its motions for summary judgment in March of 2021 on the basis that

Mr. Kunesch did not have standing as an aggrieved taxpayer to bring the appeals. The court

subsequently heard oral arguments after which the court stated on the record that the motions were

more accurately characterized as motions to dismiss for lack of standing and would enter its

decision accordingly.

                                       APPLICABLE LAW

   I.      Standing

        An aggrieved taxpayer within the meaning of N.J.S.A. 54:3-21 has standing to file a tax

appeal. “There is no question that an owner can challenge the local property assessment on his,

her, or its property.” Savage Mills Enters v. Borough of Little Silver, 29 N.J. Tax 295, 303 (2016)

(referencing N.J.S.A. 54:3-21). “The sole owner of a property in fee simple who pays the entirety

of the property taxes is clearly an aggrieved taxpayer pursuant to the statute.” Prime Accounting

Dept. v. Township of Carney’s Point, 212 N.J. 493, 506 (2013) (citing N.J.S.A. 54:4-23; 54:3-21).

It is also well settled “that one need not be the owner of real property to be an aggrieved taxpayer.”

B&D Assoc. v Township of Franklin, 32 N.J. Tax 81, 86 (2020). Rather, the plaintiff must “have

a sufficient financial interest affected by the challenged assessment in order to have standing to

file a complaint.” Ibid. It is of note that an aggrieved taxpayer “is a status designated for the

purpose of expanding or extending an affected litigants’ rights beyond just the property owner.”

Id. at 89 (emphasis added). The designation was not created to exclude the actual property owner

                                                  4
from his or her right to appeal, regardless of whether the property owner directly or indirectly paid

the property taxes.

   II.       Transfer of Property Ownership

          “Ownership of real property is transferred by deed.” N.J.S.A. 46:3-13. The transfer of a

real property interest by deed is complete only upon execution and delivery of the deed by the

grantor, and acceptance of the deed by the grantee. See In re Estate of Lillis, 123 N.J. Super. 280,

285 (App. Div. 1973). “In other words, a deed transfers a property interest ‘upon delivery.’” H.K.

v. State, 184 N.J. 367, 382 (2005) (citing Tobar Constr. Co. v. R.C.P. Assocs., 293 N.J. Super.

409, 413 (App. Div. 1996). “Whether delivery and acceptance have taken place . . . is a matter of

intention.” Dautel Builders v. Borough of Franklin, 11 N.J. Tax 353, 357 (1990). “If there is a

physical delivery without the requisite intent that the deed be presently effective as a conveyance

of the grantor’s title, there is, in legal contemplation, no delivery.” Ibid (emphasis added).

“Delivery can be shown by ‘[a]nything that clearly manifests the grantor’s intention that

the deed become immediately operative and that the grantee become the owner of the estate

purportedly conveyed.” H.K., 184 N.J. at 382 (quoting Dautel Builders, 11 N.J. Tax at 357). In

other words, the transfer of a property interest is dependent on the efficacious delivery and

acceptance of a deed, and because delivery is based on the intent of the grantor and grantee, the

deed does not need to be recorded in order to pass title if it is what the parties intended.

   III.      Deed in Lieu of Foreclosure

          “A deed in lieu of foreclosure is a contractual undertaking by the mortgagor and the

mortgagee which avoids the formal foreclosure procedure and accordingly is not governed by the

foreclosure statutes.” New Jersey Hotel Holdings, Inc. v. Dir. Div. of Taxation, 15 N.J. Tax 428,

434 (1996). It operates similar to a traditional deed and is effective between the grantor and grantee

                                                  5
although void against subsequent judgment creditors. See Lieberman v. Arzee Mid-State Supply

Corp., 306 N.J. Super. 335, 341 (App. Div. 1997). It is defined as “a voluntary, knowing and

uncoerced conveyance by the residential mortgage debtor to the residential mortgage lender of all

claim, interest and estate in the property subject to the mortgage.” N.J.S.A. 2A:50-55. “[T]he

mortgagor’s ordinary expectation in giving a deed in lieu of foreclosure (unless otherwise provided

for by agreement) is that the mortgagee is taking the deed in satisfaction of the debt and to save

the expenses of a judicial foreclosure.” 29 New Jersey Practice, Law of Mortgages § 13.14, at 971

(Myron C. Weinstein) (2d ed. 2001) (emphasis added). Meaning, all rights in the property are

supposed to transfer to the mortgage lender at the time the deed in lieu of foreclosure is executed,

unless otherwise provided for by agreement between the parties.

       Although at times advantageous, because a deed in lieu of foreclosure is so agreement-

based, it lends itself to risk. For example, a deed in lieu of foreclosure can be recharacterized as

an equitable mortgage instead of a true conveyance of title. The equitable mortgage doctrine has

been long recognized by New Jersey courts of equity and stands for the principle that “a

conveyance, whatever its form, if in fact given to secure a debt, is neither an absolute nor

conditional sale, but a mortgage, and that the grantor and grantee have merely the rights, and are

subject only to the obligations, of the mortgagor and mortgagee.” J.W. Pierson Co. v. Freeman,

113 N.J. Eq. 268, 271 (E. & A. 1933). “Courts apply principles of equity to ‘look beyond the plain

terms’ of an agreement between the parties, and thereby determine whether the agreement is in

effect a mortgage.” Zaman v. Felton, 219 N.J. 199, 217 (2014) (citing Johnson v. NovaStar

Mortg., Inc., 698 F. Supp. 2d 463, 468 (D.N.J. 2010)). The name of the instrument itself is not

material, and instead, the analysis focuses on the intention of the parties. See J.W. Pierson, 113

N.J. Eq. at 270-71 (“If a deed or contract, lacking the characteristics of a common law mortgage,

                                                 6
is used for the purpose of pledging real property, or some interest therein, as security for a debt or

obligation, and with the intention that it shall have effect as a mortgage, equity will give effect to

the intention of the parties.”). If the transaction is recharacterized as an equitable mortgage, the

transferee lacks indefeasible title to the property, and the transferor retains his or her equity of

redemption. See id. at 270.

       New Jersey’s Supreme Court has adopted these principles and the eight-factor framework

articulated by O’Brien v. Cleveland. 423 B.R. 477, 491 (Bankr. D.N.J. 2010). See Zaman, 219

N.J. at 218 (adopting the Federal District Court ruling and analysis of O’Brien from Johnson v.

NovaStar Mortg., Inc., 698 F. Supp. 2d 463, 468 (D.N.J. 2010)). In determining whether a

transaction gives rise to an equitable mortgage, the O’Brien framework asks judges to consider

and then weigh together:

               (1) Statements by the homeowner or representations by the
               purchaser indicating an intention that the homeowner continue
               ownership; (2) A substantial disparity between the value received
               by the homeowner and the actual value of the property; (3) Existence
               of an option to repurchase; (4) The homeowner's continued
               possession of the property; (5) The homeowner's continuing duty to
               bear ownership responsibilities, such as paying real estate taxes or
               performing property maintenance; (6) Disparity in bargaining power
               and sophistication, including the homeowner's lack of
               representation by counsel; (7) Evidence showing an irregular
               purchase process, including the fact that the property was not listed
               for sale or that the parties did not conduct an appraisal or investigate
               title; (8) Financial distress of the homeowner, including the
               imminence of foreclosure and prior unsuccessful attempts to obtain
               loans.
               [Zaman, 219 N.J. at 218.]
After weighing all of these factors together, along with the intention of the parties, the court may

then decide whether the deed in lieu of foreclosure is more accurately characterized as an equitable

mortgage. The court must also be mindful of the directive prescribed by New Jersey’s law of

equitable mortgage, to look at substance over form. See Zaman, 219 N.J. at 216; see also Humble

                                                  7
Oil & Ref. Co. v. Doerr, 123 N.J. Super. 530, 551 (Ch. Div. 1973). “The O’Brien factors are

meant as guidance for a court and need not all be present for the court to find an equitable

mortgage,” but all must be analyzed and then weighed together with the understanding that some

factors will be given more weight than others. Reibman v. Myers, 451 N.J. Super. 32, 50 (App.

Div. 2017).

    IV.      Judicial Estoppel

          “The doctrine of judicial estoppel operates to ‘bar a party to a legal proceeding from

arguing a position inconsistent with one previously asserted.’” Cummings v. Bahr, 295 N.J. Super.

374, 385 (App. Div. 1996) (quoting N.M. v. J.G., 255 N.J. Super. 423, 429 (App. Div. 1992)). The

court in Cummings explained that “judicial estoppel most often arises when a party takes

inconsistent positions in different litigation.” Ibid. Essentially, it helps prevent manipulation of

the judicial process. “A threat to the integrity of the judicial system sufficient to invoke the judicial

estoppel doctrine only arises when a party advocates a position contrary to a position it

successfully asserted in the same or a prior proceeding.” Kimball Int’l, Inc. v. Northfield Metal

Products, 334 N.J. Super. 596, 606 (App. Div. 2000). “[T]o be estopped [a party must] have

convinced the court to accept its position in the earlier litigation. A party is not bound to

a position it unsuccessfully maintained.” Id. at 606-07 (quoting In re Cassidy, 892 F.2d 637, 641

(7th Cir. 1987)). It should also be noted that “judicial estoppel is an extraordinary remedy, which

should be invoked only when a party’s inconsistent behavior will otherwise result in a miscarriage

of justice.” Id. at 608 (citations and internal quotation marks omitted). “Thus, as with other claim

and issue preclusion doctrines, judicial estoppel should be invoked only in those circumstances

required to serve its stated purpose, which is to protect the integrity of the judicial process.” Ibid.

                                                   8
                                           ANALYSIS

        The Township’s argument can be summarized to two points: (1) that Mr. Kunesch does not

have standing to bring his complaints because he was not the owner of the Property for the years

in question, and therefore, not an aggrieved taxpayer; and (2) even if Mr. Kunesch might have

standing, he is judicially estopped from bringing these claims due to inconsistent statements made

in his bankruptcy filing. The court finds that neither of the Township’s arguments have merit.

   I.      Ownership of the Property

        Ownership of the Property is of critical importance in these matters. If Mr. Kunesch was

the owner of the Property for the years in question, he is an aggrieved taxpayer pursuant to N.J.S.A.

54:3-21, and therefore, has standing to bring these tax appeals. See Prime Accounting Dept., 212

N.J. at 506. As noted above, the status of an aggrieved taxpayer was not created to exclude actual

property owners from his or her right to appeal. The court is satisfied that Mr. Kunesch was the

owner of the Property for the years in question and maintains his right to appeal.

        The Township argues that Mr. Kunesch neither owned nor paid taxes in connection with

the Property for any of the tax years at issue, and that he ceased being the owner of the Property

when he granted ownership of it to the Bank by the 2nd Deed in Lieu in conjunction with the

execution of Agreement 2 on March 9, 2011. The Township maintains that there was no evidence

that the portions of Agreement 1 that were not modified by Agreement 2 survived. The focus of

its argument is on the provision granting the Bank the ability to obtain ownership of the Property

only after Mr. Kunesch defaulted on the loan. While explicitly written in Agreement 1, the

provision was not written in Agreement 2; however, the provision was also not modified by

Agreement 2. Mr. Kunesch asserts that the parties intended for all portions of Agreement 1 not

modified by Agreement 2 to remain in full force and effect. This is critical because if the portions

                                                 9
of Agreement 1 not modified by Agreement 2 survived, the Bank would only be able to obtain

ownership of the Property if Mr. Kunesch defaulted on the loan rather than when the 2nd Deed in

Lieu and Agreement 2 were executed. The key issues here are (a) the intent of the parties when

they entered into Agreement 2, and (b) the characterization of the 2nd Deed in Lieu as an effective

transfer of the title to the Property to the Bank, or simply an equitable mortgage.

           a. Intent of the Parties

       The court is satisfied that there was no delivery of the 2nd Deed in Lieu because it was not

intended to be presently effective, but rather, it was only intended to be effective upon the

occurrence of a later condition. “If there is a physical delivery without the requisite intent that

the deed be presently effective as a conveyance of the grantor’s title, there is, in legal

contemplation, no delivery.” Dautel Builders, 11 N.J. Tax at 357 (emphasis added). Here, the

court finds that the parties intended that the 2nd Deed in Lieu only be effective upon recording after

default, and not presently effective. Accordingly, delivery did not take place until the default

occurred and the Bank recorded the 2nd Deed in Lieu in 2019.

       The Township concedes that while this might be the case for Agreement 1, with which

there was a side agreement accompanying the 1st Deed in Lieu specifically stating that ownership

would not transfer until default and the subsequent recording of that deed, there was no such side

agreement that accompanied Agreement 2 and the 2nd Deed in Lieu. The court is not persuaded

by this argument based on the circumstances surrounding Agreement 2, the actions of the parties,

and the intentions of the parties as set forth in their certifications. While it is true that deeds may

transfer title even if unrecorded, the transfer is still dependent on the intent of the parties in order

for the delivery of that title to take place. See H.K., 184 N.J. at 382. The court finds no clear

intention here that title to the Property was to pass upon the execution of Agreement 2. However,

                                                  10
it is clear to the court based upon the actions of the parties, that the arrangement whereby Mr.

Kunesch would continue to own, maintain, and operate the Property as a golf course, as provided

for in Agreement 1, continued after the parties entered into Agreement 2 and executed the 2nd Deed

in Lieu. The court arrives at this conclusion because Mr. Kunesch was still listed as the owner of

the Property in the Township’s records, he applied for various permits related to the Property which

were granted, and he paid taxes into an escrow account which the Bank later paid to the Township

when due. Finally, it was only upon Mr. Kunesch’s default that the Bank recorded the 2nd Deed

in Lieu, specifically as provided for in the side agreement to Agreement 1. Moreover, the Bank’s

Senior Vice-President and Chief Credit Officer (“Bank Officer”) certified that it was the intention

of Agreements 1 and 2 that the Bank “have security for its loan under this mortgage arrangement

where Ian Kunesch continued to own the Property.” The Bank Officer further certified that “[t]he

intent of the [2nd Deed in Lieu] was to provide Sussex Bank with the ability to obtain ownership

of the Property only upon the recording of the Deed in Lieu of Forclosure, if and only if Ian

Kunesch first defaulted on the loan agreement . . .,” and that “[t]he parties intended that ownership

of the Property would be retained by Ian Kunesch until the recording of the [2nd Deed in Lieu].”

(emphasis added).

       The expressed intent of the parties for entering Agreements 1 and 2 support the conclusion

that delivery of the 2nd Deed in Lieu did not take place until April 5, 2019, after Mr. Kunesch

defaulted, and the 2nd Deed in Lieu was recorded in accord with the surviving provisions of

Agreement 1. Therefore, the court finds that based on the record, certifications, and actions of the

parties, the side agreement to Agreement 1 remained in full force and effect even though it was

not explicitly written again to accompany Agreement 2 and the 2nd Deed in Lieu. Accordingly,

title did not transfer until the default and subsequent recording of the 2nd Deed in Lieu occurred,

                                                 11
leaving Mr. Kunesch the owner of the Property and an aggrieved taxpayer for the years at issue

before this court.

           b. Deed in Lieu of Foreclosure vs. Equitable Mortgage

       This is a novel issue for the Tax Court. 2 It has not been addressed before in the context of

a tax appeal and the status of an aggrieved taxpayer who executed a deed in lieu of foreclosure.

Accordingly, the court is constrained to discern whether the 2nd Deed in Lieu in these matters is

more appropriately an equitable mortgage secured by a deed to the Property.

       New Jersey’s Supreme Court adopted the principles of the equitable mortgage doctrine and

the O’Brien framework in Zaman in order to assist judges in determining whether a transaction

gives rise to an equitable mortgage. Under this framework, the court must analyze the substance

of the transaction itself, the circumstances that motivated the parties, and indications that both

parties intended for the transferor to retain ownership of the property. See ibid. The framework

serves merely as a guide, but the court is asked to consider each factor in its analysis. Moreover,

not all factors need be present or weigh in favor of finding an equitable mortgage. The intention

of the parties, and which party actually maintains possession and ownership of the property, are

paramount in determining whether the 2nd Deed in Lieu is more accurately characterized as an

equitable mortgage. See J.W. Pierson, 113 N.J. Eq. at 270-71; see also Reibman, 451 N.J. Super.

at 50. In its analysis, the court is guided by the New Jersey law of equitable mortgage to look at

substance over form and whether or not Mr. Kunesch remained the owner of the Property. See

Zaman, 219 N.J. at 216; see also Humble Oil, 123 N.J. Super. at 551.

2
  Courts in New Jersey have recognized other transactions, such as sale-leaseback arrangements
made to avoid foreclosure and simple land sales, as equitable mortgages when the transaction is
actually a mortgage loan secured by a deed to the subject property. See Zaman 219 N.J. at 217;
see also James Talcott, Inc. v. Roto Am. Corp., 123 N.J. Super. 183, 202 (Ch. Div. 1973).
                                                12
       The first factor addresses statements or representations made that indicate the owner would

continue ownership. It is clear to the court under the present facts that Mr. Kunesch was to remain

the owner of the Property until he defaulted, only after which the Bank would record the 2nd Deed

in Lieu. Mr. Kunesch maintained and operated the Property as a golf course, was listed as property

record owner in the Township’s records, applied for various permits related to the Property, and

was granted these permits until 2019. These actions make it clear to the court that Mr. Kunesch

defaulting was the key condition for the Bank to take ownership of the Property. Until that event

occurred, the parties intended that Mr. Kunesch would continue to own and operate the Property.

Because the intention of the parties is given more weight in this analysis, and because it was clearly

intended that Mr. Kunesch remain the owner of the Property until default, and he effectively

remained the owner of the Property for the years in question, this first factor weighs in favor of

finding that the 2nd Deed in Lieu is more appropriately, an equitable mortgage.

       The second factor looks to a substantial disparity between the value received by the owner

and the actual value of the property. While Mr. Kunesch alleges that there is a large disparity in

the value of the property, which is the reason for the present tax appeals, this claim alone is not

persuasive as to whether the 2nd Deed in Lieu was actually an equitable mortgage. The second

factor is more properly intended for instances of disguised sales and is of little relevance here.

       The third factor questions the existence of an option to repurchase. It is similar to the

second factor in terms of relevance in the present matters and is also intended to be analyzed in

the case of disguised sales. In the present matters, there was never an option to repurchase

presented because Mr. Kunesch believed he owned the Property until default.

       The fourth factor addresses the owner’s continued possession of the property. Mr. Kunesch

continued to possess and control the Property until April 5, 2019. Much like ownership, possession

                                                 13
is of great importance in this analysis because it illustrates the intention of the parties. Moreover,

it is actually suggested that lenders should never leave any indication that a borrower will retain

ownership or possession of the property when executing a deed in lieu of foreclosure, and in fact,

the documentation for the transaction should indicate that no rights of ownership, possession of

the subject property, or purchase option will exist upon closing. 3 In his certification, the Bank’s

Officer made it clear that Mr. Kunesch was to remain the owner and in possession of the Property

until he defaulted, as was agreed by the parties. Therefore, this fourth factor also weighs in favor

of finding that the 2nd Deed in Lieu is more appropriately an equitable mortgage because Mr.

Kunesch, and not the Bank, continued to possess the Property until the title was recorded.

       The fifth factor looks to the owner continuing to bear ownership responsibilities like paying

real estate taxes or performing property maintenance. This factor also weighs in favor of finding

an equitable mortgage. Mr. Kunesch continued to pay property taxes on the Property through the

escrow arrangement with the Bank, and paid maintenance expenses for the Property’s upkeep

throughout the tax years in question. This fifth factor further illustrates that the Bank never

intended to maintain or bear any sort of ownership responsibilities of the Property until Mr.

Kunesch defaulted and the 2nd Deed in Lieu was recorded.

       The sixth factor addresses uneven bargaining power and whether the property owner had

legal representation. Mr. Kunesch had an attorney for Agreement 1, but not for Agreement 2. The

court is satisfied that Mr. Kunesch was at no disadvantage for either of the Agreements as there is

no evidence of uneven bargaining power, deception, or heavy-handedness on the Bank’s behalf.

3
  See Clint Kakstys & Gillian Kotlen, Deed in Lieu of Foreclosure or Equitable Mortgage? Pitfalls
for Lenders to Avoid, New Jersey L. J. (July 29, 2020) available at
https://www.law.com/njlawjournal/2020/07/29/deed-in-lieu-of-foreclosure-or-equitable-
mortgage-pitfalls-that-lenders-should-avoid (providing advice to lenders and borrowers on deeds
in lieu of foreclosure).
                                                 14
The lack of legal representation for Agreement 2 may merely explain why a second side agreement

did not explicitly accompany Agreement 2 like with Agreement 1. Accordingly, this sixth factor

also weighs in favor of finding an equitable mortgage even though it is not as definitive on the

issue as the factors pertaining to ownership or possession of the Property.

       The seventh factor addresses an irregular purchase process. This factor is irrelevant in

these matters and is once again meant for those instances of disguised sales. Agreements 1 and 2

simply restructured the mortgage and allowed the Bank to have security for its loan while Mr.

Kunesch remained in possession of the Property for the years in question.

       The eighth factor looks to financial distress of the owner, the imminence of foreclosure,

and prior unsuccessful attempts to obtain loans. Mr. Kunesch asserts he was not in financial

distress when entering into Agreement 1 or Agreement 2. There is also nothing on the record that

suggests he was in financial distress when either agreement was executed, nor was there any

evidence he was ever denied a loan. It was not until 2019 when Mr. Kunesch was clearly in

financial distress, demonstrated by filing a Chapter 7 bankruptcy proceeding, eight years after

Agreement 2 was signed and the 2nd Deed in Lieu was executed. The mere signing of the 2nd Deed

in Lieu in connection with Agreement 2, does not, in and of itself, suggest that Mr. Kunesch was

in financial distress at the time Agreement 2 was entered into. There is clearly nothing in the

record to suggest otherwise. 4 Rather, the court is satisfied that at the time of the execution of

Agreements 1 and 2, Mr. Kunesch simply needed a loan and did not contemplate foreclosure or

4
  It is suggested that lenders should not consider accepting a deed in lieu of foreclosure before
there is a default under the mortgage. At least some degree of financial distress and the imminent
threat of foreclosure should exist in a deed in lieu of foreclosure transaction. See Kakstys &
Kotlen, Deed in Lieu of Foreclosure or Equitable Mortgage? Pitfalls for Lenders to Avoid, New
Jersey L.J. (July 29, 2020).

                                                15
default. Both Deeds in Lieu were entered into merely so that the Bank could have security for the

loan provided to Mr. Kunesch, enabling him to refinance, nothing more. Accordingly, the court

finds that Mr. Kunesch was not in financial distress at the time he executed either Deed in Lieu,

and only did so to secure a loan, and supports a finding that the 2nd Deed in Lieu was actually an

equitable mortgage.

         The above analysis leads the court to conclude that the 2nd Deed in Lieu, paired with

Agreements 1 and 2, is in fact an equitable mortgage. The factors considered together weigh in

support of the finding that the Bank merely used the Property to serve as collateral for a loan while

Mr. Kunesch maintained ownership over the Property. This was the clear intention of the parties

when entering into the Agreements 1 and 2, evidenced by the parties’ actions and the agreements

themselves. Accordingly, because the 2nd Deed in Lieu was actually an equitable mortgage, Mr.

Kunesch remained the owner of the Property for the years in question, and therefore, has standing

to bring these appeals.

   II.      Judicial Estoppel

         The Township also argues that Mr. Kunesch is barred from prosecuting these tax appeals

because of the doctrine of judicial estoppel as it relates to Mr. Kunesch’s Chapter 7 bankruptcy

proceeding. In the present matters, Mr. Kunesch asserts that he is entitled to a tax refund for each

tax year at issue. However, in his bankruptcy filing, he omitted the potential tax appeals refund

from his list of assets and denied any money was owed to him at his 341 Meeting. According to

the Township, these positions are inconsistent and are barred under judicial estoppel.

         The court rejects this argument. “[T]o be estopped [a party must] have convinced the court

to accept its position in the earlier litigation.” Kimball Int’l, 334 N.J. Super. at 606-07. In this

matter, Mr. Kunesch immediately contacted the Trustee when he realized his inadvertent omission,

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and the Trustee determined not to reopen the bankruptcy proceeding to administer the tax appeals

as an asset. Decisions of the Trustee are neither before, nor within the jurisdiction of, this court.

By deciding not to act, the Trustee was clearly satisfied with Mr. Kunesch’s explanation and saw

no issue with the New Jersey Tax Court proceeding with the determination of his pending tax

appeals.

       As noted above, judicial estoppel is a remedy which must be sparingly used. Given the

Trustee’s determination to not pursue the issue when these appeals were brought to the attention

of the Bankruptcy Court, this court fails to see how proceeding with these matters would be “a

miscarriage of justice.” Accordingly, Mr. Kunesch is not barred from prosecuting these tax

appeals based on the doctrine of judicial estoppel.

                                         CONCLUSION

       For all the foregoing reasons, the Township’s motions to dismiss for lack of standing are

denied. Mr. Kunesch has standing to proceed as an aggrieved taxpayer within the meaning

of N.J.S.A. 54:3-21 and may bring these appeals as the owner of the Property for the tax years in

question. Both Mr. Kunesch and the Bank intended for Mr. Kunesch to remain the owner and in

possession of the Property unless he defaulted, at which point the 2nd Deed in Lieu would be

recorded. Furthermore, the 2nd Deed in Lieu is more appropriately characterized as an equitable

mortgage because it was in essence security for a loan. Finally, Mr. Kunesch is not barred from

bringing these tax appeals based on the doctrine of judicial estoppel. The court’s order denying

the Township’s motion shall be uploaded to eCourts.

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