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Walter v. Sands

Decided: September 8, 1983.


On appeal from Superior Court of New Jersey, Chancery Division, Atlantic County.

Botter, Polow and Brody. The opinion of the court was delivered by Brody, J.A.D.


[191 NJSuper Page 364] The issue in this suit to foreclose a tax sale certificate is whether in the circumstances of this case a chancery court can

bar the right of redemption asserted by the purchaser of an heir's interest in the property. The purchaser held a tax sale certificate on adjoining property when, shortly before the foreclosure suit was commenced, she purchased the heir's minimal interest for a small sum. Relying on Bron v. Weintraub, 42 N.J. 87 (1964), and his view of the policy to be served by the 1967 amendment to N.J.S.A. 54:5-89.1, the trial judge held that the purchaser cannot defeat plaintiff's foreclosure suit. We disagree and reverse.

Plaintiff brought the underlying suit to foreclose a tax sale certificate he holds on a five-acre vacant lot in Egg Harbor, known as Block 97-A, Lot 21 (Lot 21) on the tax map. He purchased the certificate in 1975 for $100.48, representing $35.96 in delinquent taxes, $4.52 costs and a $60 premium. The assessed value at the time of trial was $8,800. The trial judge noted in his letter opinion that, "[t]he appraisal that was submitted [following trial] in response to the court's request indicates a value of $30,000.00."

Plaintiff's dispute in this appeal is with Betty Simon, who was permitted to intervene to litigate her asserted right to redeem. Simon is the assignee of a tax sale certificate on an adjoining vacant five-acre lot known as Lot 22 in the same block. Her husband acquired the Lot 22 certificate by outbidding plaintiff at a tax sale conducted in early 1979. Soon thereafter, the Simons tried to purchase plaintiff's certificate. When it became clear by the end of May that plaintiff would not sell, Simon or her representative located in Switzerland an heir of the record owner of Lots 21 and 22. She paid him $100 for a deed of his interest in both lots. In finding that consideration to be "nominal," the trial judge also accepted Simon's representation that the heir's interest was only 1.25%. The deed was executed in Switzerland on July 26, 1979, but it was not recorded until September 7, 1979 because the register of deeds insisted on an acknowledgment taken before an American Consul in Switzerland. In the interim, plaintiff commenced this foreclosure suit on August 16, 1979.

The judge held that public policy reflected in N.J.S.A. 54:5-89.1 (the 1967 amendment) bars redemption because Simon paid a nominal consideration for the deed at a time when she knew plaintiff was about to commence foreclosure. The amendment provides in relevant part:

No person . . . shall . . . 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, except where such transferee is related by blood or marriage to, or who, because of other close or personal relationship with the transferor, would in normal course be a party to an instrument for little or no consideration, or where such party acquired his interest at a judicial sale. [emphasis added]

This provision creates an exception to the general rule that a purchaser may redeem "until barred by the judgment of the Superior Court." N.J.S.A. 54:5-86. The judge concluded that although Simon purchased the heir's interest before the complaint was filed, she nevertheless violated the spirit of the 1967 amendment because she probably knew that the filing was imminent.

The 1967 amendment was adopted to prevent intruders from tracking down heirs with the aid of information obtained from a foreclosing plaintiff's notice of lis pendens filed when the suit is commenced. Such heir-hunters, trading on the efforts of the foreclosing certificate-holder, were sometimes able to purchase the fee and redeem the property. In order to redeem, the heir-hunter would have to reimburse the certificate-holder for taxes, interest and costs he had paid the municipality, N.J.S.A. 54:5-60, but not for attorney's fees and some other expenses of the foreclosure proceeding. N.J.S.A. 54:5-61. As a result, investors were reluctant to bid at tax sales, thereby depriving municipalities of a means of collecting taxes.

The legislative purpose to eliminate the foregoing practice is spelled out in an unusually detailed statement that accompanied the bill. It reads in part:

The purpose of the above supplement to the Tax Sale Revision is to curb a very questionable scheme that has recently been carried on in a wholesale fashion in the northern counties of the State to the disadvantage of plaintiffs ...

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