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Fabrikant v. Stalcup

A-2424-03T5 (N.J. Super. App. Div. 2004) (Unpublished)

CHECKS; ACCORD AND SATISFACTION—A bank check is the equivalent of cash; therefore, when a party holds onto a bank check tendered by another party as payment in full on a contested debt, it is as if the payment has been accepted.

A property owner failed to pay a $400 municipal sewer charge. As a result, an investor bought a tax sale certificate for unpaid municipal liens. The holder then sued to foreclose the tax sale certificate. Although the owner was served with both the complaint and an amended complaint, she failed to answer. The holder wrote the owner, informing her that she could redeem the certificates for $775. The owner again failed to act. Consequently, a default was entered, and the lower court entered an order fixing the amount, time, and place for redemption of the certificate. The owner was served with the order by regular mail and could have redeemed the certificate for $1,913. The owner did not respond, and final judgment was entered on August 15, 2002.

On October 1, 2002, the owner filed a notice of lis pendens. In March 2003, the owner sent the holder a letter in an attempt to settle the matter. The owner enclosed a bank check in the amount of $3,700, which included the amount of the judgment, attorney’s fees, and additional funds to cover the cost of preparation of documents necessary to extinguish all claims. The owner also stated that she was in the process of filing a motion to vacate the judgment and that if her offer to settle was accepted she would dismiss her motion. The holder did not respond to the letter, but kept the check without cashing it.

One year after the final judgment was entered, the owner filed a motion to vacate the judgment. The lower court granted the motion, allowing the owner to redeem the certificate. It based its decision on three main points. First, although the owner was a former attorney, the court concluded that she knew little about foreclosures, and was confused throughout the proceedings due to mental difficulty in understanding things. Second, it found a great disparity between the amount of the lien and the value of the property. The lien was approximately $3,000, whereas the property was thought to be worth approximately $40,000. Third, the court found that the parties entered into a settlement in March 2003 when the owner tendered a $3,700 check to the holder in settlement of the dispute and the holder retained the check.

On appeal, the Appellate Division first held that that the lower court acted within its power in reopening the foreclosure judgment. Although N.J.S.A. 54:5-87 limits the period of time to move to vacate a tax foreclosure judgment to three months, Rules 4:50-1 and -2 allow, with a showing of exceptional circumstances, an application to vacate a judgment within reasonable time. The Court agreed with the lower court that Rules 4:50-1 and -2 governed the case at hand. In this case, approximately one year after the judgment was entered, the owner moved to vacate the judgment.

Second, the Appellate Division affirmed the lower court’s decision on the merits because it concluded that the holder had accepted the owner’s offer to settle the case by accepting the $3,700 check. The owner offered the check to resolve the dispute and the holder retained the check without affirmatively rejecting the offer. The Court held that even though the holder did not cash the check, where there is a disputed claim, retention of a check for a long period of time constitutes a satisfaction of the debt. The Court noted the significance of the fact that the check was not a personal check, but rather a bank check. Unlike a personal check where the owner could have stopped payment, the owner had already paid $3,700 to the bank. She could not stop payment on the bank check after it had been issued because a bank check is the equivalent of cash. Thus, when the holder retained the bank check, it was as if he retained cash. Therefore, regardless of the holder’s subjective intent, his objective actions, by not rejecting the owner’s offer and by keeping and holding the bank check for over a year, demonstrated his acceptance of the owner’s offer. For that reason, the Court affirmed the lower court’s decision to vacate the final foreclosure judgment.


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