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Summit Bank v. Thiel

May 19, 1998

SUMMIT BANK, SUCCESSOR BY MERGER TO OCEAN NATIONAL BANK, PLAINTIFF-RESPONDENT,
v.
DENNIS THIEL AND ROSE THIEL, HUSBAND AND WIFE, AND ALLIED BUILDING PRODUCTS, INC., DEFENDANTS
IN THE MATTER OF R & H PARTNERSHIP, APPELLANT



SYLLABUS BY THE COURT

Highest bidder at mortgage foreclosure filed motion to be relieved from its bid since it did not know the amount of the tax liens. The Superior Court, Chancery Division, Ocean County, denied motion. Bidder appealed. The Superior Court, Appellate Division, Brochin, J.A.D., held that bidder was entitled to relief from its bid.

Reversed and remanded.

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

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted February 19, 1998

Wefing, J.A.D., filed a dissenting opinion.

Before Judges BROCHIN, WEFING and BRAITHWAITE.

Appellant R & H Partnership was the highest bidder at a foreclosure sale under a mortgage on real property. Ocean National Bank was the foreclosing mortgagee, and respondent Summit Bank is its successor by merger. Before delivery of the deed, R & H Partnership moved to be relieved from its bid pursuant to N.J.S.A. 2A:61-16. Insofar as pertinent, that statute reads as follows:

Any purchaser of real estate at any public sale, held by any officer or person mentioned in section 2A:61-1 of this title ... shall be entitled to be relieved from his bid if, before delivery of the deed, he shall satisfy the court by whose authority such sale was made of the existence of ... any lien or encumbrance thereon, unless a reasonable description of the ... liens or encumbrances thereon, with the approximate amount of such liens and encumbrances, if any, be inserted in the notices and advertisements required by law, and in the conditions of sale....

[ Ibid.]

As the basis for its motion, R & H Partnership showed that at the time of the sale, at which its final bid was $46,300, the property was encumbered by tax sale certificates totaling $23,647.47. The published notice which advertised the sale referred only to a first mortgage for $32,000, not to the existence of the tax sale certificates or to their amount. Prior to the sale, the sheriff made the customary announcement that the sale would be "subject to the liens of unpaid taxes and other open municipal charges that may be outstanding against the subject premises." But there was no statement of the amount of unpaid taxes secured by the liens on the property.

R & H Partnership denies that it learned the amount of unpaid taxes from any other source before the sale, and there is no evidence to the contrary. The foreclosing mortgagee learned the amount of unpaid taxes prior to the sale by inquiry from the tax office of the municipality in which the property is located.

The foreclosure court denied R & H Partnership's motion to be relieved from its bid. The court's oral opinion dealt primarily with an argument based on N.J.S.A. 46:15-5(c), a statute concerning affidavits of consideration, which R & H Partnership had made in its original motion brief. The court stated, "Since N.J.S.A. 46:15-5[(c)] does not require [R & H Partnership] to include [ ] liens for unpaid taxes in its affidavit of consideration, the movant is not entitled to be relieved of the consequences of being a successful bidder." In a reply brief to the foreclosure court dated the Monday before the Friday on which the motion was heard, R & H Partnership conceded that N.J.S.A. 46:15-5(c) did not support its argument. Instead, it relied on the plain language of N.J.S.A. 2A:61-16.

In R & H Partnership's brief to our court, it argues that the latter statute entitles it to be relieved of its bid because the mortgagee failed "to disclose the existence and extent of tax liens on the subject property." Summit Bank responds that N.J.S.A. 2A:61-16 is intended to protect bidders only from undisclosed liens such as mortgages and judgment liens, which can be discovered only by a title search. Unlike those liens, it points out, liens for unpaid taxes will encumber virtually every property foreclosed, and those taxes are always a first lien on the land. See N.J.S.A. 54:5-9. Summit Bank also argues that the construction of N.J.S.A. 2A:61-16 for ...


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