On Appeal From Superior Court of New Jersey, Chancery Division, Passaic County.
Approved for Publication March 28, 1996.
Before Judges Stern, Wallace, and Newman. The opinion of the court was delivered by Newman, J.A.D.
The opinion of the court was delivered by: Newman
The opinion of the court was delivered by NEWMAN, J.A.D.
Defendants appeal from the Chancery Division's December 13, 1994 order denying their motion to vacate the judgment of foreclosure entered in favor of plaintiff Rogan Equities, Inc. that confirmed title in respondent Peter Cocoziello (purchaser at the foreclosure sale). We affirm.
The facts are as follows. Celeste Santini (Santini), her daughter Celeste M. Santini-Snipes (Santini-Snipes), and Santini-Snipes' husband Paul Snipes owned property in Hopatcong, New Jersey (the Hopatcong property) upon which a first mortgage was held by the Irving Savings & Loan Association (Irving S & L).
On November 7, 1985, Rogan Equities loaned $305,000 to Selections of Celeste, Wayne, Inc. (Selections of Celeste), a New Jersey corporation owned by Santini-Snipes. As security for the loan, plaintiff received a second mortgage on the Hopatcong property. As further security for the loan, plaintiff was given a first mortgage on two tracts of property in Totowa, New Jersey (the Totowa properties) owned exclusively by Santini.
In 1987, Irving S & L commenced a foreclosure action on the Hopatcong property. In December 1988, plaintiff purchased the Hopatcong property at the foreclosure sale by paying to Irving S & L $95,000, the amount owed to Irving S & L by Santini, Santini-Snipes, and Paul Snipes. According to defendants, plaintiff was able to pay only $95,000 because any other bidder would have had to assume the second mortgage to plaintiff and so bid at least $400,000 ($95,000 plus $305,000). Defendants maintain that the property was worth about $525,000 at the time and that therefore the obligation to plaintiff (originally $305,000) was more than satisfied by the $430,000 difference between $95,000 and $525,000. Plaintiff claims that after purchasing the Hopatcong property for $95,000, it spent an additional. $193,000 on the property before selling it for $233,000, and therefore Selections of Celeste's obligation to plaintiff was not extinguished. The court did not consider the obligation to plaintiff to be extinguished, but credited $23,000 against the debt.
On May 1, 1989, plaintiff, asserting that Selections of Celeste had defaulted on its loan, instituted the present action to foreclose on the Totowa properties, naming as defendants Santini, then the sole owner of the properties, and her son Thomas Santini (Thomas), who was a tenant of one of the Totowa properties. In her answer, Santini pled, among other things, that plaintiff had obtained full satisfaction of Selections of Celeste's debt by purchasing the Hopatcong property for $95,000 at a time when it was valued at approximately $500,000. On November 30, 1990, Chancery Judge Amos Saunders ordered that Santini's answer be stricken, that a default be entered as though no answer had been filed, and that the matter be referred to the Superior Court's Foreclosure Unit for entry of final judgment. Thomas was not mentioned in the order entered, apparently because he was not the owner of the properties.
On March 12, 1991, before final judgment of foreclosure could be entered, Santini died. By her will, Santini devised 50% of all her property to her daughter, Santini-Snipes, and 50% in trust for the benefit of her son Thomas during his lifetime and then upon his death to "the child or children of [Thomas] then living". Thus, Santini-Snipes became 50% owner of the Totowa properties while the Trust became owner of the other 50%. Santini-Snipes was named as the trustee of the Trust with no apparent restriction on her ability to sell the trust property.
On November 22, 1991, because final judgment had not yet been entered and a final judgment cannot be entered against a decedent, see R. 4:34-1(b) and R. 4:47, plaintiff filed an amendment to the foreclosure complaint (first amendment to the complaint) adding "Trust for Thomas A. Santini" as a defendant. Plaintiff did not also add Santini-Snipes as a defendant because she had filed for bankruptcy in federal court, automatically staying all proceedings against her outside the bankruptcy proceeding. 11 U.S.C.A. § 362. The amendment also did not add the trust remaindermen, Raymond Santini, Lisa Santini Fox, and Dana Santini (Thomas's children), as defendants. On January 29, 1992, plaintiff served a summons, the complaint, and the first amendment to the complaint on Santini-Snipes in her capacity as trustee of the Trust. The trust remaindermen were not served.
In response to the complaint and first amendment to the complaint, Santini-Snipes, although not yet a named defendant, retained the services of the law firm of Cohn & Cohn to file an answer. On February 14, 1992, Cohn & Cohn filed an answer to the first amendment to the complaint which purported to be on behalf of defendants Celeste Santini, Thomas Santini, and the Trust, but not mentioning Celeste Santini-Snipes. In a certification accompanying the answer pursuant to R. 4:5-1(b)(2), Walter Cohn of Cohn & Cohn certified that
This party knows at this time of no other parties who should be joined in this action. ... If this party learns at a later date of any other party who should be joined in this action, this party shall file with the court and serve upon all counsel appearing in this action an amended certification so stating.
The certification also stated that "there is also a bankruptcy proceeding pending filed by defendants," referring to Santini-Snipes' bankruptcy proceeding. Walter Cohn later testified at a hearing before Judge Saunders that he filed the answer on behalf of "all the defendants," who he thought were Santini-Snipes individually, the Trust, and Thomas. Mr. Cohn thought that the "Celeste Santini" named in the caption was Celeste Santini-Snipes, when in reality it referred to her deceased mother. He testified that Santini-Snipes told him that she was the person named in the caption.
On March 16, 1992, a federal bankruptcy court vacated the automatic stay of proceedings against Santini-Snipes, but only up to entry of judgment in the foreclosure action. On April 2, 1992, plaintiff filed a second amendment to the complaint in the foreclosure action, adding Santini-Snipes as a defendant. Plaintiff also filed a motion to strike the previously filed answer and defenses and for summary judgment against defendants. Attached to the notice of motion served on Cohn & Cohn was a copy of the second amendment to the complaint. Plaintiff did not serve the second amended complaint directly on Santini-Snipes. Plaintiff, through its attorney at the time, Arnold Bornstein, relied upon the answer to the first amendment and Walter Cohn's certification in deciding not to serve the second amendment on Santini-Snipes. Mr. Bornstein read the answer's reference in its first paragraph to "Celeste Santini" as one of the defendants on whose behalf Cohn & Cohn were filing the answer as referring to Santini-Snipes because Cohn & Cohn purported to represent "Celeste Santini" and could not have represented the mother because she was deceased and had been represented by another attorney. Mr. Bornstein also relied upon Walter Cohn's certification, which declared that no other parties needed to be joined and that there was a bankruptcy proceeding pending filed by defendants, which could only have been referring to Santini-Snipes. Mr. Bornstein thus apparently believed that the answer to the first amendment to the complaint was filed partly on Santini-Snipes' behalf and constituted an appearance under R. 4:4-6, making service on her unnecessary.
On May 1, 1992, the Chancery Judge granted plaintiff's motion, ordering that defendants' answer be stricken, that default be entered as though no answer were filed, that judgment be entered against defendants, and that the matter be referred to the Foreclosure Unit for entry of final judgment.
On June 10, 1992, final judgment was entered. The final judgment stated that
it appearing that the defendants, Celeste Santini (now k/a Celeste Snipes), Thomas Santini and Trust for Thomas A. Santini under Will of Celeste Santini, Deceased, through their attorneys, filed a contesting Answer to the Complaint and Amended Complaint,...it is further Ordered and AdJudged that the plaintiff duly recover against defendants, Celeste Santini (now k/a Celeste Snipes), Thomas Santini and Trust for Thomas A. Santini...the possession of the [Totowa premises]...."
On January 26, 1994, the federal bankruptcy court vacated the automatic stay of proceedings against Santini-Snipes to allow the foreclosure action to proceed past the final judgment stage.
Plaintiff served notice of the sheriff's sale of the Totowa properties on Santini-Snipes, the trustee, but not on the trust remaindermen.
On May 10, 1994, respondent Peter Cocoziello (Cocoziello) purchased the Totowa properties at the sheriff's sale. On July 7, 1994, a writ of possession was entered ...