New Jersey Appellate Court Holds Evidentiary Hearing Necessary to Determine Whether Statute of Limitations Should Be Tolled in Action Regarding Title to Property

New Jersey’s Appellate Division recently reversed a lower court and held that an evidentiary hearing was necessary to determine whether the statute of limitations should be tolled in a case in which plaintiffs allege that defendant defrauded them out of title to a property over 20 years earlier.  See Benipal v. Tri-State Petro, Inc., et al., A-0894-17T3 (N.J. Super. Ct. App. Div. Jan. 4, 2019).  In 1994, plaintiffs and defendant agreed to jointly purchase a property on which they would operate a gas station.  Although the parties agreed that the title would be in the name of a jointly-owned entity, defendant titled the property in the name of a company he owned with his family.  Defendant and his family operated the gas station, but “led plaintiffs to believe” the joint entity owned it.  In 2016, plaintiffs allegedly discovered that the joint entity did not own the property.  Defendant asked them for time to “make things right” and acknowledged in an email that the property should have been purchased in the name of the joint entity.  Nonetheless, nothing was done and plaintiffs brought this action in 2017 seeking quiet title and alleging fraud.  Defendant moved to dismiss, arguing that the statutes of limitations on the claims had run.  In opposition, plaintiffs argued that the limitations period should be tolled until 2016, when they discovered the issue.  The trial court granted defendant’s motion, holding that under the recording statute, a recorded deed put all interested parties on constructive notice that the joint entity did not own the property and, therefore, that the limitations period should not be tolled.

On appeal, the Court reversed the decision.  It found that the recording statute cited by the trial court only states that “[a]ny recorded document affecting the title to real property is, from the time of recording, notice to all subsequent purchasers, mortgagees and judgment creditors of the execution of the document recorded and its contents,” but that the statute is silent as to current owners of the property like plaintiffs, and thus has questionable applicability here.  See N.J.S.A. 46:26A-12(a) (emphasis added).  Additionally, the Court found that discovery was needed as to plaintiffs’ failure to discover the true owner of the property for over 20 years, but that “[d]espite plaintiffs’ obvious complacency over the years, it is not clear on the record before us that even a prudent investor would have uncovered concealment of the property’s true ownership.”  Thus, the matter was remanded to the trial court for an evidentiary hearing.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Michael Crowley at mcrowley@riker.com, or Dylan Goetsch at dgoetsch@riker.com.