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

• Court: New Jersey Superior Court Appellate Division
• Decided: July 1, 2021
• Docket: A-1604-19
• Status: Unpublished

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ."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December 12, 2014, Sunshine Homes, Inc.'s business status was revoked on

A-1604-19 2 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

A-1604-19 3 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,

A-1604-19 4 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)).

A-1604-19 5 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

A-1604-19 6 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).

A-1604-19 7 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

A-1604-19 8 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

A-1604-19 9 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

A-1604-19 10 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.

A-1604-19 11