Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

OLD BRIDGE OWNERS COOP. CORP. v. TOWNSHIP OF OLD B

October 29, 1997

OLD BRIDGE OWNERS COOPERATIVE CORP., a New Jersey limited partnership; NORTH COUNTY CONSERVANCY, INC., a New Jersey nonprofit corporation; and GRANDVIEW ESTATES OF NEW JERSEY, LP., a New Jersey limited partnership, Plaintiffs,
v.
TOWNSHIP OF OLD BRIDGE and OLD BRIDGE MUNICIPAL UTILITIES AUTHORITY, Defendants.



The opinion of the court was delivered by: BISSELL

 BISSELL, District Judge

 This matter comes before the Court on a motion for partial summary judgment by plaintiffs North County Conservancy, Inc. ("North County") and Old Bridge Partners I, L.L.C. ("OB Partners") on the issue of liability for penalties. The Court is very familiar with the facts of this case, which have been set forth at length in the Court's previous Opinions in this matter. However, a summary of those facts relevant to the disposition of the instant motion is provided herein. The parties to the instant motion are in substantial agreement as to the relevant facts and agree that summary judgment is the appropriate vehicle for disposition of the motion.

 This action involves rights relating to certain real property, formerly known as Sterling Estates and now known as Pine Gate (the "apartment complex"), located in Old Bridge Township, New Jersey. In February 1988, Old Bridge Owners Corp. and Grandview Estates, L.P. ("Grandview") purchased the apartment complex with the intention of converting it to a cooperative. (See Segall Cert., P 3). To accomplish this goal, Old Bridge Owners Corp. and Grandview borrowed $ 12,000,000.00 from First Federal Savings and Loan Association of Roanoke (the "original loan"), which loan was secured by a first mortgage on the apartment complex. (Id.) In August 1989, the apartment complex was converted to a cooperative, and title passed to Old Bridge Owners Cooperative Corp. (the "Owners"). (Id., P 4). Grandview retained ownership of the shares of stock and proprietary leases to the 354 apartments. (Id., P 5).

 Shortly thereafter, Grandview and the Owners defaulted on the original loan. (Id., P 6). In the course of the parties' efforts to refinance, the original loan was split into two separate debts, secured by two separate mortgages. At the end of the day, Grandview and the Owners were unable to meet their debt obligations and, by this time, the loans had been sold or assigned to two federally insured banks: Metro North State Bank ("Metro") and Coreast Savings Bank ("Coreast"). (Id., P 7). In September 1990, the banks entered into an intercreditor priority and subordination agreement pursuant to which Metro became the first mortgagee on the apartment complex and Coreast was relegated to the position of second mortgagee. Metro's first mortgage interests were for the principal sum of at least $ 9,000,000.00 and Coreast's second position interests were approximately $ 4,000,000.00.

 Both Metro and Coreast thereafter became insolvent. The Resolution Trust Corporation ("RTC") was appointed receiver for Coreast in 1991, and the Federal Deposit Insurance Corporation ("FDIC") was appointed receiver for Metro in 1992. The FDIC prosecuted Metro's first mortgage interests in a foreclosure action in state court and obtained a foreclosure judgment in its favor for $ 17,497,872.00 in March 1994. *fn1" The RTC/Coreast interests were not prosecuted in the foreclosure proceeding, and the priority of the Metro interest and size of that obligation rendered the second mortgage interests of RTC/Coreast essentially worthless.

 In any event, on or about November 16, 1994, the RTC transferred its interest in the second mortgage to North County. (Id., P 9). The FDIC acquired title to the apartment complex through a sheriffs sale on October 25, 1995. Ordinarily, a private party seeking to acquire title to such property would have had to compete for it in the sheriff's sale or in accordance with the arms length marketing procedures applicable to disposal of FDIC-owned real estate. (See O'Meara Dep. at 134-40). However, having acquired the RTC/Coreast interests, North County had become a "party in interest," which status enabled it to acquire the FDIC/Metro interests without competition. (See Segall Dep. at 35-36). Upon its acquisition of the RTC/Coreast interests, North County moved to reopen the state court foreclosure judgment, alleging that the RTC/Coreast interests had been defrauded by FDIC/Metro conduct. The FDIC was, thus, in a position to negotiate with North County for a discounted purchase price of the apartment complex.

 Shortly after the sheriff's sale took place, North County assigned to OB Partners its contractual right to purchase the FDIC interests. OB Partners then proceeded to purchase the apartment complex at a discounted price ($ 50,000.00) from the FDIC on November 27, 1995. (See Segall Cert., P 10). Meanwhile, claims were accruing for unpaid taxes and interest on the property. During the negotiations between the FDIC and North County regarding the price of the apartment complex, North County learned that the Township of Old Bridge (the "Township") would not compromise these claims. As a result, North County filed the instant lawsuit protesting, inter alia, the involuntary tax liens and water and sewer liens filed by the Township against the apartment complex. (Later, OB Partners was named as a plaintiff, as well). North County sought to preserve its attack upon the municipal taxes and, thus, in the contract of sale between OB Partners and the FDIC, the standard language requiring payment of all outstanding taxes at closing was omitted. (See Segall Dep. at 56-58). Pursuant to the contractual arrangement, taxes were not paid at closing but, rather, remained open so that North County/OB Partners could continue to challenge their propriety.

 Throughout the course of this litigation, the Township has been assessing interest (at the rate of 18 percent per annum) and penalties on the outstanding property taxes. Although North County and OB Partners continue to maintain that a portion of that interest should be characterized as a penalty and that they cannot be liable for this portion of the interest and all of the penalties under 12 U.S.C. § 1825(b)(3), they did not want the amount they already allegedly owed to the Township to continue growing. Thus, on or about May 7, 1997, without prejudice to its right to pursue its claims in this case, OB Partners paid all outstanding property taxes, interest and penalties assessed by the Township, which totaled $ 2,084,009.82. (See West Cert., Exh. A, wherein a breakdown of the amounts paid is provided).

 This Court has ruled that 12 U.S.C. § 1825(b)(1) precludes the Township from asserting a lien or enforcing a lien against the apartment complex. See Old Bridge Owners Cooperative Corp. v. Township of Old Bridge, 914 F. Supp. 1059, 1065-66 (D.N.J. 1996) (holding that the Township's only recourse is against the debtor or the FDIC in personam but that it may not proceed against the property). OB Partners now seeks an order declaring that the Township is not entitled to penalties in this case. OB Partners asks for a refund in the amount of $ 165,326.54, plus prejudgment interest. (See West Cert., Exh. A). The thrust of its argument is that when the property was subject to federal receivership, the Township was precluded from assessing penalties on the unpaid property taxes and, thus, that the Township should be required to refund that portion of the money that OB Partners paid for the penalties imposed.

 The Township contends that nothing in the above-cited Opinion of the Court or any of the Court's unpublished Opinions in this matter ever invalidated the tax-related debt or any of its components (i.e., tax principal, interest and penalties) and, thus, as a result of their contractual arrangement with the FDIC, whereby the taxes on the property were not paid at closing, plaintiffs were required to pay all of the taxes, interest and penalties owed on the land -- including those that accrued during the federal receivership. The Township's primary argument is that while 12 U.S.C. § 1825(b)(3) would have exempted the FDIC from paying penalties on the property, plaintiffs here are not the FDIC; rather, they are private parties who cannot invoke that statutory exemption.

 ANALYSIS

 I. Summary Judgment Standard

 As an initial matter, the Court determines that summary judgment is the appropriate vehicle for the disposition of this motion. Federal Rule of Civil Procedure 56(c) provides that summary judgment should be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.