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Jackson v. HSBC Bank USA

May 4, 2007

ELLA JACKSON, THOMAS NASCE, AND JULIA NASCE, PLAINTIFFS-RESPONDENTS/ CROSS-APPELLANTS,
v.
HSBC BANK USA, SUCCESSOR IN INTEREST TO REPUBLIC NATIONAL BANK OF NEW YORK, DEFENDANT-APPELLANT/ CROSS-RESPONDENT,
AND
RTL PARTNERS, L.P., GLENRIVER, INC., AND TAX LIEN SERVICE CORPORATION, DEFENDANTS.
HSBC BANK USA, SUCCESSOR IN INTEREST TO REPUBLIC NATIONAL BANK OF NEW YORK, THIRD-PARTY PLAINTIFF,
v.
RTL TRUST, THIRD-PARTY DEFENDANT.



On appeal from the Superior Court of New Jersey, Law Division, Hudson County, L-152-00.

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

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued April 17, 2007

Before Judges Coburn, Axelrad and R.B. Coleman

In 2000, plaintiffs, who are real estate property owners in a number of municipalities, filed this class action lawsuit. They alleged that defendant HSBC Bank USA ("HSBC"), which held tax sale certificates ("TSCs") on their properties, had violated the Tax Sale Law, N.J.S.A. 54:5-1 to -137 ("TSL").*fn1 More specifically, they challenged the private installment payment plan agreements ("IPPs"), which they voluntarily entered into with HSBC in connection with those TSCs. The IPPs gave each property owner the right to pay off the TSC in installments, while retaining the right to redeem it by a lump sum payment if funds became available. Thus, the IPPs allowed a property owner to avoid the cost of defending against the otherwise justified institution of foreclosure proceedings and loss of the property.

Plaintiffs did not argue that IPPs were not permitted at all under the TSL. Rather, they claimed that since HSBC knowingly included charges and other non-monetary burdens in the IPPs that are not set forth in the TSL, they are entitled to the remedies contained in the TSL. Those remedies include forfeiture of the TSC to each plaintiff and recovery of any payments made pursuant thereto. Plaintiffs also claimed the right to damages under the Consumer Fraud Act, N.J.S.A. 56:8-1 to -135 ("CFA"). HSBC contended that plaintiffs are only entitled to reformation with respect to any conditions included in the IPPs that are not provided for in the TSL and not to damages under the CFA.

The issues were resolved on cross-motions for summary judgment. The order under appeal declared that HSBC was liable to plaintiffs for violating the TSL; that the IPPs were to be reformed with the class members recovering the amount of charges unauthorized by the TSL; and that there would be a trial of the following issues: (1) "the amount of unauthorized charges exacted from the class members under the IPPs;" (2) "whether [HSBC] engaged in an unconscionable commercial practice violative of the [CFA];" and (3) "the ascertainable loss sustained by the class members as a result of any such unconscionable commercial practice." By implication, the order denied both HSBC's motion for summary judgment dismissing the CFA claim and plaintiffs' motion for the statutory relief provided by the TSL.

We granted the parties leave to appeal. We determine that the only relief to which plaintiffs are entitled is reformation of the TSCs in accordance with the guidelines established by the Supreme Court in Varsolona v. Breen Capital Services Corp., 180 N.J. 605, 628-30 (2004). They are not entitled to the remedies contained in the TSL and, in the circumstances of this case, they are also not entitled to relief under the CFA.

I.

The relevant facts may be briefly summarized as follows. In 1995, HSBC entered into a loan agreement with defendant RTL Partners, L.P. ("RTL"). The financing allowed RTL to purchase TSCs jointly in the names of HSBC and RTL and required RTL to assign the TSCs to HSBC. Although RTL appears to have dealt with most of the TSCs in the ordinary course under the TSL, it also entered into the ninety-one IPPs at issue in this case for itself and for HSBC and assigned those IPPs to HSBC.

These are the terms of the IPPs about which plaintiffs complain, as described in their brief:

1. A document preparation fee ranging between $250 and $1000 which could be assessed one ...


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