327 A.3d 1177
N.J.2025Background
- Alessandro Roberto owned a property in Paterson, NJ, estimated to be worth up to $535,000, but owed $606 in unpaid sewer taxes.
- The City of Paterson sold tax liens on the property, purchased by 257-261 20th Avenue Realty, LLC (the plaintiff) at public auction.
- After Roberto failed to redeem the property or answer a foreclosure complaint, the court entered judgment transferring title to the plaintiff; property equity far exceeded the debt owed.
- Roberto moved to vacate the judgment, arguing he posted $50,000 in escrow and that the property held significant equity vital for his retirement.
- While the appeal was pending, SCOTUS decided Tyler v. Hennepin County, holding similar surplus-property-forfeiture unconstitutional.
- The New Jersey Supreme Court addressed whether New Jersey’s Tax Sale Law (TSL), pre-2024 amendment, violated the federal Takings Clause by allowing forfeiture of equity beyond unpaid taxes.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does NJ law recognize a property right to surplus equity? | NJ law does not recognize a property right to surplus equity. | NJ law, like other foreclosure contexts, protects surplus equity for owners. | NJ law recognizes a property right to surplus equity. |
| Are private lienholders state actors under TSL? | Private lienholders are not state actors; thus, no constitutional issue arises. | Lienholders act jointly with governments in tax collection—a public function. | Lienholders performing tax foreclosures under TSL are state actors. |
| Is the taking for a public use? | Surplus taken is not for public use, so Takings Clause is not implicated. | TSL serves public purpose (tax collection); surplus taken still for public use. | The taking is for a public use (tax collection); Takings Clause applies. |
| Is the pre-2024 TSL unconstitutional under Tyler? | TSL is constitutional; any new law should be applied prospectively only. | Forfeiture of surplus in excess of tax debt is an unconstitutional taking. | Pre-2024 TSL is unconstitutional as applied here for forfeiting surplus equity. |
Key Cases Cited
- Tyler v. Hennepin County, 598 U.S. 631 (2023) (forfeiture of surplus equity in tax foreclosure as an unconstitutional taking under the Fifth Amendment)
- Lugar v. Edmondson Oil Co., 457 U.S. 922 (1982) (private parties can be state actors in certain contexts)
- Harper v. Virginia Dep't of Taxation, 509 U.S. 86 (1993) (federal constitutional decisions are retroactive to cases on direct review)
- Reynoldsville Casket Co. v. Hyde, 514 U.S. 749 (1995) (state courts must give full retroactivity to federal constitutional rulings on direct review)
- Manhattan Cmty. Access Corp. v. Halleck, 587 U.S. 802 (2019) (framework for determining state action by private entities)