FRESH FISH HOLDINGS, L.L.C. v. 61 MAIN STREET, INC., et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3991-04T53991-04T5

FRESH FISH HOLDINGS, L.L.C.,

Plaintiff-Appellant,

v.

61 MAIN STREET, INC.,

Defendant-Respondent,

and

KOREA FIRST BANK OF NEW YORK,

Jackson Heights Branch, FUNB

OF FLORIDA, custodian for D.H.

ASSOC., STATE OF NEW JERSEY, and

RE INVESTORS LTD. INC.,

Defendants.

__________________________________________________

 

Argued March 20, 2006 - Decided March 30, 2006

Before Judges C.S. Fisher and Yannotti.

On appeal from the Superior Court of New Jersey, Chancery Division, Passaic County, Docket No. F-9199-02.

Robin London-Zeitz argued the cause for appellant (Zeitz & Stein, attorneys; Ms. London-Zeitz, on the brief).

John J. Scura, III argued the cause for respondent (Scura, Mealy, Scura & Stack, attorneys; Mr. Scura, of counsel; John General, on the brief).

PER CURIAM

In this appeal, we consider whether the Chancery judge mistakenly exercised her discretion in vacating a final judgment in this tax sale foreclosure action.

On June 29, 1999, MD Sass Municipal Finance Partners II, L.P. (MD Sass) purchased a tax certificate from the City of Paterson on property owned by defendant 61 Main Street, Inc. (defendant). Approximately three years later, MD Sass filed a complaint seeking foreclosure. Defendant was served with process on August 1, 2002 and default was entered on January 8, 2003. An order was entered on April 3, 2003 which set the redemption amount at $43,431.94; this order also declared May 23, 2003 as the last day of redemption.

On May 23, 2003, prior to the close of business, defendant filed, with the United States Bankruptcy Court for the District of New Jersey, a Chapter 11 petition which, by operation of law, stayed the foreclosure action. 11 U.S.C.A. 362. On June 16, 2004, MD Sass successfully moved for an order vacating the automatic stay "nunc pro tunc" to May 23, 2003. The order specifically permitted MD Sass, or its successors and assigns, to "constitute or resume and prosecute to conclusion . . . foreclosure [on the] tax sale certificate liens held by [MD Sass]" upon the property in question in this suit.

On June 28, 2004, MD Sass transferred ownership of the tax sale certificate to Fresh Fish Holdings, LLC (plaintiff), which, on July 7, 2004, moved for the entry of final judgment. Final judgment of foreclosure was entered on August 6, 2004.

Less than three weeks later, defendant moved, pursuant to R. 4:50-1, for an order vacating the final judgment. The Chancery judge found "disturbing" what she referred to in her October 28, 2004 oral decision as the vacating of the bankruptcy stay without notice to the defendant and the failure of the bankruptcy court to set a new final redemption date. As a result, the Chancery judge entered an order on October 28, 2004, which vacated the final judgment.

Plaintiff timely moved for reconsideration, asserting that the Chancery judge overlooked its request for counsel fees and costs as a condition for vacating the final judgment. The Chancery judge emphasized, in her oral decision of December 17, 2004, that the judgment was vacated "because it was void per Rule 4:50-1(d) and not because of excusable neglect or mistake," and, as a result, denied plaintiff's request for an award of fees and costs because "defendant should not have to pay attorney's fees and costs incurred in obtaining a void judgment." The Chancery judge, however, did determine that it was appropriate to reimburse plaintiff for having previously paid the cost of property insurance during the pendency of the action. An order was entered on December 21, 2004, which denied the motion for reconsideration but ordered that plaintiff was entitled to "recoup fees expended on property insurance from the defendant." Defendant redeemed the property and, on April 4, 2005, the action was dismissed.

Plaintiff appealed the orders of October 28, 2004, December 21, 2004 and April 4, 2005, arguing there was an inadequate basis for granting relief pursuant to R. 4:50 or N.J.S.A. 54:5-87, and that the granting relief from the final judgment should have been conditioned upon the payment of attorneys' fees and costs. We disagree and affirm.

A final judgment of foreclosure entered pursuant to the Tax Sale Law, N.J.S.A. 54:5-1 to -104.75, gives "full and complete relief . . . to bar the right of redemption, and to foreclose all prior or subsequent encumbrances," granting the successful party an estate in fee simple upon the recording of the judgment. N.J.S.A. 54:5-104.64. Because its chief purpose is to aid municipalities in the raising of revenues, Bron v. Weintraub, 42 N.J. 87, 91 (1964), the Legislature has declared that the Tax Sale Law "shall be liberally construed as remedial legislation to encourage the barring of the right of redemption by actions in the Superior Court to the end that marketable titles may thereby be secured," N.J.S.A. 54:5-85.

In furtherance of its intent to support tax titles, the Legislature imposed stricter limits on the vacating of a foreclosure judgment than permitted by R. 4:50. Town of Phillipsburg v. Block 1508, Lot 12, 380 N.J. Super. 159, 166 (App. Div. 2005). N.J.S.A. 54:5-87 declares that judgments entered pursuant to the Tax Sale Law "shall be final . . . and no application shall be entertained to reopen the judgment after three months from the date thereof, and then only upon the grounds of lack of jurisdiction or fraud in the conduct of the suit." N.J.S.A. 54:5-104.67 repeats this admonition.

In New Shrewsbury Bor. v. Block 115, Lot 4, 74 N.J. Super. 1, 9 (App. Div. 1962), we recognized that these statutes were "not carefully drawn," but should be interpreted to mean that "the three months' limitation applies to all grounds other than 'lack of jurisdiction or fraud,' by construing the word 'then' as meaning 'thereafter.'" See also Phillipsburg, supra, 380 N.J. Super. at 166 n.8; Lakewood Tp. v. Block 251, Parcel 34, 48 N.J. Super. 581, 586 (App. Div. 1958). Accordingly, a party aggrieved of a final judgment of foreclosure may seek its vacation for any of the reasons set forth in R. 4:50 within three months from the entry, N.J.S.A. 54:5-87, or recording, N.J.S.A. 54:5-104.67, of the judgment. "[T]hereafter" the judgment may be vacated only for reasons of "lack of jurisdiction or fraud in the conduct of the suit." N.J.S.A. 54:5-87; N.J.S.A. 54:5-104.67.

Defendant moved for relief from the final judgment seventeen days after its entry. In light of New Shrewsbury's interpretation of these statutes, defendant was not limited to the grounds of "lack of jurisdiction or fraud in the conduct of the suit" in seeking relief from the final judgment, but was entitled to urge any of the grounds contained in R. 4:50-1 that might be applicable. In seeking relief, defendant asserted that the value of the property was misrepresented to the bankruptcy court and that it was never provided a payoff amount in its moving papers either in the bankruptcy court or in the trial court. Specifically, defendant observed that the redemption amount was not set forth in the papers plaintiff served upon defendant in seeking final judgment, thus frustrating defendant's right to redeem. Moreover, defendant asserted that it was served only with a copy of the notice of motion and not the proposed judgment or any other supporting papers that may have revealed the amount needed to redeem -- an allegation that was not disputed in plaintiff's opposition to defendant's motion to vacate.

In granting the motion, the Chancery judge expressed a concern about the sufficiency of the notice given to defendant. We discern from the judge's comments that she may have based her decision, at least in part, on plaintiff's failure to serve defendant with all its moving papers in support of the entry of final judgment. We find this fact alone is sufficient to warrant the relief granted by the trial judge.

Plaintiff argues that it does not matter that it did not serve a complete set of its papers upon defendant because defendant had no right to any notice. We reject this interpretation of our rules. In seeking final judgment, plaintiff was obligated to comply with R. 4:64-1(b), which states that such a motion must be served on "all parties who have appeared in the action," including those defendants "whose answers have been stricken or rendered noncontesting." Plaintiff contends that defendant never appeared because it never filed an answer. That may be true, but defendant was entitled to notice of the motion regardless of whether it had ever "appeared" in the action because the rule requires that all "defaulting parties shall be noticed if application for final judgment is not made within six months of the entry of default." R. 4:64-1(b). Since the motion was filed more than six months after the entry of default, plaintiff was obligated to serve all parties who had appeared and all defaulting parties. Moreover, plaintiff apparently recognized this because it served a copy of its notice of motion on defendant. We, thus, conclude that defendant was a party entitled to receive notice of the application for a final judgment. And, since defendant was entitled to notice of the motion for the entry of final judgment, it necessarily follows that defendant was entitled to receive from plaintiff a complete set of its motion papers. See R. 1:6-3(a) ("If a motion is supported by affidavit or certification, the affidavit or certification shall be filed and served with the motion.").

As a result of plaintiff's failure to serve defendant with a complete set of its moving papers, the motion for the entry of final judgment was defective and the final judgment entered on the basis of that application was voidable. Since defendant expeditiously sought relief from the judgment, the Chancery judge acted well within her discretion in preserving defendant's right of redemption -- a favored equitable remedy. We find no abuse of that exercise of discretion and affirm the order of October 28, 2004 which vacated the final judgment.

 
Plaintiff also argues that the vacating of the final judgment should have been conditioned upon the payment of its attorneys' fees and costs. It is true that R. 4:50-1 authorizes the granting of relief from a judgment or order "upon such terms as are just." See also Regional Construction Corp. v. Ray, 364 N.J. Super. 534, 541-42 (App. Div. 2003); Davis v. DND/Fidoreo, Inc., 317 N.J. Super. 92, 101-02 (App. Div. 1998), certif. denied, 158 N.J. 686 (1999). However, as the Chancery judge correctly observed, the authority to enter an award of fees and costs should not be invoked in favor of a party in obtaining a voidable judgment and we find no principled reason to interfere with the judge's exercise of her discretion in that regard.

Affirmed.

N.J.S.A. 54:5-104.67 states in full: "No application shall be entertained to reopen such judgment after three months from the date of the recording thereof in the office of the county recording officer, and then only upon the grounds of lack of jurisdiction or fraud in the conduct of the action."

N.J.S.A. 54:5-87 and N.J.S.A. 54:5-104.67 are inconsistent in that the three month limitation period they refer to commences, in the former, from the entry of the judgment and, in the latter, from the recording of the judgment. Because the final judgment has the effect of foreclosing the equitable right of redemption -- a "favored right," Hardyston Nat'l Bank v. Tartamella, 56 N.J. 508, 513 (1970); Mercury Capital Corp. v. Freehold Office Park, Ltd., 363 N.J. Super. 235, 240 (Ch. Div. 2003) -- it is arguable that the latest of the two triggering dates contained in these statutes should govern the timeliness of a motion to vacate such a judgment. However, N.J.S.A. 54:5-85 declares that the Tax Sale Law should be liberally construed "to encourage the barring of the right of redemption," thus suggesting that the three month period should be narrowed and should commence, as indicated in N.J.S.A. 54:5-87, at an earlier point in time. Since defendant moved within the three month periods referred to in both statutes, we need not consider this perplexing question of statutory construction.

In its motion, defendant asserted that it had been served only with the cover letter of July 7, 2004 and the notice of motion for entry of final judgment, but not plaintiff's other pleadings. In opposing the motion, plaintiff stated that "the motion" was served on defendant but did not expressly refute defendant's assertion that only the notice of motion was served. Accordingly, we conclude that defendant was served only with the letter and notice of motion.

Even if the judge's decision should not be interpreted so expansively, we find this factual basis to be sufficient to support the judge's ultimate determination and we may affirm for that reason alone. See Isko v. Planning Bd. of Livingston, 51 N.J. 162, 175 (1968).

The Chancery judge mistakenly concluded that MD Sass failed to serve defendant with the motion to vacate the bankruptcy stay. Defendant has acknowledged that it was served with this motion and that this fact cannot legitimately form a basis for the vacation of the final judgment.

Although it never filed an answer, it is arguable that defendant "appeared" in the foreclosure action, albeit in an indirect way, by filing a bankruptcy petition which caused a stay in the foreclosure action and which brought plaintiff's claim within the jurisdiction of the bankruptcy court, where defendant did appear. We need not consider the parameters that define what it means to "appear" in such an action, since we conclude that R. 4:64-1(b) required plaintiff to serve defendant with its motion for the entry of final judgment even if defendant had never appeared.

We observe that counsel's letter enclosing the notice of motion, which was sent to all interested parties, mistakenly indicated that plaintiff had enclosed a copy of a "Notice of Motion for Entry of Default After Six Months." Although the notice of motion that was enclosed clearly indicated that plaintiff was seeking the entry of final judgment, further confusion may have been added by the inaccurate cover letter.

(continued)

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A-3991-04T5

March 30, 2006