City Of Asbury Park v. Ehrlich

• Decision Date: 09 July 1947
• Citation: 54 A.2d 118
• Parties: CITY OF ASBURY PARK v. EHRLICH et al.
• Court: New Jersey Circuit Court

54 A.2d 118

CITY OF ASBURY PARK

v.EHRLICH et al.

Circuit Court of New Jersey, Monmouth County.

July 9, 1947.

Ejectment suit by City of Asbury Park, against Tillie Ehrlich and Broad and Murray Realty Company. On plaintiff's motion to strike out defendants' answer.

Motion denied.

E. Alexander Edelstein, of Asbury Park, for plaintiff.

Durand, Ivins & Carton, of Asbury Park, for defendants.

KINKEAD, Judge.

This is an ejectment suit, whereby the City of Asbury Park seeks possession of premises occupied by defendants. The plaintiff alleged in its complaint that its rights to possession accrued on the 25th day of June, 1946. The defendants in their answer filed a general denial, and the plaintiff now moves to strike the answer.

The premises involved had been formerly owned by Coleman House, Inc. In 1934, they were sold to the plaintiff for nonpayment of 1933 taxes. The certificate of tax sale was not recorded until January 16, 1940. In December 1945, the plaintiff filed a bill to foreclose its tax title and the foreclosure proceedings were completed by the entry of a final decree dated June 21, 1946. The defendants were not joined in the tax foreclosure suit, despite the fact that they, or one of them, have been in continuous possession since 1934. Furthermore, the City had actual knowledge of the defendants' possession through the issuance of mercantile leases to the defendants to do business on the property involved. Since 1943, the defendants have occupied the premises by virtue of successive written leases from Coleman House, Inc., the last lease being dated January 2, 1946.

After the City obtained final decree in the foreclosure, it demanded possession from the defendants, who refused to quit. This suit was thereupon instituted. During its pendency, plaintiff made written demand on defendants for the payment of rent. The defendants complied and sent the sum of $500 to the City which, after being retained for a few days, was returned to the defendants with the information that the City desired only possession of the property.

Plaintiff bases its claim for possession on N.J.S.A. 54:5-53.1, and on the theory that defendants were bound by the foreclosure decree even though not joined therein.

The tax statutes of New Jersey, commencing with the year 1903, as they affect the right of a holder of a tax certificate to possession, are as follows:

Chapter 208, Laws of 1903, Section 56, which gives the purchaser of a tax certificate the right to record the same, who ‘thereupon shall be entitled to the immediate possession of the property sold and described in the certificate and to all the rents and profits thereof * * *.’

Chapter 237, Laws of 1918, Section 34, wherein the language is similar to that of the 1903 Act.

Chapter 81, Laws of 1926, which amended the 1918 Act to provide that the purchaser was not entitled to rents for such part of a dwelling house occupied by an owner or his family until after two years after recording the certificate.

Chapter 169, Laws of 1929, which amended the 1918 Act by eliminating the right to possession.

Chapter 54, Laws of 1942, which gave the municipality, after recording its tax certificate, the right to ‘immediate possession of the property sold and described in the certificate and to all the rents and profits thereof from and after the date of record and while the holder thereof, * * *.’

The next statute is N.J.S.A. 54:5-53.1, the pertinent provisions of which are as follows:

‘Whenever a municipality has heretofore or shall hereafter become the purchaser of any lands at any tax sale and the certificate of sale has been or shall be recorded in the manner provided by chapter five of Title 54 of the Revised Statutes, such municipality shall be entitled to immediate possession of the property sold and described in the certificate and to all the rents and profits thereof while the holder thereof, until redemption, but all rents and profits collected by such municipality shall be credited on the amount due upon said certificate of tax sale and for subsequent taxes, assessments or other municipal charges assessed against said lands and when the total amount due for the same, including all interests and costs, has been paid, the said lands shall be redeemed from said tax sale.

‘Whenever a municipality shall take possession of any property pursuant to the provisions of this section, the collector of taxes or other officer thereof, whose duty it shall be to collect taxes therein, shall take possession of said property and collect the rents and profits thereof for said municipality and, with the approval of the governing body of said municipality, and designate any competent person to act as the agent of said municipality for the collection of the rents and profits of said property and for the management of the same and sucn person shall account promptly to such collector or other officer, and the collector or other officer shall account promptly to the municipality, for the rents and profits so collected.’

The first point to be decided is whether the City acquired actual or constructive possession of the premises by virtue of the provisions of N.J.S.A. 54:5-53.1. The plaintiff maintains that the statute confers actual possession including the right to evict tenants of the owner. The only case which I have been able to find, construing this statute, is that of United States v. 7.41 Acres of Land, etc., D.C., 63 F.Supp. 43. Judge Forman at page 46 held: ‘The possession contemplated under N.J.S.A. 54:5-53.1 is a constructive one, as contra-distinguished from actual possession which a municipality would have the right to take by a writ of assistance after foreclosure of the right of redemption under a tax sale certificate. The municipality, however, can only exercise its right to take immediate possession of the premises, under this statute, when they are income producing. Then it may receive the rents and profits, apply them to the payment of the delinquent taxes and give the owner an accounting thereof. To this extent it is clothed with the same powers are a receiver. A tenant has no election but to attorn.’

The rights of the holder of a tax certificate are similar to those of a mortgagee in possession. Merchants' & Traders' Realty Company, Inc., v. Stern, 101 N.J.Eq. 629, 138 A. 637; Affirmed 102 N.J.Eq. 290, 140 A. 390. Vice-Chancellor Berry, 101 N.J.Eq. at page 633, 138 A. at page 699 held:

‘Under the 1918 act, however, on redemption he is entitled to reimbursement for those expenditures. A fortiori, then, a purchaser at a tax sale in possession should now pay taxes and other municipal liens accruing during such possession. His rights under the 1918 act are those of a mortgagee in possession. Cohn v. Simon and Cohn v. Schrader, supra. In those cases the Supreme Court, referring to section 34 of the Tax Sale Revision Act of 1918, said:

“We think the intent of the statute was to enable the purchaser of a tax title upon recording his certificate to acquire, the right of a mortgagee in possession, but in this respect the statute was not self-executory and the purchaser of the tax title might, if he chose, avoid the responsibility of the mortgagee in possession.' (Italics mine.)

* * *

‘The rights of a mortgagee in possession are to collect the rents and profits; his responsibilities include a liability to account for those rents and profits on redemption. Stewart v. Fairchild-Baldwin Co. [Err. and App.], 91 N.J.Eq. 86, 108 A. 301.’

In considering that the rights of the holder of a tax certificate are similar to those of a mortgagee in possession, it must be kept in mind that in the instant case, the defendant, upon demand for rent, attorned to plaintiff and paid $500 which sum, I assume, was the amount due under defendants' lease with Coleman House, Inc. However, plaintiff thereupon returned the rent, with the advice that the City sought only possession of the premises.

It has been held in New Jersey that when a mortgage is in default, the mortgagee has the right to maintain ejectment, but the tenant may avoid ejectment by attorning to the mortgage. Del-New Co. v. James, 111 N.J.L. 157, 167 A. 747. In this case, the Court 111 N.J.L. at page 159, 167 A. at page 748 held: ‘Now since a mortgagee, after default, has the right to maintain ejectment, it follows the tenant may attorn to such mortgagee in order to avoid ejectment and to keep himself in possession of the leased premises.’

Since the rights of the tax certificate holder are no stronger that those of a mortgagee in possession, it follows that a tenant may avoid ejectment by attorney to the tax certificate holder and tendering the rent which is due under tenant's lease with the owner.

The holding of the court in United States v. 7.41 Acres of Land, etc., supra, that to a certain extent the holder of a tax certificate is clothed with the powers of a receiver, leads to a consideration of the rule in New Jersey that a receiver is not authorized to dispossess a tenant who occupies premises by virtue of a lease with the owner.

In Fidelity Union Trust Co. v. 75 Prospect Cooperative Apartment, 131 N.J.Eq. 387, at page 389, 25 A.2d 508, at page 509, Vice-Chancellor Bigelow held: ‘Established practice confines the receiver of leased property to the collection of rents due the owner of the mortgaged estate, and does not permit him to dispossess tenants in disregard of the terms of their leases.’

The language of the second paragraph of the statute is, in my opinion, most significant: ‘Whenever a municipality shall take possession of any property pursuant to the provisions of this section, the collector of taxes or other officer thereof, whose duty it shall be to collect taxes therein, shall take possession of said property and collect the rents and profits thereof for said municipality * * *.’ (Italics mine.)

It is quite clear that the legislative intent was to empower any municipality holding a tax certificate, to collect the...