Zaman v. Felton

The issue this appeal presented for the New Jersey Supreme Court's review centered on an agreement for the sale of a residential property and a subsequent lease and repurchase agreement, specifically whether the transactions collectively gave rise to an equitable mortgage, violated consumer protection statutes, or contravened its decision in "In re Opinion No. 26 of the Committee on the Unauthorized Practice of Law," (139 N.J. 323 (1995)). In 2007, defendant Barbara Felton faced foreclosure proceedings with respect to her unfinished, uninhabitable home and the land on which it was situated. Felton and plaintiff Tahir Zaman, a licensed real estate agent, entered into a written contract for the sale of the property. A week later, at a closing in which neither party was represented by counsel, Felton and Zaman entered into two separate agreements: a lease agreement under which Felton became the lessee of the property, and an agreement that gave her the option to repurchase the property from Zaman at a substantially higher price than the price for which she sold it. For more than a year, Felton remained on the property, paying no rent. She did not exercise her right to repurchase. Zaman filed suit, claiming that he was the purchaser in an enforceable land sale agreement, and that he therefore was entitled to exclusive possession of the property and to damages. Felton asserted numerous counterclaims, alleging fraud, slander of title, violations of the Consumer Fraud Act (CFA), and violations of other federal and state consumer protection statutes. She claimed that the parties’ transactions collectively comprised an equitable mortgage and constituted a foreclosure scam, entitling her to relief under several theories. She further contended that the transactions were voidable by virtue of an alleged violation of "In re Opinion No. 26." A jury rendered a verdict in Zaman’s favor with respect to the question of whether Felton knowingly sold her property to him. The trial court subsequently conducted a bench trial and rejected Felton’s remaining claims, including her contention that the transactions gave rise to an equitable mortgage and her allegation premised upon In re Opinion No. 26. An Appellate Division panel affirmed the trial court’s judgment. The Supreme Court affirmed in part and reversed in part the Appellate Division’s determination. The Court affirmed the jury’s determination that Felton knowingly sold her property to Zaman. Furthermore, the Court affirmed the trial court and Appellate Division's decisions that Felton had no claim under the CFA, that this case did not implicate "In re Opinion No. 26," and that Felton’s remaining claims were properly dismissed. The Court reversed, however, the portion of the Appellate Division’s opinion that affirmed the trial court’s dismissal of Felton’s claim that the parties’ agreements constituted a single transaction that gave rise to an equitable mortgage, adopting an eight-factor standard for the determination of an equitable mortgage set forth by the United States Bankruptcy Court in "O’Brien v. Cleveland," (423 B.R. 477 (Bankr. D.N.J. 2010)). The case was remanded to the trial court for application of that standard to this case, and, in the event that the trial court concludes that an equitable mortgage was created by the parties, for the adjudication of two of Felton’s statutory claims based on alleged violations of consumer lending laws, as well as several other claims not adjudicated by the trial court. View "Zaman v. Felton" on Justia Law