The Superior Court’s Law Division lacks subject matter jurisdiction to sort out who owns real property in the wake of a foreclosure, an appeals court ruled on Wednesday.
The Appellate Division, in Kanter v. Scharf, A-2977-11, affirmed dismissal of an action seeking a declaratory judgment that the plaintiff, not the person who obtained the foreclosure, owned the property.
The panel said plaintiff Sidney Kanter should instead have intervened in the foreclosure action or moved to reopen it under Rule 4:50-1.
The property at issue was a 3.5-acre parcel in Washington Township, Morris County, containing a vacant and uninhabitable house that became the object of a tussle between two tax sale certificate buyers.
Malcolm Scharf, the defendant, bought a certificate on the property in 1986 and paid the taxes after that except for a stretch in 2004.
A second certificate for the 2004 hiatus was bought by Fernwood Funding and assigned to its president, Kenneth Kanter, Sidney’s brother. Scharf paid $7,711 to redeem it in October 2005.
Days later, Kenneth Kanter got back in the game when Fernwood paid $500 to one of the owners of the property for a quitclaim deed conveying her interest.
A week later, Scharf filed the foreclosure action. His complaint traced the line of title back to 1883 and named as defendants three of the family members who owned it as well as 37 other heirs, relatives and possible successors.
Scharf did not name Kenneth Kanter or Fernwood as defendants, but Kenneth later testified that he was aware of the filing and knew he had a right to intervene but chose not to do so.
Judge Neil Shuster, sitting in Mercer County’s Chancery Division, set a $118,448 redemption amount for the certificate and, when no one paid it by the deadline, entered a final foreclosure judgment on July 17, 2006, that gave Scharf absolute ownership and divested all the named defendants of any interest.
Sidney Kanter filed his declaratory judgment action in the Law Division on Aug. 20, 2007, after buying 20 percent of his brother Kenneth’s interest in the property for $20. He named as defendants Scharf, Fernwood and Kenneth, asking the court to declare that he, Kenneth and Fernwood were the sole owners.
Subsequently, Fernwood and Kenneth assigned the rest of their interest to Sidney and got out of the litigation.
While the declaratory action was pending, Scharf moved to reopen the foreclosure to add Sidney Kanter, but Morris County Superior Court Judge Deanne Wilson denied the request because the Law Division had not yet determined whether Sidney had an interest in the property.
During oral argument on the motion, Wilson asked Sidney why he had not appeared in the foreclosure rather than filing the Law Division case.
Sidney, an Irvington solo who handled the matter pro se, answered: “I never had a dog in the fight. We weren’t named. It wasn’t our interest being foreclosed.”
Wilson said that Sidney, rather than Scharf, should be the one trying to open the foreclosure and that she would put in her order denying the motion that Sidney did not want it reopened.
Sidney told Wilson he agreed with the foreclosure and did not challenge it because in his mind, “it did not affect us, we were not parties to the action.”
As the declaratory action moved toward trial in the Law Division, Scharf filed a motion in limine to exclude evidence of Sidney’s ownership, arguing that the foreclosure had settled the issue.
Judge Jared Honigfeld found that the declaratory action amounted to an impermissible collateral attack on a valid Chancery Division judgment, which he lacked jurisdiction to hear.
On Dec. 2, 2011, he dismissed the case without prejudice to Sidney’s ability to move to reopen the foreclosure.
“Because we agree with the sound judgment of the Law Division judge that he lacked jurisdiction to hear this case, we affirm,” Appellate Division Judges Marianne Espinosa and Michael Guadagno wrote in their per curiam opinion.
Sidney was seeking to subvert and supersede the foreclosure judgment after choosing not to intervene in that proceeding, they said.
His argument that his suit was not an attack on the foreclosure because the judgment only impacted the named defendants there ignored the fact that he had acquired his rights through a deed from one of those defendants, said the panel.
Scharf’s lawyer, Michael Mezzacca, says, “If you hold a tax sale certificate or a deed and there’s a foreclosure going on, I don’t think you’re at liberty to sit around and wait for the judgment to be entered.”
Mezzacca, of Hartlaub Dotten Mezzacca & Ko in Summit, says the property is landlocked and the Kanter brothers own the piece of land between it and the road, so future dealings between them are likely.
The house is “wrecked” but “if it could be developed, it might be worth something,” he adds.
Kanter, who is suspended from practice, could not be reached for comment.