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Simon v. Deptford Township

March 14, 1994


Judges Shebell, Long and Landau.

The opinion of the court was delivered by: Long, J.A.D.

Argued December 15, 1993

By our leave, plaintiffs, Betty Simon, Jake Simon, Marsha Zell, U.D.T., Richard Simon, Grantor, Assignor and J & M Land Company, Assignee, appeal from the trial judge's refusal to rescind their purchase of a tax sale certificate covering a piece of property in Deptford Township known as block 1.2, lot 1. Plaintiffs contend that they discovered after the purchase that the property had previously been used as a landfill, and that a permit for discharge of pollutants had been issued by the Department of Environmental Protection (DEP) to the prior owners. Thus, they claim entitlement to rescission based upon mutual mistake and/or fraud.


The case arose in September 1987 when Deptford Township (Township) issued a public notice for the tax sale of 270 properties. Prior to the sale, plaintiffs' agent, Herman Zell, made a curbside inspection of the property which was owned by Bell Harbor Corp. However, plaintiffs made no inquiry prior to the date of the sale concerning the environmental condition of the property.

On October 14, 1987, plaintiffs purchased Tax Sale Certificate No. 4867-87, covering block 1.2, lot 1 for $6,543.06. Plaintiffs were represented at the sale by Zell. At the sale, Zell asked the Township's tax collector, Joyce Michaels, if there were any environmental problems with any of the properties; according to Zell's deposition, Michaels responded that she did not know. In a subsequent certification, Zell stated that Michaels responded that she was "not aware of any problems." In her deposition, Michaels agreed that she was not aware of any environmental problem with any of the properties that she had put up for tax sale. According to Michaels, it is not her practice to conduct an investigation into the status of any property upon which a tax lien is being sold, other than to note that the property owner is delinquent in the payment of taxes.

On April 27, 1988, the Simons, Zell and U.D.T. assigned the tax sale certificate to plaintiff, J & M Land Company, a corporation which has purchased approximately 800 certificates over a ten-year period, and in which certain plaintiffs are shareholders and/or directors. Taxes on the property were paid for the 1987, 1988 and 1989 tax years, and for the first quarter of 1990.

Through their own investigation, plaintiffs first learned of environmental problems on the property in September 1990. Apparently the property had at one time been utilized as a landfill. Plaintiffs also discovered that in 1985, the DEP had issued a groundwater discharge permit to Bell Harbor. Notice of this was apparently sent by the DEP to the Township mayor in 1985 via certified mail.

On June 20, 1991, plaintiffs filed a complaint in lieu of prerogative writs seeking nullification of the tax sale. The Township answered and the first two counts of plaintiffs' complaint which sought relief only against the Township were bifurcated from the counts against the record owners. Cross- motions for summary judgment were filed. The trial judge ruled in favor of the Township. In so doing, he concluded that:

the rule of caveat emptor applies to the sale by municipalities of tax title liens. The purchaser is often a speculator, seeking a high return investment (18%) or a potentially substantial capital profit. It is a venture which carries some risks. This was the case here. The prospective purchaser is free to conduct whatever searches, inquiry and investigation he deems appropriate before entering into the transaction. No misrepresentation was made by the tax collector of the Township of Deptford. If Plaintiffs relied upon her alleged statement that she was not aware of any environmental problems, such reliance was not justifiable. Therefore, Plaintiffs' misrepresentation claim must fail.

We granted plaintiffs' motion for leave to appeal.

On appeal, plaintiffs argue that the tax sale should be rescinded on the grounds of mutual mistake because neither the tax official nor the purchasers were aware of environmental problems on the property. Alternatively, they argue that the Township's knowledge of the environmental status of the property should be imputed to the tax collector, thus warranting denial of summary judgment on the issue of fraud.

The Township counters that the grant of summary judgment was proper because the doctrine of caveat emptor, not mutual mistake, is applicable, and because the record fails to disclose an issue of material fact with respect to whether the Township committed fraud. The Township also argues that plaintiffs are estopped from asserting any defect with respect to the ...

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