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189 N.J. 345 (2007), which address the rights of third-party investors in the context of redeeming tax sale certificates
after a foreclosure action has been initiated. The holdings in these cases control the outcome of this appeal and
impel us to reverse the order under review and remand for further proceedings. "> Original Wordprocessor
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(NOTE: The status of this decision is Unpublished.)
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NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2755-06T12755-06T1
KENNETH KANTER,
Plaintiff-Respondent,
v.
KAROL SZCZEPANIK, his heirs, devisees,
personal representatives and their
or any of their successors in right,
title and interest; DORATA SZCZEPANIK;
and the STATE OF NEW JERSEY,
Defendants.
CHERRYSTONE BAY, LLC,
Intervenor-Appellant.
Argued: March 5, 2008 - Decided:
Before Judges Axelrad and Sapp-Peterson.
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On appeal from the Superior Court of New Jersey, Bergen County, Chancery Division,
Docket No. F-20107-05.
Anthony L. Velasquez argued the cause for appellant.
Keith A. Bonchi argued the cause for respondent Kenneth Kanter (Goldenberg, Mackler,
Sayegh, Mintz, Pfeffer, Bonchi & Gill, attorneys; Mr. Bonchi, on the brief).
Steven W. Griegel argued the cause for respondent Jolanta Szczepanik (Roselli Griegel,
P.C., attorneys; Mr. Griegel, on the brief).
PER CURIAM
This is an appeal by a third-party investor, Cherrystone Bay, LLC, from an order denying its motion to stay entry of
the final judgment in the tax sale certificate foreclosure initiated by plaintiff, Kenneth Kanter, and to intervene and
redeem; and denial of its motion for reconsideration. During the pendency of this appeal, the Supreme Court
rendered its decisions in Simon v. Cronecker, 189 N.J. 304 (2007), Simon v. Rando, 189 N.J. 339 (2007), and
Malinowski v. Jacobs, 189 N.J. 345 (2007), which address the rights of third-party investors in the context of
redeeming tax sale certificates after a foreclosure action has been initiated. The holdings in these cases control the
outcome of this appeal and impel us to reverse the order under review and remand for further proceedings.
Plaintiff is the assignee of a tax sale certificate sold by the City of Garfield in November 2003 for unpaid municipal
taxes against the property located at l3 Franklin Avenue, whose record owners were Karol and Maria Szcepanik.
Maria died around l992-l993 and Karol died intestate in l997. The property apparently has been vacant since 1997.
On December 3, 2005, plaintiff filed a tax foreclosure action. In an amended complaint, plaintiff named the
Szcepanik's five children: Dorota, Jolanta, Edward, and Marian, who were served in New Jersey, and Zofia, who was
served in Poland. On August 1, 2006, an order setting the amount, time and place for redemption was entered. The
redemption amount was set at $21,374.35, together with taxed costs of $420.12. The redemption date was
September l8, 2006.
On September 11, 2006, Cherrystone contracted with "Jolanta Szcz[e]panik, individually and as proposed
administratrix of the estate of Karol and Maria Szczepanik" to purchase the property for $80,000, of which $30,000
was earmarked as redemption funds. Jolanta's sister Dorota witnessed the contract. Closing was scheduled within
fifteen days after entry of a court order granting buyer's intervention and permitting the redemption. On September
l4, Cherrystone recorded the contract and filed a motion to stay entry of final judgment of foreclosure, to obtain the
court's approval to intervene, and consummate the sale and redeem at the closing. Jolanta filed a cross-motion
seeking the same relief.
Plaintiff filed a cross-motion to enter final judgment. Plaintiff argued Cherrystone's motion was untimely; the public
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policy against heir-hunting prevented the court from allowing intervention and redemption; Cherrystone had no
standing to move to intervene as it did not have a recorded interest as required by 382 N.J. Super. 201, 209, 887
A.2d 1203 (Ch. Div. 2005), appeal dismissed per stipulation, 186 N.J. 598, 897 A.2d 1055 (2006). A property owner
may finance the redemption from any source and sell his interest for any amount to any person.
After the filing of the foreclosure complaint, however, both the property's sale and the
redemption procedure are subject to court supervision, primarily to protect property
owners from exploitation by third-party investors. N.J.S.A. 54:5-89.1, -98; see Cherokee
Equities, supra, 382 N.J. Super. at 209, 887 A.2d 1203. The Act recognizes that a
property owner who has not redeemed a tax certificate by the time a foreclosure action
has commenced is likely in desperate financial circumstances and therefore vulnerable
to the manipulation of overbearing speculators. To facilitate judicial review of the
adequacy of the consideration offered to the owner, the Act requires that third-party
investors who seek either directly or indirectly to acquire the property and redeem the
tax sale certificate intervene in the foreclosure action. See Simon v. Rando, 374 N.J.
Super. 147, 154, 863 A.2d 1078 (App. Div. 2005), aff'd, 189 N.J. 339, 915 A.2d 509, 2 007
WL 208515 (2007).
[Cronecker, supra, 189 N.J. at 320.]
The Court held contract purchasers not only have standing to intervene, but are mandated to intervene and seek
judicial review before they can consummate a sale where redemption of a tax lien is paid, stating:
Both the applicable statutes and court rule clearly require that after the filing of a
foreclosure action, a person seeking to redeem a tax certificate must be a party to that
action.
N.J.S.A. 54:5-98 provides that "[a]fter the complaint has been filed redemption shall be
made in that cause only, provided notice of the suit has been filed in the office of the
tax collector." (emphasis added); see also R. 4:64-6(b) ("In [tax sale certificate
foreclosure] actions redemption shall be made in the action only, provided notice of
the action has been filed in the tax collector's office."). In the post-foreclosure complaint
stage, the requirement that a person, directly or indirectly, seeking to redeem a tax
certificate "be admitted as a party to such action" permits judicial oversight of the
adequacy of consideration offered for the property interest. 863 A.2d 1078.
By forbidding an interested investor, who is not a party to the foreclosure action from
"indirectly" seeking redemption, we intend to interdict the myriad machinations that a
creative mind might devise to elude the Tax Sale Law. For example, a third-party
investor who does not intervene in the action, but who enters into a contract to
purchase the subject property, fronts the funds necessary to redeem a tax certificate,
and schedules the closing for after the redemption date violates N.J.S.A. 54:5-89.1.
Because the investor upon entering into a contractual arrangement has an equitable
interest in the property, he must intervene in the foreclosure action to allow a judicial
determination that more than nominal consideration was paid for the property. See
Feighner v. Sauter, 259 N.J. Super. 583, 592, 614 A.2d 1071 (App. Div. 1992) (noting that
"upon execution of contract of sale, an equitable transfer occurs").
[Id. at 335-36.]
The court clearly set forth the procedure that "[a]ny person not named in the complaint must move to intervene in
the action [and] [w]ithout the court's approval, that person is not entitled to redeem the tax certificate." Id. at 336. It
elaborated:
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[I]f the third-party investor properly intervenes and satisfies the court that more than
nominal consideration has been offered for the property interest, then the court can
issue an order making the investor a party to the foreclosure action. With that order and
appropriate notice to the tax collector, the intervenor can then redeem the tax
certificate.
[Id. at 337.]
Thus the law now requires a contract purchaser who seeks to buy a property in tax foreclosure to file an
intervention motion before the sale and redemption since they are deemed the "indirect" redeeming party who
must be admitted "to the cause":
In conclusion, we hold that after the filing of a tax sale foreclosure action, a third-party
investor who acquires a property interest subject to the action must intervene to
establish that he has offered more than nominal consideration for the interest. With the
court's approval, the investor then may redeem or assist in the redemption of the tax
certificate. Without leave of court, the investor has no right to participate, directly or
indirectly, in the redemption process.
[Id. at 338.]
Cherrystone argues on appeal that Cronecker rejected all of the arguments plaintiff made to the motion judge.
Specifically, it contends: (1) its motion to intervene was filed prior to final judgment and was therefore timely; (2) as
a contract purchaser it has standing to intervene and, in fact, is required to do so; (3) the law permits buyers to
solicit owners and purchase their properties for more than "nominal consideration"; and (4) the Corestates windfall
profits test has been expressly rejected in favor of the flexible Cronecker nominal consideration analysis. Appellant
seeks reversal of the trial court's ruling denying it standing to intervene. It further argues its $80,000 purchase price
exceeds nominal consideration as it will yield a net gain of approximately $59,000 to the owner after satisfaction of
plaintiff's tax lien, and urges us to exercise original jurisdiction, R. 2:10-5, and grant its motion to consummate the
sale and redeem at the closing. Alternatively, appellant seeks a reversal and remand. The property owner urges us
to exercise original jurisdiction as to the nominal consideration issue.
Plaintiff responded in its brief that Cherrystone's application to redeem was untimely because it was filed "at the
last minute," i.e., four days before the last day to redeem and not returnable until thirty days after the last day to
redeem, although this ground was not advanced at oral argument. At oral argument plaintiff's counsel asserted two
grounds for affirming the trial court's denial of standing to Cherrystone, which he contends withstands the
Cronecker decision. Plaintiff challenges the enforceability of the contract, contending Jolanta did not have the legal
authority as she had not been appointed Administratrix prior to entering into the contract with Cherrystone.
Alternatively, Plaintiff argues the language in Cronecker requiring intervention by contract purchasers with
equitable interests in the property is dicta because the third-party investor in Cronecker closed on both properties
prior to moving to intervene and thus had legal rights in the properties. He contends that applying Cronecker's
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holding to a contract purchaser such as Cherrystone who has not consummated the sale at the time of the
intervention motion, and thus does not hold a legal interest in the property, conflicts with the language and strict
construction of the redemption statute. N.J.S.A. 54:5-54 ("Except as hereinafter provided, the owner, his heirs, holder
of any prior outstanding tax lien certificate, mortgagee, or occupant of land sold for municipal taxes . . . may redeem
it at any time until the right to redeem has been cut off . . .                                                           ."); see also Caput Mortuum, L.L.C. v. S & S Crown Servs.,
Ltd., 366 N.J. Super. 323 (App. Div. 2004) (holding a judgment creditor was not entitled to redeem tax sale certificate
as equitable owner; the redemption statute provided exclusive statutory right to redeem a tax sale certificate to an
enumerated group). Plaintiff urges that if we reject either of his standing arguments, we remand for further
proceedings for the trial court to perform a nominal consideration analysis under Cronecker.
We reject plaintiff's argument that Cronecker's holding regarding standing applies only to contract purchasers who
have consummated sales and that the entire discussion regarding contract purchasers with equitable interests is
merely dicta. The decision's entire focus is on protecting property owners facing foreclosure of tax sale certificates
from exploitation by third-party investors, which is accomplished by court supervision of "both the property's sale
and the redemption proceeding." See Cronecker, supra, 189 N.J. at 320. The Court was concerned with the
contractual arrangement, which gave the investor an equitable interest in the property, triggering the need for
judicial review of whether "more than nominal consideration has been offered for the property interest[.]" See id. at
336-37 (emphasis added); see also id. at 320 ("the Act requires that third-party investors who seek either directly or
indirectly to acquire the property and redeem the tax sale certificate [must] intervene in the foreclosure action")
(emphasis added). That the third-party investor closed on the properties prior to filing the intervention motion was
of no consequence to the Court's decision. This is apparent from the Court's summation of its holding, which does
not reference the consummated sale or Cherrystone's legal interest in the property. "[W]e hold that after the filing of
a tax sale foreclosure action, a third-party investor who acquires a property interest subject to the action must
intervene to establish that he has offered more than nominal consideration for the interest." Id. at 338 (emphasis
added). In view of the Court's broad statement of law, it would be illogical to conclude that the Croneker holding is
limited to that specific fact pattern.
We are satisfied Cronecker mandates a contract purchaser to intervene in a foreclosure action and seek judicial
review before it consummates a sale where redemption of a tax lien is paid. Such third-party investor with an
equitable interest in the property clearly has an interest in the property as required for intervention under the court
rules, R. 4:33-1 and R. 4:33-2, and the intervention provision of the Tax Sale Law, N.J.S.A. 54:5-89.1. This holding is
not inconsistent with N.J.S.A. 54:5-54, which enumerates those entitled to redeem tax sale certificates. As we noted
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in Simon v. Rando, 374 N.J. Super. 147, 153-54 (App. Div. 2005), N.J.S.A. 54:5-54 controls prior to the filing of a
foreclosure complaint ("Except as hereinafter provided . . ."), but the statutes governing actions to foreclose tax sale
certificates, such as N.J.S.A. 54:5-98 and N.J.S.A. 54:5-89.1, provide separate rules for redemption during the
pendency of a foreclosure action, aff'd, 189 N.J. 339 (2007).
We are satisfied Cronecker conferred standing on Cherrystone and, in fact, mandated the action it took in this case.
As a contract purchaser, Cherrystone was required to move to intervene in plaintiff's foreclosure action so the court
could review whether the proposed purchase was for more than nominal consideration. Moreover, Cherrystone
timely filed its application prior to the entry of the final judgment. See Town of Phillipsburg v. Block, 380 N.J. Super.
159, 171 (App. Div. 2005) ("Prior to judgment, the holder of a tax sale certificate who has an unconditional right to
redeem must be permitted to intervene in a tax sale foreclosure action."); see also Cronecker, supra, 189 N.J. at 311
(permitting redemption where the third-party investor "timely" intervenes in the action).
We need not address the issues raised by plaintiff as to whether Jolanta had the authority to bind the other heirs as
the "proposed administratix." Suffice it to say that as an heir with at least a twenty-percent interest in the property,
she has the right to redeem and to enter into a contract to sell her interest. We further note Jolanta sought to have
the contract upheld and enforced at all stages of the proceeding.
We thus reverse the trial court's ruling that Cherrystone had no standing to intervene. We decline to exercise
original jurisdiction and remand to the trial court for further proceedings to determine whether the $80,000
purchase price offered by Cherrystone constitutes more than nominal consideration within the Cronecker
parameters. The court shall receive such additional evidence as it deems appropriate to determine this issue.
Reversed and remanded.
Corestates/N.J. Nat'l Bank v. Charles Schaefer Sons, Inc., 386 N.J. Super. 554 (App. Div. 2006), rev'd and remanded,
189 N.J. 644 (2007).
(continued)
(continued)
14
A-2755-06T1
April 4, 2008
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