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Fresh Fish Holdings, L.L.C. v. 61 Main Street, Inc.

A-3991-04T5 (N.J. Super App. Div. 2006) (Unpublished)

FORECLOSURE; TAX SALES; NOTICE—Where the holder of a default tax sale foreclosure judgment waits more than six months to move for a final judgment, notice of that application must be given to the defaulting parties.

A purchaser of a tax sale certificate filed a complaint seeking foreclosure. The landowner was served with process, but failed to answer and a default was entered. Thereafter, an order was entered setting the redemption amount and setting the last day of redemption. On the last day of redemption, the landowner filed a bankruptcy petition, which by operation of law automatically stayed the foreclosure action. The purchaser of the tax sale certificate successfully moved to vacate the automatic stay. The order vacating the stay specifically permitted the tax sale certificate purchaser to prosecute the foreclosure to conclusion. Thereafter, a final judgment of foreclosure was entered. Within seventeen days of the judgment of foreclosure, the landowner moved pursuant to Court Rule 4:50-1 (claiming the final judgment is void) for an order vacating the final judgment. In granting the landowner’s motion, the lower court found that the bankruptcy court: (i) vacated the automatic stay without notice to the landowner; and (ii) failed to set a new redemption date. The tax sale certificate holder moved for reconsideration, claiming that its counsel fees must be paid prior to any vacation of the final judgment. The lower court dismissed this claim, finding that the final judgment was void as a matter of court rule, not because of excusable neglect or mistake. The lower court reasoned that the landowner should not have to pay counsel fees incurred in setting aside a void judgment. However, the lower court did order the landowner to reimburse the tax sale certificate holder for the costs of property insurance during the lower court action. The landowner thereafter redeemed the property and the lower court action was dismissed.

The holder of the tax sale certificate appealed, claiming there were inadequate grounds for relief from the final judgment. While holding that the purpose of a final judgement of (tax) foreclosure is to aid municipalities in the raising of revenues and to secure marketable title by barring the right of redemption, the Appellate Division also held that during the first three months following the entry of a final judgment of foreclosure, an affected landowner may seek to vacate the final judgment for any reason. After three months from the entry of the final judgment, the final judgment can be vacated only upon a showing of lack of jurisdiction or fraud in the conduct of the suit. In this case, the Court found that the landowner moved to vacate the final judgment of foreclosure only seventeen days after the judgment was entered, and thus was entitled to raise any claim as to the validity of the judgment. It further found that the tax sale certificate holder never provided the landowner with papers stating the amount of redemption, nor did the tax sale certificate holder provide the landowner with a copy of the proposed final judgment or any other supporting papers that would have revealed the redemption amount. This fact alone, according to the Court, constituted sufficient grounds to vacate the final judgment of foreclosure.

Contrary to the tax sale certificate holder’s contention that the landowner was not entitled to notice because it did not appear in the lower court action, the Appellate Division held that under R. 4:64-1(b), the landowner was entitled to notice because the tax sale certificate holder did not move for a final judgment until fourteen months after the default. Under the court rule, all defaulting parties are entitled to notice if an application for final judgment is made more than six months after the entry of the default. Because the tax sale certificate holder failed to provide the landowner with a complete set of moving papers, the Appellate Division ruled the motion for final judgment was defective, and the final judgment entered on that application was voidable. The Court, finding no abuse of discretion, by the lower court affirmed. It also affirmed the lower court’s ruling that counsel fees need not be paid prior to vacating a voidable judgment.

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