Zhang v. Goshen Mortg. REO
| Decision Date | 20 April 2023 |
| Docket Number | A-1957-20 |
| Parties | LILLIAN ZHANG, Plaintiff-Appellant, v. GOSHEN MORTGAGE REO, LLC, NORMA I. VARGAS, LEGION INSURANCE COMPANY, COUNTY OF PASSAIC, O'DONNELL, O'HARA AND AMANTIA, WOODBINE DEVELOPMENTAL CENTER, and STATE OF NEW JERSEY, Defendants. ANNICETTE KESSELY, Intervenor-Respondent. |
| 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 October 6, 2022
On appeal from the Superior Court of New Jersey, Chancery Division, Essex County, Docket No. F-032381-16.
Michael R. Hahn argued the cause for appellant (Simeone & Raynor, LLC, attorneys; I. Dominic Simeone, Bryan T. Eggert and Michael R. Hahn, on the briefs).
David M. Schlachter argued the cause for intervenor-respondent (Law Offices of David M. Schlachter, LLC, attorneys; David M. Schlachter, on the brief).
Before Judges Gooden Brown and DeAlmeida.
In this tax sale certificate foreclosure matter, plaintiff Lillian Zhang appeals from three orders of the Chancery Division: (1) a January 29, 2020 order granting defendant-intervenor Annicette Kessely's motion to vacate a December 20, 2017 final judgment; (2) a March 27, 2020 order awarding Zhang attorney's fees and costs; and (3) a February 5, 2021 order dismissing Zhang's complaint. We affirm the January 29, 2020 and February 5, 2021 orders, affirm the March 27 2020 order in part, reverse the March 27, 2020 order in part, and remand for the award of additional attorney's fees and costs to Zhang.
On November 29, 2005, Kessely bought property comprised of two residential units in Newark. The purchase price was $291,000.
On May 4, 2007, she recorded a mortgage on the property in the amount of $296,000 and, on the same day, recorded a second mortgage in the amount of $55,500. Kessely acknowledged that as of May 4, 2007, she extracted all of the money she originally paid for the property, as well as an additional $60,000.
On July 1, 2009, Kessely defaulted on her mortgage payments. At that point, the bank began paying the local property taxes on the property. The bank subsequently filed a mortgage foreclosure action and, on August 8, 2013, title to the property passed to defendant Goshen Mortgage REO, LLC (Goshen) through a Sheriff's sale. The deed transferring title to Goshen was recorded with the county clerk.
On November 12, 2013, Kessely bought the property back from Goshen for $85,000. She received a quit claim deed transferring title to the property to her. According to Kessely, Goshen told her that the deed would be recorded with the county clerk by the mortgage servicing company. The deed, however, was never recorded.
Kessely did not thereafter pay the local property taxes on the property. On September 18, 2014, Zhang purchased a tax sale certificate for the property from Newark for $4,133.36 and a $9,000 premium. On October 20, 2014, Zhang recorded the tax sale certificate with the county clerk.
On December 5, 2016, Zhang, who continued to pay the local property taxes on the parcel after purchase of the tax sale certificate, filed a complaint in the Chancery Division to foreclose on the certificate. She conducted a title search to identify all parties with a recorded interest in the property. Because the deed between Goshen and Kessely had not been recorded, Zhang found no evidence of Kessely's interest in the property in the county clerk's records. As a result, Zhang named Goshen, the last title owner in the county clerk's records, and six other interested parties, but not Kessely, as defendants in the foreclosure complaint.[1] While Zhang gave notice to all named defendants, she did not serve notice of the foreclosure complaint at the property. By September 28, 2017, all defendants, including Goshen, had defaulted.
The court set a deadline for redemption of the tax sale certificate in the amount of $27,337.14. No party attempted to redeem and, on December 20, 2017, the court entered a final judgment of foreclosure in favor of Zhang vesting her with title to the property.
On March 15, 2018, Kessely moved pursuant to Rule 4:50-1(a) to vacate the final judgment. She alleged that she lived at the property and "monitored it closely" since 2013, and that she was unaware of the foreclosure action until she saw a for-sale sign at the property after entry of judgment. Kessely claimed that from 2013 to 2017, she knew that local property tax bills were not being mailed to her but did not understand why. She also knew the taxes were not being paid and alleged that she tried to pay the taxes, but the tax collector would not allow her to do so because Goshen was listed as the owner in the collector's records.[2]
Kessely produced no evidence that she made an effort to record the deed transferring ownership to her after she became aware that Goshen had not followed through on its promise. She instead continued to collect rental income from the property for several years without paying local property taxes or protecting her ownership interest in the parcel. Kessely alleged that she was prepared to redeem the certificate if the judgment was vacated.
Zhang opposed the motion. She submitted a certification contesting Kessely's claim that she lived at the property. According to Zhang, both units at the property were rented. She argued that Kessely was not entitled to relief because she was aware for many years that she was not paying taxes on her income-generating property and took no action to protect her interest.
On June 12, 2018, the court ordered a plenary hearing to consider two issues: (1) whether Kessely was an occupant of the property entitled to redeem the certificate and required to be named as a defendant in Zhang's complaint; and (2) if she was not an occupant of the property, whether her actions constituted excusable neglect entitling her to relief from the final judgment. The court ordered Kessely to move to intervene and to deposit in court any rent she received from the property while her motion was pending.
On July 2, 2018, Kessely moved to intervene. Zhang opposed the motion and cross-moved to enforce litigant's rights. She submitted evidence that Kessely lived in New York during the relevant period and failed to comply with the court's order to deposit the rent she received.
On December 6, 2018, the court granted Kessely's motion to intervene.[3]
On February 19, 2019, Zhang again moved to enforce litigant's rights. She alleged Kessely failed to deposit rent from the property in court for the prior six months and owed $14,700 to the trust account. Kessely opposed the motion.
On May 3, 2019, the court granted Zhang's motion in part. The court entered an order: (1) directing Kessely to deposit all rent received since March 2018, without deductions, in court; (2) directing Kessely to give Zhang a copy of all leases for the property since March 2018, proof of the dates Kessely occupied the property, and a certification stating she was the sole occupant of one of the units; and (3) giving Zhang management control of the property and direct access to rent received after June 1, 2019, which was to be deposited by her counsel in court. In lieu of sanctions, the court ordered Kessely to pay rent on the unit she claimed to be occupying in the amount needed to ensure the total rent received each month from the property was $2,100.
On May 21, 2019, Zhang moved to enforce litigant's rights for a third time. She alleged Kessely had not deposited the correct amount of rent in court. According to Zhang, Kessely owed $31,500 to the court but had deposited only $14,000. Kessely opposed the motion.
On July 3, 2019, the court granted Zhang's motion. In a written opinion, it found Kessely failed to comply with the previous orders and required her to deposit $17,500 in court. In a July 3, 2019 order, the court reiterated the relief previously granted to Zhang with respect to control of the property and awarded Zhang attorney's fees and costs on the motion. The court, however, did not enter an amount of fees and costs awarded, instead directing Zhang to file proof of the amount of attorney's fees and costs she incurred.
On January 29, 2020, after a plenary hearing, the trial court issued a written decision granting Kessely's motion to vacate the final judgment pursuant to Rule 4:50-1(f)....
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