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CCTS Tax Liens I, L.L.C. v. Gilbert


October 26, 2009


On appeal from the Superior Court of New Jersey, Chancery Division, Camden County, Docket No. F-18369-07.

Per curiam.


Argued September 15, 2009

Before Judges Carchman, Lihotz and Ashrafi.

In Simon v. Cronecker, 189 N.J. 304 (2007), the Supreme Court 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 311. This appeal presents a variation of the issues addressed in Cronecker. A prospective intervenor, Saint Vincent DePaul Society (SVDP) appeals from an order of the general equity part denying its motion to intervene in a tax foreclosure proceeding involving plaintiff CCTS Tax Liens I, L.L.C. (CCTS), the holder of the certificate, and defendant Louise Gilbert, the property owner. SVDP purports to be not a third-party investor but a lender of funds to defendant for the limited purpose of redeeming the tax sale certificate. The motion judge denied intervention and permitted CCTS to foreclose. Unfortunately, because the application was determined on motion, the record is limited as to a presentation of all of the unique facts surrounding this matter. Accordingly, for the reasons set forth below, we reverse and remand for a plenary hearing to fully explore all of the circumstances of this transaction to the end that the judge has a full record on which to assess and adjudicate the respective rights of the parties.

We present an expansive review of the relevant facts as they were presented on motion. Defendant, disabled and receiving a monthly supplemental security income (SSI) grant, owns property located at 802 Brighton Road, Cherry Hill, a single family home (the property). The property, which was not her residence, was acquired by inheritance on June 6, 1994. It was damaged by a fire on November 24, 2004, rendering it uninhabitable. After a number of attempts to repair, Cherry Hill Township (the Township) advised defendant that if the property were not repaired, it would be deemed abandoned. Thereafter, the Township provided some maintenance of the property and forwarded bills to defendant.

In June 2006, plaintiff purchased a tax sale certificate, reflecting unpaid taxes assessed against the property, for $1,759.26 from the Township tax collector, and on July 24, 2007, plaintiff filed a tax foreclosure complaint seeking to foreclose on the certificate.

On October 31, 2007, defendant appeared in the Cherry Hill Township Municipal Court to pay a September 7, 2007 invoice for maintenance service to the property, specifically, grass cutting. A letter followed from the Township on November 15, 2007, declaring that "this property is abandoned under N.J.S.A. 40:48-2.3, et seq." Apparently, estimates for rehabilitation of the property exceeded a cost of $35,000.

Following the filing of the complaint, an order was entered fixing the redemption amount at $9,708.30 plus any taxes paid or interest accrued through June 27, 2008, the last day for redemption. The order permitted redemption "up until the entry of final judgment including the whole of the last day upon which judgment is entered."

While the foreclosure was pending, defendant was attempting to sell the property. Apparently, defendant, through counsel, was negotiating a contract with a potential buyer at a purchase price of $125,000 and another contract with a different purchaser at a purchase price of $130,000. Neither sale was consummated, and in one instance, the buyer refused to proceed because of its unwillingness to intervene in the foreclosure action.

According to a certification of Joseph M. Pinto, Esq., who was acting as defendant's attorney, in an effort to stave off the foreclosure, he arranged for a loan to defendant in the amount of $12,334.94 from SVDP, a New Jersey charitable nonprofit corporation. The purpose of the loan, which was approved on June 26, 2008, one day before the final date for redemption, was to provide the necessary funds to redeem the outstanding certificate. Defendant decided to borrow from SVDP for two reasons - the deadline to redeem was the next day, and Pinto sat as a trustee on the SVDP Board allowing for an expeditious resolution of the loan transaction. As we noted, SVDP agreed to lend the funds to defendant to redeem the outstanding tax sale certificate, and defendant agreed to execute a note and mortgage to secure the loan. Thereafter, SVDP's treasurer went to Cornerstone Bank, obtained a cashiers check in the requisite amount made payable to the Township and gave the check to defendant's attorney that night.

Pinto, representing both defendant and the lender, prepared a note and mortgage for defendant's signature, brought the documents to the motel where she resided and explained the terms to her. She reviewed both documents and executed them on June 26, 2008. The note provided for a loan of $12,337.94 (the redemption amount) with interest at six percent per annum payable in one year.

On the morning of Friday June 27, 2008, at 9:15 a.m., Pinto's paralegal, Deena Morales, appeared at the tax collector's office with a letter and cashiers check made payable to the Township in the proper redemption amount. Morales presented a cover letter to the tax collector. The letter read:

Please be advised that I represent Louise Gilbert, defendant in the above matter. Pursuant to the Court's Order Fixing Amount, Time and Place for Redemption dated May 14, 2008 setting June 27, 2008 for the date of redemption and our telephone conversation of yesterday in which you advised that the amount to redeem was $12,337.94, enclosed please find Cornerstone Bank treasurer's check number 010398 in the amount of $12,337.94 in redemption of the outstanding tax sale certificates referenced in the above case.

The remitter listed on the check was not defendant but SVDP. Noting that the funds were from a third-party, the tax collector refused to accept the funds as SVDP was not a party to the foreclosure action. As a result of the tax collector's action, defendant and SVDP filed a motion at 2:14 p.m. on June 27, 2008, seeking an order requiring the tax collector to accept the borrowed funds and permitting SVDP to intervene, "if required."

That same day, the motion was mailed to plaintiff's attorney and a copy was also sent by facsimile to his office at approximately 6:00 p.m. Claiming that he did not see a copy of the motion, on Monday, June 30, 2008, plaintiff's attorney hand- carried a final judgment to the Foreclosure Unit of the Superior Court Clerk's Office in Trenton. The judgment was entered that day. Plaintiff's attorney then faxed a copy of the final judgment to the defendant's counsel suggesting that the entry of the judgment rendered the pending motion moot.

In response, defendant filed an amended motion on July 2, 2008, seeking the following relief:

1. Granting SVDP permission to lend defendant $12,337.94;

2. Permitting SVDP the right to intervene in the matter, if necessary;

3. Extending the time for redemption of the tax sale certificates;

4. Vacating the Judgment entered on June 30, 2008, and staying the proceedings until this motion is heard; and

5. Requiring the Tax Collector to accept the said funds to redeem the tax sale certificates in the amount due as of June 27, 2008, without any further accrued interest, "due to the Tax Collector's erroneous refusal to accept said funds on the redemption date."

The Township followed with a motion to intervene, for the purpose of filing a complaint requiring defendant to either repair or demolish the property.

The judge denied both motions and said:

I'm going to deny the request to intervene at this point by the St. Vincent dePaul Society. I find that at the time they attempted to, on behalf of Ms. Gilbert - admittedly on behalf of Ms. Gilbert, provide the money to redeem on the taxes. That the Township of Cherry Hill was not required to accept the monies offered. All that is required or all that was required at the time by the Township of Cherry Hill was that they look to the complaint to see who were the parties of interest.

And I find that at that point, the person - the movant for intervention, St. Vincent dePaul Society, was not the proper party without Ms. Gilbert being present or without having giving [sic] the monies to Ms. Gilbert and having her on her own go and redeem the property, was not the proper person to walk into the Tax Office and demand their check at that point be accepted in this matter.

Under the case of Simon v. Cronecker, the Tax Collectors can just look at the caption of the foreclosure complaint to see who is able to redeem a Tax Certificate. And that one not named in the complaint is not entitled to redeem unless he or she has moved in a timely manner to intervene.

Furthermore, under N.J.S.A. 54:5-54, this statute limits those who may redeem to parties to the cause of action that have an interest in the subject property. N.J.S.A. 54:5-89 states: "No person, however, shall be admitted as a party of such action nor shall he have the right to redeem the lands from the tax sale whenever it shall appear that he has acquired such interest in the lands for nominal consideration."

There has been yet another argument that perhaps what we were dealing here with was the fact that a nominal amount of this loan, the Society may wind up buying this property. But, I'm not going to address that. I don't need that as I found that they were not permitted to intervene under the Simon case on the last day that redemption was permitted in this matter.

Furthermore, under the Phillipsburg case, there is a strong public interest in getting property back on the tax rolls, and eliminating what is called the blight on the community. In this matter, if St. Vince[nt] dePaul were permitted to intervene, if they were permitted to purchase the Tax Sale Certificate on behalf of Ms. Gilbert -right? I - I don't know if that's artfully said. But, they would be loaning her the money to pay off her taxes. The question arises whether or not I could order the Society to maintain this property. And quite truthfully, I don't believe I could.

This property has long been a problem for Cherry Hill and its residents. In the moving papers and in the response papers, rather - in the response, not the moving papers, it was noted how on several occasions Cherry Hill Township, after sending notice to Ms. Gilbert was required to cut the grass, was required to go to the property and again clean it up because the neighbors were complaining that there were rats as a result of the condition of the property.

And I believe Mr. Greenberg set forth the last time he was here the fact that the owner of the Tax Sale Certificate has himself maintained the property to his financial detriment, placing tarps on the roof which is leaking through. And, as I indicated, this property was deemed abandoned by the Township after several, several attempts to get Ms. Gilbert to either clean the property up, repair the property, alleviate the problem de jour [sic] a result of the first which occurred in 2004.

We are fast approaching - approaching Thanksgiving 2008 and the condition of this property has not change, - so, under the Phillis - Phillips - except for the efforts of Cherry Hill Township and those of the tax - present Tax Sales Certificate holder.

So, under the Phillipsburg case, this property would continue to be a problem for the community as it has been for the past four years and there appears to be no remedy in sight to rectify the problems that this home has caused to other neighbors or has incurred itself, due to this fire some four years ago. So, with that, I am denying the motion to intervene on behalf of St. Vincent dePaul Society.

On October 28, 2008, defendant and SVDP filed a motion for reconsideration, for a stay of the judgment pending appeal and for an order requiring the plaintiff, now under contract of sale to one of defendant's buyers, to pay into court the proceeds from that imminent sale. In denying the motion, the judge said:

I have before me two applications. One to reconsider the Court's prior order, preventing St. Vincent [DePaul] Society from intervening in this matter, as well as Cherry Hill, and for a new matter now, also, that any monies from the sale of the property in question be placed with the Court pending any appeal. The last time we were here it was quite a lengthy motion. And I'm already aware that this matter will be appealed, and I asked the Appellate Division to look back on the transcripts if not available today. But I obviously had great concern.

I do not lightly take anyone's home from them. I think all the attorneys that represent banks and entities will throw their hands up many times with the frustrations they have dealt with when I repeatedly hold against them and on behalf of the homeowners in every and any attempt to make sure that their property remains with them.

In this matter, last time, I believe, although, I don't have a copy of the transcript, and I didn't get a copy of the tape. That was my fault, but I do clearly remember that there were many questions as to the position of St. Vincent De Paul, which is a wonderful society. And I don't mean to seem in the l[e]ast bit derogatory when I say to them that because you have St. in front of your name, should you be treated differently. I mean that purely in an endeavor to discern whether or not one entity should be different than the other. So I meant no disrespect, nor would I ever, to any society that really does help and aid those who are needy. Nonetheless, we are in a court of law, and I have to treat all fairly, regardless of who they are, what they are, and what precedes their name.

Last time we heard this matter I ruled that St. Vincent de Paul did not and should have intervened . . . .

I have carefully re-reviewed the almost mountains of paper that came last time, and I am staying by my prior decision. Under Cronecker, under the Phillipsburg case - and although I was given the Phoenix case and reviewed it quickly on the bench - I believe we did have a detailed discussion about it -I have obviously reviewed it in more depth since then and do not feel that it will change my opinion in this matter under D'Atria versus D'Atria, found at 292 N.J. Super. 392.

I do not find that I was palpably incorrect or irrational on my basis or that I failed to appreciate the significance and probative or competent evidence with the Phoenix case. I feel that it is different from this matter. I understand clearly that St. Vincent de Paul's efforts here were to help Ms. Gilbert save her home, nonetheless, they had to comply with Cronecker and stood in no different position than anyone else who would have gone into Cherry Hill at the time and attempted to hand a check over from their society to redeem.

I also do not feel I'm incorrect under the Phillipsburg case. This property has remained for four years in absolutely deplorable condition. I have received . . . letters from the surrounding neighbors. In particular, a Mr. Tyson . . . . He's written twice. Robert and Mary G-I-A-M-P-AO-L-O . . . . John and Janet Strasser (phonetic), . . .; and John Hemingway [at] the corner property . . . . They all refer to the deplorable condition for the past four years of that. And they're starting to use capital letters and exclamation points.

So the neighbors have also been upset. Cherry Hill declared this property an abandoned property due to its condition and on many occasions had attempted to have Ms. Gilbert bring the property to any condition far better than it was, including down to even just cutting the grass. This tax sales certificate was purchased by the plaintiff in the interim with no obligation to himself. He has done his best to keep this property from at least deteriorating by placing tarps on the roof, repairing doors that are opened.

The Township has cut the grass and build [sic] Ms. Gilbert. And now at the 11th hour there are claims that she will be homeless living in - in hotels. And although - I don't know if that's the case or not. That would be pitiful, but nonetheless it should have no effect on my decision not to reconsider this matter.

Again, I feel clearly for the reasons placed on the record last time, a review of the matter and of the Phoenix case and the arguments present yet again today that Ms. Gilbert did not have the right to redeem on this property.

This appeal followed. While the appeal was pending, we granted defendant's motion for a stay and required that the proceeds of the sale of the property be deposited into court pending the outcome of the appeal.

SVDP and defendant assert that SVDP was a lender, not a third-party investor, and was not required to intervene in the foreclosure action; or in the alternative, SVDP should have been granted leave to intervene for the purposes of allowing it to lend defendant sufficient funds to redeem the outstanding tax sale certificate.

Our analysis of the issue of SVDP's obligation to intervene requires a brief review of principles relevant to tax sale certificate foreclosures. The Tax Sale Law, N.J.S.A. 54:5-1 to -137, identifies the competing rights of tax certificate holders and property owners. Cronecker, supra, 189 N.J. at 318. A "property owner and others with an interest in the land have the right to redeem the tax sale certificate at anytime before the final date for redemption set by the court," N.J.S.A. 54:5-54, and "until barred by the judgment of the Superior Court[,]" N.J.S.A. 54:5-86. Cronecker, supra, 189 N.J. at 320; see R. 4:64-6(b) (stating that "[r]edemption may be made at any time until the entry of final judgment . . . .").

"In order to redeem a tax sale certificate while a foreclosure action is pending, the person must be a party to the action." Phoenix Funding, Inc. v. Krute, 403 N.J. Super. 261, 266-67 (App. Div. 2008). Since a primary participant in any redemption will be the tax collector accepting the redemption funds, Cronecker has relieved the tax collector of the burden of going behind the foreclosure pleadings and has adopted a simple and basic rule. Where a person or entity is not named in the foreclosure complaint and seeks to redeem, he or it must move to intervene in the action. Cronecker, supra, 189 N.J. at 336.

SVDP, the remitter identified on the checks, was not named in the foreclosure complaint. While the paralegal and Pinto's letter explained that, with these funds, defendant was prepared to redeem the tax sales certificate on her property, the tax collector refused, after consulting with counsel, to accept the funds and redeem the tax sales certificate. SVDP asserts that an attorney's representation should suffice to establish that the funds were being paid on behalf of defendant. Because of our disposition of this appeal, we need not decide whether an attorney's statements are sufficient to satisfy the operative rule and procedures.

In the two cases considered in Cronecker, the owner or the owner's attorney appeared at the tax collector's office to tender the redemption funds. Cronecker, supra, 189 N.J. at 312, 314. In each case, however, there was no dispute that the funds were the proceeds of the sale of the property to a third-party investor. Ibid. The Court ultimately ordered that the investor's contract rights with the owner be held in a constructive trust to permit the certificate holder to gain the benefit of the sale if he desired to do so. Id. at 338.

The Court has established a "bright line" rule to prevent redemption by a non-party to the litigation. Tax collectors should not be placed in a position where they must make legal assessments regarding the identity of the redeemer. As stated in Cronecker, "[w]hen a person attempts to redeem a tax certificate, the tax collector need only look to the foreclosure complaint for the names of persons with an interest in the property." Id. at 336.

We recently addressed the necessity of intervention by a purported lender in Phoenix, where an heir borrowed money from a family friend who thereafter purchased the property. We focused on the ultimate purchase and concluded that "the obligation to intervene extends to one who redeems 'indirectly'", Phoenix Funding Inc., supra, 403 N.J. Super. at 267, such as the family friend, and we further observed, without deciding, that it was arguable that the heir, even though permitted to redeem by law, N.J.S.A. 59:5-54, should have intervened prior to her redeeming the tax sale certificate. The rule enunciated in Cronecker and alluded to in Phoenix is that the prescription for intervention is a broad one insuring that a court is in a position to oversee the true nature of the transaction. If in Phoenix, the lender had intervened, the entire transaction could have been scrutinized to meet the dictates of Cronecker.

Here, another purported lender emerged. The absence of intervention deprived the court of an opportunity to test the bona fides of this transaction where legitimate questions abound including the relationship of defendant, the lender and the various potential contract purchasers. Inquiry must be made as to whether the loan and redemption were premised on an ultimate sale that would have required the court to examine the issue of "nominal consideration."

On this record, we are not prepared to adopt a broad rule that all lenders must intervene. We do observe that Cronecker recognized that "bank loan[s] in exchange for a mortgage," might be involved in the financing of the redemption. Cronecker, supra, 189 N.J. at 329. We recognize that there is a cost to intervention but that must be balanced against the need to protect the interests of the parties and their respective statutory rights. We remain mindful of the cautionary observation in Cronecker that a purpose of requiring intervention is to "interdict the myriad machinations that a creative mind might devise to elude the Tax Sale Law." Id. at 336. It may be that the need for court scrutiny should prevail as against any additional costs to a distressed property owner including any "chilling" that this may have on a commercial lender's willingness to advance funds for redemption. For now, we leave the ultimate resolution of this question for another day and appropriate factual circumstances.

The need for intervention under the present factual scenario is apparent. This was not a circumstance where defendant was going to redeem the certificate and reside in the property. The intent of redemption here was to allow defendant to then convey the property to a third-party, the same factual framework described in Phoenix. With intervention, the judge could assess the full circumstances of the transaction, the relationship between SVDP and any prospective purchaser, the purchase price, if relevant, and any other aspects of the transaction that would bring it either within or outside of the scope of Cronecker. This record fails to provide the proofs to allow the judge to make the informed and comprehensive ruling necessary to protect the rights of the parties.

Defendant argues that SVDP should have been permitted to intervene. We agree.

In considering intervention, a judge must first determine whether the moving party has shown that it has a right to intervene in this matter. Rule 4:33-1 provides:

Upon timely application anyone shall be permitted to intervene in an action if the applicant claims an interest relating to the property or transaction which is the subject of the action and is so situated that the disposition of the action may as a practical matter impair or impede the ability to protect that interest, unless the applicant's interest is adequately represented by existing parties.

We apply this rule liberally. ACLU of New Jersey, Inc. v. County of Hudson, 352 N.J. Super. 44, 67 (App. Div.), certif. denied, 174 N.J. 190 (2002). The rule establishes four criteria to permit intervention as of right:

The party must (1) claim an interest relating to the property or transaction which is the subject of the action, (2) show he is so situated that the disposition of the action may as a practical matter impair or impede its ability to protect that interest, (3) demonstrate that the party's interest is not adequately represented by existing parties, and (4) make a timely application to intervene.

Ibid. (citing Meehan v. K.D. Partners, L.P., 317 N.J. Super. 563, 568 (App. Div. 1998)). The rule is not discretionary, and if the four criteria are met, the court must approve an application for intervention. Meehan, supra, 317 N.J. Super. at 568.

Defendant executed an unrecorded mortgage on June 27, 2008, the last day to redeem. The motion judge acknowledged that "if and when [the monies are] accepted, [SVDP] will have a mortgage on th[e] property." A pre-complaint mortgage is an interest in property. N.J.S.A. 54:5-89.1. Even though the mortgage here was post-complaint, we adopt a broad view that Cronecker envisioned after-acquired interests to be subject to the same procedural requirements as the pre-complaint interests described in N.J.S.A. 54:5-89.1.

The critical prong concerning the judge was whether SVDP's application was timely. The court has the discretion to determine the timeliness, under all the circumstances, of the intervention application, and may deny the application if deemed untimely. See generally State v. Lanza, 39 N.J. 595 (1963); see also Clarke v. Brown, 101 N.J. Super. 404 (Law Div. 1968); Zanin v. Iacono, 198 N.J. Super. 490 (Law Div. 1984).

A person who has the right to redeem has the right to intervene in a tax foreclosure action at any time prior to the entry of final judgment therein. Gov't Security Co. v. Waire, 94 N.J. Super. 586, 589 (App. Div.), certif. denied, 50 N.J. 84 (1967); see also The Allan-Deane Corp. v. Twp. of Bedminster, 63 N.J. 591 (1973) (finding not untimely an application for intervention in an action in lieu of prerogative writs in which injunctive relief was sought even though the application was made nine months after filing of the complaint and, if granted, would have substantially delayed final disposition of the plaintiff's cause); Cold Indian Springs Corp. v. Twp. of Ocean, 154 N.J. Super. 75 (Law Div.), motion for leave to appeal granted and remanded for hearing, 75 N.J. 592 (1977), aff'd 81 N.J. 502 (1980). Most relevant, the rule affords a party an opportunity to intervene in order to exercise its claimed right of redemption and we have sanctioned such intervention "even in the very last days before entry of judgment." Town of Phillipsburg v. Block 1508, Lot 12, 380 N.J. Super. 159, 175 (App. Div. 2005).

Here, on June 27, 2008, SVDP moved to intervene in the foreclosure matter to stay the time for redemption of the taX sale certificates and for permission to lend the defendant the sum of $12,337.94, the amount required to redeem. Defendant asserts that filing the motion to intervene prior to the end of the day on the last day set for redemption was timely filing, as no judgment was entered at that time. This comports with the language of the court's order fixing the last day for redemption. We deem SVDP's motion to be timely filed.

As we have previously noted, the required analysis does not end here, as the circumstances of SVDP's mortgage requires further consideration. Ultimately, the court must determine SVDP's role in the entire transaction. In addition, the court must determine whether the purchaser of the property offered more than nominal consideration to defendant.

N.J.S.A. 54:5-89.1 provides that no person shall be admitted as a party to a tax sale foreclosure action, nor shall he have the right to redeem the lands from the tax sale if he has acquired such interest in the lands for a nominal consideration after the filing of the complaint.

In order for a third-party investor to become a party to a foreclosure action, the third-party investor must intervene in the action and establish to the satisfaction of the court that the owner has been offered more than a "nominal consideration" for his interest. Cronecker, supra, 189 N.J. at 322. The Court has extended the necessity to examination of the transaction to the holders of other tax sale certificates, see Simon v. Rando, 189 N.J. 339 (2007), as well as the purchasers of mortgage interests. See Malinowski v. Jacobs, 189 N.J. 345 (2007). As noted in Rando, the logic of the marketplace is no less persuasive when the property interests acquired by a third-party investor are prior tax sale certificates. Rando, supra, 189 N.J. at 344. On remand, the judge must explore the entire transaction to ensure compliance with the tax sale law, including whether the defendant property owner will receive more than "nominal consideration."

Finally, the judge relied, in part, on Phillipsburg and the condition of the property in denying the motion to intervene. As the property has now been sold, we deem that issue to be moot, and it need not be considered on remand.

Reversed and remanded for a hearing consistent with this opinion. We do not retain jurisdiction.


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