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UNITED STATES v. 1993 BENTLEY COUPE

November 26, 1997

UNITED STATES OF AMERICA, Plaintiff,
v.
1993 BENTLEY COUPE, et al., Defendants.



The opinion of the court was delivered by: WOLIN

 WOLIN, District Judge

 Once again, the perils and pitfalls of foreclosure proceedings have spun a large and intricate web. The property that is at the center of the web is 78 Fox Hedge Road. The United States of America ("United States") and Manchester Fund, Ltd. ("Manchester") spun the web independently, and now they are stuck in it as they pursue the prize at the center. The United States began the web in 1993 when it filed a Complaint in this Court for foreclosure on 78 Fox Hedge Road. The web became large and intricate when the United States misindexed its lis pendens. Manchester enlarged and spun over the United States' web in 1994 when it purchased the tax lien on 78 Fox Hedge Road from the Tax Collector of Saddle River. During the next three years, the path to the center of the web became more distant and more difficult to find as the United States and Manchester proceeded, or failed to proceed, in their respective actions. Eventually, a Superior Court in New Jersey ruled that Manchester could foreclose on 78 Fox Hedge Road because the original owners had failed to redeem the property.

 The United States now moves this Court to enter an order forfeiting the property to it because it was first in time. Manchester opposes the United States' motion, argues that it is an innocent owner, and moves for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. After picking away the superfluous strands of the web, the Court finds that the United States cannot complete the journey to the center of the web because of the impenetrable impediments in its path. On the other hand, the Court concludes that Manchester has a direct path to the center of the web. Thus, the Court finds in favor of Manchester. The Court has decided this motion without oral argument pursuant to Rule 78 of the Federal Rules of Civil Procedure.

 BACKGROUND1

 On March 25, 1993, the United States filed a Verified Complaint in this Court for civil forfeiture of Victor Matos Peralta's and Gloria Reynoso's ("defendants") personal and real property. Included in the in rem forfeiture proceeding was 78 Fox Hedge Road, Saddle River, New Jersey, the property in dispute in this case. On March 30, 1993, the United States filed an Amended Complaint. Essentially, the United States' Complaint alleged that defendants had purchased the properties with the proceeds of drug trafficking. The United States, therefore, asserted that it could forfeit the properties pursuant to 18 U.S.C. § 981 and 21 U.S.C. § 881(a)(6). On March 26, 1993, the United States filed a notice of lis pendens in Bergen County, the county in which the property is located. The United States, however, misfiled the lis pendens.

 On April 23, April 30, and May 7, 1993, the United States published notice of its foreclosure proceedings in The Record, which covers Bergen County, in The Jersey Journal, which covers Hudson County, and in The New York Post. After this Court determined that the United States had probable cause to believe that the properties had been purchased with "drug money," the United States seized the property pursuant to a warrant for arrest in rem.

 On October 6, 1994, the Tax Collector of Saddle River held her statutorily mandated annual sale of properties that had unpaid municipal charges. The property located at 78 Fox Hedge Road was involved in the sale because defendants had failed to pay the property taxes. Manchester purchased the tax lien on 78 Fox Hedge Road, and the Tax Collector issued a tax sale certificate for the property to Manchester. On October 21, 1994, Manchester recorded its tax sale certificate in the Bergen County Register's Office.

 On February 17, 1995, this Court administratively terminated the United States' action. The case had been stayed pending the outcome of a New York state criminal prosecution against Matos.

 After the two-year statutory waiting period for moving for foreclosure had transpired, Manchester filed a foreclosure action in the Superior Court of New Jersey, Law Division, Bergen County, on December 3, 1996. During the two-year waiting period, Manchester paid all the outstanding taxes assessed on 78 Fox Hedge Road. At the time it filed the foreclosure action, Manchester hired a title company to conduct a title search on 78 Fox Hedge Road. Because the United States had misfiled its notice of lis pendens, the title company was unable to discover that the United States had instituted a foreclosure action in federal court. Manchester did not have any personal knowledge that the United States had filed a notice of lis pendens.

 On January 15, 1997, Manchester followed the state court's instructions and served its summons and complaint in its foreclosure suit by publication in The Record. The following day, United State Marshal Dominick Russo called Harold Hoffman, Manchester's attorney, and left a voicemail message indicating that he had notice of the forfeiture action and that the United States had already instituted a foreclosure action involving 78 Fox Hedge Road. On February 14, 1997, government counsel called Hoffman and said that he had notice of the forfeiture action.

 On February 21, 1997, the state court issued an order that permitted defendant Reynoso *fn2" to redeem the property if she paid Manchester an amount equal to the outstanding tax liabilities plus costs by April 14, 1997. On February 25, 1997, government counsel and Hoffman talked for ten minutes about the foreclosure proceedings. On the same day, this Court reopened the United States' foreclosure action.

 On Friday, April 11, 1997, the business day before the final opportunity for redemption of the property, government counsel called Hoffman and asked if Manchester would adjourn its foreclosure action because the United States had a pending action in this Court. Hoffman declined government counsel's request. On Monday, April 14, 1997, Hoffman left government counsel a voicemail message in which he asked government counsel to call him so that they could discuss the property. Government counsel never returned the phone call.

 Reynoso failed to redeem the property on April 14, and the Tax Collector of Saddle Brook, who was following the state court's order, issued an affidavit stating that Reynoso had failed to make the requisite payment on time. On the same day, the United States applied to this Court for a temporary restraining order and for an order to show cause why the state proceedings should not be stayed pending the conclusion of the federal forfeiture case. The Court granted the United States' motions. A Deputy Marshal delivered a copy of the order to the Tax Collector of Saddle River that morning. The United States claims that the Tax Collector issued the affidavit in violation of this Court's order. Manchester did not receive notice of the order for two days because the United States dialed the wrong facsimile number when it sent a copy of the order to Hoffman's office.

 The following day, the state court issued a final order of foreclosure vesting Manchester with fee simple title to the property. The United States never intervened or ...


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