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Del Vecchio v. Hemberger

2006 WL 1994879 (N.J. Super. App. Div. 2006) (Unpublished)

TAX SALES; FORECLOSURE — A party foreclosing on a tax sales certificate has no duty to include the mortgagee in its foreclosure even if the property owner claims to have relied on the mortgagee’s representation that it would redeem the property.

An investor bought a tax sale certificate on residential property. After awaiting the necessary two years, the purchaser instituted a foreclosure action, naming the property owners and their mortgagee as the defendants. However, the investor later voluntarily dismissed the mortgagee from the action, thereby preserving its two mortgages on the property from foreclosure. Following entry of the judgment of foreclosure, the investor also purchased an assignment of the mortgages from the mortgagee.

After a final judgment of foreclosure was entered, a developer contracted with the record property owners for the purchase of the property, where the developer arranged for the property owners to redeem the property and agreed to fund any legal services required by the property owners in connection with the sale transaction. However, the redemption was not permitted because the final judgment of foreclosure had been entered.

In the property owners’ motion to vacate the judgment one and one-half months after its entry, they argued that the judgment was void because it was based upon faxed copies of both the certification of non-redemption by the tax collector and the investor’s certification as to the genuineness of the tax collector’s signature. In support of their claim, the property owners pointed to the fax’s date on the certification of non-redemption. Further, the developer certified that when he called the Foreclosure Unit to verify the entry of judgment, he had been told that none appeared on the Foreclosure Unit’s computers. The property owners also argued that the investor acted inequitably in dismissing the mortgagee from the foreclosure, without notice to the property owners, since the property owners were relying on the mortgagee’s representation that it would redeem the property. Essentially, they argued that if the mortgagee had then instituted a mortgage foreclosure action, the property owners would have been entitled to the amount of any excess recovery, and thus to a potential return of a portion of their equity in the house that otherwise would be lost in a strict tax sale certificate foreclosure.

The lower court denied the property owners’ motion to vacate the foreclosure judgment, finding nothing improper in its entry. The property owners moved for reconsideration on the basis of newly discovered evidence from the Foreclosure Unit that it did not have, in its files, the original either the tax collector’s certification of non-redemption or the purchaser’s certification of the genuineness of the tax collector’s signature. The lower court found reconsideration unwarranted, and entered an order denying that relief.

On appeal, the property owners, joined by the developer, argued that the lower court erred in denying their motion to vacate the judgment of foreclosure, and that such relief was required pursuant to the pertinent statutory provision.

In addressing the property owners appeal, the Appellate Division stated that it was guided by the principle that the decision whether to vacate a judgment on one of the six specified grounds is a determination left to the sound discretion of a trial court, guided by principles of equity and the lower court’s decision must be left undisturbed in the absence of a clear abuse of discretion.

The Court noted that the property owners never contended that the tax collector failed to certify non-redemption, and that they had no evidence of collusion or other improper conduct by personnel of the Foreclosure Unit that would demonstrate that the judgment of the foreclosure was issued on some other date. The Court stated that the property owners’ argument rested on the technicality that the investor may have submitted a facsimile copy of his certification as to the authenticity of the tax collector’s signature on the certification of non-redemption, and on the claim that if he did so, the resultant judgment would be void. Rejecting the property owners’ claims, the Court noted that the certification bore no markings that would suggest it was faxed, and found that the original had been supplied to the court. It thus found a sufficient factual foundation for the conclusion by the lower court that the judgment of foreclosure was properly entered, and found no abuse of discretion on the lower court’s part in denying the property owners’ motion to vacate the judgment as void on this technical ground.

Furthermore, the Court stated that even if the investor’s affidavit had been submitted in fax form, that fact would not detract from the investor’s obligation to produce the original of the tax collector’s certification if the property owners or the Foreclosure Unit had requested it. Thus, the Court concluded that if the judgment were irregularly entered, a remedy readily existed. In these circumstances, the Court found no defect with a capacity to affect the judgment’s validity or to suspend its operation so as to extend the period for redemption.

Similarly, the Court found no equitable grounds for vacating the foreclosure judgment. It found that the property owners were aware of their defaults from the outset and had more than ample time to effect a cure, had they been financially able to do so. Although the property owners provided evidence that they actively sought to obtain redemption funds but were unable in doing so, the Court held this was inadequate grounds for vacating the foreclosure judgment.

As final matter, the Court found no abuse of discretion by the lower court in denying reconsideration. It explained that by denying reconsideration, the lower court denied the property owners a forum for the delayed acceptance of the investor’s offer to reimburse them the amount they lost by their inability to consummate their post-foreclosure deal with the developer. However, the Court concluded that this did not entitle the property owners to payment of that amount by the investor because their deal with the developer, negotiated after a judgment of foreclosure had been entered, fell through. The Court reasoned that the investor obtained title to the property by adherence to statutory procedures. In addition, no grounds for the establishment of an equitable trust had been demonstrated, and the Court found that the purchaser’s offer of payment, which was not renewed, lapsed because it found no grounds to reverse the Court’s denial of the property owner’s motion to vacate the judgment of foreclosure and that any contractual rights that the developer might have sought to maintain by virtue of its contract with the property owner lapsed.

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