(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
Argued November 29, 2005 - R eargued September 12, 2006 – Decided January 29, 2007
ALBIN, J., writing for a unanimous Court.
Plaintiffs, Richard Simon and TriState Investments, are tax certificate holders who filed foreclosure
actions. Third-party investor, Cherrystone Bay, LLC, purchased prior tax sale certificates. Both Simon
and TriState rebuffed Cherrystone’s offers to purchase their tax certificates. Without first intervening
in the foreclosure actions, Cherrystone made arrangements to have plaintiffs’ certificates redeemed in
the tax collectors’ offices in the municipalities in which the properties were located.
The tax collectors accepted the monies necessary for redemption of the tax certificates.
In both cases, the trial courts allowed Cherrystone to intervene in the foreclosure
actions after the redemption of the tax certificates, and then approved the redemptions,
thus thwarting plaintiffs from obtaining title in fee simple to the subject properties.
The Appellate Division reversed, finding that Cherrystone’s redemptions were invalid. Simon v. Rando,
374 N.J. Super. 147 (App. Div. 2005). The Supreme Court granted certification.
HELD: A third-party investor who acquires prior tax certificates in the post-foreclosure complaint
stage and fails to intervene in the foreclosure proceeding commenced by holders of
the subsequently issued tax certificates is barred from participating in the redemption process.
1. The Court affirms the Appellate Division’s decision substantially for the reasons given
in Judge Grall’s opinion with the following caveat. The appellate panel relied on
certain broad pronouncements in Wattles v. Plotts,
120 N.J. 444 (1990), which condemned
intermeddling by third-party investors in the tax sale process. In Simon v. Cronecker,
__ N.J. __ (2007), the Court rejects the view suggested in Wattles that
after the filing of a foreclosure action a third-party investor who purchases property
for more than nominal consideration and properly intervenes in the action may be
barred from redeeming a tax sale certificate on public policy grounds. Cronecker explains
that a third-party investor must intervene in the foreclosure action before attempting to
redeem the certificate at the tax collector’s office. (pp. 5-6)
2. The reasoning in Cronecker applies with equal force when a third-party investor
purchases prior tax sale certificates. A prior tax sale certificate is an interest
in land pursuant to the Tax Sale Law. Therefore, in the post-foreclosure complaint
period, the prior tax certificate must be purchased for more than nominal consideration
by a third-party investor. (pp. 6-7)
3. Accordingly, after purchasing the prior tax certificates for more than nominal consideration,
had Cherrystone timely intervened in the tax sale foreclosure action, with the court’s
approval it then could have redeemed plaintiffs’ subsequently acquired tax certificates. (pp. 7-8)
4. Cherrystone should not benefit from its failure to intervene in the foreclosure
actions. Plaintiffs are to reimburse Cherrystone for any payments made to the holders
of the prior tax sale certificates and accepted by the tax collectors. (p.
8)
The judgment of the Appellate Division is AFFIRMED and REMANDED.
JUSTICES LAVECCHIA, ZAZZALI, WALLACE and RIVERA-SOTO join in JUSTICE ALBIN’s opinion. JUSTICE LONG
did not participate.
SUPREME COURT OF NEW JERSEY
A-121/
122 September Term 2004
RICHARD SIMON, TRUSTEE,
Plaintiff-Respondent,
v.
CATHERINE H. RANDO, unmarried, ROBERT A. CORKHILL, unmarried, HARMONIA SAVINGS BANK, n/k/a SOVEREIGN
BANK, CARF REALTY, 1997, L.L.C. and FUNB CUSTODIAN FOR D. & H. ASSOCIATES,
Defendants,
and
CHERRYSTONE BAY, LLC,
Intervenor-Appellant.
TRI STATE INVESTMENTS,
Plaintiff-Respondent
v.
ARSENIO E. ISASI, AIDA J. ISASI, FRANKLIN CREDIT MANAGEMENT CORPORATION, FIRST DEPOSIT NATIONAL
BANK, MARTIN MEDVIN, VICKY MEDVIN and STATE OF NEW JERSEY,
Defendants,
and
CHERRYSTONE BAY, LLC,
Intervenor-Appellant.
Argued November 29, 2005 – Reargued September 12, 2006 – Decided January 29, 2007
On certification to the Superior Court, Appellate Division, whose opinion is reported at
374 N.J. Super. 147 (2005).
Robert W. Keyser argued the cause for intervenor-appellant (Kaplin Stewart Meloff Reiter &
Stein, attorneys; Mr. Keyser, Lisa A. Buckalew and Anthony L. Velasquez, on the
briefs).
Keith A. Bonchi argued the cause for respondents (Goldenberg, Mackler, Sayegh, Mintz, Pfeffer,
Bonchi & Gill, attorneys).
Adam D. Greenberg and Robert N. Wright, Jr., submitted a brief on behalf
of amici curiae New Jersey State League of Municipalities and the Tax Collectors
and Treasurers Association of New Jersey (Honig & Greenberg, attorneys).
JUSTICE ALBIN delivered the opinion of the Court.
In Simon v. Cronecker, ___ N.J. ___ (2007), decided today, we held that
“the Tax Sale Law does not prohibit a third-party investor from redeeming a
tax sale certificate after the filing of a foreclosure action, provided that the
investor timely intervenes in the action and pays the property owner more than
nominal consideration for the property.” Id. at ___ (slip op. at 5). Thus,
in the post-foreclosure complaint period, unless the third-party investor who acquires an interest
in the subject property first receives court approval, the investor has no right
to participate, directly or indirectly, in the redemption of a tax certificate. Id.
at ___ (slip op. at 42-45). In Cronecker, the third-party investor, Cherrystone Bay,
LLC (Cherrystone), contracted to purchase properties from owners facing foreclosure based on unredeemed
tax sale certificates. Because Cherrystone “did not seek to become a party to
the action before arranging for the redemption of the tax certificates” in violation
of the Tax Sale Law, we voided Cherrystone’s contracts and “impose[d] constructive trusts
in favor of defendant property owners, granting [the tax certificate holders] the opportunity
to assume Cherrystone’s contractual rights.” Id. at ___ (slip op. at 45-46). The
consolidated appeals before us present a factual variation of the theme in Cronecker.
For purposes of these appeals, an abbreviated factual history will suffice; a detailed recitation may be found at Simon v. Rando, 374 N.J. Super. 147, 150-52 (App. Div. 2005). In the present cases, third-party investor Cherrystone entered the scene after plaintiffs Richard Simon and TriState Investments, the tax certificate holders, waited more than the two-year period required in N.J.S.A. 54:5-86 and filed actions to foreclose on their tax certificates. Id. at 150-51. Instead of purchasing the subject properties, as it did in Cronecker, here Cherrystone purchased prior tax sale certificates. Id. at 151. Under N.J.S.A. 54:5-54, a holder of a prior tax sale certificate is authorized to redeem a subsequently issued tax sale certificate. The holder of the prior certificate may then file a foreclosure action to acquire the subject property in fee simple. N.J.S.A. 54:5-86 to -87.
Both plaintiff Simon and plaintiff TriState rebuffed Cherrystone’s offers to purchase their tax certificates. Id. at 151-52. Without first intervening in the foreclosure actions, Cherrystone made arrangements to have plaintiffs’ certificates redeemed in the tax collectors’ offices in the municipalities in which the properties were located. Ibid. The tax collectors in both cases accepted the monies necessary for redemption of the tax certificates. Ibid. In both cases, the trial courts ultimately allowed Cherrystone to intervene in the foreclosure actions after the redemption of the tax certificates, and then approved the redemptions, thus thwarting plaintiffs from obtaining title in fee simple to the subject properties. Ibid.
The Appellate Division reversed, in a thorough and well-reasoned opinion written by Judge Grall, finding that Cherrystone’s redemptions were invalid. Id. at 157-59. The appellate panel held that “one who redeems an interest acquired post-complaint, without first applying for admission to the action, has not made a valid redemption in the cause.” Id. at 158. We granted certification. 183 N.J. 585 (2005).
We now affirm substantially for the reasons given by Judge Grall with the following caveat. The appellate panel relied on certain broad pronouncements in Wattles v. Plotts, 120 N.J. 444, 450-53 (1990), which condemned intermeddling by third-party investors (described as heir hunters) in the tax sale foreclosure process. In Cronecker, supra, we rejected the view suggested in Wattles that after the filing of a foreclosure action a third-party investor who purchases property for more than nominal consideration and properly intervenes in the action may be barred from redeeming a tax sale certificate on public policy grounds. ___ N.J. at ___ (slip op. at 31).
As more fully explained in Cronecker, a third-party investor, such as Cherrystone, must intervene in the foreclosure action before attempting to redeem the certificate at the tax collector’s office. Id. at ___ (slip op. at 42-45). That follows from a plain reading of the relevant sections of N.J.S.A. 54:5-89.1 and 54:5-98. Specifically, N.J.S.A. 54:5-98 states 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 such actions redemption shall be made in the action only, provided notice of the action has been filed in the tax collector’s office.”). A third-party investor’s obligation to intervene in the action becomes even clearer in conjunction with N.J.S.A. 54:5-89.1. That statute provides in pertinent part:
No person, however, shall be admitted as a party to such action, nor shall he have the right to redeem the lands from the tax sale whenever it shall appear that he has acquired such interest in the lands for a nominal consideration after the filing of the complaint . . . .
[N.J.S.A. 54:89.1.]
In Cronecker, we observed that “[i]n enacting N.J.S.A. 54:5-89.1, the Legislature
intended to
extend judicial scrutiny to financial arrangements between third-party investors and property owners during
the post-foreclosure complaint period.” Id. at ___ (slip op. at 31). We held
that “[t]he purpose of N.J.S.A. 54:5-89.1 is not to bar third-party investors from
helping property owners in desperate need of financial assistance, but rather to ensure
that the third-party investors do not exploit vulnerable owners by offering only nominal
consideration for their property interests.” Id. at ___ (slip op. at 31). We
find that reasoning applies with equal force when a third-party investor purchases prior
tax sale certificates. That is so because a prior tax sale certificate is
an interest in land pursuant to N.J.S.A. 54:5-31 to -32, -46. Therefore, in
the post-foreclosure complaint period, the prior tax certificate too must be purchased for
more than nominal consideration by a third-party investor. See N.J.S.A. 54:5-89.1.
Accordingly, after purchasing the prior tax certificates for more than nominal consideration, had
Cherrystone timely intervened in the tax sale foreclosure action, with the court’s approval
it then could have redeemed plaintiffs’ subsequently acquired tax certificates. As we said
in Cronecker:
We are presented with commercial competitors, one claiming to advance society’s interest in
collecting taxes from tax-dormant properties and the other claiming to champion the right
of owners to freely sell their properties. These
sophisticated
investors are clearly capable
of looking after their own interests. See Brunswick Hills Racquet Club, Inc. v.
Route 18 Shopping Ctr.,
182 N.J. 210, 230 (2005) (“We are not eager
to impose a set of morals on the marketplace. Ordinarily, we are content
to let experienced commercial parties fend for themselves . . . .”). In
pursuing their self-interests to maximize their profits, the parties make possible the achievement
of socially desirable objectives. Provided the parties comply with the dictates of the
Tax Sale Law and other relevant laws, this Court is loath to intervene
in the self-regulating forces of the marketplace, particularly when competition will result in
protecting a property owner’s interest from forfeiture.
[Id. at ___ (slip op. at 33-34).]
The logic of the marketplace is no less persuasive when the property
interests acquired by a third-party investor, such as Cherrystone, are prior tax sale
certificates. Tax certificate holders, such as plaintiffs, who want to foreclose on their
certificates and acquire title to the property without fear of intermeddling by the
likes of a Cherrystone, can simply offer to purchase the interests of the
prior tax certificate holders first. See id. at ___ (slip op. at 35).
Thus, subsequent tax certificate holders have the means to protect their interests from
competitors.
We agree with the appellate panel that Cherrystone should not benefit from its failure to redeem the tax certificates without first having intervened in the foreclosure actions. We therefore affirm the Appellate Division in both cases and remand for entry of foreclosure judgments in favor of plaintiffs, but require plaintiffs to reimburse Cherrystone for any payments made to the holders of the prior tax sale certificates and accepted by the tax collectors. See Rando, supra, 374 N.J. Super. at 159.
JUSTICES LaVECCHIA, ZAZZALI, WALLACE and RIVERA-SOTO join in JUSTICE ALBIN’S opinion. JUSTICE LONG did not participate.
SUPREME COURT OF NEW JERSEY
NO. A-121/122 SEPTEMBER TERM 2004
ON CERTIFICATION TO Appellate Division, Superior Court
RICHARD SIMON, TRUSTEE
Plaintiff-Respondent,
v.
CATHERINE H. RANDO,
unmarried, ROBERT A.
CORKHILL, unmarried, HARMONIA
SAVINGS BANK, n/k/a SOVEREIGN
BANK, CARF REALTY, 1997,
L.L.C. and FUNB CUSTODIAN FOR
D. & H. ASSOCIATES,
Defendants,
and
CHERRYSTONE BAY, LLC,
Intervenor-Appellant.
DECIDED January 29, 2007
Justice LaVecchia PRESIDING
OPINION BY Justice Albin
CONCURRING/DISSENTING OPINIONS BY
DISSENTING OPINION BY
CHECKLIST