GARDEN STATE INVESTMENT v. JAMES ZALESKI (2010)

This is an appeal involving plaintiff, Garden State Investment, an owner of a Tax Sale Certificate, in a foreclosure action.   Defendant, James A. Zaleski, contested the foreclosure action and the matter was transferred from the Foreclosure Unit to the Superior Court, Chancery Division, in Gloucester County.   Following argument on a summary judgment motion, the court deemed the contesting answer non-contesting, returned the matter to the Foreclosure Unit as an uncontested foreclosure, and severed the third-party complaint defendant brought against third-party defendants, Township of Mantua and the State of New Jersey, which was then transferred to the Law Division.   Defendant appeals from that order.   We affirm.

Viewing the facts in the light most favorable to defendant, they can be summarized as follows.   Defendant failed to pay the taxes for the year 2005.   Isadore H. May, Esq., plaintiff's agent, certified that, “[o]n December 6, 2006, [he] personally attended and purchased Tax Sale Certificate # 05-00037, at a public tax sale in the Township of Mantua.  “Defendant's taxes, interest [,] and cost of sale ․ [were] offered to the public” and purchased in the amount of $4,596.39, according to May. Plaintiff was the successful bidder.   May also certified that “[t]he municipal lien was on [the] property located at Block 246, Lot 6, on the tax map” of Mantua Township.   The purchaser was an investor who acquires tax liens throughout the state.   The Tax Sale Certificate was “recorded by the Gloucester County Clerk on December 21, 2006,” as May certified.

Plaintiff, in May's certification, alleged that “[a]ll subsequent taxes have been paid.”   May certified that the redemption calculation prepared by the Tax Collector's office in Mantua Township was $31,028.20, as of December 31, 2009.   May's certification also stated that plaintiff instituted a tax lien foreclosure action more than twenty-four months after the purchase of the lien by filing this complaint on May 14, 2009, which was served on defendant on June 30, 2009.   Though it began as an uncontested foreclosure, the matter was transferred on October 7, 2009, after defendant filed a contesting answer on or about July 31, 2009.

In challenging the Tax Sale Certificate, defendant asserted that the sale was invalid and that the tax itself was invalid.   Relying on Rule 4:64-6(a), defendant claimed that he had set up the aforementioned defenses, which then should have been tried in the action.   Defendant asserted there was a genuine issue of fraud relating to the issuance and procurement of the Tax Sale Certificate, referring to the fact that the check used to pay for the delinquent taxes, interest, and costs was dated two days before the public auction and that it was not in the form of a certified check or a cashier's check as purportedly required by the notice to bidders.

In rejecting the argument, the trial court ruled that, with regard to plaintiff, it did not matter how the Township was paid so long as it was paid, which was evidenced by the issuance of the Tax Sale Certificate itself.

With respect to the claim that the property was unlawfully assessed and amounted to an inverse condemnation by the defendant Township, and other conduct by defendant, the State of New Jersey, the court ruled that those were issues to be tried before the Law Division, severing the action.   The issues raised would not affect the issuance of the Tax Sale Certificate, but could be addressed and, if successful, defendant could be awarded money damages for diminution in value of the property as a result of the actions by the Township and/or the State.

On appeal, defendant raises the following arguments for our consideration:

ARGUMENT 1

The ‘contesting answer’ is clearly a ‘contesting answer’, which was disregarded by Judge Rafferty in his ruling, by misapplying Rule 4:64-5, instead of applying the relevant Rule 4:64-6(a) which was pled, and which constitutes error to Reverse the Subject Order of this Appeal.

ARGUMENT 2

Appellant's position in the Motion upon which the Order under Appeal herein is presented, was prejudiced by Judge Rafferty's allowance of Respondent's Motion of December 20, 2009 to be heard, without consideration of Appellant's prior Motion to Compel Discovery from Respondent dated December 14, 2009, and Appellant's Motion to Compel discovery from Third-Party Defendant, Mantua Township, dated January 20, 2010, upon prior notification.

ARGUMENT 3

There is a genuine issue of Fraud, as a matter of controversy, related to the issue and procurement of the subject Property Tax Sale Certificate # 05-00037, by and between, Respondent, Garden State Investment, and Third-Party Defendant, The Township of Mantua, along with legitimate inferences therein to require submission of the issue to the trier of Fact, which was disregarded by the lower Court (Rule 4:46-2, Rule [4]:64-6(a)).

ARGUMENT 4

The Property Taxes upon which the subject Property Tax Sale Certificate # 05-00037 is based, were assessed unlawfully through a ‘Constructive’ and/or ‘Equitable’ Fraud by Third-Party Defendants, the Township of Mantua and/or The State of New Jersey therefore Certificate # 05-00037 is also invalid, as a genuine and germane issue of controversy as to material fact, in the subject action.   Rule 4:46-2, Rule 4:64-6(a)).

ARGUMENT 5

There is significant case law that demonstrates that the invalidity of the subject property taxes is directly germane to the validity or invalidity of the subject Certificate # 05-00037, and thus germane to Appellant's position in this action which was disregarded by the lower Court.

ARGUMENT 6

There are public policy issues involved in this action, wherein the subject Order itself, perpetrates an ongoing Fraud against the general public, and should therefore be reversed.

We need not address the issues involving claims against the Township and the State of New Jersey presented in this action, which were severed and referred to the Law Division.   Additionally, the discovery which defendant sought was held in- tact and referred to the Law Division for determination, as well.

In connection with the claim as to the invalidity of the sale of the Tax Certificate, defendant was precluded by N.J.S.A.

54:5-52 from challenging the certificate's validity.   That provision provides:

The certificate of sale shall be presumptive evidence in all courts in all proceedings by and against the purchaser, his representatives, heirs, and assigns, of the truth of the statements therein, of the title of the purchaser to the land therein described, and the regularity and validity of all proceedings had in reference to the sale.   After two years from the record of the certificate of sale, no evidence shall be admitted in any court to rebut the presumption, unless the holder thereof shall have procured it by fraud, or had previous knowledge that it was fraudulently made or procured.

The provision makes it clear that after two years no evidence shall be permitted to rebut the presumption that the Certificate was validly issued.   Defendant's attempt to overcome the statutory presumption was feeble at best.   The fact that the check was dated two days prior to the public auction does not translate into fraud.   This is especially so in view of the fact that plaintiff's representative certified that he personally attended the auction and was the successful bidder.   As the trial court noted, it would not matter how the money was actually paid to the Township.   Obviously, the Township would not have issued the Certificate unless payment had been made.   There is no showing that any fraud took place to rebut the presumption contained in N.J.S.A. 54:5-52, which was designed, as here, “to protect the purchaser of [the] Tax Sale Certificate.”   See Barry L. Kahn Defined Benefit Pension Plan v. Twp. of Moorestown, 243 N.J.Super. 328, 341 (Ch. Div.1990).

Parenthetically, it should be noted that defendant did not challenge the validity of the Tax Sale Certificate when it was initially issued in 2006 or within two years of its issuance.   By waiting more than the two years, defendant was obliged to overcome this statutory presumption and failed to do so.

We see no basis to disturb the decision rendered by the trial court in finding the answer of defendant as non-contesting and returning the matter to the Foreclosure Unit for further processing to foreclosure, nor in severing the third-party action.

Affirmed.

PER CURIAM