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Town of Phillipsburg v. Block 1508

September 8, 2005

TOWN OF PHILLIPSBURG, A MUNICIPAL CORPORATION IN THE COUNTY OF WARREN AND STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT/ CROSS-APPELLANT,
v.
BLOCK 1508, LOT 12 (142 MERCER STREET) ASSESSED TO DONALD STREBIG, BLOCK 1227, LOT 2 (370 MEMORIAL PARKWAY) ASSESSED TO DONALD PHELAN, CLERK OF SUPERIOR COURT OF NEW JERSEY (TSC: ASSESSED TO MARIE EMERY, INC.), DEFENDANTS, AND COMMUNITY PROPERTY RESOURCES CORPORATION, PETITIONER/INTERVENOR-APPELLANT/ CROSS-RESPONDENT.



On appeal from the Superior Court of New Jersey, Law Division, Warren County, F-8690-02.

The opinion of the court was delivered by: Wecker, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Submitted December 14, 2004

Before Judges Stern, Wecker and Graves

In this appeal, we address the relationship between the Tax Sale Law governing a motion to vacate a final judgment of foreclosure, and Rule 4:50, governing a motion to vacate a final judgment. We conclude that the policies underlying the Tax Sale Law support the orders on appeal, which denied the intervenor's motion to vacate a judgment of foreclosure and its motion for reconsideration.

This case presents yet another variation of the competing interests involved in proceedings to foreclose a tax sale certificate. Here, the municipal holder of two later-issued tax sale certificates obtained a judgment of foreclosure. The legal effect of that judgment was to foreclose all prior certificate holders' rights of redemption and to vest title in fee simple to the subject property in the municipality. It is undisputed that the property, known as 370 Memorial Parkway, has long been vacant, has not been maintained for many years, and is in need of rehabilitation. Within three months of the recording of the judgment, the foreclosed holder of a tax sale certificate, which had obtained its interest by assignment after the filing of the complaint, sought to intervene in the action in order to vacate the judgment and redeem certain later-issued certificates. The Chancery Division judge granted the assignee's motion to intervene but denied its motion to vacate the judgment and to redeem the tax sale certificates, which were held by the municipality.

I.

A review of the pertinent provisions of the Tax Sale Law, N.J.S.A. 54:5-1 to -104.75, will provide helpful background to our decision. The underlying purpose and rationale of the Tax Sale Law is to support tax titles by encouraging courts to bar the right of redemption "to the end that marketable titles may thereby be secured." Bron v. Weintraub, 42 N.J. 87, 91 (1964) (quoting N.J.S.A. 54:5-85). The Court thus incorporated the language of the statute: "The provisions of this article*fn1 shall be liberally construed as remedial legislation to encourage the barring of the right of redemption by actions in the Superior Court to the end that marketable titles may thereby be secured." See also Wattles v. Plotts, 120 N.J. 444, 451-52 (1990). Protecting the marketability of tax titles enables municipalities (1) to maximize the recovery of unpaid property taxes (and other municipal charges) and (2) to quickly return to the tax rolls the property on which such charges have remained in default.

In furtherance of those goals, the Legislature and the courts have looked with disfavor on those (described as "intermeddlers" or "title raiders") who would take advantage of the Tax Sale Law to obtain a windfall at the expense of persons who either might be unaware or unable to take advantage of their own rights and interests in the property. See, e.g., O & Y Old Bridge Dev. Corp. v. Cont'l Searchers, Inc., 120 N.J. 454 (1990); Wattles, supra, 120 N.J. 444; Bron, supra, 42 N.J. 87; Savage v. Weissman, 355 N.J. Super. 429 (App. Div. 2002).

In Savage, we explained the basics of the tax sale law:

When municipal taxes are delinquent for the period stated by statute, a lien arises on the land on which the taxes are assessed, N.J.S.A. 54:5-6, and the municipality may enforce the lien by selling the property as prescribed by statute. N.J.S.A. 54:5-19. The officer holding the sale delivers to the purchaser a certificate of sale. N.J.S.A. 54:5-46.

A tax sale certificate is not an outright conveyance. It creates only a lien on the premises and conveys the lien interest of the taxing authority. Chelsea Laundry Co. v. Toscano, 14 N.J. Super. 496, 500, 82 A.2d 473 (Ch. Div. 1951). Furthermore, the interest of the holder of the tax sale certificate is entirely subordinate to the statutory right of redemption of the property owner. This right of redemption can be exercised up to the date fixed by the court barring the right of redemption. Manning v. Kasdin, 97 N.J. Super. 406, 417, 235 A.2d 219 (App. Div. 1967), certif. denied, 51 N.J. 182, 238 A.2d 469 (1968). See generally, C. Zachary Seltzer, New Jersey Law, Tax Title Foreclosures, 13-213 to -214 (1971).

After two years, the purchaser of the tax sale certificate, his heirs or assigns, may commence a proceeding known as a tax sale foreclosure to foreclose or bar the property owner's right of redemption. N.J.S.A. 54:5-86.*fn2 The parties to this proceeding are the property owner and the holders of existing interests in the property. Bron, supra, 42 N.J. at 92, 199 A.2d 625. The property owner, his heirs, a holder of any prior outstanding tax lien certificate, mortgagee, or occupant of land sold for municipal taxes, assessment for benefits pursuant to N.J.S.A. 54:5-7 or other municipal charges, may redeem it at any time until the right to redeem has been cut off in the manner prescribed by statute. N.J.S.A. 54:5-54. A judgment of the Superior Court in an action to foreclose the right of redemption may give full relief to bar the right of redemption and to foreclose all prior or subsequent alienations and descents of the lands and encumbrances thereon, except subsequent municipal liens, and to adjudge an absolute and indefeasible estate of inheritance in fee simple, to be vested in the purchaser. [N.J.S.A. 54:5-87.]

[Savage, supra, 355 N.J. Super. at 436.]

In Simon v. Rando, 374 N.J. Super. 147 (App. Div. 2005), certif. granted, 183 N.J. 585 (2005), we described the specific requirements of the Tax Sale Law applicable to persons who acquire a tax sale certificate by assignment after the filing of a complaint to foreclose:

Where one acquires an interest in the property by assignment after the complaint is filed, the Tax Sale Law imposes additional procedural and substantive requirements. Pursuant to N.J.S.A. 54:5-89.1, a person with an unrecorded assignment of an interest may record the assignment and "apply to be made a party to the action."*fn3 Absent such an application, the person is bound by "the proceedings ... in the same manner as if he had been made a party to and appeared in [the foreclosure] action, and the judgment ...·had been made against him as one of the defendants...." N.J.S.A. 54:5-89.1; cf. N.J.S.A. 54:5-90 to -91 (unknown owners of recorded interests). If the person does not "apply to be made a party," the person cannot redeem with the tax collector because such redemption is not "made in that cause." N.J.S.A. 54:5-98. [Id. at 154 (emphasis added).]*fn4

After the filing of a complaint in foreclosure, the municipal taxing authority may not accept redemption of a tax sale certificate; redemption then can be made only in the foreclosure proceeding. N.J.S.A. 54:5-98.*fn5 But one who acquires an interest in such property after the filing of a complaint has neither the right to redeem nor to participate in the foreclosure action if the interest was acquired "for a nominal consideration." N.J.S.A. 54:5-89.1.*fn6

The purchase of a tax sale certificate benefits the municipality in the short term by allowing it to collect otherwise uncollected property tax or other unpaid assessments. In the long term, municipalities benefit when their certificates are marketable. The law encourages the market by offering several rights to a purchaser. See, e.g., Petak v. ...


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