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United States v. City of Newark

September 29, 2009


The opinion of the court was delivered by: Peter G. Sheridan, U.S.D.J.


This matter comes before the court on a motion for summary judgment by the United States of America and on cross-motions for summary judgment by Hobson Associates, LLC ("Hobson") and the City of Newark. Pursuant to 38 U.S.C. § 301, the Department of Veterans Affairs (the "DVA") is an executive department of the United States. The Secretary of Veterans Affairs (the "Secretary") is the head of the DVA and, pursuant to 38 U.S.C. § 303, is responsible for the proper execution, administration, and management of the DVA.


By Sheriff's Deed dated January 4, 1983, the DVA purchased title to 26 Hobson Street, Newark, New Jersey known as Block 3059 Lot 33 ("the Property".) (Govt. Ex. 1.)

On August 24, 1983, the DVA entered into an Installment Contract for Sale of Real Estate of the Property with Minne McKoy, Stewart McKoy, and Jerome McKoy (the "McKoys"). Pursuant to paragraph 18 of the installment contract, title remained with the DVA until full payment of the purchase price had been made. (Id. Ex. 2.)

Pursuant to paragraph 5 of the installment contract the McKoys were to pay all taxes and municipal fees for 1983 and beyond. (Id.)

The McKoys have never made full payment on the installment contract, and the DVA has never conveyed the property to the McKoys or any other person or entity. (Id. Ex. 3.)

On December 16, 1999, the Collector of Taxes for the City of Newark issued a Certificate of Sale for Unpaid Municipal Liens (a water and sewer bill) to defendant Crusader Servicing Corporation ("Crusader") for $185.02. (Id. Ex. 4.)

On August 31, 2005 the attorneys for Crusader wrote to DVA in Newark, Brooklyn and Washington by certified mail about the DVA's deed to the property (Crusader wrote a total of five letters to the DVA). Each letter states in part:

Our office represents Crusader Servicing Corporation, a holder of a tax sale certificate against the above property and we are in the process of commencing foreclosure proceedings, however, the last deed of record shows the owner as the Administrator of Veterans Affairs. The last deed was a Sheriff's Deed for a mortgage foreclosure action and was recorded on February 8, 1983. I am trying to find out if, in fact, the VA still owns this property or if the VA has since sold to the property and if so, if there is any deed information regarding this.

(Gonski Aff. Exs. 19-23.) On September 16, 2005, the attorneys received an answer from Max Shemtob, regional counsel. Mr. Shemtob's letter gives direction on how to collect the sewer fees paid by Crusader. (Id. Ex. 24.) Moreover, Mr. Shemtob states that the property had been sold to the McKoys in 1983 under the terms of an installment contract and that the DVA "has no knowledge as to whether or not the McKoys are still the equitable owners of the property as a result of the installment contract." (Id.) Mr. Shemtob further states that "[t]here is no requirement to keep VA apprised of the status of the contract ownership once VA assigns the contract." (Id.)

By letter dated November 5, 2005, the DVA terminated the installment sales contract due to the McKoys' failure to make payments as required, and instituted a suit against the McKoys to terminate the agreement.

On or about February 17, 2006, Crusader filed a complaint for foreclosure of tax sale certificate(s) with demand for judicial sale in the Superior Court of New Jersey, Essex County. (Govt. Ex. 5.) The complaint erroneously alleges that the DVA transferred its ownership interest in the property to the McKoys. (Id. Ex. 5 ¶ 10.) The complaint reads in pertinent part:

The UNITED STATES OF AMERICA is joined as a Defendant because of the unrecorded installment of Sales Agreement referred to above, which transferred the interest of the Department of Veterans Affairs. The last deed of record is to the DVA and appears in Deed Book 4775 Page 818.

(Id. Ex. 5 ¶ 12.) On April 14, 2006, the complaint was personally served upon the United States Attorney in Newark, New Jersey, and served by certified mail upon the Department of Justice in Washington D.C. around the same date.

On April 20, 2006, the United States corresponded with Crusader's attorney acknowledging service and "admitting the priority of Plaintiff's mortgage." The letter reads:

The United States Attorney for the District of New Jersey hereby acknowledges service of the Summons and Complaint filed by plaintiff in the captioned matter as of the date hereof, providing all the jurisdictional requirements of 28 U.S.C. § 2410 have been met. The United States will not file an Answer in this matter, as it admits the priority of Plaintiff's's mortgage, and will not oppose the entry of default against it.

The United States does specifically request that plaintiff's final judgment, whether or not submitted for its consent, contain language similar to that set forth on the attached information sheet.

PLEASE PROVIDE THIS OFFICE WITH COPIES OF THE SHERIFF'S SALE NOTICE. Your client may obtain a release of the Government's lien by paying the appropriate government agency the amount due on the lien prior to the sale; or by negotiating for the release of it's right of redemption ...

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