Case Title: Richard Simon , Trustee v. Catherine H. Rando , etc., et al.

Citation: 

Docket Number: a-121-04

State: new-jersey

Court: New Jersey Supreme Court

Date: 2007-01-29T00:00:00Z

Document:
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. [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. 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