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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