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M. Credit, Inc. v. Sexton


June 19, 2008


On appeal from the Superior Court of New Jersey, Chancery Division, Essex County, Docket No. F-9502-06.

Per curiam.


Argued June 2, 2008

Before Judges Parrillo and S.L. Reisner.

Plaintiff M. Credit, Inc. appeals from a March 9, 2007 trial court order, granting Cherrystone Bay, L.L.C. intervenor status in plaintiff's tax foreclosure action concerning property owned by Cecil Sexton, and permitting Sexton to sell the property to Cherrystone for $130,000 which the court found to be more than nominal consideration. We affirm.


These are the most pertinent facts, drawn from the record presented to us on this appeal. Plaintiff purchased a tax sale certificate issued with respect to a property located at 749-751 10th Street in Newark (the property). On May 31, 2006, after the required two years elapsed without redemption, plaintiff filed an in personam tax foreclosure complaint. However, the complaint named the wrong party as owner of the property.

The property was part of the estate of Margaret Richardson. According to Cecil Sexton's undisputed certification, she was the estate's executor and had held recorded title to the property since September 9, 2004. However, the complaint named Russell Sexton, Jr. as the executor and did not name Cecil Sexton. Nor was Cecil served with the complaint. As a result, although plaintiff eventually obtained entry of default and an order setting amount, time, and place of redemption (OST) from the Foreclosure Unit, setting a redemption deadline of December 28, 2006, that deadline was meaningless with respect to Cecil because plaintiff had not named or served the correct owner.*fn1

Plaintiff finally served Cecil Sexton with an amended complaint on December 17, 2006. On December 21, 2006, Cecil Sexton entered into a contract to sell the property to Cherrystone for $130,000. Based on that contract, Cherrystone filed a motion on January 2, 2007, seeking to intervene in the tax foreclosure action, to stay entry of final judgment, and to redeem the tax certificate.*fn2

The redemption amount set by the OST was $64,756.46. According to Cherrystone's motion papers, the property was worth $225,000, although it needed $75,000 in repairs. Plaintiff filed a response indicating that the property was worth between $300,000 and $315,000. Thus, according to plaintiff's proofs, if plaintiff obtained final judgment in its foreclosure action, it would reap a windfall of up to $250,000, at the expense of the estate which would receive nothing. On the other hand, if the sale went through, Cecil would redeem the property out of the sale proceeds and realize between $59,000 and $65,000 for the estate.

Relying on Simon v. Cronecker, 189 N.J. 304 (2007), Judge Kenneth Levy reasoned that Cherrystone had properly moved to intervene in the action. Consistent with Simon, the motion allowed the court to determine whether Cherrystone was offering the property owner only nominal consideration, in violation of N.J.S.A. 54:5-89.1,*fn3 or whether Cherrystone was legitimately seeking to help the owner to realize some value from the property. Applying the factors in Simon, Judge Levy concluded:

[U]nder all the circumstances, the contract price to be paid by Cherrystone is not nominal. While the approximately $59,000 that Sexton . . . will be left with after tendering redemption to the tax collector is far less than the full fair market value of the property . . . it is not an unconscionably low estimate of her equity in the property.

The Court cannot say that even $59,000 is nominal. $59,000 represents a substantial amount of equity that Sexton held in the property that would have otherwise been forfeited. And the $130,000 purchase price to be paid by Cherrystone is not an insubstantial investment on its part.

In her certification, Sexton points to the expenses she will avoid by making this sale, including substantial repairs that the property would require to make it marketable and the expense required to list the property with a real estate agent. Sexton's certification is unequivocal that the value she will receive is . . . substantial, "tangible" and "real money to me."

The Court is satisfied that the intent of N.J.S.A. 54:5-89.1 will be served by permitting Cherrystone's intervention in this action in permitting redemption.

The judge further noted, and the parties agreed, that since no OST had been set with respect to Cecil Sexton's interest in the property, a stay of entry of the final judgment of foreclosure was not required.


Where, as here, a trial judge permits a party to intervene in a tax sale foreclosure, we review the decision for abuse of discretion. Phillipsburg v. Block 1508, Lot 12, 380 N.J. Super. 159, 172 (App. Div. 2005). In contending that the trial court abused its discretion, plaintiff argues that Cherrystone's intervention was untimely, the contract was "procured through unconscionable practices and for nominal consideration," and that the trial court should have given plaintiff an opportunity to buy the property.

Having reviewed the record, we find all of plaintiff's appellate arguments to be without sufficient merit to warrant discussion in a written opinion, Rule 2:11-3(e)(1)(e), and we affirm substantially for the reasons stated in Judge Levy's opinion. We add the following comments.

Plaintiff's contentions are largely based on a distortion of the record, which continued through the oral argument of this appeal. Plaintiff's attempt here to portray Cherrystone as a "title raider" appearing at the eleventh hour is belied by the fact that plaintiff failed to name the proper party defendant and as a result had a worthless OST. Far from being almost at the finish line, plaintiff had just served the correct defendant with the amended complaint when Cherrystone made its offer to Cecil Sexton.

We find Justice Albin's summary of the Court's holding in Simon v. Cronecker to be particularly instructive here:

These cases illustrate that competition in the marketplace can yield considerable social good. Here, in pursuing their self-interests to maximize profits, the tax sale certificate holders and third-party investor also produce important societal benefits --the certificate holder puts property back on the tax rolls and the third-party investor helps a property owner salvage a piece of his equity. We do not read the Tax Sale Law, N.J.S.A. 54:5-1 to -137, to discourage commercial competition that is likely to benefit a financially-strapped property owner, and we will not interfere with salutary market forces for the purpose of impoverishing him.

In balancing the conflicting interests in these cases, we now hold 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. [189 N.J. at 310-11.]

As Judge Levy concluded, Cherrystone followed the proper procedure here in moving to intervene in the foreclosure action, to obtain court approval before it attempted to redeem the property. See ibid. We find no error in his conclusion that Cherrystone offered more than nominal consideration for the property, see id. at 334-35, and no abuse of discretion in his decision to let Cherrystone intervene and purchase the property. As Justice Albin noted in Simon, if plaintiff had wanted to hedge its risk of losing the property to Cherrystone, it might have offered to buy the property from the owner for some reasonable consideration before filing the foreclosure suit. Id. at 329-30.

While we affirm the judge's decision, we cannot consider Cherrystone's argument that this meritless appeal was filed for purposes of delay and that we should therefore toll the running of interest on the tax certificate during the pendency of the appeal. Cherrystone did not apply to the trial court to stay the interest from accruing, an application that likely would have required Cherrystone to deposit at least the redemption amount into court. Moreover, assuming that Cherrystone had standing to represent the owner's interest in raising the point, Cherrystone did not file a cross-appeal.


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