Summit Bank v. Thiel

162 N.J. 51, 740 A.2d 139 (1999)
  • Opinion Date: October 28, 1999

MORTGAGES; FORECLOSURE; LIENS—Even though a bidder at a foreclosure sale can find out the existence and amount of outstanding tax liens, if the amount of the tax liens is not in the sale notice, it can have a court set its bid aside.

The issue in this appeal was whether property tax liens are “liens or encumbrances” within the meaning of N.J.S. 2A:61-16. That statute permits a buyer of real estate at a sheriff’s sale to be relieved of its bid if the buyer shows that the notice of sale did not reveal a “lien or encumbrance” and its approximate amount. The published notice advertising this sale referenced only the lien of the first mortgage. Prior to the sale, the sheriff made the customary announcement that the sale would be “subject to the liens of unpaid taxes and other open municipal charges that may be outstanding against the subject premises.” However, there was no mention of the amount of unpaid taxes. The successful bidder denied any knowledge of the amount of unpaid taxes prior to the sale. The foreclosure court denied the bidder’s motion to be relieved of its bid. On appeal, the foreclosing bank argued that liens for unpaid taxes encumbered virtually every foreclosed property and buyers at foreclosure sales must be deemed to know of the existence of unpaid taxes. It further asserted that the amount of tax liens can be easily acquired by requesting the information from the municipal tax officer. The Appellate Division held for the bidder, reasoning that even if it were deemed to have known of the existence of unpaid taxes, it must be assumed that it did not have actual knowledge of the amount. By that reasoning, because the bidder did not have such knowledge and because the amount of taxes was not included in the notice of sale as required by statute, the bidder was entitled to be relieved of its bid. The New Jersey Supreme Court agreed with the Appellate Division. Essentially, it “believed that even though the bidder could easily have found out about any tax liens (including their amount), such an requirement was at odds with both the language and intent of the statute, which was to shift the burden of lien discovery from bidders to the owner in foreclosure.” The Court believed that a mortgagee can satisfy the requirements of this statute by inserting in the notices and advertisements the amount of the delinquent taxes due as of a specific date. It held that this information need not be updated in the event the date of the sale is adjourned. Further, because this requirement for such notice was seen as a departure from the prevailing practice, the Supreme Court held that its decision was to be applied only to this case and to cases in which a public sale is conducted after May 19, 1999, the date the Appellate Division rendered its decision.