Trystone Capital Assets, LLC v. Dorothy T. Toulson ( 2024 )

NOT FOR PUBLICATION WITHOUT THE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-1287-22
TRYSTONE CAPITAL
ASSETS, LLC,
Plaintiff-Respondent,
v.
DOROTHY T. TOULSON,
THOMAS W. TOULSON,
DEBORAH W. GRISCOM,
as Executor of the Estate of
DOROTHY T. TOULSON, LIVE
WELL FINANCIAL, INC., UNITED
STATES OF AMERICA, SOUTH
JERSEY GAS, and THE STATE OF
NEW JERSEY,
Defendants,
and
ALLOWAY VENTURES, LLC,
RED CAT PROPERTY RESCUE,
LLC, and MECUM TOULSON, LLC,
Third-Party Defendants-
Respondents.
_________________________________
WILMINGTON SAVINGS FUND
SOCIETY, FSB, not individually but
solely as trustee for Finance of
America Structured Securities
Acquisition Trust 2019-HB1,
Intervenor-Appellant.
_________________________________
Submitted January 16, 2024 – Decided January 29, 2024
Before Judges Chase and Vinci.
On appeal from the Superior Court of New Jersey,
Chancery Division, Salem County, Docket No.
F-3794-21.
Ashley S. Miller (Akerman LLP), attorney for
intervenor-appellant.
Honig & Greenberg LLC, attorneys for respondents,
Alloway Ventures, LLC, Red Cat Property Rescue,
LLC, and Mecum Toulson, LLC (Adam D. Greenberg,
on the brief).
Anthony Louis Velasquez, attorney for respondent
Trystone Capital Assets, LLC.
PER CURIAM
Wilmington Savings Fund Society, FSB ("Wilmington"), appeals the
October 18, 2022 denial of its motion to set aside a sheriff's sale and December
9, 2022 denial of its motion for reconsideration. Because the trial court correctly
applied the doctrine of laches, we affirm.
A-1287-22
2
I.
In 2011, Dorothy T. Toulson secured a line-of-credit mortgage on her
home at 33 Market Street in Salem ("the property") through a note to Genworth
Financial Home Equity Access, Inc. ("Genworth"), in the amount of $165,000.
To secure payment of the note, Toulson entered into a reverse mortgage with
Mortgage Electronic Registration Systems, Inc. ("MERS"), and conveyed the
property to Genworth. The mortgage was properly recorded, and MERS, as
nominee for Genworth, was named the mortgagee.
Toulson passed away in 2016 and defaulted on the mortgage loan. MERS
assigned the defaulted mortgage to Live Well Financial, Inc. ("Live Well"). The
assignment was properly recorded. Live Well filed a foreclosure complaint in
September 2017.
In February 2018, the Tax Collector of the City of Salem commenced a
public tax sale of the property for unpaid 2018 taxes. The tax sale certificate
was sold and assigned to Trystone Capital Assets, LLC ("Trystone"), which
properly recorded it.
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After Trystone recorded the tax sale, Live Well recorded a lis pendens at
the end of July 2018.1 Live Well then filed a second amended complaint. Live
Well's mortgage foreclosure was dismissed in April 2019 but reinstated in June
2020 upon motion. Separately, Live Well filed for Chapter 7 bankruptcy in the
District of Delaware in June 2019. Although N.J.S.A. 46:16-4.1 permitted Live
Well to record its bankruptcy in the land records, it did not do so.
No redemption of the tax lien was made within two years. As such, in
April 2021, Trystone ordered a title search and mailed notices of intent to
foreclose. The title search had a "board date" of March 20, 2021, meaning it
reflected documents recorded only through that date. Trystone then served Live
Well with a thirty-day pre-foreclosure notice on June 14, 2021, pursuant to Rule
4:42-9(a)(5).
After being served with Trystone's pre-foreclosure notice, Live Well
assigned the mortgage it held to Wilmington, which recorded it on June 15,
2021. However, Wilmington did not immediately substitute in on Live Well's
reinstated mortgage foreclosure action.
1
Rule 4:64-1(a)(1) required Live Well to "receive and review a title search of
the public record" to identify others with interest in the property. Although the
record is devoid of any mention of the search or the required certification of
compliance, Live Well would have been on constructive notice of the tax
foreclosure if they complied with the Rule.
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Trystone filed its tax foreclosure complaint on July 21, 2021, after the
required thirty-day notice period lapsed. The foreclosure complaint named Live
Well, not Wilmington, as the holder of the mortgage. Trystone filed its lis
pendens, which was recorded on July 22, 2021. It then conducted a rundown
search, which did not reflect Live Well's assignment of the mortgage to
Wilmington. On August 9, 2021, Wilmington substituted in for Live Well in
the mortgage foreclosure action.
Trystone's tax foreclosure proceeded, and a final judgment was entered in
Trystone's favor. A writ of execution was issued on October 14, 2021.
In December 2021, a sheriff's sale took place and resulted in the sale of
the property to a successful bidder for $23,000.2 The successful bidder at the
sheriff's sale was Andrew Dunlop who then assigned his bid to his LLCs:
Alloway Ventures, LLC, and Red Cat Property Rescue, LLC (collectively
"Alloway"). Subsequently, a sheriff's deed was issued and recorded by Alloway.
On December 29, 2021, Alloway took possession of the dilapidated
property and started a substantial rehabilitation project. The property had been
abandoned and vacant for years, was littered with trash throughout, and had been
2
Typically, the tax foreclosure initiated by Trystone would have ended at final
judgment vesting title. However, because of a federal lien, the case was required
to go to sheriff's sale.
A-1287-22
5
damaged by fire. The interior ceilings had collapsed, the pipes had frozen and
burst, and the wood floors were extensively damaged. Alloway fully restored
the property to its current state as a historic late-1800s building. The restoration
cost approximately $150,000.
Simultaneously, in December 2021, Wilmington filed another motion in
the mortgage foreclosure action to correct the plaintiff's name. That second
substitution order was entered January 5, 2022. Wilmington then filed an
amended complaint.
Wilmington finally obtained foreclosure judgment on January 26, 2022.
When Wilmington requested its own sheriff's sale of the property on February
17, 2022, it learned of the previous sheriff's sale.
Wilmington's counsel then emailed Trystone's counsel advising Live Well
assigned the mortgage to Wilmington, which was recorded prior to the filing of
Trystone's tax foreclosure complaint, and Trystone's tax foreclosure complaint
failed to name Wilmington. Trystone's attorney responded that neither the title
search nor the rundown search showed an assignment from Live Well to
Wilmington, that the property was sold at sheriff's sale in December 2021, and
that the real party in interest was now the successful bidder, Alloway. Trystone
further provided Wilmington's counsel with Alloway's full contact information.
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However, neither Wilmington nor any of its representatives ever contacted
Alloway.
Wilmington then filed a motion to intervene in the Trystone tax
foreclosure matter on May 3, 2022, which was granted on June 10, 2022.
Wilmington thereafter moved to set aside the sheriff's sale on June 22, 2022.
The trial court denied the motion on October 18, 2022. The trial court denied a
subsequent motion for reconsideration on December 9, 2022. 3
The trial judge first opined Trystone's title search did not reveal
Wilmington's assignment because the cover page of the document recording the
assignment left the municipality, block, lot, and property address blank.
Because this information was missing, the trial judge determined Wilmington' s
recording was not completed sufficiently.
However, the crux of the trial judge's opinion was the equitable principle
of laches. Specifically, the trial judge determined, "Wilmington had significant
time to intervene in this matter and to assert [its] rights, but waited
approximately [four] months to do so." During that time, Alloway, "in good
3
Although the motion for reconsideration was mentioned in Wilmington's
notice of appeal, it was not briefed. An issue not briefed is waived on appeal.
Miller v. Reis, 189 N.J. Super. 437, 441 (App. Div. 1983) (issue not briefed
beyond conclusory statements need not be addressed).
A-1287-22
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faith, continued to make significant improvements to the property and continued
to pay property taxes." Ultimately, the trial judge found Wilmington's delay in
intervening and moving to vacate the sheriff's sale "inexcusable," and declined
to set aside the sale.
In its reconsideration opinion, the trial court recognized that Wilmington
claimed there was a two-month and three-day delay4 between Wilmington
learning of the sheriff's sale and filing a motion to vacate the sale on June 22,
2022. Noting that Wilmington learned of the sheriff's sale on February 17, 2022,
the court found Wilmington's seventy-five-day delay did not "warrant
reconsideration as the reasoning in the [c]ourt's [o]pinion remain[ed]
consistent . . . ."
The trial judge addressed Wilmington's argument that the assignment of
the mortgage was properly recorded and adequately indexed. Citing its previous
opinion, the trial judge explained that according to the exhibits, Wilmington did
not include the property address, lot, block, or municipality on the cover sheet.
Because Wilmington did not provide any documentation in support of the
mortgage being properly recorded and indexed, the court found the motion for
4
The court also recognized its previous description of the delay as being
"approximately four-month[s]" was incorrect, although not determinative in its
decision.
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"[r]econsideration adds nothing new and leaves the [c]ourt to make a
determination on an argument that is already decided."
II.
We review an order granting or denying a motion to vacate a sheriff's sale
for abuse of discretion. United States v. Scurry, 193 N.J. 492, 502-503 (2008).
We will find an abuse of discretion "when a decision is 'made without a rational
explanation, inexplicably departed from established policies, or rested on an
impermissible basis.'" U.S. Nat'l Bank Ass'n v. Guillaume, 209 N.J. 449, 467
(2012) (quoting Iliadis v. Wal-Mart Stores, Inc., 191 N.J. 88, 123 (2010)).
Whether a motion for relief has been timely made "rests in the sound discretion
of the trial court, equitable principles constituting the guide." Last v. Audubon
Park Assocs., 227 N.J. Super. 602, 607 (App. Div. 1988) (internal citations
omitted). We review an order denying reconsideration under the same abuse of
discretion standard. Pitney Bowes Bank, Inc. v. ABC Caging Fulfillment, 440
N.J. Super. 378, 382 (App. Div. 2015).
In DelVecchio v. Hemberger, 388 N.J. Super. 179 (App. Div. 2006), we
reviewed a motion to vacate a judgment of foreclosure. We stated:
Our consideration of the arguments raised is governed
by the principle that "[t]he decision whether to vacate a
judgment on one of the six specified grounds [of Rule
4:50-1] is a determination left to the sound discretion
A-1287-22
9
of the trial court, guided by principles of equity" and
that decision must be left undisturbed unless a clear
abuse of discretion appears.
[Id. at 187-88 (alterations in original) (quoting F.B. v.
A.L.G., 176 N.J. 201, 207 (2003)) (citing Hous. Auth.
of Morristown v. Little, 135 N.J. 274, 283 (1994)).]
We then concluded that despite the tragic circumstances of that case, where the
death of a child caused the financial downward spiral of owners who sought to
redeem too late, the trial court did not abuse its discretion in applying the
principles of equity and declining to vacate the tax foreclosure judgment.
III.
Wilmington believes the sheriff's sale must be vacated for two reasons.
First, it contends Trystone did not follow the statutory requirements of Rule
4:65-2. Second, Wilmington maintains equity warrants the vacatur.
A.
Rule 4:65-2 requires a plaintiff to serve notice of a foreclosure sale on
every person holding an ownership or lien interest to be divested by the sale and
is recorded in the appropriate office. Wilmington argues despite having a lien
interest at the time of the sale, the trial court incorrectly found errors with the
recording of the mortgage assignment and excused the lack of notice.
Wilmington contends N.J.S.A. 46:26A-3, governing prerequisites for recording,
A-1287-22
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does not require a mortgage assignment to include the municipality, block, and
lot numbers. Rather, it contends N.J.S.A. 46:26A-3(a)(6) requires only that
mortgage assignments state the book and page number or document number of
the mortgage to which the assignment relates.
Further, Wilmington suggests the assignment's absence from Trystone's
title report is "irrelevant" because Trystone and Alloway were charged with
notice of the assignment, given that Wilmington's interest was recorded prior to
the filing of Trystone's tax foreclosure action and the sheriff's sale to Alloway.
Ultimately, Wilmington maintains its mortgage interests should be unaffected
because it was not given notice of the sale or foreclosure.
Rule 4:65-2 governs notice of a public sale and requires "notice of the
sale . . . be posted in the office of the sheriff of the county . . . where the
property is located, and also, in the case of real property, on the premises to be
sold . . . ." In addition, "at least [ten] days prior to the date set for sale, [the
party obtaining the order or writ shall] serve a notice of sale by registered or
certified mail, return receipt requested," on "every party who has appeared in
the action[,]" the "owner of record[,]" and except in mortgage foreclosures,
every other person with recorded ownership or lien interests. Ibid. A party
objecting to a sheriff's sale must have a valid basis for the objection, such as
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"fraud, accident, surprise, irregularity, or impropriety in the sheriff's sale."
Brookshire Equities, LLC v. Montaquiza, 346 N.J. Super. 310, 317 (App. Div.
2002) (citing Orange Land Co. v. Bender, 96 N.J. Super. 158, 164 (App. Div.
1967)).
Under N.J.S.A. 46:26A-3(a):
A document satisfies the prerequisites for recording . . .
(6) if the document is an assignment, release or
satisfaction of a mortgage or an agreement respecting a
mortgage, it states the book and page number or the
document identifying number of the mortgage to which
it relates if the mortgage has been given such a number.
N.J.S.A. 46:25A-3, on which Wilmington relies, refers solely to the
requirements for recording the mortgage assignment document itself, not the
indexing cover sheet. Cover sheet requirements are governed by N.J.S.A.
46:26A-5, a law initially effective in 2012 and made mandatory in 2017.
Specific regulations over cover sheet format, fields, and attributes are outlined
in N.J.A.C. 15:3-9.13. These regulations allow each county recorder to adopt a
cover sheet that complies with the regulations and meets the needs of its
recordation procedures. N.J.A.C. 15:3-9.13(c)(2). Cover sheets are required by
all county recording offices for submitted documents of all types, including
deeds, mortgages, assignments, and liens. Proper cover sheets enable such
documents to be indexed and located via computerized search.
A-1287-22
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The cover sheet to Wilmington's assignment contained the information as
required by N.J.S.A. 46:26A-5(b)(1)-(3) and the corresponding regulations in
N.J.A.C. 15:3-9.13(c)(1)(i)-(iii). However, in failing to include the lot, block,
street address, and name of the municipality, the cover sheet did not include
additional data requested by the county clerk, thus impeding proper, complete
title searches. While the trial court considered the cover sheet deficiencies when
assessing Wilmington's culpability, absent any intentional wrongful action or
fraud, these deficiencies alone were not a valid reason to deny the motion to
vacate the sale.
B.
The ultimate question is therefore whether the trial judge abused his
discretion in applying the doctrine of laches. We conclude he did not.
Laches is an equitable doctrine operating as an affirmative defense and
precluding relief when there is an "'unexplainable and inexcusable delay' in
exercising a right." Fox v. Millman, 210 N.J. 401, 417 (2012) (quoting Cnty. of
Morris v. Fauver, 153 N.J. 80, 105 (1998)). Laches is "invoked to deny a party
enforcement of a known right when the party engages in an inexcusable and
unexplained delay in exercising that right to the prejudice of the other party."
Knorr v. Smeal, 178 N.J. 169, 180-81 (2003) (internal citations omitted).
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Whether to apply laches "depends upon the facts of the particular case and is a
matter within the sound discretion of the trial court." Mancini v. Twp. of
Teaneck, 179 N.J. 425, 436 (2004) (quoting Garrett v. Gen. Motors Corp., 844
F.2d 559, 562 (8th Cir. 1988)). In deciding whether to apply laches, a court
considers: 1) the length of the delay, 2) the reasons for the delay, and 3) how
the circumstances of the parties have changed over the course of the delay.
Knorr, 178 N.J. at 181. "The core equitable concern in applying laches is
whether [an opposing] party has been [unfairly] harmed by the delay." Ibid.The period of laches should be computed by considering the earliest moment in
time when the right to the relief being sought could have been asserted. Flammia
v. Maller, 66 N.J. Super. 440, 453 (App. Div. 1961).
In considering the doctrine of laches in the context of a default judgment
entered despite faulty service of process, we held that:
Even substantial deviations from the prescribed
procedures may be insufficient to require vacating a
default judgment based upon flawed service if rights of
an innocent third party have intervened. . . . "[E]ven
owners who have been deprived of a property interest
without notice can by their delay and the reasonable
reliance of others lose the right to attack a judgment."
[Sobel v Long Island Entm't Prods., Inc., 329 N.J.
Super. 285, 293 (App. Div. 2000) (quoting Sonderman
v. Remington Constr. Co., 127 N.J. 96, 106 (1992)).]
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See also City of Newark v. Block 1852, 244 N.J. Super. 402, 407-08 (App. Div.
1990); Heinzer v. Summit Fed. Sav. & Loan Ass'n, 87 N.J. Super. 430, 439
(App. Div. 1965); Rogan Equities v. Santini, 289 N.J. Super. 95, 114-15 (App.
Div. 1996); Woglemuth v. 560 Ocean Club, 302 N.J. Super. 306 (App. Div.
1997).
"[W]here a loss must be borne by one or two innocent persons, equity will
impose the loss on that party whose acts first could have prevented the loss."
Cambridge Acceptance Corp. v. Am. Nat'l Motor Inns, Inc., 96 N.J. Super. 183(Ch. & Law Div. 1967), aff'd, 102 N.J. Super. 435 (App. Div. 1968). See also
Hon. William A. Dreier et al., Guidebook to Chancery Practice in New Jersey,
(Tenth Ed. 2018), Ch. I(A)(12). A court must consider "any prejudice that
would accrue to the other party." In re Guardianship of J.N.H., 172 N.J. 440,
474 (2002).
Here, the trial court opined:
[I]n the present case, the sheriff's sale took place
on December 13, 2021. Wilmington learned of the sale
approximately two months later on February 17, 2022.
Wilmington immediately contacted [Trystone's]
counsel to reach out to Alloway, but never engaged in
any follow up communications nor attempted to reach
Alloway themselves. Wilmington then waited
approximately [four] months to intervene into the
matter on June 10, 2022 . . . . In the meantime, . . .
Alloway continued to expend money to make
A-1287-22
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improvements . . . . Wilmington had significant time to
intervene in this matter and to assert their rights, but
waited approximately [four] months to do so.
....
Wilmington's delay to intervene and motion to vacate
the sheriff's sale after receiving notice of the sale is
inexcusable considering the reasons stated above.
Wilmington argues equity requires vacating the sheriff's sale to Alloway
because it never received notice of the sale. It contends refusing to vacate the
tax sale is unfair to it, "while any damage to Alloway upon vacating the sale
could be addressed." Ultimately, Wilmington contends laches favors it and the
trial court's decision is inequitable.
Rule 4:65-5 is the "Court Rule dealing with sheriff's sales and objections
thereto . . . ." Brookshire Equities, 346 N.J. Super. at 315. The Rule expressly
fixes a ten-day period for the submission of objections to a sheriff's sale.
Hardyston Nat'l Bank of Hamburg v. Tartamella, 56 N.J. 508, 513 (1970). "A
sheriff's sale is automatically confirmed after ten days without an objection
being filed." Brookshire Equities, 346 N.J. Super. at 316.
While Wilmington could not have filed a motion within ten days of the
sale given its claimed lack of notice, it fails to explain why they waited as long
as it did to file its motion after learning of the sale. If ten days is the time limit
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for objections in the ordinary course, Wilmington's significantly longer delay
weighs strongly in Alloway's favor in the application of laches.
Our Supreme Court has identified circumstances that may warrant a delay
in moving to vacate a sheriff's sale beyond the statutory ten-day limit. Scurry,
193 N.J. at 506. The Court in Scurry found the doctrine of laches could not bar
a defendant homeowner from relief where the homeowner was not properly
served with notice of a sheriff's sale, promptly acted upon learning of the sale,
and then moved to vacate the sale four months later. Ibid. The doctrine of
laches did not apply to protect the plaintiff lender's interests because:
In the balance of equities that lies at the very foundation
of the application of the doctrine of laches, the
prejudice alleged by plaintiff simply does not match up
to defendant having been dispossessed of her home and
belongings without plaintiff's compliance with its
procedural notice obligations. In these circumstances,
where plaintiff cannot demonstrate compliance with the
procedural requirements precedent to a valid mortgage
foreclosure action, a conclusion to the contrary in
respect of the applicability of the doctrine of laches
lacks rationality, inexplicably departs from established
policies, and rests, therefore, on an impermissible basis.
[Id. at 505].
The court also noted, since the date when the foreclosed party lost access to the
property "nothing has happened at or to the property . . . ." Ibid.A-1287-22
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The trial court found Scurry distinguishable because Wilmington had
significant time to intervene and instead waited four months during which
Alloway incurred substantial sums to improve the property and pay its taxes.
Although Wilmington frames the delay in intervening as a "slight delay," it is
objectively unreasonable to find a seventy-five-day delay to be "slight." This is
especially so given that Wilmington's recorded assignment indicates it paid Live
Well $10.00 for the property.5 Had Wilmington, within a reasonable time,
sought to intervene in this matter and protect that substantial financial interest,
the court could have exercised its discretion in vacating the tax sale to include
Wilmington in the matter and put Alloway on notice before additional resources
were put into the property's restoration.
The trial court's decision was not made without a rational explanation nor
rests on an impermissible basis. Indeed, the trial judge reasonably exercised his
discretion when considering the amount of time Wilmington allowed to pass
before intervening and the considerable resources Alloway used to improve the
5
Although Wilmington's mortgage lien was $239,023.41, the price obtained at
a sheriff's sale is presumed to be for the reasonably equivalent value of the
property. BFP v. Resol. Tr. Co., 511 U.S. 531, 537 (1994) (whether "reasonably
equivalent value" equates to fair market value under 11 U.S.C. §548).
Therefore, the value of this fire-damaged, abandoned structure was the $23,000
paid by Alloway at auction.
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property during that time. Wilmington learned of the sale and Alloway's interest
in February but did not promptly contact Alloway or otherwise place them on
notice, and instead waited to move to intervene in May and to vacate the sale in
June. The delay is objectively unreasonable under the facts. Wilmington sat on
its rights and failed to intervene in a reasonable time, while Alloway invested
time, money, and resources to rehabilitate the property.
The trial court properly applied the doctrine of laches and weighed the
equities at stake when it concluded Wilmington lost its right to attack the
foreclosure judgment. For these reasons, the trial court did not abuse its
discretion, and equity does not warrant vacating the tax sale.
Affirmed.
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