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MMU, LLC v. Savo


October 3, 2008


On appeal from Superior Court of New Jersey, Chancery Division, Hudson County, Docket No. C-85-06.

Per curiam.


Argued September 22, 2008

Before Judges Carchman, Sabatino and Simonelli.

In this tax certificate foreclosure matter, defendants Michael Savo and Patricia Savo appeal from the March 30, 2007 order granting summary judgment to plaintiff MMU, LLC, and imposing a constructive trust on property located at 17 Meadow Street, Bayonne (the property), which defendants purchased in April 2004. Defendants also appeal from the order of August 21, 2007, setting forth the specific terms of the constructive trust. Plaintiff cross-appeals from that portion of the August 21, 2007 order awarding defendants a credit of $11,700 for repairs made to the property. We affirm.

Madeline Kulish owned the property. She died intestate on January 21, 1997. Her only child, Paul Kulish (Kulish), acquired the property but failed to pay the real estate taxes. As a result, on September 28, 2001, the Bayonne tax collector held a public auction sale and sold a tax sale certificate (the certificate) to Federal Warranty SVC Corp. (Federal) for $3904.55.

On December 9, 2003, Federal assigned the certificate to plaintiff. On January 26, 2004, plaintiff's counsel advised the tax collector that it was filing a tax sale foreclosure complaint. On February 2, 2004, plaintiff filed a foreclosure complaint, naming Madeline Kulish, John Doe, the Federal Deposit Insurance Corporation and an entity identified as Community Development Office as defendants. On March 31, 2004, plaintiff recorded a lis pendens on the property. Neither the complaint nor the lis pendens named The Estate of Madeline Kulish, Kulish, or defendants as parties.

Because of the property's dilapidated condition, not many people were interested in purchasing it. However, Kulish asked defendants if they would purchase the property to help him pay his debts.*fn1 On January 15, 2004, Kulish and defendants entered into a contract, where defendants agreed to purchase the property for $85,000,*fn2 and to permit Kulish to continue living there as a tenant. The closing occurred on or about April 22, 2004.*fn3 Defendants' counsel paid the amount necessary to redeem the certificate from the $45,016.82 Kulish received from the sale proceeds.

On April 23, 2004, the tax collector notified plaintiff that the certificate had "been redeemed and the redemption funds [were] deposited into the City's Tax lien Redemption Account."

Plaintiff believed that because the tax collector accepted the redemption monies, there was a lawful redemption. Thus, plaintiff surrendered the certificate to the tax collector.

Plaintiff later discovered that the property was redeemed by persons who were not parties to and did not intervene in the foreclosure action. On May 1, 2006, plaintiff filed a complaint against defendants, seeking to declare the redemption unlawful, to impose a constructive trust upon the property and to allow plaintiff to obtain title to the property for $85,000.

On October 16, 2006, plaintiff filed a motion for summary judgment. On November 3, 2006, defendants filed a cross-motion for summary judgment. On March 30, 2007, Judge Olivieri issued his opinion after our Supreme Court's decision in Simon v. Cronecker, 189 N.J. 304 (2007), finding as follows:

These cases, specifically [Cronecker], dealt with a third-party investor who had purchased two properties after a foreclosure complaint was filed, and the court held that it would not be permitted to take action without intervening in the underlying foreclosure action. In order to redeem a tax sale certificate, that party must be a party to the underlying foreclosure action. Additionally, the Cronecker court held that redemptions that are done, either directly or indirectly, are still subject to judicial review.

This court does not have to get to the issue of whether or not there was any familial or close relationship, thereby triggering this nominal consideration analysis. It's clear, based upon the statutes, the Court Rules and the aforementioned cases, that since there was no motion to intervene, the appropriate remedy in this matter is for a constructive trust to be imposed. And let me be very specific with what I have in mind here.

I am entering summary judgment in favor of the plaintiff MMU for the reasons I've indicated, and against the defendants Michael Savo and Patricia Savo. I'm imposing a constructive trust on the subject property at 17 Meadow Street in Bayonne, New Jersey.

The judge also found that Malinowski v. Jacobs, 189 N.J. 345 (2007), and Simon v. Rando, 189 N.J. 339 (2007), required retroactive application of his decision. He also ordered an accounting of rent defendants received and an appraisal of the property*fn4 , stating:

I want to create a remedy here in the context of the aforementioned cases, but in order to do that I'm going to need an accounting and I'm going to need the appraisal. On one hand, I'm aware that the defendants did not follow the statutes and Court Rules, and in another way, I do not want any party in this case to have a windfall. So we're taking it one step at a time. We'll get an accounting to see the monies put in, the monies received, and we'll also get an appraisal, so the court knows what the property is worth now, and we'll have a status conference on May 29 at 3 PM.

On June 20, 2007, defendant filed a motion for reconsideration. On July 20, 2007, the judge denied the motion and scheduled a plenary hearing to determine whether defendants were entitled to a credit for alleged repairs made to the property. By order, entered August 21, 2007, the judge, inter alia, set forth the terms of the constructive trust and awarded defendants a $11,700 credit for certain repairs, finding as follows:

I'm permitting this reimbursement in exercising what I am told and read are my vast equitable powers, under a theory of quasi-unjust enrichment. And what I mean by that is I don't think Mr. Savo ever anticipated the position he would be in today vis-à-vis this property. He did work which he believed would improve the value of the property, at least for him. The new owners of the property, or who will be the owners of the property, it may be worth more to them as a tear down rather than leaving it in place. But you know, the new owners may change their minds as well and decide that they'll take the current structure and build on it or make improvements to the house, and I believe that Mr. Savo should have the benefit of that possibility, even though it may not be probable.

This appeal and cross-appeal followed.

We use the same standard as the trial court when deciding a summary judgment motion. Jolley v. Marquess, 393 N.J. Super. 255, 267 (App. Div. 2007); Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). Summary judgment must be granted if "the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment as a matter of law." R. 4:46-2(c); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 528-29 (1995). "Genuine" issue of fact means "only if, considering the burden of persuasion at trial, the evidence submitted by the parties on the motion, together with all legitimate inferences therefrom favoring the non-moving party, would require submission of the issue to the trier of fact." R. 4:46-2(c). If there is no genuine issue of fact, we must then decide whether the lower court's ruling on the law was correct. Prudential, supra, 307 N.J. Super. at 167.

Applying these standards, and based upon our careful review of the record in light of the arguments presented, we are satisfied Judge Olivieri properly granted summary judgment. "[O]ne who acquires an interest post-complaint and is not named in the court's order of redemption [nor moves to intervene in the action] is barred from redeeming through the tax collector[,]" Cronecker, supra, 189 N.J. at 336-37 (citing Rando, supra, 374 N.J. Super. at 157).

We reject defendants' argument, not raised below, that plaintiff is not entitled to retroactive application of Cronecker because it waived its right to object to the redemption by waiting over two years to do so. The holdings in Cronecker and Rando are applied retroactively without condition and establish a black-letter rule prohibiting redemptions by those who have not applied for admission to the foreclosure action. Malinowski, supra, 189 N.J. at 351.

Also, plaintiff's acceptance of the redemption before discovering the redeemers' identity did not relieve defendants of their obligation to intervene. And this obligation exists despite that plaintiff failed to name the Estate of Madeline Kulish, Kulish and defendants in the foreclosure complaint. Plaintiff properly filed a notice of the foreclosure action with the tax collector. N.J.S.A. 54:5-98.

Finally, we are satisfied that the judge properly exercised his discretion in granting the $11,700 credit and that the amount awarded is adequately supported by credible evidence in the record. Fagliarone v. Twp. of N. Bergen, 78 N.J. Super. 154, 155 (App. Div.), certif. denied, 40 N.J. 221 (1963).


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