Opinion ID: 2091965
Heading Depth: 1
Heading Rank: 3

Heading: Grivas v. Smyth

Text: The City of Wildwood conducted a tax sale auction in 1996, putting up for bid a tax certificate covering back real estate taxes on property owned by defendant Smyth family. [3] First Union National Bank purchased the tax certificate, valued at $2,893.59. The auction set the interest yield rate at fifteen percent per annum. Six years later, First Union assigned the certificate for one dollar to plaintiff Nicholas Grivas (Grivas), who thereafter paid taxes on the property. In January 2004, Grivas filed a complaint to foreclose on the tax certificate. The last day for redemption of the certificate, then valued at almost $90,000, was scheduled for March 14, 2005. Eleven days before the redemption date, Cherrystone contacted Richard and Loretta Smyth, expressing interest in purchasing the property. With the looming prospect of losing all the equity in their property in the foreclosure action, the members of the extended Smyth family decided to sell their interests to Cherrystone. [4] Thereafter, Cherrystone contracted with the Smyths to purchase the property for $200,000. [5] A real estate broker's opinion letter estimated the value of the property to be between $325,000 and $350,000. One day after the last date set for redemption but before the entry of final judgment, Richard and Loretta Smyth met with Cherrystone's owner and attorney at the Wildwood tax collector's office and tendered a redemption check for approximately $97,000 in the name of Cherrystone Bay, LLC (Loretta Smyth). The tax collector refused to accept the check on the basis that Cherrystone was not a party in the foreclosure action and therefore was statutorily barred from participating in the redemption process. A foreclosure judgment entered in favor of Grivas had to be vacated due to defective service of process on the Smyths. The last day to redeem the tax certificate was then set for September 8, 2005. A week before that date, the Smyths and Cherrystone closed on the property, and the Smyth family received $90,623.48 from the sale. On September 6, 2005, the Smyths' attorney delivered to the tax collector's office a check in the amount necessary to redeem the tax sale certificate. Although the tax collector accepted the redemption check, plaintiff Grivas refused to release the tax sale certificate and discharge the lien on the property. Grivas then moved to bar the redemption, and Cherrystone cross-moved to compel Grivas to discharge the tax lien.
The Chancery Division addressed the motions in Simon v. Cronecker and Grivas v. Smyth together. In both cases, plaintiffs argued that Bron, Wattles, and the Tax Sale Law bar a third-party investor from intermeddling in the redemption process after the filing of a tax sale foreclosure complaint. Conversely, Cherrystone and defendants contended that the Tax Sale Law only prohibits a third-party investor from intervening to redeem the tax sale certificate in the post-foreclosure complaint process when the property owner surrenders his interest in the property for a nominal consideration. See N.J.S.A. 54:5-89.1. In a thorough and well-reasoned opinion, Judge William C. Todd, III held that under the Tax Sale Law the property owners were entitled to redeem the tax sale certificates through third-party financing arrangements with Cherrystone, even after the filing of the tax sale foreclosure complaints. Judge Todd determined that neither Bron nor Wattles squarely addressed the issue in the present cases  a post-complaint third-party investor offering more than nominal consideration to property owners. He noted that in Bron and Wattles the post-foreclosure-complaint third-party investors were described as heir hunters and intermeddlers preying on distant and vulnerable heirs, who, at least in the Bron case, were offered inadequate consideration for their property interests. In the present cases, Judge Todd observed a new and different dynamic  significant benefits to the property owners by the involvement of third-party investors. He concluded that Bron and Wattles should not be extended to the facts here because the third-party investor had paid substantial consideration to acquire the owners' interests in their properties. Judge Todd recognized that the Tax Sale Law embodied two competing public policy goals  one to enhance the tax-collecting ability of municipalities by encouraging tax sale foreclosures and the other to protect property owners from the devastating consequences of foreclosure. He expressed the need to strike some balance between the interests of purchasers of tax sale certificates and the interests of property owners. Judge Todd found that balance in N.J.S.A. 54:5-89.1, which requires that after the filing of a tax sale foreclosure complaint, a third-party investor must provide an owner with more than nominal consideration for his property interest. In both cases, he concluded that Cherrystone gave substantial consideration to the property owners, thereby satisfying the dictates of N.J.S.A. 54:5-89.1. Judge Todd finally reasoned that permitting redemption would not place an undue burden on the present tax certificate holders because they still would receive the benefit of their bargain: [R]eimburse[ment] for all the monies they advanced, with interest at the rates established at the original tax sales [twelve percent for Smyth and fifteen percent for Grivas]. Because plaintiffs were aware that [their] properties would be subject to redemption in any number of ways from the time they elected to acquire the tax sale certificates, he determined that plaintiffs should have had no false expectation that their purchases of tax certificates were guaranteed to end in foreclosure of the properties. Judge Todd 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, we granted direct certification pursuant to Rule 2:12-1.