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MD Sass Municipal Finance Partners-II, L.P. v. Township of Lower


July 6, 2007


On appeal from the Superior Court of New Jersey, Law Division, Cape May County, Docket No. CPM L-0209-05.

Per curiam.


Argued June 6, 2007

Before Judges Winkelstein, Fuentes and Baxter.

Plaintiff, MD Sass Municipal Finance Partners-II, L.P., appeals from a June 15, 2006 order that dismissed plaintiff's complaint seeking a refund from defendant Township of Lower of a municipal lien in the amount of $18,709 that plaintiff satisfied when it sold the property in question to a third party. The municipal lien resulted from demolition costs incurred by the township when it razed a burned-out structure on the property on June 16, 1999. At the time the demolition occurred, plaintiff was the owner of a tax sale certificate on the property, and defendant's failure to notify plaintiff of the pending demolition deprived plaintiff of an opportunity to accomplish the demolition at a lesser cost. Defendant later failed to notify plaintiff of the recording of the demolition lien when it was filed on July 19, 1999.

Plaintiff argues that the Law Division erred when it concluded that the statute in question did not obligate the township to notify plaintiff of the pending demolition or of the recording of the lien. We disagree with plaintiff's interpretation of the statute, but agree with its argument that the township's failure to advise it of the recording of the lien violated its right to due process. We reverse.


In May 1997, and again in December 1997, fire severely damaged a vacant, single family house at 116 Race Track Drive in Lower Township (the property). On May 1, 1998, defendant sent a certified letter to the owners notifying them that the property's condition violated municipal ordinances. The letter was returned as undeliverable. On May 15, 1998, defendant's building inspector concluded that the house could not be rebuilt and should be demolished because it was a safety hazard.

On January 5, 1999, defendant sent a "Notice of Unfit Dwelling" (notice) to the owners of the property notifying them that a hearing on the matter would be held on February 26, 1999. The letter, sent by certified mail to the owners, was returned to defendant by the postal service with a notation that the addressees had moved and left no forwarding address. Defendant then published a copy of that same notice for two consecutive weeks in the local newspaper, posted the notice at the property itself, and filed it with the county clerk.

The owners did not attend the scheduled hearing on February 26, 1999. That hearing resulted in a finding that the house was unsafe and in imminent danger of collapse. On March 11, 1999, the township construction code officer issued a demolition order, stating that:

By a date which shall not exceed sixty (60) days from the date of this Order, the above-referenced property [must] be demolished. In the event that the above-referenced property is not demolished within said time period, the Township will take steps necessary to demolish the property, with all costs to be assessed as a lien against the property.

This March 11, 1999 demolition order was recorded in the county clerk's office on March 17, 1999, and copies were sent to the owners, were published in the local newspaper on March 25 and April 1, 1999, and were posted at the property.

On April 15, 1999, plaintiff purchased from defendant for the sum of $1127 a certificate of sale for unpaid municipal tax liens on the property. Plaintiff did not perform a title search or drive-by inspection of the property, nor did it make any inquiries at the municipal or county offices prior to purchasing the tax sale certificate. Defendant did not notify plaintiff of the March 11, 1999 demolition order.

The property was demolished by defendant's public works department on June 16, 1999, at a cost of $5215. On July 19, 1999, the Township Council adopted a resolution ratifying the demolition of the structure and imposing the cost thereof, $6223, as a lien on the property.*fn1 On May 2, 2002, plaintiff filed a complaint seeking to foreclose on the tax sale certificate it had purchased on April 15, 1999. The complaint further requested sale of the property in order to satisfy the unredeemed tax sale certificate. After the court issued a judgment of foreclosure, plaintiff obtained title to the property following a sheriff's sale in November 2003. On May 7, 2004, plaintiff sold the property to a third party. In order to convey clear title, plaintiff was required to satisfy defendant's demolition lien, which by then had increased to $18,709 because of interest charges.

On April 28, 2005, plaintiff filed a complaint in the Law Division, alleging that defendant's failure to provide it with notice of the demolition order had improperly prevented it from exercising its statutory right to seek injunctive relief. Plaintiff sought a refund of the $18,709 it had paid to satisfy the demolition lien. Cross-motions for summary judgment were filed, and on June 15, 2006, the Law Division denied plaintiff's motion and granted defendant's.

In a memorandum of decision accompanying the order, the judge held that plaintiff was not entitled to notice either at the time of the hearing on the Notice of Unfit Dwelling, held on February 26, 1999, or at the time the demolition order was entered on March 11, 1999. The judge held that plaintiff "became a party in interest after the statutorily prescribed notice period of thirty days, and sixty-three days before the actual demolition occurred. Nevertheless, plaintiff's status for purposes of the Demolition Statute vested outside the statutorily prescribed period." The judge further held that had plaintiff investigated the condition of the property or the status of the title, it would have learned of the pending demolition. The judge concluded that defendant's failure to notify plaintiff of the pending demolition proceedings did not violate applicable statutes or deny plaintiff due process of law, and entered judgment in favor of defendant.


Plaintiff argues that defendant had an affirmative obligation to notify it of the pending demolition, either in conjunction with, or immediately after, its purchase of the tax sale certificate on April 15, 1999. Plaintiff bases that argument on N.J.S.A. 40:48-2.8,*fn2 and claims that the statute requires a municipality to serve all parties in interest with notice of demolition proceedings within thirty days after the posting and service of the pending demolition order so as to afford them an opportunity to enjoin the municipality from proceeding with any demolition. Plaintiff contends that even though it was not a party in interest when the demolition order was issued on March 11, 1999, it nevertheless became a party in interest during the thirty-day period following the order's publication on March 25 and April 1, 1999. Plaintiff asserts that by failing to provide notice of the proceedings, defendant thwarted the purposes of the demolition statute and violated its express provisions.

In addition to the statutory argument plaintiff raises under N.J.S.A. 40:48-2.8, plaintiff also argues that defendant's failure to provide notice of the demolition proceedings violated state and federal constitutional guarantees of due process of law.

In response, defendant argues that plaintiff was a "sophisticated tax sale purchaser" who had an obligation to investigate the property before purchasing the tax sale certificate. Defendant maintains that plaintiff was not a party in interest of record at any of the statutorily-mandated times when notices were required, and that accordingly, it had no obligation to notify plaintiff of the pending demolition. Defendant further argues that plaintiff's arguments concerning the thirty-day period specified by N.J.S.A. 40:48-2.8 confuse "the service requirements under the statute with a right of an interested party to seek injunctive relief under the statute." Defendant also maintains that the thirty-day period for injunctive relief began running from the date the order was issued, not the date it was published in the newspaper, and contends that the order was readily available to plaintiff because it was recorded in the county clerk's office and posted on the property.

On appeal, we apply the same legal standard as the trial court did in determining whether the grant of summary judgment was correct, Prudential Property & Casualty Insurance Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998), and we turn to an analysis of the demolition statute. As we recently held in 21-23 Seidler Associates v. City of Jersey City, 391 N.J. Super. 201, 209-10 (App. Div. 2007), the demolition statute, N.J.S.A. 40:48-2.3 to -2.8, has three distinct phases, each with distinct notice requirements. The statute specifies the obligation of the municipality to provide adequate notice to "parties in interest." The term "parties in interest" is defined as "all individuals, associations and corporations who have interests of record in a building and any who are in actual possession thereof." N.J.S.A. 40:48-2.4(e) (emphasis added). A purchaser of a tax sale certificate is a party in interest. Garden State Land Co. v. City of Vineland, 368 N.J. Super. 369, 379 (App. Div. 2004).

In the first phase, if a municipality concludes that premises are unsafe, it is authorized to serve the owner*fn3 and parties in interest with a complaint specifying the date of a hearing to be held not less than seven, nor more than thirty days, after service of such complaint. N.J.S.A. 40:48-2.5(b). Here, the first phase occurred on January 5, 1999, when defendant issued the complaint and attempted to serve it on the owners. Clearly, plaintiff was not a party in interest at that time because its purchase of the tax sale certificate did not occur until April 15, 1999.

The second phase encompasses the conducting of the hearing that parties have been advised of during the first phase. N.J.S.A. 40:48-2.5(c) specifies that if the building code inspector or other duly authorized official concludes, as a result of the hearing, that the premises are "unfit for occupancy," the inspector may issue an order, and serve it upon the owner and parties in interest, requiring the owner to repair the property or demolish it within the "reasonable time," that is to be specified in the order. N.J.S.A. 40:48-2.5(c)(1). That same order advises the owner that a failure to do so within the "reasonable time" specified will result in the municipality demolishing the property. N.J.S.A. 40:48-2.5(e).

We agree with defendant that plaintiff was not a party in interest at the time of the first phase, when the Notice of Unfit Dwelling was issued on January 5, 1999, or in the second phase, when the demolition order was issued on March 11, 1999. We are not persuaded by plaintiff's argument that because it became a party in interest thirty-five days after the March 11, 1999 demolition order was issued and twenty-five days earlier than that order permitted any demolition to begin, that defendant was therefore required by the terms of N.J.S.A. 40:48-2.5(c) to serve the demolition order upon plaintiff immediately after plaintiff purchased the tax sale certificate. The statute imposes no duty on the municipality to continually update its investigation of the existence of any new parties in interest once it has already served the order upon the owner and parties in interest, and we see no basis upon which to add to the statute new terms the Legislature did not see fit to impose.

This court has held the "general rule is that what 'the Legislature omits the courts will not supply.'" Klink v. Twp. Council of Monroe, 181 N.J. Super. 25, 30 (App. Div. 1981) (quoting Keenan v. Bd. of Chosen Freeholders of Essex, 101 N.J. Super. 495, 507 (Law Div. 1968), aff'd, 106 N.J. Super. 312 (App. Div. 1969)). Further, it is clear that this court should exercise "unusual caution" when inserting words into a statute, and "'where the path is not clear, then the courts should refrain from usurping the legislative function.'" Id. at 30-31 (quoting Prop. Owners Ass'n v. N. Bergen Twp., 74 N.J. 327, 338 (1977)). Exercising such caution, we decline to supply a requirement the Legislature did not specify.

Our rejection of plaintiff's argument that defendant had an obligation in the second stage to notify plaintiff of the pending demolition relies upon our interpretation of N.J.S.A. 40:48-2.5(c). Instead of relying on that statute, plaintiff relies on N.J.S.A. 40:48-2.8. Nothing in the latter statute requires a municipality to serve notice upon a party in interest. Its terms are confined to the procedures to be used by an aggrieved party seeking to enjoin a pending demolition. We accordingly reject the argument plaintiff advances under N.J.S.A. 40:48-2.8. Although defendant does not rely upon N.J.S.A. 40:48-2.5(c), we nonetheless have analyzed that statute to determine if its provisions support plaintiff's claims.

Likewise, we analyze the third phase of the demolition statute, N.J.S.A. 40:48-2.5(f)(2), for the same reason. The third phase addresses the filing of a lien by a municipality to recover its demolition costs. In the third phase, the statute very clearly differentiates between those persons upon whom the proposed demolition lien must be served and those persons who have the right to object to the terms of any such lien. The statute makes it clear that only an "owner" is entitled to be provided with a copy of the proposed lien. In contrast, the same subsection permits an "owner" or "party in interest" to file an action to contest the lien. N.J.S.A. 40:48-2.5(f)(2). The statute provides:

That the amount of . . . . such cost of such . . . demolition, if any, or the amount of the balance thereof remaining after deduction of the sum, if any, realized from the sale of materials derived from such building . . . shall be a municipal lien against the real property upon which such cost was incurred . . . .

[I]f the sum total of such costs exceeds the total of such credits, a detailed statement of the aforesaid costs and the amount so due shall be filed with the municipal tax assessor . . . and a copy thereof shall be forthwith forwarded to the owner by registered mail. . . . Any owner or party in interest may, within 30 days from the date of the filing of the lien certificate, proceed in a summary manner in the Superior Court to contest the reasonableness of the amount or the accuracy of the costs set forth in the municipal lien certificate. [N.J.S.A. 40:48-2.5(f)(2) (emphasis added).]

Here, because the Legislature so precisely differentiated in the third phase between those who are entitled to notice and those who are entitled to object, we are not prepared to hold that by giving parties in interest the right to object, the Legislature must also have intended to require a municipality to serve parties in interest with a copy of the proposed lien. Had the Legislature intended such a result, it could have written N.J.S.A. 40:48-2.5(f)(2) differently. See GE Solid State, Inc. v. Dir., Div. of Taxation, 132 N.J. 298, 308 (1993) (holding that if "the Legislature has carefully employed a term in one place and excluded it in another, it should not be implied where excluded"). Accordingly, defendant had no obligation to serve plaintiff with a copy of the proposed lien because plaintiff was not an owner as that term is defined in N.J.S.A. 40:48-2.4(d).

We are mindful of the holding in 21-23 Seidler Associates, supra, that the holder of a tax sale certificate was entitled to such notice. 391 N.J. Super. at 211. That case is distinguishable, however, because there, unlike here, the predecessor of the owner of the tax sale certificates at issue had already purchased those certificates when the demolition order was issued in phase two, but was not provided with notice of either the proposed demolition or the proposed lien. Id. at 204-05. Equally important, the municipality had never served the Notice of Unfit Dwelling in phase one on the tax certificate holder even though the purchase of the certificate pre-dated the issuance of the Notice. Id. at 209. Here, in contrast, defendant could not have provided comparable notice to plaintiff because the tax sale certificate was not purchased until thirty-five days after the demolition order had been entered.


We do, however, agree with plaintiff's argument that, notwithstanding the provisions of N.J.S.A. 40:48-2.5(f)(2), under the facts presented here, due process required the municipality to serve a copy of the proposed lien on plaintiff on July 19, 1999 when the Township Council adopted the resolution ratifying the demolition costs and imposing the cost of $6223 as a lien on the property. See Mennonite Bd. of Missions v. Adams, 462 U.S. 791, 795, 103 S.Ct. 2706, 2709-10, 77 L.Ed. 2d 180, 185 (1983) (holding that the State is required to provide notice of actions affecting an interest in property so as to afford interested parties an opportunity to present their objections). Defendant's failure to serve a copy of the proposed lien on plaintiff most assuredly did affect an interest in property. Ibid.

Plaintiff's interest in the property was affected because the failure to provide notice decreased plaintiff's profit upon sale of the property, thereby reducing its value. If plaintiff had been notified in July 1999 that a demolition lien was being assessed against the property, plaintiff would have had the opportunity to contest the asserted demolition costs. Even more importantly, plaintiff could have purchased the lien at the subsequent tax sale and thus defrayed or avoided the interest charges that more than tripled the cost of the lien over the course of the next five years.

We also agree with plaintiff's argument that the United States Supreme Court's opinion in Jones v. Flowers, 547 U.S. 220, 126 S.Ct. 1708, 164 L.Ed. 2d 415 (2006) strongly supports the conclusion that defendant violated plaintiff's due process rights. In Jones, a homeowner sued the State for failing to provide him with adequate notice before selling his house for delinquent taxes. Id. at ___, 126 S.Ct. at 1712-13, 164 L.Ed. 2d at 423-24. The Court phrased the issue as whether the government is charged with additional notice requirements if it learns that notice has failed prior to the taking. Id. at ___, 126 S.Ct. at 1714, 164 L.Ed. 2d at 426.

The Court noted "'when notice is a person's due . . . the means employed must be such as one desirous of actually informing the absentee might reasonably adopt to accomplish it.'" Id. at ___, 126 S.Ct. at 1715, 164 L.Ed. 2d at 427 (quoting Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 315, 70 S.Ct. 652, 657, 94 L.Ed. 865, 874 (1950)). It observed that "[i]n prior cases, we have required the government to consider unique information about an intended recipient regardless of whether a statutory scheme is reasonably calculated to provide notice in the ordinary case." Id. at ___, 126 S.Ct. at 1716, 164 L.Ed. 2d at 428. Reasoning that it was difficult to see why due process requirements would be less if the government learned of some "practicality or peculiarity" of the case after notice was sent but before the taking occurred, the Court held that in such situations the government must take additional, reasonable steps to notify the property owner of the pending action. Ibid.

In the matter at hand, the "peculiarity" was that plaintiff became a party in interest in the midst of the demolition proceedings. Defendant, which sold the certificate, was aware of plaintiff's new status prior to the filing of the lien. Under those circumstances, due process required defendant to provide notice of the proposed lien and an opportunity to challenge its attachment. Ibid. Thus, defendant's failure to do so invalidates the demolition lien as to plaintiff.

It does not follow, however, that simply because the lien is invalid, defendant should be required to refund the entire $18,709 plaintiff paid to defendant to satisfy that lien. In light of the trial court's determination that defendant was not obliged to provide notice to plaintiff of the proposed lien, the Law Division did not have the opportunity to consider whether defendant should be required to refund all, or only some, of the $18,709. We remand to the Law Division for a plenary hearing on that subject. We leave to the parties and the court the determination of what factors should be considered during such hearing. The discussion in Garden State, supra, 368 N.J. Super. at 380-82, of possible factors should provide considerable guidance.

Reversed and remanded for entry of an order invalidating the July 19, 1999 demolition lien as to plaintiff and for a hearing to determine what portion of the $18,709 defendant should be required to refund to plaintiff.

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