Title: Richard Simon , Trustee v. Richard William Cronecker , etc., et al.
Citation: N/A
Docket Number: a-105-05
State: new-jersey
Issuer: new-jersey Supreme Court
Date: January 29, 2007

This matter concerns two consolidated appeals, Simon v. Cronecker and Grivas v. Smythe. In Simon v. Cronecker, Sea Isle City put up for bid a tax sale certificate on four lots owned by Mary E. Ross. The successful bidder, Richard Simon, purchased the tax sale certificate valued at $4,841.40. In 2003, Simon filed an action to foreclose on the tax certificate. Through a search of public records, Cherrystone Bay, LLC, the intervenor in this case, learned of Simon s foreclosure complaint. It contracted to purchase Ross s property interest for $250,000. Cherrystone and Ross closed on the property on August 22, 2005, the last day to redeem the tax sale certificate. Ross delivered a cashier s check to the tax collector s office to redeem the tax sale certificate. Up to that point, Cherrystone had not sought to intervene in the foreclosure action. Although the tax collector accepted the redemption check, Simon refused to surrender the tax sale certificate. Simon then filed a motion to bar redemption of the tax sale certificate. In response, Cherrystone for the first time moved to intervene in the foreclosure action. An appraisal valued the Ross property at approximately $1,200,000. In Grivas v. Smyth, the City of Wildwood put up for bid a tax certificate on property owned by defendant Smyth family. First Union National Bank purchased the tax certificate valued at $2,893.59, which was later assigned to Nicholas Grivas. In January, 2004, Grivas filed a complaint to foreclose on the tax certificate. Cherrystone contracted with the Smyths to purchase the property for $200,000 and closed on it before the redemption date for the tax sale certificate. Although the tax collector accepted the redemption check, Grivas refused to release the tax sale certificate and discharge the lien on the property. Grivas moved to bar the redemption and Cherrystone cross-moved to compel Grivas to discharge the tax lien. A real estate broker s opinion letter valued the property between $325,000 and $350,000. The Chancery Division permitted Cherrystone to intervene and approved of the redemption of the tax sale certificates. Simon and Grivas appealed. While their cases were pending before the Appellate Division, the Supreme Court granted direct certification pursuant to R. 2:12-1. HELD: The Tax Sale Law, N.J.S.A. 54:5-1 to -137, 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. Because Cherrystone did not satisfy the procedural requirements of the Tax Sale Law, the Court imposes constructive trusts in favor of defendant property owners, granting the tax certificate holders the opportunity to assume Cherrystone s contractual rights. 1. The Tax Sale Law was created to facilitate the collection of property taxes by municipalities. The sale of a tax certificate is a conditional conveyance of property to the purchaser, subject to a person with a property interest having the right to redeem the certificate. Unless redemption occurs, a purchaser who forecloses on the tax certificate becomes the owner of the property in fee simple. (p. 16). 2. Although the primary purpose of the Tax Sale Law is to encourage the purchase of tax certificates, another important purpose is to give the property owner the opportunity to redeem the certificate and reclaim his land. (pp. 16-18) 3. After the filing of the foreclosure complaint, both the property s sale and the redemption procedures are subject to court supervision, primarily to protect property owners from exploitation by third-party investors. To facilitate judicial review of the adequacy of the consideration offered to the owner, the Tax Sale Law 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. N.J.S.A. 54:5-98 and -89.1 require judicial scrutiny of a third-party investor after the foreclosure complaint s filing. (pp. 18-23) 4. To the extent that Wattles v. Plotts, 120 N.J. 444 (1990) suggests a violation of public policy when a third-party investor offers more than nominal consideration for the property interest of an owner facing foreclosure, the Court rejects that view. In 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. The purpose of the statute 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. (pp. 23-31) 5. 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, the 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. The Court has no reason to believe that the overall marketability of tax sale certificates will be lessened by this holding, which simply articulates the rights accorded by the Legislature to both tax certificate holders and property owners. In sum, the Court acknowledges that the primary goal of the Tax Sale Law is to encourage the sale of tax certificates. (pp. 31-36) 6. In determining whether Cherrystone offered more than nominal consideration for the Ross and Smyth properties, the Court adopts a more flexible, under-all-the-circumstances approach that will keep the focus on the benefit to the property owner facing forfeiture of his land. The court may consider a number of factors, including the amount received by the owner in comparison to the property s fair market value and to his equity in the property or the windfall profit to be made by a third-party. A court should rightly be reluctant to strike-down a third-party financing arrangement that will provide some meaningful monetary relief to the property owner. In the end, more than nominal consideration means consideration that is not insubstantial under all the circumstances; it is an amount, given the nature of the transaction that is not unconscionable. In Simon, the property owner was left, in hand, with $63,422.77. In Grivas, the property owner was left, in hand, with $90,623.48. On its face, it appears that the trial court was correct in finding that the consideration in both was more than nominal. (pp. 36-41) 7. Before redeeming or causing to be redeemed the tax certificate, Cherrystone had the duty to apply for admission to the foreclosure actions. Cherrystone did not have a right to tender funds to the tax collector without prior judicial authorization. Cherrystone s failure to follow the clear dictates of the Tax Sale Law and the court rules renders any redemption or attempted redemption invalid. (pp. 41-45) 8. Cherrystone will not be permitted to benefit from the purchase of the Ross and Smyth properties. But neither will the Court permit the property owners to suffer as a result of Cherrystone s procedural defaults. The appropriate remedy is to impose constructive trusts on Cherrystone s rights under its contracts with the property owners. The certificate holders will be allowed to succeed to Cherrystone s rights, after reimbursing Cherrystone for any monies expended redeeming the tax certificates and for the purchase price of the properties. In the event the certificate holders decline to do so, the constructive trusts will be vacated and the contractual rights will revert back to Cherrystone. (pp. 45-46) The judgment of the Chancery Division is REVERSED and REMANDED for further proceedings consistent with this opinion. JUSTICES LAVECCHIA, ZAZZALI, WALLACE and RIVERA-SOTO join in JUSTICE ALBIN s opinion. JUSTICE LONG did not participate. SUPREME COURT OF NEW JERSEY A-105/ 106 September Term 2005 RICHARD SIMON, TRUSTEE, Plaintiff-Appellant, v. RICHARD WILLIAM CRONECKER, his heirs, devisees and personal representatives, and their or any of their successors in right, title and interest; MRS. RICHARD WILLIAM CRONECKER; EMMETT W. ROSS, his heirs, devisees and personal representatives, and their or any of their successors in right, title and interest; HELOISE B. LEVIT and SUSAN FISCH, Individually and As Executrices of the Estate of Claire Bertman, Deceased; LUPE H. SYNDER, Individually and As Executrix of the Estate of Franklyn R. Snyder, Deceased; PAULINE M. CASSEL a/k/a PAULINE MOOCK CASSEL; PAUL C. MOOCK, JR., Individually and As Executor of the Estate of Margaret S. Moock, Deceased; RONALD SMITH and LOIS SMITH, his wife; SAMUEL W. NEWMAN, ESQUIRE, Executor of the Estate of Blanche B. Moock, Deceased; C. HOWARD MOOCK, his heirs, devisees and personal representatives and their or any of their successors in right, title and interest; CLARK S. REESE, Individually and As Executor of the Estate of Elizabeth R. Moock, Deceased; ANNIE LANGENFELD; JOSEPHINE M. ROSS; FUNB-CUSTODIAN FOR FUNDCO, INC.; STATE OF NEW JERSEY; UNKNOWN OWNERS/UNKNOWN CLAIMANTS, their heirs, devisees and personal representatives, and their or any of their successors in right, title and interest, Defendants, and CHERRYSTONE BAY, LLC, Intervenor-Respondent. NICHOLAS GRIVAS, Plaintiff-Appellant, v. LORETTA SMYTH and RICHARD SMYTH, her husband, Defendants-Respondents, and FLORENCE BARILOTTI and GEORGE BARILOTTI, her husband; HELEN CIANDRA and FURIO CIANDRA, her husband, their heirs, devisees and personal representatives, and their or any of their successors in right, title and interest; JOSEPHINE MARENGO, widow; JOHN BARLETTO and ROSE BARLETTO, his wife; PAUL BARLETTO and JULIA BARLETTO, his wife; STATE OF NEW JERSEY; BUREAUS INVESTMENT GROUP #4 LLC and HARRY TINI, Defendants, and CHERRYSTONE BAY, LLC, Intervenor-Respondent. Argued September 12, 2006 Decided January 29, 2007 On certification to Superior Court, Chancery Division, Cape May County. Keith A. Bonchi argued the cause for appellants (Goldenberg, Mackler, Sayegh, Mintz, Pfeffer, Bonchi &amp; Gill, attorneys). Anthony L. Velasquez argued the cause for intervenor-respondent Cherrystone Bay, LLC in (A-105-05) Simon v. Cronecker. Steven W. Griegel argued the cause for respondents Loretta Smyth and Richard Smyth (Roselli Griegel, attorneys). Maeve E. Cannon argued the cause for intervenor-respondent Cherrystone Bay, LLC in (A-106-05) Grivas v. Smyth (Hill Wallack, attorneys; Mark K. Smith, on the brief). JUSTICE ALBIN delivered the opinion of the Court. In the two consolidated appeals before us, plaintiffs are holders of tax sale certificates covering the unpaid municipal taxes and charges on defendants properties. Plaintiffs have instituted actions to foreclose on the tax certificates, and defendants stand to lose their properties unless they can redeem those certificates within the time prescribed by law. A third-party investor contracted to purchase defendants properties and arranged for the redemption of the tax certificates, without intervening first in the foreclosure action. Plaintiffs claim that the eleventh-hour intermeddling by the third-party investor, frustrating their efforts to foreclose on defendants properties, violates the Tax Sale Law and this Court s decisions in Bron v. Weintraub, 42 N.J. 87 (1964) and Wattles v. Plotts, 120 N.J. 444 (1990). They reason that thwarting the foreclosure action will diminish the market for tax certificates and thus increase the number of untaxed properties on the rolls of municipalities. Defendants and the third-party investor respond that property owners have both a statutory and constitutional right to sell their property, as defendants did here for substantial consideration. They contend that their contractual arrangements for redeeming the tax certificates will avert an unwarranted forfeiture of all of defendants equity in their properties. The trial court permitted the redemption of the tax certificates, finding that the third-party investor paid significant consideration for defendants properties. We granted direct certification because of the importance of the issues raised in both cases. 188 N.J. 259 (2006). These cases illustrate that competition in the marketplace can yield considerable social good. Here, in pursuing their self-interests to maximize profits, the tax sale certificate holders and third-party investor also produce important societal benefits -- the certificate holder puts property back on the tax rolls and the third-party investor helps a property owner salvage a piece of his equity. We do not read the Tax Sale Law, N.J.S.A. 54:5-1 to -137, to discourage commercial competition that is likely to benefit a financially-strapped property owner, and we will not interfere with salutary market forces for the purpose of impoverishing him. In balancing the conflicting interests in these cases, we now hold 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. However, because the third-party investor here did not intervene in the foreclosure actions before arranging for redemption of the tax certificates, the investor will not be permitted to profit from the transactions. To protect defendants interests, we impose constructive trusts, allowing plaintiffs to succeed in the third-party investor s place. For those reasons, we reverse the judgment of the trial court. [(emphasis added).] Because N.J.S.A. 54:5-89.1 prohibits a third-party investor from becoming a party to [the foreclosure] action and redeeming a tax certificate if he acquires an interest for only a nominal consideration, it necessarily follows that he must be a party to the action if he pays more than nominal consideration. See footnote 9 Accordingly, to become a party, the third-party investor must intervene in the action and establish to the satisfaction of the court that the owner has been offered more than a nominal consideration for his interest. Taken together, N.J.S.A. 54:5-98 and -89.1 require judicial scrutiny of a third-party investor after the foreclosure complaint s filing. Plaintiffs cannot point to anywhere in the text of the Tax Sale Law that specifically bars a third-party investor from intervening in the foreclosure action when more than nominal consideration is offered for the property. See footnote 10 Instead, plaintiffs argue that this Court s decisions in Bron and Wattles forbid Cherrystone s intermeddling activities as a violation of the social policy that animates the Tax Sale Law. On that basis, they ask this Court to prohibit Cherrystone and its ilk from frustrating their efforts to foreclose on tax certificates. We therefore turn to Bron and Wattles to see how they bear on the issues before us. * * * * The scheme of these intermeddlers is simple. They permit the purchaser of the tax sale certificate to invest his capital, hold the lien for the statutory period, engage counsel to examine the title, make inquiry as to the whereabouts of the defendants, their heirs, devisees, and personal representatives, prosecute the case up to the point of completion, and upon being satisfied at that time that the defendants do not intend to redeem, such intermeddlers offer the defendants a nominal sum for a deed and they thereupon step into the shoes of the purchaser of the lien. At that stage they find the defendants very amenable to any suggestion that they might make because they have nothing to lose -- the defendants have already determined to abandon their interests. [Statement Accompanying Sen. No. 291, L. 1967, c. 149 (emphasis added).] We find that the legislative history of the amendment to N.J.S.A. 54:5-89.1 can be read consistently with the statute s wording. The actual language of the enactment ordinarily is the best indicator of legislative intent. DiProspero v. Penn, 183 N.J. 477, 492 (2005). In interpreting legislation, [w]e ascribe to the statutory words their ordinary meaning and significance. Ibid. (citing Lane v. Holderman, 23 N.J. 304, 313 (1957)). In doing so, if the legislation s purpose is clearly stated, we need look no further. Ibid. We will not turn to extrinsic evidence, such as a Senate Statement, in search of legislative intent unless an ambiguity arises from the statute s wording, or a straight-forward reading of the statute will lead to an absurd result, or the plain language is fatally at odds with the overall statutory scheme. Id. at 492-93. Although we find no ambiguity in the plain language of N.J.S.A. 54:5-89.1, we also note that the legislative history does not contradict the statute s words. We reject plaintiffs invitation to export some of the more expansive language from Bron and Wattles to bar all third-party investors from coming to the aid of helpless property owners facing foreclosure. Like most cases, Bron and Wattles are anchored to their facts. In Bron, the third-party investors forwarded deceptive letters to distant heirs who had interests in property foreclosed decades earlier. The heirs received for their interests only one-fiftieth of the property s true value, and as such, no party benefited but the third-party investor. In that sense, the Court condemned third persons who seek only to further their own interests rather than the interests already on hand. Bron, supra, 42 N.J. at 95. Passage of the amendment to N.J.S.A. 54:5-89.1 ensured that third-party investors would have to appear before a court and offer more than nominal consideration. In contrast to Bron, in the present cases, Cherrystone arguably offered substantial consideration, and thus a significant benefit to actual property owners - not heirs -- facing foreclosure. Wattles is more difficult to distinguish because there the heirs seemingly were offered substantial consideration - a fifty-fifty division of profits from the property s sale after reimbursement to National for the costs of redemption and other out-of-pocket expenses. However, we do not know the amount of National s out-of-pocket expenses because National did not seek to be admitted as a party t o [the foreclosure] action . See footnote 12 Without the judicial oversight contemplated by N.J.S.A. 54:5-98 and 54:5- 89.1, there was no determination whether National s expenses might devour the profits from the property s sale, leaving the heirs only nominal consideration. For that simple reason, National s failure to intervene and establish that it would pay the heirs more than nominal consideration would have been reason alone to nullify its contract and impose a constructive trust - the result reached by this Court. To the extent that Wattles suggests a violation of public policy when a third-party investor offers more than nominal consideration for the property interest of an owner facing foreclosure, we now reject that view. In 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. The 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. SUPREME COURT OF NEW JERSEY NO. A-105/106 SEPTEMBER TERM 2005 ON CERTIFICATION TO Chancery Division, Superior Court RICHARD SIMON, TRUSTEE Plaintiff-Appellant, v. RICHARD WILLIAM CRONECKER, his heirs, devisees and personal representatives, and their or any of their successors in right, title and interest, etc., et al. Defendants, and CHERRYSTONE BAY, LLC, Intervenor-Respondent. DECIDED January 29, 2007 Justice LaVecchia PRESIDING OPINION BY Justice Albin CONCURRING/DISSENTING OPINIONS BY DISSENTING OPINION BY In any action to foreclose the right of redemption in any property sold for unpaid taxes or other municipal liens, all persons claiming an interest in or an encumbrance or lien upon such property, by or through any conveyance, mortgage, assignment, lien or any instrument which, by any provision of law, could be recorded, registered, entered or filed in any public office in this State, and which shall not be so recorded, registered, entered or filed at the time of the filing of the complaint in such action shall be bound by the proceedings in the action so far as such property is concerned, in the same manner as if he had been made a party to and appeared in such action, and the judgment therein had been made against him as one of the defendants therein; but such person, upon causing such conveyance, mortgage, assignment, lien, claim or other instrument to be recorded, registered, entered or filed as provided by law, may apply to be made a party to such action.