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M & D Associates v. Mandara

366 N.J. Super. 341, 841 A.2d 441 (App. Div. 2004)

TAXATION; TAX SALES CERTIFICATES; NOTICE—Fundamental fairness requires that the amount of diligence required to locate a missing property owner in a tax sale foreclosure is related to the discrepancy between the amount of taxes owed and the property’s value; and, all co-owners of a property must be served.

A company purchased three tax sale certificates for a property and then moved to foreclose. A co-owner’s seventeen-year-old daughter was served by a sheriff’s deputy at the address listed in the records for the local tax collector, the owner’s bank, and on the owner’s IRS mortgage statement. Personal service was also attempted, but was unsuccessful. The holder then contacted that particular co-owner and requested that he submit a proper address for the other co-owner so that the other co-owner could also be served for the foreclosure action. It never received a response. Consequently, the holder attempted service on the missing owner by publication, and a summons to the unserved owner appeared in a local newspaper. Afterwards, the company filed an affidavit of inquiry to demonstrate its diligent efforts in looking for the missing owner and in support of the service by publication. In addition to the publication, the holder contracted the local Voter Registration Board, consulted the telephone book, and reviewed the records of the tax collector. After the missing co-owner failed to file an answer, the holder obtained a final judgment of foreclosure.

Almost three years after the foreclosure, the two co-owners filed a motion to vacate the final judgment. The missing owner claimed that he had only recently become aware of the foreclosure because he had been living at another address, and that a search of the Division of Motor Vehicles records would have revealed this information.

Based on the certifications submitted, the Chancery Court denied the motion to vacate, holding that the co-owners had failed to meet the exceptional circumstance requirement of R. 4:50-1(f), which the judge considered the only basis for relief. It also found that service on the owner’s daughter was proper, but did not make findings as to service by publication on the missing co-owner. It held that both owners knew about the case in time and should have moved immediately to vacate the judgment

The two owners argued that exceptional circumstances and a lack of service of process for the missing co-owner required dismissal of the foreclosure judgment. The lower court disagreed, holding that because the motion was filed well beyond the one-year time limitation, the co-owners could only rely on subsection (f) of R. 4:50-1, requiring a movant to show that the circumstances were exceptional and that enforcement of the judgment would be unjust, oppressive or inequitable. The co-owners contended that the judge should have considered subsection (d) because service was improper and the judgment was void. They also contended that under subsection (d) they were not limited to one year, but an action thereunder could be brought within a reasonable time.

On appeal, the salient issue was whether the inquiry made by the foreclosing company prior to the publication was sufficient to warrant its method of service. The missing co-owner was entitled to a diligent inquiry on the part of the foreclosing company before substitute service could be made. Without any record of findings on the record concerning diligent inquiry, the Appellate Division held that the lower court mistakenly exercised its discretion in disposing of the matter.

Based on the principles of fundamental fairness, where there is both substituted service and a great disparity between the amount due on tax certificates and the value of the property subject to foreclosure, careful scrutiny of the affidavit of inquiry requires a lower court to demand more than cursory inquiries into the matter. Here, there was approximately $4,500 due on the tax certificates, while the value of the property was from $100,000 to $200,000. The Court also believed that the missing co-owner’s address could have been found in the state’s motor vehicle records.

Service on the known co-owner was proper, however. His daughter was over the age of fourteen and was a “competent member of the household.” Thus, the Court vacated the order of the lower court only for the unserved co-owner. One owner alone, though, has the power to unilaterally prevent an entire transfer of title. Therefore, since one co-owner was not given adequate notice, the entire judgment was vacated.


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