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City of Newark v. Block 1, Lots 1, 3, 902-904 McCarter Highway Breco Realty Co.

A-3987-07T3 (N.J. Super. App. Div. 2009) (Unpublished)

FORECLOSURES; TAX SALES; NOTICES — Even though the current due process standards for service of a tax sale foreclosure notice might not permit the issuance of a default judgment in the same circumstances, if service in a foreclosure complaint in 1978 met the due process standards existing in 1978, then the default judgment will stand even if the property owner never actually was served.

Property owners owned two adjoining lots (original owners). One lot had a two-family home. The other lot was vacant. In 1975, they failed to pay taxes due on the vacant lot. In 1976, the municipality purchased a tax sale certificate for that lot and recorded it. In 1978, the municipality filed an in rem tax foreclosure complaint against the lot. The municipality attempted service of the foreclosure complaint at the vacant lot but the certified mail notice was returned unclaimed. Default judgment was entered and, approximately two years later, the municipality executed a deed transferring title to the lot to a third party. The third party then recorded the deed. The municipality regained title to the lot by another in rem tax foreclosure judgment in 1987. Approximately a year later, the municipality then executed a deed to yet another party. Then, in 1996, the original owners delivered a no-consideration deed to their daughter purportedly transferring title of both lots to her. They did not conduct a title search. The current holders of the deed for the vacant lot then transferred title to the parcel. In 2006, the then current owners of the vacant lot sent a notice to the original owners asserting they owned the vacant lot and demanded that the original owners stop interfering with the current owners’ possession of the property. The original owners filed a complaint in the Chancery Division to quiet title.

The Chancery Division ruled that the current owner’s title was valid, but allowed the original owners the right to file a motion to vacate the default judgment in the foreclosure action. In their subsequent motion to vacate the judgment, the original owners claimed that service of the foreclosure complaint was defective and that the subsequent owners of the vacant lot were placed on constructive notice of the original owners’ ownership because of the original owners’ open, notorious, and unequivocal use of the lot. The Court rejected the original owners’ contentions, holding that the municipality complied with the due process standards existing in 1978. Further, the Court held that the original owners had a duty to make sure that they paid taxes on the lot and ruled they could have easily rectified the problem if they had conducted a title search when they transferred title to their daughter. In addition, the Court ruled that the subsequent owners of the lot properly relied on title searches and affidavits of title that they obtained when they purchased the lot. The Court also found that the abandoned car, unused boat, and no parking signs left at the vacant lot did not give the subsequent owners on constructive notice of the original owners’ continued ownership of the vacant lot. The original owners appealed.

The Appellate Division affirmed, agreeing with the lower court that the municipality complied with all due process standards existing in 1978 for a foreclosure action. Further, it noted that anyone who acquires title to property by paying valuable consideration is considered a “bona fide purchaser for value.” It noted that even a bona fide purchaser has a duty to inquire of the one in possession concerning the right by which it occupies the premises. Here, the Court was satisfied, based on an evaluation of the totality of the circumstances, that the subsequent owners properly relied on affidavits of title and title searches prior to purchasing the lot. Finally, the Court rejected the claim that the original owners’ non-receipt of a tax bill discharged them of their duty to pay taxes for the vacant lot.

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