257-261 20th Ave. Realty v. Roberto

307 A.3d 19

477 N.J.Super. 339

257-261 20TH AVENUE REALTY, LLC, Plaintiff-Appellant,

v.Alessandro ROBERTO,¹ Defendant-Respondent, andFanny Roberto, Wife of Alessandro Roberto, Keller Depken Fuel Oil Company Inc., a/k/a HOP Energy LLC, and Midland Funding LLC, Defendants.

DOCKET NO. A-3315-21

Superior Court of New Jersey, Appellate Division.

Argued October 17, 2023

Decided December 4, 2023

West Codenotes

Held Unconstitutional

N.J. Stat. Ann. §§ 54:5-87, 54:5-104.64

On appeal from the Superior Court of New Jersey, Chancery Division, Passaic County, Docket No. F-003349-21.

Elliott J. Almanza argued the, cause for appellant (Goldenberg, Mackler, Sayegh, Mintz, Pfeffer, Bonchi & Gill, attorneys; Keith A. Bonchi, Atlantic City, of counsel and on the briefs; Elliott J. Almanza, on the briefs).

Glenn R. Reiser, Hackensack, argued the cause for respondent (Shapiro Croland Reiser Apfel & Di. Iorio, LLP, attorneys; Glenn R. Reiser, of counsel and on the briefs; Ilan Danon, on the briefs).

Adam D. Greenberg argued the cause for amicus curiae National Tax Lien Asso- ciation, Inc. (Law Offices of Honig & Greenberg, LLC, and Gary C. Zeitz, LLC, attorneys; Adam D. Greenberg, Voorhees, and Robin London-Zeitz, Cherry Hill, on the brief).

Maryann Flanigan Sutherland argued the cause for amicus curiae Legal Services of New Jersey (Legal Services of New Jersey, attorneys; Dawn K. Miller, Maryann Flanigan Sutherland, Robert Casagrand, Wayne, David McMillin, Rebecca Schore, Newark, and Jeremy Silberman, on the brief).

Frank G. Marshall, Jr., Associate General Counsel, argued the cause for amicus curiae New Jersey State League of Municipalities (New Jersey State League of Municipalities, attorneys; Frank G. Marshall, Jr., on the brief).

David J. Deerson (Pacific Legal Foundation) of the California bar, admitted pro hac vice, argued the cause for amicus curiae Pacific Legal Foundation (Christina M. Martin (Pacific Legal Foundation) of the Washington, Oregon, and Florida bars, admitted pro hac vice, David J. Deerson, and Jonathan M. Houghton, attorneys; Christina M. Martin, David J. Deerson, and Jonathan M. Houghton, on the brief).

Before Judges Sumners, Smith and Perez Friscia.

₃₄₉The opinion of the court was delivered by

PEREZ FRISCIA, J.S.C. (temporarily assigned).

In this tax sale foreclosure appeal, we address whether the United States Supreme Court’s recent decision in Tyler v. Hennepin County, 598 U.S. 631, 143 S.Ct. 1369, 215 L.Ed.2d 564 (2023), which declared a taxing authority’s confiscation of a property owner’s equity violated the Fifth Amendment Takings Clause, bars a third-party tax sale certificate holder’s foreclosure of a property owner’s equity under the New Jersey Tax Sale Law (TSL), N.J.S.A. 54:5-1 to -137, and if barred, whether pipeline retroactivity is afforded. We also address whether the motion judge’s decision to vacate final judgment under Rule 4:50-1(f), based primarily on defendant having redemption funds and significant property equity, was an abuse of discretion.

₃₅₀Plaintiff 257-261 20th Avenue Realty, LLC appeals from the Chancery Division orders dated June 1, June 13, and June 16, 2022, which pursuant to Rule 4:50-1(f) conditionally vacated final judgment permitting redemption, vacated final judgment upon satisfaction of the conditions, and dismissed the action with prejudice. Plaintiff argues the judge erred in finding exceptional circumstances existed to vacate final judgment. Defendant, Alessandro Roberto, argues the totality of facts weighed in favor of exceptional circumstances to vacate final judgment and the judge did not abuse his discretion. After the judge’s decision and the submission of merits briefs on appeal, the United States Supreme Court decided Tyler.

We affirm the decision to vacate final judgment, based on the judge’s detailed findings of exceptional circumstances under Rule 4:50-1(f), discerning no abuse of discretion. We also conclude cause exists to vacate judgment as the application of Tyler to New Jersey’s similar TSL framework establishes that the confiscation of a New Jersey property owner’s equity, through a tax sale foreclosure, violates the Fifth Amendment Takings Clause. As Tyler established a new principle of law, pipeline retroactivity is afforded.

I.

The facts are largely undisputed. Defendant owned a mixed residential and com- mercial use property located in Paterson, New Jersey. The income-generating property consisted of two residential units, a carwash, an automechanic’s shop, a coffee shop, and a vacant store. In 2010 and 2016, defendant failed to pay his sewer tax bills, resulting in plaintiff's $606 purchase of the following three property tax sale certificates: (1) Certificate No. 2011-0001122 for $226.57 on June 9, 2010; (2) Certificate No. 2011-A04713 for $88.24 on October 28, 2010; and (3) Certificate No. 2017-002319 for $291.19 on June 23, 2016.

Almost eleven years after the third tax sale certificate was purchased, in June 2021, plaintiff commenced a tax sale foreclosure₃₅₁ pursuant to N.J.S.A. 54:5-86. After defendant was served with the complaint, he tried to redeem his property at the Office of the Tax Collector of Paterson. Defendant was denied redemption because the amount owed was greater than his available funds. Because defendant did not file an answer, the complaint proceeded through the Office of Foreclosure as an uncontested matter.

On October 21, 2021, plaintiff moved for an order setting the time, place, and amount of redemption. The judge issued an order setting the date of redemption as December 21, 2021; the place of redemption as the Office of the Tax Collector of Paterson; and the total amount of redemption as $32,973.15, consisting of $30,428.15 plus $2,545.00 in tax costs. Three days later, on October 25, 2021, plaintiff moved for default. On February 2, 2022, the judge entered final judgment.

One day after judgment was entered, but before defendant was served final judgment, defendant filed a Chapter 13 bankruptcy petition, which he later dismissed. Less than two months after judgment was. entered, defendant moved pursuant to Rules 4:50-1(e) and (f) to vacate final judgment and to permit redemption. Defendant argued he was entitled to equitable relief from final judgment because he retained the redemption funds prior to moving to vacate and would lose the significant equity in the property. Plaintiff opposed the motion, and in April 2022, moved on short notice for permission to make repairs based on the tenants’ alleged concerns.

On May 19, 2022, the judge, in an oral decision, denied vacating final judgment under Rule 4:50-1(e), finding "relief from judgment should ordinarily not be granted where the so-called changed circumstances were actually anticipated at the time of the decree."² However, the judge granted relief under Rule 4:50-1(f) reasoning that "courts of equity must do their best to balance the equity." Although "plaintiff held these certificates, paid taxes, ₃₅₂went through the process legitimately[,] and lawfully" obtained a final judgment, the judge found relief was warranted because: defendant had escrowed $50,000 in an attorney trust account to redeem; the property had "very substantial equity relative to the lien itself," as it was worth between $475,000 and $535,000;³ and COVID-19 "may or may not have" impacted the collection of rents. The judge elucidated, "this is a case that is exceptional that warrants relief under Rule 4:50-1(f). I think that … it would be inequitable and precedent at this juncture to allow a forfeiture of such significant equity for a seventy-five-year- old man, recognizing that it is commercial property." The judge also considered the lack of other encumbrances, and that defendant owned the property for over twenty years. The judge granted defendant’s motion to vacate with conditions, finding unpersuasive plaintiff's arguments that the circumstances were "wholly unremarkable," not "exceptional," and that equity loss was a "circumstance inherent in the nature of tax foreclosure." Plaintiff’s motion on short notice to make repairs was also denied.

The judge conditioned vacating final judgment on defendant’s redemption within forty-five days, the payment of $10,000 for plaintiff’s legal fees and costs, and the surrender of $2,400 plaintiff collected in rents. After defendant satisfied the conditions, the judge vacated final judgment and revested property title to defendant. Subsequently, plaintiff discharged its notice of lis pendens, which allowed defendant to record the court’s June 13, 2022 order with the Passaic County Register. Three days later, the judge dismissed the foreclosure suit with prejudice on June 16, 2022.

II.

On appeal, plaintiff argues the judge erred in vacating final judgment because relief under Rule 4:50-1(f) was unwarranted. ₃₅₃Plaintiff contends no exceptional circumstances existed and that the judge failed to abide by the binding precedent established in Del Vecchio v. Hemberger, 388 N.J. Super. 179, 188, 906 A.2d 1117 (App. Div. 2006) and the TSL statutory framework. Plaintiff further argues, pursuant to N.J.S.A. 54:5-87, final judgment divests an owner of any equity, and the clear legislative intent was to secure marketable titles, thus barring the right of redemption. Plaintiff asserts the equities weighed against defendant because he: failed to pay the lien delinquencies for over a decade, retained his property collecting rent, falsely claimed an inability to pay based on his tenants’ alleged rental arrears, and maintained the property in poor condition.

Plaintiff, in its supplemental brief,⁴ argues Tyler is inapplicable to private lienholders. Alternatively, plaintiff argues if Tyler applies, it should only be prospective to not violate private lienholders’ due process rights. Plaintiff argues Tyler’s prospective application has no bearing on our court’s review of whether exceptional circumstances existed warranting vacation of judgment under Rule 4:50-1(f).

In...