KEYSTONE SERVICING COMPANY, LLC VS. BLOCK 365 (F-8211-19, ESSEX COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE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-3170-19
KEYSTONE SERVICING
COMPANY, LLC,
Plaintiff-Respondent,
v.
BLOCK 365, LOT 9
713 S 17th St., CITY OF
NEWARK, STATE OF NEW
JERSEY,
ASSESSED TO: ARMANI
REALTY GROUP, LLC,
Defendant-Appellant.
__________________________
Argued October 5, 2021 – Decided October 22, 2021
Before Judges Fisher and DeAlmeida.
On appeal from the Superior Court of New Jersey,
Chancery Division, Essex County, Docket No. F-8211-
19.
Andrew R. Turner argued the cause for appellant
(Turner Law Firm, LLC, attorneys; Andrew R. Turner,
of counsel and on the briefs).
Amber J. Monroe argued the cause for respondent
(Gary C. Zeitz, LLC, attorneys; Amber J. Monroe, on
the brief).
PER CURIAM
In this tax sale certificate foreclosure action, we consider the property
owner's argument that the chancery judge abused his discretion in denying a
motion to vacate a default judgment. Because there was a genuine factual dispute
about whether the property was abandoned and because the property owner's
inadequate responses to the proceedings were not inexcusable, we reverse.
The record reveals that in September 2018, Armani Realty Group, LLC
purchased property on South 17th Street in Newark from the First Episcopal
District of the African Methodist Episcopal Church. Armani did not pay 2018's
fourth quarter property taxes, and FIG as CUST for FIG NJ18, LLC purchased
a tax sale certificate on the property that was issued by the City on January 11,
2019. Armani did not receive notice of the lien's existence because of its failure
to timely record the deed memorializing its purchase.
By way of background, the holder of a tax sale certificate – like FIG – has
no right to foreclose sooner than two years from the certificate's acquisition
unless the property is abandoned within the meaning of the Abandoned
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Properties Rehabilitation Act,1 in which case the foreclosure action may be
commenced "any time" after the certificate's acquisition. See N.J.S.A. 54:5-
86(b). FIG commenced this foreclosure action on April 30, 2019.
Because a City official did not or would not provide a certification
declaring the property abandoned, FIG was required to seek a declaration from
the court. In that instance, N.J.S.A. 54:5-86(b) requires the submission of the
lienholder's evidence of abandonment that may be "accompanied by a report and
sworn statement by an individual holding appropriate licensure or professional
qualifications."
FIG moved in the trial court on June 25, 2019, seeking a determination
that the property was abandoned. In support, FIG submitted a certification
executed by Derek Leary, a licensed building inspector, who asserted the
property had been abandoned and had not been legally occupied for at least the
prior six months. FIG also provided six-year-old documents suggesting the City
had then placed the property on its abandoned property list. Armani – through
its non-lawyer principal – attempted to file opposition to FIG's motion, but the
county clerk would not accept those papers because the matter was pending in
the foreclosure unit. Armani's principal also wrote to FIG's counsel on July 10,
1
N.J.S.A. 55:19-78 to -107.
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2019, advising of Armani's ownership of the property, providing an address and
phone number, and claiming the property was not vacant and was "presently
under renovation." FIG's counsel did not respond and did not inform the motion
judge of Armani's communication.
On July 12, 2019, viewing it unopposed, the motion judge granted the
abandonment motion, by way of a succinct written opinion that relied, for the
most part, on Leary's certification. A few weeks later, Armani's principal
attempted to file a motion to vacate the abandonment order. The motion was
rejected by the clerk because Armani was not represented by counsel as required
by Rule 1:21-1(c). Around the same time, Armani recorded the deed obtained in
September 2018, and FIG thereafter amended its complaint to include Armani
as the property owner.
On January 24, 2020, FIG moved for the substitution of Keystone
Servicing Company, LLC as plaintiff 2 and for the entry of default judgment. 3 A
few days later, Armani retained counsel who immediately wrote FIG's counsel
2
FIG claims it assigned the lien to Keystone in August 2019 without revealing
the consideration received for the assignment.
3
The certification of service on which Keystone relies in support of its argument
that Armani was served with the motion for default judgment states only that
service was made on Armani of the motion to substitute Keystone as plaintiff.
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setting forth Armani's position that, among other things, the property was not
abandoned but instead undergoing renovations. Two weeks later, Armani's
attorney wrote again to FIG's counsel with additional information about the
renovation and again requested that the complaint be dismissed. A few days
before counsel's second letter, FIG obtained an order substituting Keystone as
plaintiff in this action, and the next day – February 11, 2020 – the trial court
entered default judgment in Keystone's favor.
On March 11, 2020 – twenty-nine days later – Armani moved to vacate
the default judgment. In asserting the existence of excusable neglect, Armani's
certification delineated its efforts to both communicate with FIG and file
opposition to the abandonment motion. To demonstrate a meritorious defense,
Armani provided, among other things, information about the renovation. Armani
also argued that Keystone had not provided any evidence to suggest FIG's
assignment to Keystone was for more than nominal value as required by Simon
v. Rando, 189 N.J. 339, 343-44 (2007). In opposition, Keystone merely recited
the procedural history and outlined Armani's failure to timely record its deed or
to timely respond to the motions that led to entry of the default judgment.
The chancery judge denied Armani's motion for reasons expressed in a
written opinion, and Armani appeals, arguing in a single point that the judge
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misapplied his discretion by failing to vacate a month-old default judgment in
the face of its allegations of excusable neglect and a meritorious defense. We
agree.
Missing from the chancery judge's decision is the well-established
principle that a Rule 4:50 motion requires a judge's consideration of equitable
principles and demands that a request to vacate a default judgment "be viewed
with great liberality," with "every reasonable ground for indulgence . . . tolerated
to the end that a just result is reached." Marder v. Realty Constr. Co., 84 N.J.
Super. 313, 318-19 (App. Div.), aff’d, 43 N.J. 508 (1964); see also Hous. Auth.
of Morristown v. Little, 135 N.J. 274, 283-84 (1994); Mancini v. EDS ex rel.
N.J. Auto. Full Ins. Underwriting Ass'n, 132 N.J. 330, 334 (1993). The chancery
judge's written opinion reveals a departure from both the letter and spirit of these
principles. Armani, which was unrepresented until two weeks before entry of
the default judgment, made numerous attempts to file opposition to the
abandonment motion and to less formally convince FIG's counsel that the
property wasn't abandoned. Certainly, pro se status does not imbue a party with
greater rights than represented litigants, but courts should exercise their
discretion in light of that circumstance. See Midland Funding LLC v. Albern,
433 N.J. Super. 494, 500 (App. Div. 2013). While Armani's principal should
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have understood the better course was to retain counsel at an earlier point in
time, we do not view his brief delay until shortly before entry of default
judgment to be of any serious consequence, particularly considering Keystone
waited until the same approximate time to enter the litigation even though it
alleges it was the real party in interest as far back as August 2019.
Moreover, Armani made a significant showing that the claim of
abandonment was incorrect and, in fact, that FIG's submission on the
abandonment motion was inadequate. As mentioned above, both FIG and the
judge4 relied on the Leary certification. Leary's certification consisted of a
preprinted form – delineating the factors set forth in N.J.S.A. 55:19-81 as to
what constitutes abandonment – on which Leary made or chose not to make
certain markings in a way that generates doubt about the sufficiency of what he
was attempting to convey.
Leary asserted that he "inspected the exterior of the [p]roperty on 2/2/19,"
the day before the certification was executed. He declared that the property "is
abandoned pursuant to N.J.S.A. 55:19-81 because the [p]roperty has not been
legally occupied for at least six (6) months preceding the date of this
4
We note that one judge ruled on the abandonment motion, another entered the
default judgment, and a third denied the motion to vacate.
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certification." Leary did not explain how he knew the property had not been
legally occupied for the prior six months, nor does the certification provide
many other facts that would support this conclusion; the certificatio n provides
only scant information about what could be seen from the outside of the structure
on a single day. For example, the preprinted form that Leary used to express his
findings listed seven indicia of abandonment. Leary, however, drew a line
through the first four and didn't check off the boxes of the other three. Beyond
that, the form contained three other paragraphs in which the inspector would fill
in the blanks to describe those conditions that: required rehabilitation or repair;
made the property unfit for use or occupancy; and posed potential health and
safety hazards. Leary left those spaces blank and drew a line through those three
categories of conditions. After a signature and a date, the following was
handwritten on the document unseparated or terminated by punctuation: "Vacant
property secure no utilitys [sic] home exterior appears to be in good shape." 5
On its face, the certification presents numerous questions and suggests
many ambiguities. First, by striking the preprinted material, was Leary
5
So the reader may better appreciate our description of the Leary certification,
a copy is appended.
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conveying the opposite of what is stated in that preprinted material was true? If
so, then the certification conveyed that:
• the property was not in need of rehabilitation
• rehabilitation had taken place during the last six
months
• the property was fit for human habitation,
occupancy or use
• there was no material increased risk of fire to the
property and adjacent properties
• no conditions required rehabilitation or repair
• no conditions made the property unfit for human
habitation, occupancy or use, and
• no conditions presented health and safety hazards
Second, by failing to check off other boxes, it would seem Leary was asserting
that:
• the property is not subject to unauthorized entry
and that the owner has taken reasonable and
necessary measures to secure the property
• there is no presence of vermin and no
accumulation of debris, uncut vegetation, or
physical deterioration, and
• the structure was not dilapidated and its condition
did not materially affect the welfare of the
residents in close proximity
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So viewed, it would appear Leary provided information that would suggest –
despite his bald general assertion of a six-month abandonment at the
certification's outset – the property was not abandoned. Only Leary's assertion
that the property was "vacant" and the utilities were turned off provided support
for his claim of abandonment earlier than the only day he visited the property.
In short, other than what Leary conveyed about what he could observe from
outside the structure on February 2, 2019 – much of which countered his claim
of abandonment 6 – Leary did not reveal how he had personal knowledge that the
property met the statutory definition that it had not been "legally occupied for a
period of six months." N.J.S.A. 55:19-81.
Much of the parties' arguments in this appeal focus on the abandonment
issue. We, of course, draw no conclusions on this issue except to observe the
presence of genuine factual disputes. To constitute a meritorious defense under
Rule 4:50-1, a party need not demonstrate the defense is undisputed, only that it
is "worthy of judicial determination." O'Connor v. Altus, 67 N.J. 106, 129
(1975). Armani satisfied this aspect of Rule 4:50-1(a) not only because of its
own affirmative allegations about the property but also because of the
6
Leary certified that the "property [was] secure" and the "home exterior appears
to be in good shape."
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inadequacies in the Leary certification. We are also satisfied the judge did not
reasonably indulge Armani's brief delays or missteps in seeking to protect its
interests. Armani's principal repeatedly – albeit ineffectually – tried to make
Armani's position known to FIG, Keystone, and the trial court. His missteps,
while regrettable, were not so egregious as to fail to waken the conscience of
the chancery court. See, e.g., Bergen-Eastern Corp. v. Koss, 178 N.J. Super. 42,
45-46 (App. Div. 1981); see also BV001 Reo Blocker, LLC v. 53 W. Somerset
St. Props., LLC, 467 N.J. Super. 117, 128-30 (App. Div. 2021); Olympic Indus.
Park v. P.L., Inc., 208 N.J. Super. 577, 581-82 (App. Div. 1986).
In the final analysis, the chancery judge mistakenly failed to indulge or
"view with great liberality" Armani's reasonable arguments about both its claim
of excusable neglect and its meritorious defense. 7 The judge also gave no
consideration to equitable principles, including here the overarching maxim that
"equity abhors a forfeiture." See Dunkin Donuts of Am., Inc. v. Middletown
Donut Corp., 100 N.J. 166, 182 (1985); Brunswick Bank & Trust v. Heln Mgmt.
LLC, 453 N.J. Super. 324, 330-31 (App. Div. 2018); Sovereign Bank, FSB v.
Kuelzow, 297 N.J. Super. 187, 198 (App. Div. 1997).
7
For this reason, we need not opine on Armani's other alleged defenses,
including its claim that Keystone may lack standing because it has not shown it
received an interest in the property from FIG for more than nominal value.
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The order denying the motion to vacate the default judgment is reversed
and the matter remanded for entry of an order granting Armani leave to file a
pleading responsive to the complaint and for all proceedings that may thereafter
be necessary to fairly, efficiently, and justly resolve this tax sale foreclosure
action.
Reversed and remanded. We do not retain jurisdiction.
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