Opinion
DOCKET NO. A-1765-13T4
02-11-2015
MILESTONE INVESTMENT PARTNERS, LLC, Plaintiff-Appellant, v. YAAKOV KAPLAN; MRS. KAPLAN, spouse of YAAKOV KAPLAN; JOSEPH GUTTERMAN and MASHA GUTTERMAN, husband and wife; SAMUEL RABINOWITZ, Defendants, and WELLS FARGO BANK, N.A. s/b/m/t WACHOVIA BANK, N.A., Defendant-Respondent.
Linda S. Fossi argued the cause for appellant (Gary C. Zeitz, L.L.C., attorneys; Ms. Fossi, on the briefs). Gregory F. Kotchick argued the cause for respondent (Durkin & Durkin, LLP, attorneys; Mr. Kotchick, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Messano and Ostrer. On appeal from the Superior Court of New Jersey, Chancery Division, Ocean County, Docket No. F-8696-11. Linda S. Fossi argued the cause for appellant (Gary C. Zeitz, L.L.C., attorneys; Ms. Fossi, on the briefs). Gregory F. Kotchick argued the cause for respondent (Durkin & Durkin, LLP, attorneys; Mr. Kotchick, on the brief). PER CURIAM
Plaintiff Milestone Investment Partners, LLC (Milestone) obtained a final default judgment of foreclosure on a tax sale certificate, granting it title to Block 12.02, Lot 18.02 (Lot 18.02) in Lakewood Township. The judgment foreclosed the right of redemption of various parties, including defendant Wells Fargo Bank, N.A. (Wells Fargo). Pursuant to Rule 4:50-1(f), the Chancery Division thereafter conditionally vacated the judgment upon Wells Fargo's motion, which was filed thirteen months after entry of the judgment. Milestone appeals, contending principally that the circumstances did not justify extraordinary relief under subsection (f). We disagree. The court's discretionary grant of relief was justified by special circumstances, which arose out of the subdivision of property that created Lot 18.02; and the apparent misallocation of taxes thereafter. We therefore affirm.
I.
Wells Fargo's predecessor Wachovia Bank, N.A. received a mortgage on Block 12.02, Lot 18 on April 26, 2006 from Masha and Joseph Gutterman, to secure a $252,500 note with a twenty-four-month term maturing April 28, 2008. The mortgage described the address of the property as "Block 12.02, Lot 18.02" and the "Parcel No." at "12.02-18." The record does not include a legal description of the property attached to the mortgage.
At some point, Wells Fargo succeeded to Wachovia's interests. For convenience we will hereafter use "Wells Fargo" to refer to Wachovia.
In 2008, if not sooner, Lot 18 was apparently subdivided into two lots, 18.01 and 18.02. The Guttermans conveyed to Yaakov Kaplan Block 12.02, Lot No. 18.01 (Lot 18.01) by a deed filed April 14, 2008. Attached to the deed was a legal description that, incongruously, apparently incorporated the entire Lot 18 (Lot 18 Description). The metes and bounds was followed by a note that referred to "Lot(s) 18, Block 12.02." In connection with the Guttermans-to-Kaplan transfer, Wells Fargo released Lot 18.01 from its mortgage lien. The Partial Release was signed March 19, 2008 and filed soon thereafter. It expressly preserved the lien on the "Block 12.02, Lot 18.02 . . . Parcel ID Number 12.02-18.02."
Thereafter, the Guttermans apparently defaulted on their note. Wells Fargo filed a notice of lis pendens on September 30, 2008. The notice, incongruously, included the same legal description set forth above, encompassing the entire Lot 18 without regard to the subdivision. Wells Fargo ultimately obtained a final judgment of foreclosure against the Guttermans, entered June 17, 2009. The judgment also named Kaplan and others as defendants. A writ of execution was entered the same day, and noted that the property had been subdivided and referred to Lot 18.02. The writ nonetheless also included the full Lot 18 description.
Meanwhile, taxes apparently were unpaid on one or both of the subdivided lots. Lakewood issued a tax sale certificate to Milestone's predecessor, The Approved Realty Group (ARG), on October 7, 2009 for unpaid taxes assessed to Kaplan. However, the certificate referred to Lot 18.02, and not Lot 18.01. The total cost of sale was $4807.26. The certificate number was 09-00013. ARG subsequently assigned the certificate to Milestone in December 2010. The assignment referred to Kaplan as the assessed owner, but Lot 18.02 as the property.
It is unclear from the record before us whether (1) the unpaid taxes reflected in certificate 09-00013 were those properly due and owing on Lot 18.01, the property conveyed to Kaplan and released from Wells Fargo's lien, and the certificate simply misstated the lot involved; or, (2) the unpaid taxes were due and owing on Lot 18.02, and the certificate misstated the owner involved.
After the two-year waiting period under N.J.S.A. 54:5-86 elapsed, Milestone filed its foreclosure complaint on October 14, 2011, naming Kaplan, the Guttermans, and Wells Fargo, among others. It alleged that Kaplan was the record owner of the property. It also referred to the Guttermans-to-Kaplan deed, but stated that the relevant property was Lot 18.02. The complaint alleged that Wells Fargo was a proper party by dint of the Guttermans' mortgage, and Wells Fargo's October 2008 lis pendens.
Less than two weeks later, a private process server served a Wells Fargo manager at a Wells Fargo office or branch on Broad Street in Newark. Wells Fargo did not answer the complaint. A representative of Wells Fargo, vice-president for loan documentation, Kylie E. McKay, later certified that the bank's records "do not reflect" service. However, the bank did not provide a certification from the person allegedly served.
Milestone's counsel provided no explanation for why it served Wells Fargo at a branch or office in Newark, as opposed to an office near Lakewood.
Just three days after Milestone filed its complaint, and before service on Wells Fargo, a bank representative wrote to Lakewood's tax collector to obtain a statement of any taxes due on Lot 18.02. The bank representative wrote:
McKay certified that Wells Fargo personnel periodically contacted the tax collector to determine if there were encumbrances on Lot 18.02. She alleged the bank did so after Milestone filed a previous tax sale foreclosure action in December 2010. The record does not include the complaint, or any orders pertaining to it. McKay stated that in March 2011, the bank was informed that $7430.39 was due "to satisfy tax sale certificates and/or taxes" on Lot 18.02, which the bank paid.
REGARDING: BLOCK 12.02, LOT 18.02
Our reference # 176264023
Customers Masha & Joseph Gutterman
Wells Fargo Bank is a lien holder on this property since April 06. We need to make sure our lien is not wiped out by a tax sale. I need to know the past due taxes (which from what I understand are 2008) and need to know the full reinstatement amount dated out 3 weeks. Please call me with the information . . . I only need about 3 minutes worth of your time. I have been trying to get this paid for a month now.
The tax collector responded by setting forth "the lien redemption figure for block 12.02 lot 18, 151 Miller Road, assessed to Joseph & Masha Gutterman." However, the tax collector then proceeded to refer to a tax sale certificate that was sold on December 2, 2008, and did not mention the one from 2009 that was the subject of Milestone's foreclosure action. "The amount required to redeem Tax Sale Certificate 08-00010 on November 4, 2011 is $11,760.33." The tax collector added that the lien was sold for unpaid property taxes from 2006. Wells Fargo promptly paid the amount stated.
On April 30, 2012, the court entered an order setting date, time, place and amount of redemption (OSDTPA) in Milestone's foreclosure action. The order referred to the 2009 tax sale certificate, stated a redemption amount of $17,022.77, together with costs of $1145.23, and set June 14, 2012 as the date for redemption. Milestone's counsel certified that the order was sent by certified mail to Wells Fargo, to the attention of "Officer/Managing Agent" at 550 Broad Street, in Newark. The record reflects that the mail was received. Wells Fargo still did not respond to Milestone's foreclosure action.
McKay certified that in preparation for the sheriff's sale based on its foreclosure judgment against the Guttermans, Wells Fargo was advised that its counsel again contacted the tax collector to determine the status of any outstanding taxes or tax sale certificates. The bank was advised that the collector informed counsel of the Milestone foreclosure action. Thereafter, Wells Fargo learned that final judgment had been entered.
However, Milestone's counsel on June 28, 2012 mailed a copy of the final judgment to Wells Fargo, again directing it to its office or branch in Newark. The same day, the bank's counsel wrote to Milestone's counsel asserting that he just learned that a foreclosure action was "pending," but the bank had "no record of being served." He requested a copy of the summons and complaint "so as to verify that it is the same property which is encumbered by the Bank's mortgage and further provide a copy of the Order setting Time, Place and Amount of Redemption if same has been entered." In response, Milestone's counsel transmitted by email the complaint, OSDTPA, and final judgment, and proof of service of all three.
Wells Fargo alleged that the tax collector admitted that it misallocated its tax payments. McKay asserted:
The Lakewood Tax Collector was thereafter contacted. Wells Fargo was advised by the Lakewood Tax Collector's office that through inadvertence and/or mistake they improperly calculated the outstanding amounts due and owing as same relates to the taxes due on the Amended Mortgaged Premise (i.e. Block 12.02 Lot 18.02) and further applied the monies received by Wells Fargo (i.e.: $11,760.33) to property which is not encumbered by Wells Fargo's Mortgage (i.e.: Block 12.02 Lot 18).
However, Wells Fargo did not immediately move to vacate the default judgment. Instead, the bank recorded a notice of lis pendens on July 6, 2012. The notice included the caption of Milestone's foreclosure action and stated that Wells Fargo "hereby disputes the Plaintiff's right to institute the within foreclosure action and/or issuance of an Order setting the time, place and amount of redemption and entry of final judgment, if any." The notice then referred to the Guttermans' 2006 mortgage and Block 12.02, Lot 18.02.
Shortly after one year had elapsed since obtaining the final judgment of foreclosure, Milestone's counsel wrote to Wells Fargo's counsel requesting that the bank voluntarily remove its lis pendens. Counsel contended that the time within which the bank could move for relief from the judgment under Rule 4:50-2 had passed.
That letter apparently prompted Wells Fargo to act. On July 24, 2013, it filed its motion to vacate the default judgment. The motion was supported by McKay's certification, but apparently lacked a supporting brief as required by Rule 4:50-1. The bank provided no competent evidence to excuse its inaction between the filing of its lis pendens in July 2012, and its motion a year later.
To justify its delay, the bank's counsel asserted "[W]e moved quick but we couldn't get responses quick. It took a long time to figure out what happened." He also asserted that "it was acknowledged by . . . the township attorneys[,] . . . the tax collector and the holder of the tax certificate that the tax collector's office messed up." He added there were settlement negotiations involving the township, and Milestone, to no avail. Milestone's counsel responded that none of those assertions were supported by competent evidence in support of the bank's motion.
Milestone opposed Wells Fargo's motion, supported by a brief and certification of counsel, and cross-moved for an order discharging the notice of lis pendens. Milestone asserted that as of August 31, 2013, the amount due and owing on account of the tax lien was $24,552.72 (including interest of $8178.84), plus statutory costs of $1145.23; that amount included taxes that Milestone had paid since entry of its judgment.
At oral argument, Wells Fargo argued the merits of its defense to the foreclosure action. It contended that it dutifully inquired what taxes were due on the property subject to its mortgage, Lot 18.02, and paid the amounts stated by the tax collector. Milestone argued that Wells Fargo was properly served and its counsel had actual notice of the default judgment, yet the bank inexcusably waited to file its motion.
In a brief oral decision, the trial judge apparently weighed the substantial financial loss that Wells Fargo would suffer if denied relief. The court considered that Wells Fargo had attempted to pay all taxes due on the property in which it was interested, and "the [tax] collector should've picked this up with the subdivision and . . . I think, in large measure, the collector created the problem," although the judge recognized that the collector was not present, and its position was not known. The court also determined that Milestone should not suffer any losses as a result of Wells Fargo's delay. The judge stated that "as a Court of equity," considering "the totality of the circumstances," relief from the judgment was warranted, conditioned upon compensating Milestone for its attorney's fees and the costs associated with maintaining the property. The court denied the cross-motion for an order discharging the lis pendens. The court's order, entered October 29, 2013, also conditioned relief upon Wells Fargo's redeeming the tax lien through the township upon receipt of the lien redemption statement.
It is unclear whether Milestone maintained Lot 18.02, or Lot 18.01.
Milestone's appeal followed. Milestone argues Wells Fargo's motion was time-barred if grounded under Rule 4:50-1(a), (b), or (c); the judgment was not void under Rule 4:50-1(d); and the facts did not support extraordinary relief under Rule 4:50-1(f). Milestone further asserted that Wells Fargo's motion was untimely under N.J.S.A. 54:5-87. Milestone also argued that Wells Fargo's motion should have been barred by the doctrine of laches. Finally, Milestone asserts the court erred in not discharging the lis pendens.
II.
Our decision is guided by well-established principles. The determination whether to grant a motion to vacate a default judgment is "left to the sound discretion of the trial court, and will not be disturbed absent an abuse of discretion." Mancini v. EDS ex rel. N.J. Auto. Full Ins. Underwriting Ass'n, 132 N.J. 330, 334 (1993). See also US Bank Nat'l Ass'n v. Guillaume, 209 N.J. 449, 467 (2012) (stating that a decision on a motion to vacate default judgment "should not be reversed unless it results in a clear abuse of discretion").
A motion to vacate a default judgment implicates two often competing goals: the desire to resolve disputes on the merits, and the need to efficiently resolve cases and provide finality and stability to judgments. "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." Manning Eng'g, Inc. v. Hudson Cnty. Park Comm'n, 74 N.J. 113, 120 (1977). Essentially, the decision whether to grant or deny a motion to vacate a default judgment must be guided by equitable considerations. Prof'l Stone, Stucco & Siding Applicators, Inc. v. Carter, 409 N.J. Super. 64, 68 (App. Div. 2009) (noting that "Rule 4:50 is instinct with equitable considerations").
Although the trial judge did not expressly identify the subsection of the rule upon which he relied, it is apparent that he based his ruling on subsection (f), which allows a court to vacate a judgment for "any other reason justifying relief." Relief under that subsection is not subject to the one-year time bar, and need only be sought within a "reasonable time." R. 4:50-2. In requiring Wells Fargo to compensate Milestone for its attorneys fees and maintenance costs, the court utilized the power under the rule to condition relief "upon such terms as are just." See Regional Constr. Corp. v. Ray, 364 N.J. Super. 534, 543 (App. Div. 2003) (noting that purpose of power to impose just terms is to "relieve the plaintiff of any attending prejudice" from the grant of relief).
We reject Milestone's reliance on N.J.S.A. 54:5-87. The Court Rule governs a motion for relief from a tax sale foreclosure judgment, notwithstanding that N.J.S.A. 54:5-87 bars relief after three months from the date of judgment, except for grounds of lack of jurisdiction, or fraud in the conduct of the suit. See M & D Assocs. v. Mandara, 366 N.J. Super. 341, 351 (App. Div.) (stating Court Rule is paramount), certif. denied, 180 N.J. 151 (2004); Town of Phillipsburg v. Block 1508, Lot 12, 380 N.J. Super. 159, 166 (App. Div. 2005) (interpreting three-month deadline). Nonetheless, the statutory limitation, and the underlying policy to grant stability of foreclosure judgments, informs a court's exercise of its discretion under the Rule. Id. at 166-67; Bergen-Eastern Corp. v. Koss, 178 N.J. Super. 42 (App. Div.), appeal dismissed, 88 N.J. 499 (1981).
Relief under subsection (f) is available upon a showing of "exceptional and compelling circumstances." Schwartzman v. Schwartzman, 248 N.J. Super. 73, 77 (App. Div.) (internal quotation marks and citation omitted), certif. denied, 126 N.J. 341 (1991). The subsection is "limited to situations in which, were it not applied, a grave injustice would occur." Guillaume, supra, 209 N.J. at 484 (internal quotation marks and citation omitted).
Given our deferential standard of review, we discern no compelling grounds to disturb the trial court's balancing of the equities, and its exercise of discretion. Milestone conceded at oral argument that had the township's tax collector accurately applied Wells Fargo's tax payments, its tax sale certificate would have been redeemed. In other words, Wells Fargo did not have a merely "meritorious defense" to the foreclosure complaint that it did not answer; it concededly had a conclusive defense that would have defeated Milestone's action.
The merit of Wells Fargo's defense obviously weighed heavily in support of its claim for relief, as did the fact that other parties apparently bore significant responsibility for the creation of tax liens against Lot 18.02. Although the real property transfers between the Guttermans and Kaplan clearly referred to Lot 18.01 (notwithstanding the legal description that apparently referred to the whole undivided lot), the taxes apparently assessed against Kaplan were allocated to Lot 18.02. This led Milestone to seek foreclosure of Wells Fargo's interests in Lot 18.02.
Unquestionably, Wells Fargo's delay once its counsel was actually notified of the final judgment was not justified. The post-judgment filing of a lis pendens obviously did not shield it from the effect of the judgment. On the other hand, Milestone was obviously aware of the lis pendens, and the bank's objection to the judgment. Milestone did not formally respond, which might have triggered a Rule 4:50-1 motion, until a year had elapsed and a motion to vacate under Rule 4:50-1(a), (b) and (c) would have been untimely.
We need not reach Wells Fargo's argument that service on a so-called manager in Newark did not constitute proper service, although we note that the bank provided no competent evidence regarding the nature of its facility in Newark, or the duties of the person who allegedly received the summons and complaint. In any event, Wells Fargo subsequently was served with the OSDTPA, and the final judgment.
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The trial court did not abuse its discretion in weighing and ameliorating the prejudice that Wells Fargo would suffer if denied relief, and that Milestone would suffer if Wells Fargo were granted relief. The court's order conditioning relief upon reimbursement of Milestone's fees and maintenance costs, as well as the order compelling redemption, would relieve Milestone of any financial losses associated with its investment in the tax sale certificate, and its subsequent efforts to foreclose.
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office. CLERK OF THE APPELLATE DIVISION