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City of Trenton v. 392 Brunswick Avenue

A-1149-04T2 (N.J. Super. App. Div. 2005) (Unpublished)

FORECLOSURE; TAX SALES — In choosing between the interests of a foreclosing municipality needing the particular property and the interests of the holder of an inferior tax sales certificate who did not investigate the status of the foreclosure proceedings before acquiring its interest and who shows no excusable neglect, a court may favor the municipality.

An assignee of a tax sale certificate purchased it knowing that the municipality had already filed a foreclosure proceeding. At the time, the assignee did not research the status of the foreclosure proceeding. Ten days after acquiring its interest, the assignee requested and received a payoff letter from the municipal tax collector in order to redeem the tax sale certificate. When it sought to redeem the certificate, the assignee was told that a final judgment had been obtained a day earlier and that it would not be permitted to redeem the tax sale certificate. The assignee filed a motion to vacate the final judgment. The assignee claimed that it did not know the municipality had applied for a final judgment at the time it acquired its interest; that it would lose the money already invested; and that it would lose the opportunity to profit from its work and investment. The assignee also claimed that it would be in the community’s best interest for it to obtain ownership and rehabilitate the property. Lastly, it claimed that the purpose of the In Rem Tax Foreclosure was to collect taxes, which would be accomplished if the assignee was permitted to redeem the tax sale certificate. The lower court denied the request, noting that in order to vacate a final judgment, the assignee had to show a reasonable excuse for its neglect and a meritorious defense. The lower court further held that, in this case, the assignee did not have a meritorious defense to the foreclosure action, because there was no defense to the foreclosure action. Even if the final judgment were to be vacated, the assignee would be still be required to redeem the tax sale certificate. Nonetheless, the lower court found that because the assignee did not conduct any investigation to determine if a final judgment was forthcoming and it ruled against the investor. The Appellate Division affirmed. In doing so, it noted that in choosing between the interests of the municipality, which claimed it needed the property and had followed the In Rem Tax Foreclosure Act procedures, and the interests of the certificate holder, which did not investigate the status of the foreclosure proceeding prior to acquiring its interest and presented no excusable neglect, the lower court correctly ruled in the municipality’s favor.


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