BV001 Reo Blocker, LLC v. 53 W. Somerset St. Props., LLC

• Decision Date: 31 March 2021
• Docket Number: DOCKET NO. A-0419-19
• Citation: 249 A.3d 236,467 N.J.Super. 117
• Parties: BV001 REO BLOCKER, LLC, Plaintiff-Respondent, v. 53 WEST SOMERSET STREET PROPERTIES, LLC, Defendant-Appellant, and Wells Fargo Bank, N.A., Defendant.
• Court: New Jersey Superior Court — Appellate Division

467 N.J.Super. 117

249 A.3d 236

BV001 REO BLOCKER, LLC, Plaintiff-Respondent,

v.53 WEST SOMERSET STREET PROPERTIES, LLC, Defendant-Appellant,andWells Fargo Bank, N.A., Defendant.

DOCKET NO. A-0419-19

Superior Court of New Jersey, Appellate Division.

Submitted January 21, 2021

Decided March 31, 2021

Law Offices of Peter N. Laub Jr. & Associates, LLC, attorneys for appellant (Peter N. Laub, Jr., Branchburg Township, and M. Teresa Garcia, on the briefs).

Robert A. Del Vecchio, LLC, attorneys for respondent (Susan B. Fagan-Rodriguez, of counsel and on the brief).

Before Judges Ostrer, Vernoia and Enright.

The opinion of the court was delivered by

OSTRER, P.J.A.D.

To avoid a financial debacle, a commercial-property owner asked the trial court to vacate a final default judgment of foreclosure of a tax sale certificate. The owner did not know the tax sale certificate existed until judgment was entered. The trial court denied defendant relief. It cited the tax sale certificate's validity, and defendant's failure to ensure its taxes were paid. But, under the Tax Sale Law, an owner need not challenge the tax sale certificate, nor excuse its own past non-payment, before redeeming its property. And here, defendant 53 West Somerset Street Properties, LLC, presented compelling reasons for its failure to answer the foreclosure complaint; it promptly moved to vacate the default judgment; and it was prepared to redeem the property. Based on those exceptional circumstances, the trial court should have exercised its broad equitable power under Rule 4:50-1(f) and granted defendant relief from the judgment. Therefore, we reverse.

I.

The facts are largely undisputed. The real property at the heart of this case, 53 West Somerset Street in Raritan, includes a bar and restaurant. Defendant, a limited-liability company, owns the real property, and Assunta Tummolillo is defendant's sole member. She is also the sole member of Assunta, LLC, which owns the restaurant and bar.

In 2014, Tummolillo entered into an executory contract to sell her business assets and real property. The two buyers agreed to pay Tummolillo $650,000 over five years, and to pay all property taxes. In the meantime, they were permitted to operate the restaurant and bar as their own. After five years and receipt of the full purchase price, Tummolillo would transfer ownership.

Unbeknownst to Tummolillo, the buyers did not pay the taxes. The tax bills and delinquent notices apparently went to the business address, and Tummolillo never arranged to receive duplicates. By late 2015, the Borough of Raritan sold to U.S. Bank a tax sale certificate on the property.¹ Tummolillo received no actual notice.

More than two years after that, one of the buyers appointed himself registered agent for the LLC — without Tummolillo's knowledge or consent. So, when plaintiff filed its foreclosure complaint in early 2019, it attempted to serve the LLC through the imposter. Tummolillo was still in the dark when plaintiff obtained entry of default, the court set the amount, time and place of redemption, the tax collector certified non-redemption, and plaintiff moved for default judgment.

Tummolillo first learned of plaintiff's motion while preparing to sue the buyers — who had defaulted in their payments to her — for breach of contract. According to defendant's counsel, only one or two days after Tummolillo's discovery, the court entered judgment.

Defendant raced to rectify the situation. Less than a week after the court entered judgment, defendant served its motion to vacate, so it could file an answer and redeem the property.² In support, Tummolillo and defendant's counsel certified many of the facts we have set forth.

During the motion hearing, defendant's counsel argued that the court should vacate the judgment to allow defendant to redeem. Counsel noted that the LLC's equity in the property far exceeded the amount owed, and that defendant had made payment arrangements.

Plaintiff's counsel responded that the tax sale certificate was valid; service was proper because plaintiff was entitled to rely on the public record of the registered agent; and defendant should have diligently ensured that its taxes were paid.

In its written opinion, the court held that defendant was barred from challenging the certificate because two years elapsed after the tax certificate was recorded. And, defendant's claim that the buyer fraudulently registered himself as agent was not a germane defense to the foreclosure action. The court also stated that, because defendant remained title owner, it was responsible to ensure that taxes were paid. The court stated that Tummolillo's failure to monitor her (that is, her company's) property's taxes "does not support her plea to this Court of Equity to ignore statutory requirements."

II.

A motion to vacate default judgment implicates two oft-competing goals: resolving disputes on the merits, and providing finality and stability to judgments. See Manning Eng'g, Inc. v. Hudson Cnty. Park Comm'n, 74 N.J. 113, 120, 376 A.2d 1194 (1977) (stating that Rule 4:50-1 "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"); Nowosleska v. Steele, 400 N.J. Super. 297, 303, 946 A.2d 1097 (App. Div. 2008) (stating that courts have liberally exercised the power to vacate default judgment "in order that cases may be decided on the merits").

In balancing the two goals, "[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, 625 A.2d 484 (1993) (alterations in original) (quoting Marder v. Realty Constr. Co., 84 N.J. Super. 313, 319, 202 A.2d 175 (App. Div. 1964), aff'd, 43 N.J. 508, 205 A.2d 744 (1964) ). Although the movant bears the burden of demonstrating a right to relief, see Jameson v. Great Atl. & Pac. Tea Co., 363 N.J. Super. 419, 425-26, 833 A.2d 626 (App. Div. 2003), a court should resolve "[a]ll doubts ... in favor of the part[y] seeking relief," Mancini, 132 N.J. at 334, 625 A.2d 484.

Ultimately, "equitable principles" "should ... guide[ ]" a court's decision to vacate a default judgment. Hous. Auth. of Morristown v. Little, 135 N.J. 274, 283, 639 A.2d 286 (1994) ; see also Pro. Stone, Stucco & Siding Applicators, Inc. v. Carter, 409 N.J. Super. 64, 68, 975 A.2d 1039 (App. Div. 2009) (stating that "Rule 4:50 is instinct with equitable considerations"). Therefore, a Rule 4:50-1 decision rests within "the sound discretion of the trial court," and we will not disturb it "absent an abuse of discretion." Mancini, 132 N.J. at 334, 625 A.2d 484.

However, a trial court mistakenly exercises its discretion when it "fail[s] to give appropriate deference to the principles" governing the motion, see Davis v. DND/Fidoreo, Inc., 317 N.J. Super. 92, 100-01, 721 A.2d 312 (App. Div. 1998) (reversing denial of motion to vacate); relies "upon a consideration of irrelevant or inappropriate factors," Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561, 571, 796 A.2d 182 (2002) (defining abuse of discretion); or rests its decision "on an impermissible basis," U.S. Bank N.A. v. Guillaume, 209 N.J. 449, 467, 38 A.3d 570 (2012) (discussing standard of review of order under Rule 4:50-1).

We conclude that the trial court erred in denying defendant relief under Rule 4:50-1(f) ("any other reason justifying relief from the operation of the judgment"). The trial court discounted the equitable principles that favor granting the motion, mistakenly concluding that if defendant lacked a defense to the tax sale or the right to foreclose, defendant was not entitled to relief from the judgment and to a chance to redeem. We do not reach defendant's argument that it was also entitled to relief under subsection (a) ("excusable neglect"), which also requires a showing of a "meritorious defense." See Guillaume, 209 N.J. at 469, 38 A.3d 570. Given the motion's timing, we need not guard against defendant repackaging a subsection (a) motion as a subsection (f) motion to avoid Rule 4:50–2's one-year deadline for filing the former, but not the latter. See Baumann v. Marinaro, 95 N.J. 380, 395, 471 A.2d 395 (1984) (stating that relief is available under subsection (f) "only when the court is presented with a reason not included among any of the reasons subject to the one year limitation").³

Nor do we decide defendant's contention that the court should have vacated the judgment under subsection (d) ("the judgment or order is void") because of defective service. See Jameson, 363 N.J. Super. at 425, 833 A.2d 626 (stating that a default judgment is void if "taken in the face of defective personal service," if the defect is so significant that it "cast[s] reasonable doubt on proper notice").⁴

Subsection (f) affords relief in " ‘exceptional circumstances’ " and "its boundaries ‘are as expansive as the need to achieve equity and justice.’ "

Hous. Auth. of Morristown, 135 N.J. at 290, 639 A.2d 286 (first quoting Baumann v. Marinaro, 95 N.J. 380, 395, 471 A.2d 395 (1984) and then quoting Palko v. Palko, 73 N.J. 395, 398, 375 A.2d 625 (1977) ). In deciding if relief is warranted, a court may consider the movant's delay, the justification for its request, and potential prejudice to the responding party. Parker v. Marcus, 281 N.J. Super. 589, 593, 658 A.2d 1326 (App. Div. 1995).

Defendant presents compelling grounds for relief from the judgment. Even if service of the registered agent was valid, we have stated that trial courts should treat a motion to vacate more liberally where there is "doubt about [a] defendant['s] actual receipt of the process." Davis, 317 N.J. Super. at 100, 721 A.2d 312. Likewise, "the absence of evidence establishing willful disregard of the court's process" favors...