On appeal from Superior Court of New Jersey, Chancery Division, Hudson County.
King, Gaulkin and D'Annunzio. The opinion of the court was delivered by D'Annunzio, J.A.D.
In this suit to foreclose a mortgage the plaintiff relies on Mennonite Board of Missions v. Adams, 462 U.S. 791, 103 S. Ct. 2706, 77 L. Ed. 2d 180 (1983), to avoid the effect of a judgment entered pursuant to the In Rem Tax Foreclosure Act (1948) (the Act), N.J.S.A. 54:5-104.29 et seq.
The mortgage was executed in 1943. It encumbered property in Jersey City consisting of a 26-unit apartment house. Subsequently, title to the property was conveyed to plaintiff's friend, Louis Wahl. In April 1963, less than one month before the final payment on the mortgage was due, the mortgage was assigned by Phoenix Mutual Life Insurance Company to Amber Realty, a corporation owned by plaintiff. Shortly thereafter, the mortgage was extended by an agreement between Louis Wahl and Amber Realty Corporation. In 1969, the mortgage
was assigned to plaintiff individually. In 1971 when Louis Wahl died, the principal amount due was $14,400. Subsequent to Louis' death, his son, Marvin Wahl, and plaintiff entered into an agreement that plaintiff would accept interest payments only until Louis Wahl's estate was settled. The last interest payment was made on January 12, 1978. Thereafter, though the mortgage was in default, plaintiff took no action to enforce his rights under it.
In 1978, taxes on the property were in arrears and the City of Jersey City purchased a tax sale certificate covering the property. In January 1980, Jersey City commenced foreclosure under the Act and final judgment of foreclosure under the Act was entered on April 22, 1980. Plaintiff did not receive actual notice of the in rem foreclosure proceedings. Notice to the plaintiff was effected by publication and posting pursuant to N.J.S.A. 54:5-104.42 and R. 4:64-7.
On August 25, 1982, the City of Jersey City conveyed the property to Audubon Park Associates. By deed of even date Audubon Park Associates conveyed the property to Audubon Development Corporation. Audubon acquired the property to develop it and other adjacent properties into 169 low income subsidized rental units under a federal housing program.
Plaintiff testified that in "early 1983" he drove past the property and noticed work being performed on it in the nature of demolition and renovation. He ordered a title search which he received in April 1983. The search revealed that the lien of his mortgage had been cut off by the tax foreclosure judgment. Plaintiff accepted the fact that his mortgage had been extinguished and gave the matter no further thought until August 1984 when a friend of his, a lawyer, brought the Mennonite decision to plaintiff's attention.*fn1 Plaintiff is also a lawyer. Mennonite held that the due process clause of the Fourteenth Amendment requires that actual notice of a tax foreclosure be
given to a mortgagee whose mortgage is a matter of public record and whose identity and address are reasonably ascertainable.
Although under Mennonite, plaintiff's mortgage survived the tax foreclosure judgment, plaintiff failed to assert any rights under his mortgage or under the Mennonite decision until October 1984, approximately 15 months after Mennonite had been decided and 18 months after he read the title search. At that time he wrote to Audubon, informing it of his claim under his mortgage for the principal sum of $14,400 "plus interest from January 12, 1978, in the sum of $111.53 compounded monthly." Plaintiff's letter declared the mortgage to be in default and warned Audubon that unless the principal and interest were paid by November 1, 1984, that he would proceed to enforce the mortgage. Audubon rejected plaintiff's claim. On June 6, 1986, approximately two years after learning of the Mennonite decision and almost two years after his demand letter to Audubon, plaintiff commenced this foreclosure action.
Plaintiff and Audubon moved for summary judgment. The motions were denied and the matter proceeded to trial on a stipulation of facts and the testimony of plaintiff and of John Skelly, general partner of Audubon. In a letter opinion, the trial judge ruled that the Mennonite decision was to be given prospective effect only and, in the alternative, that plaintiff "did not act with reasonable diligence and has failed to comply with the conditions precedent of N.J.S.A. 54:5-104.67 and R. 4:50-2." He also ruled that "setting aside the foreclosure judgment would place an inequitable and disproportionate hardship on defendant Audubon for Last's failure to move against the foreclosure judgment in a more timely fashion or 'within a ...