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Gemenese Realty L.L.C., As Assignee of Sass Muni V, L.L.C. By U.S. Bank, N.A. As Custodian v. Housing Authority of the City of East Orange

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


November 19, 2012

GEMENESE REALTY L.L.C., AS ASSIGNEE OF SASS MUNI V, L.L.C. BY U.S. BANK, N.A. AS CUSTODIAN, PLAINTIFF-RESPONDENT,
v.
HOUSING AUTHORITY OF THE CITY OF EAST ORANGE, DEFENDANT-APPELLANT.
HOUSING AUTHORITY OF THE CITY OF EAST ORANGE, PLAINTIFF-APPELLANT,
v.
THE CITY OF EAST ORANGE, DEFENDANT-RESPONDENT.

On appeal from Superior Court of New Jersey, Chancery Division, Essex County, Docket No. F-12049-09.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION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.

I.

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 that time. EOHA was also aware, at least by that date, that the City had imposed a lien on the Property.

By letter dated May 7, 2007, EOHA's attorney advised the City's "Tax Collector" that it objected to the 2007 assessment, arguing the Property was exempt from taxes. EOHA took no further action at that time and there is nothing in the record to indicate the City responded to EOHA's letter.

On December 12, 2007, a second tax sale occurred. Gemenese again purchased the outstanding tax lien on the Property, this time for $177,408.42. The lien was recorded on February 8, 2008. During the pendency of this litigation, Gemenese paid the ongoing assessed taxes on the property.

On December 9, 2009, EOHA filed a verified complaint and order to show cause against the City and Gemenese in the Chancery Division under Docket Number C-309-08. In its complaint, EOHA sought to invalidate both the tax assessments against the Property and the two tax sales that had occurred. EOHA also sought to enjoin a third tax sale, that was scheduled for December 10, 2008. On that same date, EOHA and the City entered a consent order to postpone the tax sale. This temporary restraint, however, was vacated by the trial judge and EOHA's request for preliminary injunctive relief against the City was denied on February 15, 2009.

On March 6, 2009, Gemenese filed a complaint for foreclosure of tax sale certificate under Docket Number F-12049-09 in the Chancery Division. EOHA's motion to dismiss the foreclosure complaint was denied on July 27, 2009.

The City moved to transfer the case to the Tax Court and an order to this effect was entered on June 3, 2009. However, in an April 5, 2010 order, the Tax Court determined it lacked jurisdiction and the matter was returned to the Chancery Division.

The parties subsequently filed cross-motions for summary judgment. In response to the City's motion, EOHA submitted a number of documents with its reply brief which, on their face, contradicted Executive Director Domato's deposition testimony that EOHA had stopped receiving HUD funding after the demolition of the Project in February 2004. The documents were Annual Contributions Contracts that indicated that, on an annual basis from 2005 to 2010, EOHA received "Replacement Housing Factor (RHF) Funds" for the Property from HUD. RHF Funds are given to public housing authorities which have removed units from inventory for the sole purpose of developing new housing units.

These documents had not been submitted to the City in discovery and had only recently been received by EOHA's attorney. The City objected to the trial judge considering the documents at oral argument on the summary judgment motions. The following colloquy occurred at the December 23, 2010 argument, when EOHA's attorney argued the documents merely "amplified" arguments it raised in its initial brief:

THE COURT: Well, you know, that's nice use of words, but amplification? Usually, that has to do with volume.

Now, you - -MR. MC CARTHY [EOHA's attorney]: Expanded.

THE COURT: - - maybe that might talk louder - -MR. MC CARTHY: Expanded.

THE COURT: - - but the fact is that those documents never saw the light of day before your amplification.

MR. MC CARTHY: And you know what, Your Honor? You don't - - and - - and if - - you don't even need to consider those documents if you don't want to. The law is clear.

THE COURT: Oh, okay, then I won't, I won't.

MR. MC CARTHY: Well, the law is clear, the law is clear, okay, and the documents, you don't need the documents because the federal statute is clear and the federal case law is clear.

The City's attorney subsequently objected to the judge considering the funding documents, which counsel stated included, the annual contributions contract, and five renewals that weren't produced during the course of discovery, despite the fact those documents were requested in interrogatories, they were requested in notice to produce, they were requested in a deposition notice at the time of Mr. Damato's deposition. Specific questions were directed towards those documents. Mr. Damato said he had basically no idea as to any renewal of an annual contribution contract when he had, in fact, signed an extension one month before deposition.

The judge replied, "[b]ut he already told me, Counsel told us, we don't even really have to consider those documents. I can basically forget that they exist."

Thus, the judge refused to consider the 2005 to 2010 funding agreements between HUD and EOHA. In her decision, the judge explained, in connection with her finding that EOHA had not established it had any funding contracts with HUD after 2004:

[W]ith respect to prong two [of paragraph

3.(a) of the Cooperation Agreement, EOHA] added a complication, of course, of this very belated revelation of the documents in reply to summary judgment which the Court, by the way, does not see fit to consider on this motion at all. That is absolutely improper. You cannot present affidavits or documents to contradict prior statements made during discovery and the depositions are replete with them. You cannot do that in an effort to avoid summary judgment, and that's precisely what was done, but it's not an issue, anyway, for me because these annual contributions have to be, by their terms in connection with a low rent housing project. There is none. It's not there.

There is just a plan which has not been effectuated.

The judge granted the City's and Gemenese's motions for summary judgment and denied EOHA's motion. The judge first determined that EOHA's suit was not barred by any statute of limitations. The judge found EOHA was arguing the tax liens had been void from the time they were first imposed and, accordingly, there could be no time bar to its action in "a court of equity."

However, the judge ruled that, once the Project had been demolished, there was no longer any public housing on the Property. Therefore, the Property had lost its public purpose, which had justified its tax exempt status. Because EOHA did not rebuild public housing on the Property for over six years, which she held was "not a reasonable time," the judge ruled that property taxes had been properly imposed for the entire period after the 2004 demolition and, therefore, the tax sales were not void.

On January 5, 2011, the judge entered orders granting the City's motion for summary judgment, denying EOHA's motion for summary judgment, and granting Gemenese's motion for summary judgment and striking EOHA's answer in the foreclosure action.*fn4

EOHA filed a notice of appeal of these orders but, in a May 31, 2011 order, we dismissed this appeal as interlocutory because the foreclosure action had not yet been completed. A final judgment of tax sale certificate foreclosure was filed on December 21, 2011. Thereafter, EOHA filed a notice of appeal challenging the three orders on the parties' summary judgment motions and the final judgment of foreclosure. On April 16, 2012, we denied EOHA's motion to supplement the record with documents concerning its funding relationship with HUD following the demolition of the Project in 2004.

II.

On appeal, EOHA argues the trial judge erred in granting the City and Gemenese's motions for summary judgment. It asserts it can document it continued to receive HUD funding even after the Project was demolished and, based upon its receipt of that funding, the Property should have retained its prior tax exempt status. The City and Gemenese, on the other hand, argue EOHA failed to submit the HUD-funding documentation during the discovery period and the judge properly refused to consider it in deciding the cross-motions for summary judgment. The City and Gemenese also contend that EOHA did not file a timely appeal of its tax assessments and, therefore, its claims are barred by the applicable statute of limitations. However, because the record reveals there were numerous, significant and disputed factual issues regarding the parties' respective claims, we conclude that summary judgment should not have been granted for any party.

We evaluate the parties' respective arguments under customary principles governing summary judgment motions. Summary judgment must be granted where there is "no genuine issue as to any material fact challenged and . . . the moving party is entitled to a judgment or order as a matter of law."

R. 4:46-2(c). "If there is the slightest doubt as to the existence of a material issue of fact, the motion should be denied." Saldana v. DiMedio, 275 N.J. Super. 488, 494 (App. Div. 1994).

Reviewing a trial court's grant of summary judgment, we review the legal conclusions de novo, using the same legal standard applied by the trial court. Turner v. Wong, 363 N.J. Super. 186, 198-99 (App. Div. 2003). We must determine whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the disputed issues in favor of the non-moving party. R. 4:46-2(c); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 539-41 (1995). To survive summary judgment dismissal, a party must rely on more than "conclusory and self-serving assertions." Puder v. Buechel, 183 N.J. 428, 440-41 (2005). Where issues of credibility are presented, however, summary judgment is generally inappropriate. Brill, supra, 142 N.J. at 540. Credibility is always for the factfinder to determine. Ferdinand v. Agric. Ins. Co. of Watertown, N.Y., 22 N.J. 482, 492 (1956).

Under EOHA's and the City's Cooperation Agreement, the Property was to be exempt from all real and personal property taxes . . . so long as either . . . such Project is owned by a public body or governmental agency and is used for low-rent housing purposes or . . . any contract between [EOHA] and [HUD] for loans or annual contributions or both, in connection with such Project remains in force and effect[.]

Thus, the two critical legal issues to be determined were whether the Property was being used for a public purpose, i.e., for public housing or whether EOHA was receiving HUD funding in connection with the Project. The facts needed to resolve both issues are plainly disputed by the parties.

As to the question of whether the Property was being used for public housing at the time the taxes were imposed, it is undisputed that the Arcadian Gardens Project was demolished in 2004. Immediately thereafter, however, the City and EOHA began to work in partnership to redevelop the Property with a number of different uses, including affordable housing for low-income individuals. Thus, EOHA makes a fairly strong factual argument that the Property continued to be used for a public purpose as the redevelopment planning process continued.

At the same time, however, the City and Gemenese correctly point out that it is not clear how much of the Property would be used for public housing and how much would be used for commercial development, single-family homes and open spaces, which would arguably not enjoy tax exempt status. The parties, however, did not thoroughly develop any of these important facts in the current record.

Just as importantly, the judge did not fully address this factual issue in her findings. The linchpin of the judge's conclusion that EOHA was not "using" the Property for public housing was her finding that the Project had been demolished in 2004 and had remained vacant since that time. As the judge explained, "[w]hat is relevant is that it is vacant land and it has been such for six years, it will be going on seven, and that is not a reasonable time, frankly."

However, the City began imposing taxes on the Property in 2005, right after the Project was demolished, and not after the passage of several years of "non-use." The taxes were imposed during a period where EOHA and the City were clearly working together on redeveloping the Property. It is not clear whether the judge considered whether, under those factual circumstances, the Property should still be considered as being "used" for public purposes, especially during the immediate aftermath of the demolition, or whether the entire Property or only the portion of it that would be redeveloped as public housing should have been subject to taxes. Because the judge made no findings on this issue, and because the facts are in sharp dispute, summary judgment was not appropriate.

Apart from the question of whether the Property was being "used" for public housing, the judge did not adequately address the factual issue of whether EOHA was receiving HUD funding either to maintain or redevelop the Property as a site for public housing. The City and Gemenese correctly point out that EOHA's Executive Director, Mark Damato, testified during his deposition that, once the Project was demolished, EOHA received no further federal funding. During discovery, EOHA also failed to provide any positive information concerning HUD funding in response to interrogatories and requests to produce relevant documents.

Just prior to the court's consideration of the cross-motions for summary judgment, however, EOHA located documentation that, at least on its face, indicated it had received RHF Funds for the Property from HUD on an annual basis from 2005 to 2010. EOHA submitted this documentation with its reply brief, but the City objected to its consideration and the judge refused to review it. The judge found that, because the documentation contradicted Damato's deposition testimony and had not been submitted in response to the City's requests for discovery, the funding information had to be barred.

We "generally defer to a trial court's disposition of discovery matters unless the court has abused its discretion or its determination is based on a mistaken understanding of the applicable law." Rivers v. LSC P'ship, 378 N.J. Super. 68, 80 (App. Div), certif. denied, 185 N.J. 296 (2005). Here, we conclude the judge mistakenly exercised her discretion.

These were cross-motions for summary judgment, not a trial. The documentation was not submitted in response to the City's discovery requests. However, it was submitted in ample time prior to the court's consideration of the motions for the City and Gemenese to be able to address it. The receipt or non-receipt of federal funding was a critical issue in this case. Once the HUD-funding documentation was found by EOHA and submitted, the judge could have adjourned the motions to give the City and Gemenese additional time to analyze and respond to the documentation, while perhaps sanctioning EOHA for any costs incurred by the other parties due to the resulting delay.

There was no compelling reason to bar any consideration of these important documents. Under these circumstances, we conclude the interests of justice required that the documentation be accepted and reviewed.

The City and Gemenese argue that the HUD documentation does not clearly demonstrate EOHA received RHF funds during the period in question. The City, in particular, argues that EOHA's Board never adopted the contracts embodied in the documentation and, therefore, these contracts were never valid. However, these are factual issues that need to be researched and further developed by the parties. The resolution of significant factual issues of this magnitude cannot be accomplished on cross-motions for summary judgment.

Both the City and Gemenese argue that, regardless of whether the assessments of taxes on the Property were proper, EOHA was required to appeal the assessments in a timely fashion. Under N.J.S.A. 54:3-21, an aggrieved taxpayer, such as EOHA, must appeal an assessment to the appropriate county board of taxation or the Tax Court by April 1 of the tax year in question. Because EOHA did not file a timely appeal from any of the assessments at issue here, the City and Gemenese argue the assessments cannot be challenged as a matter of law, regardless of whether they were correctly assessed in the first place.

However, we conclude this issue could not be determined on the basis of the contested factual record that existed at the time the cross-motions for summary judgment were submitted.

As the trial judge found, there are two lines of cases regarding appeals from tax assessments. One line of cases, exemplified by Hudson Cty. Park Comm'n v. Jacobson, 132 N.J.L. 287, 289 (Sup. Ct. 1944), holds that if a tax is void ab initio, the statute of limitations does not apply because the tax should never have been assessed and, therefore, it would be unfair to attempt to collect it. The other line of cases, typified by the Supreme Court's decision in N.J. Transit Corp. v. Borough of Somerville, 139 N.J. 582, 590 (1995), holds that once the statute of limitations period has expired, the assessment cannot be challenged under any circumstances.

Here, the judge indicated she would apply the Jacobson line of cases, explaining it was "incumbent upon [her] to apply equitable principles to that equitable remedy[.]" Therefore, she declined to apply the statute of limitations to bar EOHA's claim.*fn5 Because the judge never considered the HUD-funding documents, we cannot determine from the current record whether EOHA can argue that the assessments were void ab initio, since the assessments would have been barred under the Cooperation Agreement. Because the judge did not fully address this issue, we also cannot determine from this record whether the Property was being "used" for public purposes during the period of time the City and EOHA were working together to redevelop it as a new public housing project.

There is at least one more factual issue, in addition to those already discussed, which prevented this issue from being decided on the basis of the record developed on the cross-motions for summary judgment. On this record, it is not clear whether EOHA was properly served with the tax assessment notices beginning in 2005. The City sent the notices to the former manager of the Property. After the Project was demolished in 2004, however, the record does not disclose what role, if any, this manager continued to have regarding the Property. In 2007, the City began sending the notices to EOHA's main office, without any apparent reason in the record for making this change.

While it is clear that EOHA thereafter began receiving the notices, the judge made no finding as to a specific date when such service was made, nor did she consider whether EOHA's tax liability should be limited to that accrued after 2007 or whether the service on the prior manager of the Property was sufficient. These matters cannot be decided in the absence of a more thorough development of the record.

In sum, the key legal issues in this case are whether the Property was being "used" as a "public housing Project" after Arcadian Gardens was demolished and whether EOHA continued to receive HUD funding to maintain or develop the Property as a "public housing Project" after the demolition occurred. The proper resolution of these legal issues is dependent upon the resolution of disputed facts and documentation that was not fully considered by the trial court. We are therefore satisfied that there exist genuine issues of material fact which should have precluded summary judgment for any party.

Accordingly, we reverse the trial judge's January 5, 2011 orders granting summary judgment to the City and granting summary judgment to Gemenese in the foreclosure matter. We affirm the January 5, 2011 order denying EOHA's motion for summary judgment and we reverse the December 21, 2011 final judgment of tax sale certificate foreclosure in favor of Gemenese. We remand to the trial court for further proceedings consistent with this opinion.

Affirmed in part; reversed in part; and remanded. We do not retain jurisdiction.


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