City of East Orange v. Block 174
| Decision Date | 12 April 2022 |
| Docket Number | A-0856-20 |
| Parties | CITY OF EAST ORANGE, Plaintiff-Respondent, v. BLOCK 174, LOT 18.1 (#16) ASSESSED TO: NADEN, LLC, 122 NORTH MAPLE AVENUE, EAST ORANGE, Defendant-Appellant. |
| Court | New Jersey Superior Court — 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.
Argued January 26, 2022
On appeal from the Superior Court of New Jersey, Chancery Division, Essex County, Docket No. F-011494-19.
Russell M. Finestein argued the cause for appellant Naden LLC (Finestein & Malloy, LLC, attorneys; Russell M Finestein, on the briefs).
Elliot J. Almanza argued the cause for respondent (Goldenberg, Mackler, Sayegh, Mintz, Pfeffer, Bonchi & Gill, PC, attorneys; Keith A. Bonchi, of counsel and on the brief; Elliot J. Almanza, on the brief).
Before Judges Rothstadt and Natali.
In this tax sale certificate foreclosure action, defendant Naden, LLC appeals from the Chancery Division's August 28, 2020 order denying its Rule 4:50-1 motion to vacate a February 27, 2020 default judgment entered in favor of plaintiff City of East Orange. Defendant also appeals from the court's October 30, 2020 order denying its Rule 4:49-2 motion for reconsideration.
On appeal, defendant argues that Chancery Division Judge Jodi Lee Alper erred when she failed to make a finding of fact as to whether the tax collector received a check sent by the settlement agent at the closing on defendant's purchase of the subject property, which was intended to redeem the outstanding tax sale certificate, and which would have rendered the entered judgment void under Rule 4:50-1(d). Defendant also argues that the Chancery judge abused her discretion by finding that its failure to file an answer was not based on excusable neglect under Rule 4:50-1(a), even though defendant relied on advice from its attorney and the settlement agent that the payment towards the outstanding tax sale certificate had been sent to the City. It also contends that the judge failed, under Rule 4:50-1(f), to balance the equities between the parties by not considering the financial loss that it would incur and the windfall the City would realize by taking title to a property that was worth substantially more than the amount due on the tax sale certificate. Also, defendant argues that the judge erred by failing to impose a constructive trust that would have ameliorated its financial losses, and by failing to consider new evidence provided in its reconsideration motion under Rule 4:49-2, which demonstrated that the tax collector received, but likely misplaced, the check that should have redeemed the tax sale certificate.
We have considered defendant's arguments in light of the record and the applicable principles of law. We affirm Judge Alpers's orders because the record amply supports her conclusion that defendant did not establish excusable neglect or a meritorious defense to vacate the judgment, failed to demonstrate the two-prong standard for the creation of a constructive trust, and the judge's conclusions were not arbitrary, capricious, or unreasonable, especially in light of defendant's avoidable failure to cure its default in payment or to respond to the complaint in this action.
The facts derived from the record on appeal are summarized as follows. Defendant purchased Block 174, Lot 18.1, also known as 122 North Maple Avenue, East Orange, in October 2018 for $120, 000. Part of the purchase price, which was financed through a mortgage loan, was to be applied toward satisfaction of two outstanding tax sale certificates in the amounts of $35, 951.07 and $21, 090.64.
According to defendant, a few days after the closing, the settlement agent for the closing sent two checks to the City's tax collector in the amounts necessary to redeem the tax sale certificates. However, according to the City, the tax collector only received one check in the amount of $35, 961.67 for one tax sale certificate. The City deposited the check and applied the check to redeem the one certificate. According to the City, a check in the amount $21, 090.64 for the other certificate was never received because it was not deposited by the tax collector, and thus, that certificate remained outstanding.
In May 2019, while defendant's principal was at the tax collector's office, he learned that the $21, 090.64 tax sale certificate was still outstanding. Despite that information, defendant attempted to pay only the taxes for the subsequent quarters and did not tender payment of the $21, 090.64 due on the one tax sale certificate. For that reason, the tax collector rejected the payment for the current taxes.
For the next three months, defendant took no action toward satisfying the amount owed under the outstanding certificate. However, in August 2019, defendant requested, on three occasions, information from its attorney and the closing's settlement agent about its payment of the $21, 090.64 tax sales certificate. According to defendant, it was assured that the payment was made. Based on that advice, defendant never made any attempt to pay the outstanding amount necessary to redeem the certificate. Moreover, defendant never tendered further payment of any taxes that became due.
Thereafter, the City filed its foreclosure complaint. Defendant failed to answer or otherwise respond. The court entered a default and defendant received notice that a default judgment was about to be entered. By that time, defendant had learned from the settlement agent and its attorney that the missing check had not been cashed by the City. Nevertheless, defendant again took no action. The court entered a default judgment in favor of the City on February 27, 2020.
In April 2020, defendant filed a motion to vacate the final judgment under Rule 4:50-1. In response, the Chancery judge initially directed the parties to conduct limited discovery, including depositions, related to defendant's purported payment of the outstanding tax sales certificate and subsequent taxes, and then file supplemental submissions regarding same.
After the parties completed discovery, the Chancery judge held a second hearing, on August 25, 2020, where she considered the parties' oral arguments regarding defendant's tax payments and defendant's arguments about it making an "honest mistake," its establishment of "excusable neglect," and for the first time, a motion for an alternative relief-the creation of a constructive trust under Simon v. Cronecker, 189 N.J. 304 (2007).
After considering all arguments, Judge Alper issued an oral decision, denying defendant's motion to vacate the final default judgment. In her decision, the judge stated the following:
The Chancery judge also denied defendant's motion for the creation of a constructive trust. She did so "as a result of the arguments made by [the City]," including that the City is not a wrongdoer. She also observed that the Court in Cronecker, created a constructive trust under a different context and she was unaware of any case law that applied the remedy under the circumstances present in this case. Thereafter, on August 28, 2020, the judge entered an order consistent with her oral opinion.
Defendant filed a motion for reconsideration under Rule 4:49-2, on September 15, 2020. The motion was supported by a supplemental certification from the settlement agent and attached a newly discovered letter to demonstrate that the settlement agent sent the tax collector two checks to pay the sales tax certificates.
Judge Alper considered the matter on October 30, 2020, after which she denied defendant's motion. In her oral decision placed on the record that day, the judge found that after considering the standards governing reconsideration motions her "prior decision was [not] palpably incorrect." She rejected the notion that the settlement agent's letter was "new evidence" because defendant was afforded a "significant discovery period" where it could have...
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