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Burbach v. Sussex County Municipal Utilities Authority

318 N.J. Super. 228, 723 A.2d 137 (App. Div. 1999)

FORECLOSURE; NOTICE—A tenant in common is entitled to notice of a foreclosure sale even if its real property interest is not being sold.

The single and narrow question raised by this appeal was whether a non-debtor tenant in common is entitled to notice of an execution sale to enforce a judgment against a debtor-tenant. Two parties owned a tract of land as tenants in common. A utilities authority obtained a default judgment against one of the owners and her husband. The other co-owner had no connection with the underlying debt. The utility company obtained a writ of execution against its debtor and directed the Sheriff to conduct an execution sale of the debtor’s interest in the tract. Appropriate notices were served and posted, but the utility authority was not aware of the innocent co-owner’s interest in the property and no notice was ever served upon him. The Sheriff’s sale took place and the utility authority was the successful bidder for a nominal sum. About four months later, the innocent co-owner became aware of the Sheriff’s sale and contacted the utility authority, objecting to the lack of notice and contending that the sale was therefore void. The innocent co-owner also offered to pay the full amount of the judgment in exchange for a reconveyance of the property to the debtor. The utility did not respond favorably to that offer and proceeded to offer the interest it had acquired at the auction sale, for public sale, at a significantly higher price. The lower court believed that the law simply required notice to be provided to those parties who stood to be divested of their rights in the particular property as a result of a foreclosure sale. In its mind, the innocent co-owner, as a tenant in common, was clearly not such a party, and therefore, was not entitled to personal notice. The Appellate Division reversed. According to the Appellate Division, at one time the relevant court rule required mailing of the notice of execution of foreclosure sales only to “each party who has appeared in the action or served a pleading and to the record owner of the property as of the date of the commencement of the action whether of not he has appeared in the action.” The Supreme Court, in the context of judgment liens, recognized the constitutional inadequacy of the defined class of persons entitled to notice and held that readily identifiable holders of property interests adversely affected by the sale are entitled to actual notice. Consequently, the Court revised the rule to assure the due process rights of such property interests as might be subject to adverse consequences as a result of litigation to which they are not parties. Here, however, the Court did not need to rely upon the amendment to the rule because the Court found that the rule had always required notice to the record owner of the property in question whether or not a party to the litigation resulting in the execution sale. It held the non-debtor tenant in common to be an owner of record within the intendment of the rule and was therefore entitled to actual notice. A tenant in common, by definition, has an undivided interest in the entire property. Just because a tenant in common is free to alienate its interest in property without the consent of any co-tenant and is ordinarily free to compel partition, it is not deprived of a right to notice of an execution sale to enforce the separate obligation of a co-tenant. To the Court, it was obvious that a tenant in common, as a practical matter, is affected by an execution sale, particularly where, as in this case, the tenants in common were not strangers to each other and had been functioning in a nature of a partnership under a common deed. The matter was remanded to the lower court for entry of an order setting aside the execution sale.


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