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EF Financial, LLC v. Pisani

A-1726-02T2 (N.J. Super. App. Div. 2004) (Unpublished)

TAX SALES CERTIFICATES; NOTICES—If an otherwise diligent search for missing property owners is conducted, a holder of a tax sale certificate desiring to foreclose on the subject property need not search the Surrogate’s records to locate someone who might claim to be the current property owner by reason of an unrecorded deed.

A property owner conveyed its property, for nominal consideration, to herself and her brother as joint tenants. She then died. Thus, title vested in her brother as the surviving joint tenant. Then he died.

The house had been boarded up for many years and had been the subject of numerous complaints and code violations. Taxes had not been paid for about five years. A tax sale certificate was sold. An assignee of the tax certificate holder filed a foreclosure action, naming the now-deceased sister and brother, since they were still the owners of the record. Service was made by publication. The company then filed an affidavit of inquiry outlining its unsuccessful attempts to locate the original owners. Those attempts included: (a) attempting to personally serve at the property; (b) sending an inquiry letter to the postmaster; (c) mailing a copy of the summons and complaint by regular and certified mail; (d) conducting a postal search; (e) reviewing a CD-ROM of addresses in the area; and (f) conducting “skip trace” searches.

While the foreclosure action was pending, the certificate holder was contacted by someone purporting to represent the current property owner. The holder told him to contact the tax collector. Although he contacted the tax collector to straighten out “the problem,” the taxes remained unpaid. A final foreclosure judgment by default was entered in favor of the certificate holder, who then conveyed the premises to a buyer. The property was then resold to someone who built a house on the property.

Six months after the foreclosure judgment was entered, someone claiming to have been the property owner filed a motion to vacate the judgment. He claimed to be the grantee under an unrecorded deed given to him a decade earlier by one of the original joint tenants. In support of the motion, he certified that he was aware that the Tax Collector had stopped accepting tax payments from his broker five years ago. He claimed the only notices he received about the property were from the local code enforcement official. He also asserted that he did not learn of the foreclosure action until he returned from Italy about two years earlier. He also claimed to be one of the heirs of the original joint tenants.

The Chancery Division denied his motion. The basis of the claimant’s claim (that he could have been found for the purpose of service) was that the estate’s documents filed with the surrogate would have revealed his address in Italy where he could have been served. He also filed a second motion to vacate the judgment on behalf of the heirs of one of the original joint tenants. The lower court denied both motions.

On appeal, the claimant contended that the lower court lacked jurisdiction to enter final judgment by default because the named defendants were deceased and because the certificate holder failed to conduct a diligent inquiry. The Appellate Court disagreed with the claimant.

The lower court had been satisfied with the efforts made by the holder’s counsel in trying to find the record owners of the property, given the facts that were known or ascertainable. The Appellate Division felt that the lower court’s finding was supported by evidence. Each court rejected any contention that the search was not diligent. Each considered it “highly speculative that any search would have [succeeded].” Therefore, the foreclosure judgment was properly entered against the record owners of the property, who were served by publication.

N.J.S.A. 54:5-87 sets forth that a foreclosure judgment cannot be reopened after three months other than for lack of jurisdiction or fraud in the conduct of the suit. Here, the lower court had jurisdiction, and there was no allegation of fraud on the part of the certificate holder.

The claimant also contended that the lower court abused its discretion by denying his motion to vacate on behalf of the original joint tenant’s heirs. The lower court had concluded that the heirs were in no different position than the claimant himself. The inquiry conducted by the certificate holder was diligent. The owners of the property, whether they were the claimants by virtue of the unrecorded deed, or the heirs by virtue of intestacy, allowed the taxes to go unpaid, leading to the foreclosure. They took no steps to let their interest in the property or their whereabouts be known to the Tax Collector or to the Register of Deeds.

The claimant’s final contention was that equity required the lower court to vacate the default judgment because otherwise he would be deprived of a substantial asset without notice. The Court recited that “equity aids the vigilant, not those who sleep on their rights.” And “where a loss must be borne by one of two innocent persons, equity will impose the loss on that party whose first act could have prevented the loss.” Here, the equities did not favor the claimant.


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