On appeal from Superior Court of New Jersey, Chancery Division, Probate Part, Burlington County, Docket Number P2000-0992.
Before Judges Pressler, Parker and Coleman.
The opinion of the court was delivered by: Parker, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted December 16, 2003
In this appeal, we focus on the priority of liens against an insolvent estate. Specifically, we address the conflict between N.J.S.A. 3B:22-2, which establishes priorities for liens against an insolvent estate, and N.J.S.A. 54:5-9, which grants "first lien" status to municipal liens. The Township of Moorestown (Township) and F. Gerald Caruso, purchaser of a Moorestown Tax Sale Certificate on property of the estate, appeal from a judgment of the Chancery Division, Probate Part, declaring the estate insolvent and directing that all creditors be paid on a pro rata basis pursuant to N.J.S.A. 3B:22-2. We reverse the judgment of the trial court and hold that the municipal liens have priority over Medicaid and Public Guardian liens against this estate.
Decedent owned a home located at 145 Holmes Terrace and a one-third interest in a vacant lot at 144 Holmes Terrace.*fn1 The property taxes on 145 Holmes Terrace were delinquent, and in 1995, Caruso purchased the tax sale certificate and paid the taxes for 1994. The property was sold on March 21, 2002, with the net proceeds totaling $34,345. Caruso claimed that he had invested $16,080.04, plus interest, in the property, and the Township claimed $722.81 in taxes and water and sewer bills.
When Edith Pryor died, she was a ward of the Public Guardian. After her death, Medicaid submitted a notice of lien claim against the estate in the amount of $145,770.36. Other claims against the estate included court-ordered fees to attorneys for administration of the estate and the Public Guardian, bills owed to a convalescent center, two private individuals, two hospitals, a bank, an electric company and an oil company.
The administrator of the estate moved to declare the estate insolvent and to determine the priority of payments to the creditors. Upon finding the estate insolvent, the motion judge ordered the creditors to be paid in accordance with N.J.S.A. 3B:22-2, which provides as follows:
If the applicable assets of the estate are insufficient to pay all claims in full, the personal representative shall make payment in the following order:
a. Reasonable funeral expenses;
b. Costs and expenses of administration;
c. Debts and taxes with preference under Federal Law or the Laws of this State, including debts for the reasonable value of services rendered to the decedent by the Office of the Public Guardian for Elderly Adults;
d. Reasonable medical and hospital expenses of the last illness of the decedent including ...