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MMU, LLC v. Watychowicz

July 9, 2008


On appeal from Superior Court of New Jersey, Chancery Division, Bergen County, F-18181-05.

Per curiam.


Argued January 30, 2008

Before Judges Payne and Messano.

In this tax certificate redemption case, proposed third-party intervenor, Cherrystone Bay, LLC, appeals from Chancery Division orders invalidating its attempted redemption of the property at issue, imposing a constructive trust on the transaction, and permitting plaintiff, MMU, LLC, to purchase the property from Cherrystone, free and clear of all liens, for the sum of $180,000.

The record discloses that MMU was the holder of a tax lien certificate on property located in Teaneck. After waiting the requisite two-year period, on November 23, 2005, it filed a complaint seeking to foreclose on the property owner's right of redemption and to obtain title to the property. On April 21, 2006, the trial court entered an order setting the time, place and amount of redemption, and establishing June 5, 2006 as the last day to redeem. On June 3, 2006, Cherrystone purchased the property for $180,000 and, on June 5, tendered the redemption amount of $60,000 to the tax collector.

When MMU was advised of Cherrystone's actions, it filed a motion to bar redemption on the ground that "nominal consideration" had been paid, and Cherrystone filed a cross-motion seeking to confirm the sale and redemption. While the motions were pending, Cherrystone undertook improvements to the property at a cost of $49,675. The chancery judge heard oral argument on the cross-motions on August 25, 2006, and at that time, ordered an independent appraisal of the property to determine its value as of June 3, 2005. The appraisal, conducted in October 2006, resulted in an appraised value of $450,000.

Following further argument, the judge held on the basis of our opinion in CoreStates/N.J. Nat. Bank v. Charles Schaefer Sons, Inc., 386 N.J. Super. 554 (App. Div. 2007) that the consideration paid by Cherrystone was nominal in nature. As a result, the judge barred redemption and imposed a constructive trust upon Cherrystone's interest in the property, finding that MMU was equitably entitled to the property upon payment of the $180,000 purchase price that had been tendered to the property owner by Cherrystone.

A motion for reconsideration by Cherrystone, argued on January 19, 2007, was denied. A modifying order was entered at that time, which continued the constructive trust with a right of purchase by MMU, required the tax collector to accept the redemption, required that MMU surrender its tax lien certificate for cancellation, and further ordered that transfer of the property be stayed pending Cherrystone's appeal, provided that "Cherrystone Bay shall not alienate, transfer, encumber or otherwise place any liens on the subject property." Cherrystone was also required to maintain insurance on the property and to post a bond equal to the property's fair market value.

In a settlement between the parties, an undisclosed sale of the property to Michael Bonner, Cherrystone's principal, was voided and he was required to personally repay a mortgage loan that he had placed on the property.

On appeal from the court's orders, Cherrystone claims that it substantially complied with the intervention requirements set forth in Simon v. Cronecker, 189 N.J. 304 (2007); it contests the trial court's determination that the consideration that it paid for the property was "nominal" in nature; and it seeks a determination that it is entitled to reimbursement of $49,675, representing the amount spent by Cherrystone on home renovations. We affirm, but for some reasons that are different from those employed by the trial judge.

As Cherrystone notes, our decision in Corestates, upon which the trial judge relied in determining that the consideration paid by Cherrystone for the property was nominal and thus that its redemption was invalid, was later reversed by the Supreme Court. See CoreStates/N.J. Nat. Bank v. Charles Schaefer Sons, Inc., 189 N.J. 644 (2007). However, we find that the attempted redemption is nonetheless invalid as the result of the Supreme Court's decisions in Cronecker, supra, 189 N.J. 304 and Simon v. Rando, 189 N.J. 339 (2007), holding that "[t]o facilitate judicial review of the adequacy of the consideration offered to the owner, the [Tax Sale Law] requires that third-party investors who seek either directly or indirectly to acquire the property and redeem the tax sale certificate intervene in the foreclosure action." Cronecker, supra, 189 N.J. at 320; see also Rando, supra, 189 N.J. at 342; N.J.S.A. 54:5-89.1 and -98.

In the present case, Cherrystone did not follow the procedures mandated by the Supreme Court when construing applicable tax sale statutes. Although its action preceded the Supreme Court's decisions, the retroactive applicability of the Court's rulings was recognized in Malinowski v. Jacobs, 189 N.J. 345, 350-54 (2007). We discern no principled reason to depart in this case from the Supreme Court's dictates in those three decisions, regarding them to have established a bright-line procedure for third-party conduct in the circumstances presented.

We also conclude that the trial court was correct in determining that Cherrystone should not receive any reimbursement for the money it expended as a volunteer on repairs to a house that it did not own, while its motion to confirm ownership and redemption remained pending. Although by not requiring MMU to reimburse Cherrystone, a benefit was arguably conferred upon MMU, Cherrystone has failed to demonstrate that receipt of the benefit by MMU is unjust. See Wanaque Borough Sewerage Auth. v. Twp. of W. Milford, 144 N.J. 564, 575 (1996) (establishing dual standard for recovery); Kopin v. Orange Prods., Inc., 297 N.J. Super. 353, 367 (App. Div.) (holding evidence only of receipt of a benefit to be insufficient to require reimbursement), certif. denied, 149 N.J. 409 (1997); see also Callano v. Oakwood Park Homes, Corp., 91 N.J. Super. 105, 109 (App. Div. 1966). At no time did MMU authorize the improvements or agree to compensate Cherrystone for them, thereby engendering in Cherrystone the legally-required expectation of remuneration. Kopin, supra, 297 N.J. Super. at 367; Cohen v. Home Ins. Co., 230 N.J. Super. 72, 82 (App Div.), certif. denied, 115 N.J. 70 (1989). By ...

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