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Jackson v. HSBC Bank USA

393 N.J. Super. 1, 922 A.2d 750 (App. Div. 2007)

CONSUMER FRAUD ACT; TAXATION —Where the holder of a tax sale certificate fails to observe the framework of responsibilities and restrictions imposed under the New Jersey Tax Sale Law with respect to private installment agreements, and in doing so commits an unconscionable commercial practice, the holder would be in violation of the Consumer Fraud Act, but minor violations will not penalized so long as the intended purposes of the Tax Sale Law were not violated and as long as the minor violation are reformed.

A property owner was a representative in a class action against a bank. The class claimed that the bank violated New Jersey’s Tax Sale Law (TSL) while holding tax sale certificates on the class’s property. Specifically, they challenged a private installment payment plan agreement used by the bank to collect payments in connection with the tax sale certificates. The plans gave a delinquent property owner the ability to avoid the cost of defending against foreclosure proceedings and the possible loss of property by way of actions that could be taken on the certificates.

The class asserted that the plans included charges and other non-monetary burdens that were not covered by the TSL, and thus the class alleged it was entitled to remedies under the TSL. The remedies sought included forfeiture of the certificates, recovery of any payments made to the bank, and damages under New Jersey’s Consumer Fraud Act (CFA). The bank responded that the class was only entitled to reformation with regard to any provisions of the plans covering charges not under the TSL, and that the class was not entitled to damages under the CFA.

The lower court found in favor of the class, granting it a judgment for the amount of charges unauthorized under the TSL.

On appeal, the Appellate Division held that the bank was required to adhere to the TSL’s framework of responsibilities and restrictions, and that it was possible for the bank to engage in unconscionable commercial practices in violation of the CFA. According to the Court, minor violations would not be penalized, so long as the intent and the purpose of the TSL were not violated and so long as the minor violations were reformed. The class conceded that the TSL allowed for private redemptive arrangements in lieu of the statutory remedy of forfeiture and recovery of all amounts paid under the certificates.

The Court also addressed the lower court’s denial of the bank’s motion for summary judgment. The Appellate Division noted that neither the class nor the lower court cited any particularly egregious aspect of the plan or explained why the installment payment plan should be considered an unconscionable commercial practice. The Court further noted that the transfer of the non-monetary rights was standard practice for commercial loans, and the only thing that made them noteworthy was that they were not contained in the TSL. Without evidence of an unconscionable commercial practice, the Court ruled in favor of the bank by reversing the lower court’s denial of the bank’s motion for summary judgment. In doing so, the Court affirmed the class’s right to reformation of the certificates, but denied relief under the TSL or the CFA.

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