PC8REO, LLC v. Block 3031

PC8REO, LLC, Plaintiff-Respondent, v. BLOCK 3031, LOT 1, 90-100 INGRAHAM PL, CITY OF NEWARK, STATE OF NEW JERSEY, ASSESSED TO: BRR INGRAHAM PL LLC, Defendant-Respondent.

TOORAK CAPITAL PARTNERS, LLC, Appellant.

No. A-1789-20

Superior Court of New Jersey, Appellate Division

April 22, 2022

This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

Argued January 24, 2022

On appeal from the Superior Court of New Jersey, Chancery Division, Essex County, Docket No. F-006690-20.

Morgan C. Fiander argued the cause for appellant (Polsinelli PC attorneys; Morgan C. Fiander, on the briefs).

Robin I. London-Zeitz argued the cause for respondent PC8REO, LLC (Gary C. Zeitz, LLC, attorneys; Robin I. London-Zeitz, on the brief).

David M. Schlachter argued the cause for respondent BRR Ingraham PL LLC.

Before Judges Mayer and Natali.

PER CURIAM

In this tax sale certificate foreclosure action, defendant BRR Ingraham PL, LLC ("BRR") and its lender, appellant Toorak Capital, LLC ("Toorak"), ^[1] appeal from the Chancery Division's February 8, 2021 order denying their Rule 4:50-1 motion to vacate a default judgment foreclosing on property at 90-100 Ingraham Place in Newark ("Property"), pursuant to the Tax Sale Law N.J.S.A. 54:5-1 to -137. Before us, Toorak and BRR both argue the court abused its discretion when it denied their motion to vacate final judgment. For the foregoing reasons, we vacate the February 8, 2021 order and remand for further proceedings.

I.

We discern the following facts from the motion record. BRR purchased the Property on June 24, 2019, which was secured by a mortgage and loan issued by Envision Funded, LLC. The mortgage was thereafter assigned to Toorak, and after BRR failed to pay municipal liens on the Property, the City of Newark Tax Collector ("Tax Collector") sold the tax lien certificate at a public sale to PRO CAP 8 LLC/Procapital MGT II ("Procap"), subject to BRR's right of redemption. On June 18, 2020 plaintiff^[2] filed a foreclosure action pursuant to the In Rem Tax Foreclosure Act, N.J.S.A. 54:5-104.29 to -104.75, specifically, N.J.S.A. 54:5-86(b), alleging that the tax sale certificate was eligible to be foreclosed upon immediately, and BRR had failed to exercise its redemption rights.

Plaintiff later published notice of the in rem foreclosure action on September 11, 2020 in The Star-Ledger. The notice stated that BRR could contest the foreclosure by answering the complaint within forty-five days or redeem the tax lien by paying $13, 802.70 prior to the entry of final judgment. That same day, plaintiff also sent BRR, Envision Funded and Toorak a letter via first class and certified mail notifying them of The Star-Ledger publication and of the forty-five-day deadline for redeeming the tax lien. The notice specifically informed BRR and its lenders that plaintiff would move for entry of final judgment if the tax lien was not timely redeemed, or if they failed to contest the foreclosure.

Plaintiff also mailed notice of the in rem foreclosure action to BRR, Envision Funded and Toorak via first class and certified mail, as permitted by N.J.S.A. 54:5-104.48 and Rule 4:64-7(c). Plaintiff certified that none of the first class mail was returned and signatures on the return mail receipts indicate BRR received notice at the Property and at its Brooklyn, New York address. Toorak's agents similarly signed for the mail at its Summit, New Jersey and Wilmington, Delaware addresses on September 15, 2020. On September 16, 2020, plaintiff also posted notice at the Property and in various public locations throughout the City, as required by Rule 4:64-7(d).

Next, plaintiff retained Dino M. Cavalieri, a licensed building inspector, to evaluate the Property. Cavalieri's inspection report determined that "at least one installment of property tax remains unpaid and delinquent" and stated that various conditions on the Property indicated it was "in need of rehabilitation," including "boarded and missing windows" and "graffiti all over [the] building."

As such, plaintiff submitted that Cavalieri's inspection established the Property as abandoned under N.J.S.A. 55:19-81.

On October 6, 2020, plaintiff filed a motion to certify the Property as abandoned. The court later granted plaintiff's application and noted the motion was unopposed. In its accompanying statement of reasons, the court considered Cavalieri's report, determined that it was unrefuted, and designated the Property abandoned in accordance with N.J.S.A. 55:19-81 and N.J.S.A. 54:5-86(b).

Plaintiff certified that it served the complaint on BRR, Envision Funded, and Toorak via first class and certified mail on October 9, 2020.^[3] Toorak maintained it became aware of the foreclosure action in "approximately" October 2020, and retained Cold River Land, LLC, to redeem the tax certificate. Cold River is a third-party tax management company located in Georgia and regularly hired by Toorak for these purposes.

In an effort to redeem BRR's property rights, Cold River claimed it first faxed an inquiry to the Tax Collector on October 22, 2020, requesting information as to how to satisfy the tax lien. Cold River thereafter stated it received payment instructions from the City on December 1, 2020, which it understood permitted it until December 31, 2020 to redeem the certificate in order to avoid foreclosure. Although these instructions are not contained in the record, Cold River and Toorak maintain that the thirty-seven-page document received was "confusing", as it contained information on numerous unrelated properties, and "it took some time for Cold River to discern what the document was and the relevant portions therein."

On November 17, 2020, the Tax Collector executed an affidavit of non-redemption, in which it stated that BRR failed to redeem the tax lien certificate and further noted that it had received a copy of the notice of foreclosure. On November 20, 2020, plaintiff's counsel moved to substitute PC8REO, LLC, as plaintiff. Notice of the motion was sent to all parties that same day via first class mail. The court later granted the motion, noting that PC8REO, LLC was the rightful holder of the tax sale certificate.

After successfully moving for entry of default, plaintiff filed an application for final judgment on November 20, 2020, which the court granted on December 8, 2020, thereby extinguishing BRR's right of redemption. The order stated that notice of the foreclosure action had been provided in accordance with relevant statutes and Rules and was published both at the Property and in conspicuous places throughout the City as required under Rule 4:64-7(d). The court further noted that BRR failed to file an answer and plaintiff was therefore vested with an "absolute and indefeasible [fee simple] estate."

Plaintiff served BRR and Toorak with the final judgment on December 11, 2020, via first class mail. That same day, Cold River sent a second request for payment instructions to the City. For its part, Toorak remitted payment to the City on December 18, 2020, but the City rejected its payment. Toorak stated it sent payment "in accordance with the instructions received" and relied upon the reported "valid through" December 31, 2020 date on the instructions, believing that "final judgment could not and would not be entered" until that day.

On December 23, 2020, two weeks after the entry of final judgment, Toorak filed a motion to vacate final judgment. The motion was supported by an "attorney statement" from its counsel, Morgan Fiander, Esq., and a notarized affidavit from Amber Hedgecock Watts, a Senior Account Manager at Cold River. Watts attested that "[Toorak] retained Cold River to obtain information on the tax lien certificate, specifically the amount due and how to redeem the certificate."^[4] Watts further stated that Toorak learned of the pending tax foreclosure in October 2020, and asserted that Toorak retained Cold River to "obtain information on the tax lien certificate, specifically the amount due and how to redeem the certificate." She also attested that Toorak, through Cold River, took steps to attempt to redeem the tax lien "in accordance with the instructions given" by the City.

BRR joined Toorak's motion and submitted an initial and supplemental affidavit from Mosche Wachsman, its owner and registered agent, as well as a certification from its counsel, David Schlachter, Esq. Wachsman stated that he checked the Property "regularly," and did not see any postings on the Property notifying him of the pending foreclosure proceeding. He further attested he was not aware of the action until "late December 2020." Further, Wachsman stated that he was never served with notice "at the LLC's address (in Lakewood, New Jersey)," but did not explain how he received notice of the final judgment.

Wachsman also noted that he understood that tax foreclosures "usually take two years from the date of default," and was told as much "by [an unidentified individual] at the Tax Office in Newark." Finally, he disputed that the Property was abandoned, claiming it was undergoing renovations that had been delayed because of the COVID-19 pandemic.

Schlachter stated he was "familiar with the facts from a review of the file and discussions with [his] client," and noted that "[t]he address for the LLC is in Lakewood, New Jersey." He asserted that the complaint was "never served on any party [and] was not even mailed to the property." Schlachter further explained that the Brooklyn address was an "apartment [that] ha[d] been rented by someone else since July 2020." Finally Schlachter...