On appeal from Superior Court of New Jersey, Chancery Division, Essex County, Docket No. F-12049-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued telephonically November 5, 2012
Before Judges Sapp-Peterson, Nugent and Haas.
In this tax assessment and foreclosure action, the Housing Authority of the City of East Orange (EOHA) appeals three January 5, 2011 orders of the Chancery Division (1) granting summary judgment to the City of East Orange (the City); (2) denying EOHA's motion for summary judgment; and (3) striking EOHA's answer and granting summary judgment to Gemenese Realty
L.L.C. (Gemenese) in the related foreclosure matter. EOHA also appeals the Chancery Division's December 21, 2011 final judgment of tax sale certificate foreclosure in favor of Gemenese.
EOHA argues the property it owned that was subject to the tax sale should have been treated as tax-exempt property, as it was prior to 2004. After reviewing the record in light of the contentions advanced on appeal, we reverse the January 5, 2011 orders granting summary judgment to the City and Gemenese; affirm the January 5, 2011 order denying EOHA's motion for summary judgment; reverse the December 21, 2011 final judgment of foreclosure; and remand to the trial court for further proceedings consistent with this opinion.
EOHA is a public entity, established by the City in 1957, to provide housing to the City's low income population. In 1961, EOHA entered into a Declaration of Trust Agreement*fn1 (the HUD Agreement) with the United States Department of Housing and Urban Development (HUD). Under the HUD Agreement, HUD agreed to provide loans, grants or bonds to EOHA in order to enable EOHA to construct the Arcadian Gardens Project (the Project). The twenty-three building, public housing Project was completed in 1967 and comprised 212 apartment units on a nine-acre property (the Property). EOHA was the owner of the Property.
In 1965, EOHA and the City entered into a Cooperation Agreement. In paragraph 3.(a) of the Cooperation Agreement, the City agreed that EOHA's projects are exempt from all real and personal property taxes and special assessments levied or imposed by any Taxing Body. With respect to any Project, so long as either
(I) such Project is owned by a public body or governmental agency and is used for low-rent housing purposes, or (II) any contract between [EOHA] and [HUD] for loans or annual contributions, or both, in connection with such Project remains in force and effect, and (III) any bonds issued in connection with such Project or any monies due to [HUD] in connection with such Project remain unpaid, whichever period is the longest, the [City] agrees that it will not levy or impose any real or personal property taxes or special assessments upon such Project or upon [EOHA] with respect thereto.
The term "Project" is defined in paragraph 1.(a) of the Cooperation Agreement as "any low-rent housing hereafter developed as an entity" by EOHA with financial assistance from HUD. There is no dispute that, at the time it was built, the Arcadian Gardens Project was a "Project" under the terms of the Cooperation Agreement. Prior to 2005, EOHA was not assessed taxes on the Property where the Project was located.
By 2004, the Arcadian Gardens Project had fallen into disrepair and it could no longer be safely maintained. With the assistance of HUD funding, the remaining residents were relocated and EOHA had the Project demolished in February 2004.
In July 2004, the City designated the Property as an area in need of redevelopment. In May 2005, EOHA submitted an Arcadian Gardens Redevelopment Plan to the City. Under this Plan, EOHA would work in partnership with the City to create "mixed income, traditionally designed housing, commercial development and accessible, well-designed open spaces" on the Property. Affordable housing would be available for low-income individuals as part of this Plan. On September 26, 2005, the Redevelopment Plan was adopted by the City.*fn2
In 2005, the City began to assess taxes on the Property. During a deposition, Brigida Caruso, the City's tax assessor prior to December 2005, testified she did not recall what led to the City's decision to begin to assess property taxes. Her successor, Barbara Williams, who became the City's tax assessor on November 21, 2005, testified that she likewise had no recollection of why taxes began to be assessed on the Property.
The City produced a one-page "Approval for Override" submitted by Caruso to the Essex County Board of Taxation. While the specific date on this document is not fully legible, it was issued sometime in 2005. The document indicated that the property was being changed from a Class 15C designation, which is used for tax exempt properties, to a Class 1 designation, which is used for vacant land. The stated reason for the request was "Low income housing/Building Demolished."
The City began to send EOHA quarterly tax bills beginning in June 2005. The bills were sent to an address in Pleasantville, New Jersey, rather than to EOHA's office in East Orange. The Pleasantville address was for Community Realty Management, Inc., a property management company retained by EOHA in 2000 to manage the Project. However, after the Project was demolished, the record does not disclose what role, if any, Community Realty Management continued to play at the Project.
After the Project was demolished, the record is not clear whether EOHA continued to receive HUD funding, either to maintain the Project or to redevelop it. During discovery, EOHA did not submit any documentation to verify that it received any HUD funding for the Property after the demolition. In a deposition, EOHA's Executive Director, Mark Damato, testified that, although EOHA intended to use the Property for public housing, it had not been used for this purpose since 2004. Beginning in 2005, he stated EOHA no longer received any contributions or loans from HUD in connection with the Property. According to Damato, such funding would resume when the Property was redeveloped.
EOHA never paid the taxes that began to be assessed on the Property in 2005. The City sent EOHA quarterly delinquency notices, but no response was received. Like the tax bills, the delinquency notices were sent to the Pleasantville address of the Project's former manager.
On December 13, 2006, a tax sale was held in connection with EOHA's unpaid taxes and Sass Muni V, LLC purchased the lien for $255,705.34, subject to redemption at the rate of 18% interest. The certificate was recorded on February 15, 2007. The lien was later sold to U.S. Bank, NA as custodian, which, in turn, assigned it to Gemenese.*fn3
Beginning in 2007, and for reasons that are not clear from the record, the City began sending the quarterly tax bills and delinquency notices directly to EOHA's main office in East Orange. Internal memoranda authored by Damato indicate that, at least by March 21, 2007, EOHA was aware the Property had been assessed at $4.1 million for 2007 and that EOHA owed $121,840.65 in past due taxes at ...