Daily Development for Wednesday, September 1, 2004
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin Kansas City, Missouri dirt@umkc.edu
TAXATION; TAX SALES CERTIFICATES; NOTICE: Fundamental fairness requires that the
amount of diligence required to locate a missing property owner in a tax sale
foreclosure is related to the discrepancy between the amount of taxes owed and
the property's value; and, all co-owners of a property must be served.
M & D Associates v. Mandara, 366 N.J. Super. 341, 841 A.2d 441 (App. Div. 2004)
A company purchased three tax sale certificates for a property and then moved to
foreclose. A co-owner's seventeen-year-old daughter was served by a sheriff's
deputy at the address listed in the records of the local tax collector, the
owner's bank, and on the owner's IRS mortgage statement. Personal service was
also attempted, but was unsuccessful. The holder then contacted that particular
co-owner and requested that he submit a proper address for the other co-owner so
that the other co-owner could also be served for the foreclosure action. It
never received a response. Consequently, the holder attempted service on the
missing owner by publication, and a summons to the unserved owner appeared in a
local newspaper. Afterwards, the company filed an affidavit of inquiry to
demonstrate its diligent efforts in looking for the missing owner and in support
of the service by publication. In addition to the publication, the holder
contracted the local Voter Registration Board, consu lted the telephone book,
and reviewed the records of the tax collector. After the missing co-owner failed
to file an answer, the holder obtained a final judgment of foreclosure.
Almost three years after the foreclosure, the two co-owners filed a motion to
vacate the final judgment. The missing owner claimed that he had only recently
become aware of the foreclosure because he had been living at another address,
and that a search of the Division of Motor Vehicles records would have revealed
this information.
The two owners argued that exceptional circumstances and a lack of service of
process for the missing co-owner required dismissal of the foreclosure judgment.
Based on the certifications submitted, the Chancery Court denied the motion to
vacate, holding that the co-owners had failed to meet the “exceptional
circumstance” requirement under New Jersey law, which the judge considered the
only basis for relief. It also found that service on the owner's daughter was
proper, but did not make findings as to service by publication on the missing
co-owner. It held that both owners knew about the case in time and should have
moved immediately to vacate the judgment
On appeal, the salient issue was whether the inquiry made by the foreclosing
company prior to the publication was sufficient to warrant its method of
service. The missing co-owner was entitled to a diligent inquiry on the part of
the foreclosing company before substitute service could be made. Without any
record of findings on the record concerning diligent inquiry, the Appellate
Division held that the lower court mistakenly exercised its discretion in
disposing of the matter. It noted that there was approximately $4,500 due on the
tax certificates, while the value of the property was from $100,000 to $200,000.
“Based on the principles of fundamental fairness, where there is both
substituted service and a great disparity between the amount due on tax
certificates and the value of the property subject to foreclosure, careful
scrutiny of the affidavit of inquiry requires a lower court to demand more than
cursory inquiries into the matter.”
The Court also believed that the missing co-owner's address could have been
found in the state's motor vehicle records.
Service on the known co-owner was proper, however. His daughter was over the age
of fourteen and was a "competent member of the household." Thus, the Court
vacated the order of the lower court only for the unserved co-owner. One owner
alone, though, has the power to unilaterally prevent an entire transfer of
title. Therefore, since one co-owner was not given adequate notice, the entire
judgment was vacated.
Comment: Nothing is more fundamental in our system of justice than the
requirement that government undertake reasonable attempts to notify those whose
property might taken by its actions prior to the taking occurring. Nevertheless,
not all state courts have been as punctilious in protecting tax sale victims as
New Jersey. In Mosssafa v. Kleiman, 2003 WL 443797 (N.Y. 2/25/03) the New York
Court of Appeals upheld a tax foreclosure where mailed notice was returned and
county did not check "ordinary sources" for alternative addresses.
In Zaccaro v. Cahill, 800 N.E.2s 1096 (N.Y. 2003) (the DIRT DD for 4/27/04) the
court found that there had been adequate notice to an owner that his property's
had been included on map of regulated wetlands when notice had been provided by
publication and mailing to owners of affected land, as shown on most recent
property tax rolls, even though error in tax rolls resulted in affected owner
not receiving actual notice. Notice was adequate even though the court
acknowledged that tax rolls are not regularly updated and rife with errors. The
court upheld an $8000 fine for violation of the wetlands restrictions, which
violations apparently occurred without any actual knowledge of the restrictions,
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