TOWER DBW VI REO, LLC VS. SUNSHINE HOMES, LLC (F-004358-19, UNION COUNTY AND STATEWIDE) ( 2021 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
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.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1604-19
TOWER DBW VI REO, LLC,
Plaintiff-Appellant,
v.
SUNSHINE HOMES, LLC, and
BRISCO FUNDING, LLC,
Defendants-Respondents.
___________________________
Argued May 5, 2021 – Decided July 1, 2021
Before Judges Sumners and Mitterhoff.
On appeal from the Superior Court of New Jersey,
Chancery Division, Union County, Docket No.
F-004358-19.
Susan B. Fagan-Rodriguez argued for appellant
(Rodriguez Law Group, LLC, attorneys; Susan B.
Fagan-Rodriguez, on the brief).
Javier M. Lopez argued for respondent Brisco Funding
(Meyner and Landis, LLP, attorneys; Javier M. Lopez,
on the brief).
Michael C. Schonberger argued for respondent
Sunshine Homes, LLC.
PER CURIAM
Plaintiff Tower DBW VI REO, LLC appeals the Chancery Division,
General Equity Part's November 22, 2019 order granting defendant Sunshine
Homes and Management, Inc.'s (SHMI) motion to intervene and vacate final
default judgment of foreclosure on a tax sale certificate for 212 Port Avenue in
Elizabeth ("the property"). Because the record supports the court's
determination that SHMI was a title holder when the complaint was filed and
was not properly served the foreclosure complaint, we affirm.
I
In December 2014, SHMI purchased the property. (Pa51-56). A
scrivener's error deeded the property to "Sunshine Homes, LLC," a non-existent
entity, but listed SHMI's correct address of 700 Park Avenue in Elizabeth. The
property was encumbered by a $176,000 commercial loan extended by
defendant Brisco Funding, LLC to SHMI. The recorded mortgage note
incorrectly listed "Sunshine Homes, Inc." as the mortgagee located at 700 Park
Avenue, Elizabeth. Before the mortgage note and deed were recorded on
December 12, 2014, Sunshine Homes, Inc.'s business status was revoked on
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November 16, 2014, for failing to file an annual report for two consecutive
years.
In June 2016, plaintiff purchased a tax sale certificate from the tax
collector for the property, deeded to "Sunshine Homes, LLC." About two and a
half years later, on January 28, 2019, plaintiff sent "Sunshine Homes, LLC" a
pre-action notice advising that it would file a complaint to institute foreclosure
proceedings on the property unless the tax sale certificate was redeemed within
thirty days. The letter, although addressed to non-existent Sunshine Homes,
LLC, was sent to SHMI's address of 700 Park Avenue, Elizabeth; receipt was
acknowledged by SHMI's counsel.
Plaintiff filed a complaint on March 4, 2019 to foreclose the tax sale
certificate against Sunshine Homes, LLC and Brisco when the tax certificate
was not redeemed. As of January 28 of that year, the tax certificate lien
amounted to $40,151.72. Proper service of the complaint was made upon
Brisco. After filing the complaint, plaintiff allegedly conducted a search and
discovered Sunshine Homes, LLC did not exist and another search identified
Sunshine Homes, Inc., listing Sheldon Furman as registered agent.
Consequently, service was not made upon the non-existent entity Sunshine
Homes, LLC, but against the revoked Sunshine Homes, Inc.––which never had
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ties to the property––by delivering a copy of the summons and complaint to
Furman, its registered agent, at 17 Arthur Place in Montville, New Jersey on
March 7, 2019.
On April 17, more than a month after the foreclosure complaint was filed,
a corrective deed for the property was filed and recorded, listing the grantor as
"Sunshine Homes, LLC" at 700 Park Avenue in Elizabeth and the grantee as
SMHI at the same address. On April 22, plaintiff moved for entry of default
against Sunshine Homes, LLC and Brisco for failing to appear.
On May 21, plaintiff's motion was granted, and an order was entered
setting the amount, time, and place for redemption for Brisco and Sunshine
Homes, LLC. After redemption was not made, plaintiff obtained an uncontested
final judgment against defendants Brisco and Sunshine Homes, LLC on August
14, 2019. The property was valued at approximately $435,000 while redemption
of the tax lien was $40,589.66.
On September 5, SHMI filed a motion to vacate final judgment. The
motion judge denied the request, stating SHMI lacked "standing because . . . [it]
fails to establish that it is a party or a legal representative of the party." The
judge held that if SHMI were "a party to this action and plaintiff had only
effectuated service on [Sunshine Homes] LLC and . . . Brisco but not SHMI,
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SHMI would have a valid argument for . . . lack of notice here. [SHMI] has not
established that it is entitled to notice and, accordingly, the motion is denied."
SHMI in turn filed a motion to intervene, R. 4:33-1, and vacate final
judgment, R. 4:50-1. (Pa96-138). The motion was granted. (Pa 180-81). In
his oral decision, the judge reasoned SHMI's ownership of the property was not
"an after acquired interest. It was an interest that was held and that the
correct[ive] deed corrected only the title or the name of the party." He held that
because SHMI was an interested party, "it would be not only unfair but
[in]equitable to not allow the party to intervene" and vacated the default
foreclosure judgment.
II
Generally, a court's determination under Rule 4:50-1 warrants substantial
deference and should not be reversed unless it results in "a clear abuse of
discretion." Hous. Auth. of Morristown v. Little, 135 N.J. 274, 283 (1994). An
abuse of discretion occurs when a decision is "made without a rational
explanation, inexplicably depart[s] from established policies, or rest[s] on an
impermissible basis." US Bank Nat'l Ass'n v. Guillaume, 209 N.J. 449, 467-68
(2012) (internal quotations omitted) (quoting Iliadis v. Wal-Mart Stores, Inc.,
191 N.J. 88, 123 (2007)).
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Rule 4:50-1(d) allows a party relief from a final judgment when "the
judgment or order is void." "The rule is 'designed to reconcile the strong
interests in finality of judgments and judicial efficiency with the equitable
notion that courts should have authority to avoid an unjust result in any given
case.'" Guillaume, 209 N.J. at 467 (citation and internal quotation marks
omitted). "The minimum requirements of due process of law are notice and an
opportunity to be heard[,] . . . mean[ing] an opportunity to be heard at a
meaningful time and in a meaningful manner." Klier v. Sordoni Skanska
Constr. Co., 337 N.J. Super. 76, 84 (App. Div. 2001) (citing Doe v. Poritz, 142
N.J. 1, 106 (1995)). A "fundamental requirement of due process in any
proceeding which is to be accorded finality is notice reasonably calculated,
under all the circumstances, to apprise interested parties of the pendency of the
action and afford them an opportunity to present their objections." Rosa v.
Araujo, 260 N.J. Super. 458, 463 (App. Div. 1992) (quoting O'Connor v. Altus,
67 N.J. 106, 126 (1975)).
Where a litigant has been provided due process, "technical violations of
the rule concerning service of process do not defeat the court's jurisdiction."
Rosa, 260 N.J. Super at 463 (citing O'Connor, 67 N.J. at 127-28). That said,
"[d]efective service that results in a 'substantial deviation from service of
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process rules' typically makes a judgment void." M & D Assocs. v. Mandara,
366 N.J. Super. 341, 352-53 (App. Div. 2004) (quoting Jameson v. Great Atl.
& Pac. Tea Co., 363 N.J. Super. 419, 425 (App. Div. 2003)). "If a judgment is
void in this fashion, a meritorious defense is not required to vacate under the
rule." Id. at 353 (citing Jameson, 363 N.J. Super. at 425).
"A court should view 'the opening of default judgments . . . with great
liberality,' and should tolerate 'every reasonable ground for indulgence . . . to
the end that a just result is reached.'" Mancini v. EDS ex rel. N.J. Auto. Full
Ins. Underwriting Ass'n, 132 N.J. 330, 334 (1993) (alterations in original)
(quoting Marder v. Realty Constr. Co., 84 N.J. Super. 313, 319 (App. Div.
1964)). In accordance with N.J.S.A. 54:5-87, a foreclosure judgment "shall be
final . . . and no application shall be entertained to reopen the judgment after
three months from the date thereof, and then only upon the grounds of lack of
jurisdiction or fraud in the conduct of the suit." This court recently held that
"even the three-month limit must yield to the Court Rules which permit
applications thereafter." BV001 Reo Blocker, LLC v. 53 W. Somerset St.
Props., LLC, 467 N.J. Super. 117, 128 (App. Div. 2021) (citing M & D Assocs.,
366 N.J. Super. at 351).
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Efforts to vacate a foreclosure action are limited. "In any action to
foreclose the right of redemption in any property sold for unpaid taxes or other
municipal liens, all persons claiming an interest in . . . [the] property, by or
through any conveyance," which could be recorded but is not recorded "at the
time of the filing of the complaint in such action shall be bound by the
proceedings in the [foreclosure] action so far as [the] property is concerned, in
the same manner as if he had been made a party to and appeared in such action
. . . ." N.J.S.A. 54:5-89.1.
SHMI's motion to vacate was timely, whether considered under N.J.S.A.
54:5-87 or our court rules. Rule 4:50-2 requires that all motions seeking relief
from a judgment be filed "within a reasonable time." See Orner v. Liu, 419
N.J. Super. 431, 436-37 (App. Div. 2011). A final judgment in this matter was
entered on August 14, 2019, and SMHI filed a motion to vacate the judgement
three weeks later on September 5. After the motion was denied because the
judge determined SHMI was not a party to the complaint, SHMI filed a motion
to intervene and vacate final judgment on October 17. Even assuming
arguendo, that the October 17 motion did not relate back to the September 5
motion, the sixty-four days between the August 14 final judgment and the
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October 17 motion was within a reasonable time under Rule 4:50-2, as well as
the three-month deadline under N.J.S.A. 54:5-87.
The motion judge did not abuse his discretion in vacating the default
foreclosure judgment. SHMI was deprived of procedural due process because
it was not served the summons and foreclosure complaint. Even though SHMI's
counsel was served with the pre-action notice of foreclosure, plaintiff failed to
properly serve SHMI. Service is a jurisdictional issue and knowledge of a
pending foreclosure before entry of foreclosure judgment does not estop a party
from seeking relief where the judgment is void due to the lack of proper service.
M & D Assocs., 366 N.J. Super. at 352.
Plaintiff was not diligent in effectuating service of process upon the
proper party—SHMI. Although the deed named Sunshine Homes, LLC as the
title owner, and the mortgage named Sunshine Homes, Inc. as the mortgagee
and owner, both instruments correctly identified SHMI's address. Plaintiff's
records search revealed that Sunshine Homes, LLC was a non-existent entity
and that Sunshine Homes, Inc.'s business status was revoked before the deed and
mortgage note were recorded. There was no showing that SHMI was responsible
for the confusion regarding the deed owner of the property or the inability of
plaintiff to identify the proper owner on whom to serve the foreclosure
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complaint. Even though the property's original recorded deed erroneously did
not list SHMI as grantee, the lack of service of the foreclosure complaint upon
SHMI made the judgment void under Rule 4:50-1(d).
We find no merit in plaintiff's assertion that SHMI, the property's title
holder at the time the complaint was filed, was required to intervene before entry
of final judgment on August 14, 2019. There is no dispute that SHMI was the
property's owner despite the scrivener's error on the deed. In addition, SHMI's
right to redeem was not "cut off" by the final default judgment as plaintiff
argues, because the judgment was void due to lack of jurisdiction caused by lack
of service on SHMI.
Moreover, vacating the foreclosure judgement was a proper exercise of
the judge's equitable powers. The Tax Sale Law, N.J.S.A. 54:-1 to -137, aids in
collection of property taxes. Varsolona v. Breen Capital Servs. Corp., 180 N.J.
605, 620 (2004). "Courts of equity have long been charged with the
responsibility to fashion equitable remedies that address the unique setting of
each case. . . ." Guillaume, 209 N.J. at 476. "In the tax sale certificate
foreclosure context[,] considerations of public policy and equity are also taken
into account." M & D Assocs., 366 N.J. Super. at 350. "Foreclosure is a harsh
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remedy and equity abhors a forfeiture." Brinkley v. W. World, Inc., 275 N.J.
Super. 605, 610 (Ch. Div. 1994).
Under the circumstances here regarding service of the foreclosure
complaint, equity does not favor plaintiff's acquisition of a $435,000 property
through default foreclosure judgment based on its purchase of a $35,000 tax sale
certificate (2T-16 to 18), now valued at over $40,000. Accordingly, there is no
sound basis to overturn the order granting SHMI's motion to intervene and
vacate default final foreclosure judgment.
Affirm.
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