On certification to the Superior Court, Appellate Division, whose opinion is reported at 374 N.J. Super. 147 (2005).
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
Plaintiffs, Richard Simon and TriState Investments, are tax certificate holders who filed foreclosure actions. Third-party investor, Cherrystone Bay, LLC, purchased prior tax sale certificates. Both Simon and TriState rebuffed Cherrystone's offers to purchase their tax certificates. Without first intervening in the foreclosure actions, Cherrystone made arrangements to have plaintiffs' certificates redeemed in the tax collectors' offices in the municipalities in which the properties were located. The tax collectors accepted the monies necessary for redemption of the tax certificates. In both cases, the trial courts allowed Cherrystone to intervene in the foreclosure actions after the redemption of the tax certificates, and then approved the redemptions, thus thwarting plaintiffs from obtaining title in fee simple to the subject properties.
The Appellate Division reversed, finding that Cherrystone's redemptions were invalid. Simon v. Rando,
The opinion of the court was delivered by: Justice Albin
Reargued September 12, 2006
In Simon v. Cronecker, ___ N.J. ___ (2007), decided today, we held that "the Tax Sale Law does not prohibit a third-party investor from redeeming a tax sale certificate after the filing of a foreclosure action, provided that the investor timely intervenes in the action and pays the property owner more than nominal consideration for the property." Id. at ___ (slip op. at 5). Thus, in the post-foreclosure complaint period, unless the third-party investor who acquires an interest in the subject property first receives court approval, the investor has no right to participate, directly or indirectly, in the redemption of a tax certificate. Id. at ___ (slip op. at 42-45). In Cronecker, the third-party investor, Cherrystone Bay, LLC (Cherrystone), contracted to purchase properties from owners facing foreclosure based on unredeemed tax sale certificates. Because Cherrystone "did not seek to become a party to the action before arranging for the redemption of the tax certificates" in violation of the Tax Sale Law, we voided Cherrystone's contracts and "impose[d] constructive trusts in favor of defendant property owners, granting [the tax certificate holders] the opportunity to assume Cherrystone's contractual rights." Id. at ___ (slip op. at 45-46). The consolidated appeals before us present a factual variation of the theme in Cronecker.
For purposes of these appeals, an abbreviated factual history will suffice; a detailed recitation may be found at Simon v. Rando, 374 N.J. Super. 147, 150-52 (App. Div. 2005). In the present cases, third-party investor Cherrystone entered the scene after plaintiffs Richard Simon and TriState Investments, the tax certificate holders, waited more than the two-year period required in N.J.S.A. 54:5-86 and filed actions to foreclose on their tax certificates. Id. at 150-51. Instead of purchasing the subject properties, as it did in Cronecker, here Cherrystone purchased prior tax sale certificates. Id. at 151. Under N.J.S.A. 54:5-54, a holder of a prior tax sale certificate is authorized to redeem a subsequently issued tax sale certificate. The holder of the prior certificate may then file a foreclosure action to acquire the subject property in fee simple. N.J.S.A. 54:5-86 to -87.
Both plaintiff Simon and plaintiff TriState rebuffed Cherrystone's offers to purchase their tax certificates. Id. at 151-52. Without first intervening in the foreclosure actions, Cherrystone made arrangements to have plaintiffs' certificates redeemed in the tax collectors' offices in the municipalities in which the properties were located. Ibid. The tax collectors in both cases accepted the monies necessary for redemption of the tax certificates. Ibid. In both cases, the trial courts ultimately allowed Cherrystone to intervene in the foreclosure actions after the redemption of the tax certificates, and then approved the redemptions, thus thwarting plaintiffs from obtaining title in fee simple to the subject properties. Ibid.
The Appellate Division reversed, in a thorough and well-reasoned opinion written by Judge Grall, finding that Cherrystone's redemptions were invalid. Id. at 157-59. The appellate panel held that "one who redeems an interest acquired post-complaint, without first applying for admission to the action, has not made a valid redemption in the cause." Id. at 158. We granted certification. 183 N.J. 585 (2005).
We now affirm substantially for the reasons given by Judge Grall with the following caveat. The appellate panel relied on certain broad pronouncements in Wattles v. Plotts, 120 N.J. 444, 450-53 (1990), which condemned intermeddling by third-party investors (described as heir hunters) in the tax sale foreclosure process. In Cronecker, supra, we rejected the view suggested in Wattles that after the filing of a foreclosure action a third-party investor who purchases property for more than nominal consideration and properly intervenes in the action may be barred from redeeming a tax sale certificate on public policy grounds. ___ N.J. at ___ (slip op. at 31).
As more fully explained in Cronecker, a third-party investor, such as Cherrystone, must intervene in the foreclosure action before attempting to redeem the certificate at the tax collector's office. Id. at ___ (slip op. at 42-45). That follows from a plain reading of the relevant sections of N.J.S.A. 54:5-89.1 and 54:5-98. Specifically, N.J.S.A. 54:5-98 states that "[a]fter the complaint has been filed redemption shall be made in that cause only, provided notice of the suit has been filed in the office of the tax collector." (emphasis added); see also R. 4:64-6(b) ("In such actions redemption shall be made in the action only, provided notice of the action has been filed in the tax ...