On appeal from the Superior Court of New Jersey, Chancery Division, Essex County, Docket No. F-20104-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before: Judges Cuff, Lihotz and Simonelli.
Appellant Cherrystone Bay, LLC (Cherrystone) invests in tax sale certificates. It appeals from an order denying its motion to intervene in a tax sale foreclosure proceeding and imposing a constructive trust on behalf of plaintiff Kenneth Kanter on the contract for sale of real estate between defendant Richard Forrest and Cherrystone. We affirm.
On December 11, 2003, a tax lien was sold against property owned by the Estate of Virginia Forrest. Richard Forrest is the son of decedent and administrator of the estate. The tax sale certificate was assigned to plaintiff Kanter, who filed a complaint to foreclose the tax certificate on December 27, 2005. The final date for redemption was June 2, 2006, at 4 p.m.
On June 1, 2006, Forrest signed a contract to sell the property to Cherrystone for $71,465.02. Cherrystone paid a deposit of $26,465.02, the amount required to redeem the taX sale certificate. Forrest proceeded immediately to the office of the tax collector to redeem the property but the payment was rejected.
In the meantime, a final judgment of foreclosure was entered on June 5, 2006. On August 1, 2006, Forrest moved to vacate the judgment and Cherrystone moved to intervene in the action. On December 11, 2006, the judgment was vacated and the tax collector was authorized to accept the funds advanced by Forrest to redeem. Plaintiff's motion for reconsideration was denied, but the court imposed a constructive trust on behalf of plaintiff on the contract of sale between Forrest and Cherrystone.
On January 29, 2007, the Supreme Court issued opinions in three appeals that addressed the ability of third-party investors to redeem tax sale certificates after commencement of a foreclosure proceeding. In Simon v. Cronecker, 189 N.J. 304, 331 (2007), the Court held that a third-party investor is not prohibited from purchasing a property owner's interest and redeeming the tax certificate as long as the investor pays more than nominal consideration and intervenes in the foreclosure proceeding. In Simon v. Rando, 189 N.J. 339, 344 (2007), the Court held that a third-party investor, who purchased prior tax sale certificates for more than nominal consideration in order to obtain an interest in the property subject to foreclosure on another tax sale certificate, must intervene in the pending foreclosure action to properly redeem the plaintiff's subsequently acquired tax sale certificates. And in Malinowski v. Jacobs, 189 N.J. 345, 351 (2007), the Court held that the rules announced in Cronecker and Rando are to be applied retroactively.
Cherrystone concedes that it did not intervene in this matter before it advanced to Forrest the sums needed to redeem the tax sale certificate or before Forrest sought to redeem the tax sale certificate. It argues that the facts of this case are distinguishable, that this position is supported by authority,*fn1 and that a constructive trust is an ill-advised remedy. We disagree.
The facts of this case demonstrate that Cherrystone indirectly sought to redeem the tax sale certificate by advancing the sum required to the property owner. Cronecker directly addresses this factual situation and expressly provides that no redemption will be allowed from funds provided by a third-party investor, unless the investor has intervened in the foreclosure action. In the course of its examination of whether Cherrystone had complied with the procedural requirements of the Tax Sale Law, the Court stated:
By forbidding an interested investor, who is not a party to the foreclosure action from "indirectly" seeking redemption, we intend to interdict the myriad machinations that a creative mind might devise to elude the Tax Sale Law. For example, a third-party investor who does not intervene in the action, but who enters into a contract to purchase the subject property, fronts the funds necessary to redeem a tax certificate, and schedules the closing for after the redemption date violates N.J.S.A. 54:5-89.1. Because the investor upon entering into a contractual arrangement has an equitable interest in the property, he must intervene in the foreclosure action to allow a judicial determination that more than nominal consideration was paid for the property. [189 N.J. at 336 (emphasis added).]
Therefore, when Cherrystone entered into a contract to purchase the Forrest property, paid a deposit to Forrest in the amount required to redeem, and Forrest used the deposit to attempt to redeem the tax sale certificate, the tax collector correctly rejected the redemption because Cherrystone had not intervened in the foreclosure proceeding.
We are also unpersuaded that the constructive trust imposed by Judge Levy is ill-advised or against public policy. In virtually identical circumstances, the Court imposed a ...