Opinion
DOCKET NO. A-3747-13T4
10-29-2015
STONEFIELD INVESTMENT FUND I, LLC, Plaintiff-Appellant, v. JRSM REAL ESTATE HOLDINGS, LLC, Defendant-Respondent.
Robert A. Del Vecchio, LLC, attorneys for appellant (Susan B. Fagan-Rodriguez, on the brief). Hoagland, Longo, Moran, Dunst & Doukas, LLP, attorneys for respondent (Thomas J. Walsh, Jr., on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Koblitz and Gilson. On appeal from the Superior Court of New Jersey, Chancery Division, Middlesex County, Docket No. F-9362-13. Robert A. Del Vecchio, LLC, attorneys for appellant (Susan B. Fagan-Rodriguez, on the brief). Hoagland, Longo, Moran, Dunst & Doukas, LLP, attorneys for respondent (Thomas J. Walsh, Jr., on the brief). PER CURIAM
Plaintiff Stonefield Investment Fund I, LLC ("Stonefield") appeals an order vacating a default judgment of a tax sale foreclosure against defendant JRSM Real Estate Holdings, LLC ("JRSM"). The chancery court did not abuse its discretion in vacating the default under the facts of this case and, thus, we affirm.
I.
In 2005, JRSM purchased property located in Sayreville (the "JRSM Property"). To finance that purchase, JRSM borrowed $600,000 from Columbia Bank. The loan was secured by a note, a mortgage, and an assignment of leases and rents.
JRSM is owned by four individual members: Jennifer O'Neill, Ryan O'Neill, Shannon Lalley and Michael Lalley. The O'Neills and Lalleys each own businesses. Both businesses also executed promissory notes to Columbia Bank for the loan and pledged certain assets, including a liquor license, as collateral. Each of the four individual members of JRSM also signed guarantees to Columbia Bank and pledged as collateral their homes.
In 2010, JRSM failed to pay the real estate taxes due on the JRSM Property to the Borough of Sayreville. Thereafter, Sayreville sold and Stonefield purchased a tax sale certificate for the JRSM Property.
In January 2013, Stonefield sent JRSM a notice requesting redemption and advising that if redemption was not made a foreclosure action would be filed. The JRSM Property was not redeemed, and on March 13, 2013, Stonefield filed a foreclosure action. In April 2013, JRSM's attorney had communications with the attorney for Stonefield to try to work out a redemption. On May 17, 2013, Stonefield filed a motion for entry of a default and an order setting the amount, time, and place for redemption. The court established July 11, 2013, as the redemption deadline. The JRSM Property was not redeemed and a final judgment of default was entered on August 2, 2013.
Over the next several months, attorneys for JRSM communicated with the attorney for Stonefield and attempted to negotiate a redemption. The issue of Columbia Bank's mortgage came up in those discussions. Stonefield had conducted a title search and found no mortgage. Accordingly, Stonefield had not served or noticed Columbia Bank of its tax sale foreclosure action. JRSM believed that there was a valid mortgage and communicated that position to Stonefield. Ultimately, a resolution was not reached.
On January 29, 2014, JRSM filed a motion to vacate the default judgment. Columbia Bank also filed a letter brief in support of JRSM's motion to vacate the default judgment. The Bank advised the chancery court that the Bank was never given notice of the tax sale foreclosure action, that without vacation of the default judgment, JRSM and its individual members could lose their homes and livelihood, and that the Bank was still willing to work with JRSM to redeem the tax sale certificate. Stonefield filed opposition to the motion to vacate.
On February 28, 2014, the chancery judge, Judge Ann G. McCormick, heard oral arguments and granted the motion to vacate the default judgment. Judge McCormick also ordered Stonefield to assist JRSM to determine the redemption amount. In support of that ruling, Judge McCormick set forth, on the record, a careful and well-reasoned analysis of the facts and law. Judge McCormick focused on the equities of the situation, finding that (1) JRSM and its individual members could suffer "devastating" financial consequences if the judgment was not vacated; (2) JRSM had established excusable neglect and JRSM's attorneys had been in negotiations with Stonefield's attorney both before and after the entry of the final judgment; and (3) JRSM was prepared to make the redemption, which would give Stonefield a reasonable return on its investment. In considering the interplay between N.J.S.A. 54:5-87 and Rule 4:50-1, Judge McCormick reasoned that under the facts and equities of this case, the rule controlled. Judge McCormick expressly stated that she was not ruling on whether Columbia Bank had a properly recorded mortgage or whether the lack of service on the Bank would void the judgment.
II.
On appeal, Stonefield argues that the judge abused her discretion in granting the motion to vacate the final judgment. Specifically, Stonefield makes a series of arguments contending: (1) JRSM lacks standing to argue a claim on behalf of Columbia Bank; (2) JRSM cannot redeem a tax sale certificate after the entry of a final judgment; (3) JRSM did not demonstrate sufficient grounds to warrant relief under N.J.S.A. 54:5-87 or Rule 4:50-1; (4) JRSM was given adequate notice and an opportunity to cure before the default judgment was entered; (5) Columbia Bank is bound by the final judgment; and (6) the judge's ruling was inconsistent with the public policy of the tax foreclosure statute.
The decision on whether to grant a motion to vacate a default judgment is "left to the sound discretion of the trial court, and will not be disturbed absent an abuse of discretion." Mancini v. E.D.S. ex rel. N.J. Auto. Full Ins. Underwriting Ass'n, 132 N.J. 330, 334 (1993); see also U.S. Bank Nat'l Ass'n v. Guillaume, 209 N.J. 449, 467 (2012) (stating that a decision on a motion to vacate default judgment "should not be reversed unless it results in a clear abuse of discretion"). A motion to vacate a default judgment involves balancing a "strong interest[] 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." Manning Eng'g Inc. v. Hudson Cty. Park Comm'n, 74 N.J. 113, 120 (1977). Accordingly, the decision whether to grant or deny a motion to vacate a default judgment must be guided by equitable considerations. Prof'l Stone, Stucco & Siding Applicators, Inc. v. Carter, 409 N.J. Super. 64, 68 (App. Div. 2009) (noting that "Rule 4:50 is instinct with equitable considerations").
Given our deferential standard of review, we discern no grounds to disturb Judge McCormick's balancing of the equities and her exercise of discretion in vacating the judgment. We do not address the arguments concerning JRSM's lack of standing to argue a claim on behalf of Columbia Bank or whether Columbia Bank would have been bound by the final judgment. Judge McCormick did not reach those issues and they were not the basis for her decision to vacate the default judgment.
Stonefield's principal argument on appeal is that JRSM could not vacate the judgment because it filed its motion more than three months after the entry of the default judgment. In that regard, Stonefield relies on N.J.S.A. 54:5-87, which provides that "no application shall be entertained to reopen the judgment after three months from the date thereof" except for grounds of lack of jurisdiction or fraud in the conduct of the suit. Ibid. Rule 4:50-1 governs a motion for relief from a tax sale foreclosure judgment, notwithstanding N.J.S.A. 54:5-87. See M & D Assocs. v. Mandara, 366 N.J. Super. 341, 351 (App. Div.) (holding that Rule 4:50-1 is paramount), certif. denied, 180 N.J. 151 (2004); see also Town of Phillipsburg v. Block 1508, Lot 12, 380 N.J. Super. 159, 166 (App. Div. 2005) (interpreting the three-month deadline). The guiding principles are that the statutory limitation, and the underlying policy to grant stability of foreclosure judgment, informs a court's exercise of its discretion under the rule. Phillipsburg, supra, 308 N.J. Super. at 166-67; Bergen-Eastern Corp. v. Koss, 178 N.J. Super. 42 (App. Div.), certif. granted, 87 N.J. 351, and appeal dismissed, 88 N.J. 499 (1981).
In this case, Judge McCormick carefully considered the interplay between N.J.S.A. 54:5-87 and Rule 4:50-1, and she found that there were grounds warranting relief from the judgment. Given the facts and equities of this case, we see no abuse of discretion.
Finally, we are not persuaded by Stonefield's argument that Judge McCormick's ruling was inconsistent with the public policy underlying the tax foreclosure statute. As our Supreme Court has recently explained, the Tax Sale Law, N.J.S.A. 54:5-1 to -137, serves "as a framework to facilitate the collection of property taxes." In re Princeton Office Park LP v. Plymouth Park Tax Servs., LLC, 218 N.J. 52, 61 (2014) (quoting Varsolona v. Breen Capital Servs. Corp., 180 N.J. 605, 620 (2004)). "Although the primary purpose of the Tax Sale Law is to encourage the purchase of tax certificates, another important purpose is to give the property owner the opportunity to redeem the certificate and reclaim his [or her] land." Simon v. Cronecker, 189 N.J. 304, 319 (2007). JRSM is prepared and willing to redeem the tax certificate. Thus, Sayreville will receive its taxes, JRSM will receive its property back, and Stonefield will receive a very reasonable return on its investment because the redemption will include an interest payment.
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION