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M&D TSC, LLC v. FGB Realty Advisors

May 21, 2010


On appeal from the Superior Court of New Jersey, Chancery Division, Morris County, Docket No. F-10545-00.

Per curiam.


Argued February 3, 2010

Before Judges Cuff, Payne and Waugh.

In 1975 Alexander and Jean Fraenkel jointly purchased property in the Township of Mendham. In May 1984, the law firm of Kohn & Needle took a mortgage on Alexander's*fn1 one-half interest in the Fraenkels' property as security for payment of its attorneys' fees in a matter involving Alexander. Thereafter, Alexander failed to pay the fees, and on August 16, 2000, Kohn & Needle obtained a judgment of foreclosure on its one-half interest. A sheriff's sale occurred on April 2, 2001, and the property was sold to Kohn & Needle, which assigned its interest to Emanuel Needle. On April 21, 2001, Needle received a Sheriff's deed pursuant to the foreclosure judgment, subject to Jean's interest. The deed was recorded in May 2001. Needle did not cure an existing tax default on the property or pay accruing taxes.

In the meantime, in 1995, a predecessor to plaintiff M&D TSC, LLC had obtained a tax sale certificate on the property. On June 26, 2000, that predecessor instituted a foreclosure action against various parties including Alexander and Jean, as well as Kohn & Needle. Alexander filed a contesting answer, counterclaim and third-party complaint against the Township of Mendham. On October 16, 2000, Alexander filed a petition in federal court for Chapter 13 bankruptcy. As a consequence, the chancery court dismissed the foreclosure action without prejudice. Following the dismissal of Alexander's bankruptcy petition on June 19, 2001, M&D's predecessor moved to reinstate its complaint. A first amended complaint was filed on June 13, 2002. Although Needle filed a contesting answer, it was later stricken.

In December 2006, the tax sale certificate was assigned to M&D, and in July 2007, M&D was substituted as plaintiff in the foreclosure action. In September 2007, M&D obtained a quitclaim deed from Jean Fraenkel, which it characterized as a deed in lieu of foreclosure, for a payment of $10,000. M&D did not immediately disclose the property transfer or dismiss Jean from the foreclosure action. However, on September 24, 2007, M&D moved to dismiss Alexander as a party to the foreclosure proceeding. Its motion was granted on October 19, 2007.

As of October 2007, the property owner owed $320,030 in back taxes, and the total redemption amount was $322,224. M&D alleged that, with the exception of one quarter, it or a predecessor had paid those taxes. On March 25, 2008, a judge of the Chancery Division entered an order setting the time, place and amount of redemption, setting the amount at $322,268 and the date as May 9, 2008.

Following entry of the March order, Needle moved to dismiss the complaint for foreclosure alleging irregularities in the assignment of the tax sale certificate and, alternatively, to reduce the redemption amount to one-half of the taxes due, without interest and penalties. A different Chancery Division judge denied Needle's motion to dismiss and held that Needle could redeem only by payment of the full amount of taxes due on the property from the date of issuance of the tax sale certificate until M&D acquired its ownership interest in 2007, and one-half of the taxes thereafter. An order to that effect was entered on April 30, 2008. Needle appealed, but his appeal was dismissed as interlocutory. On February 20, 2009, the Superior Court entered final judgment in the matter. A second notice of appeal was then filed.

While this appeal was pending, M&D filed an ejectment action in order to obtain possession of the property, captioned M&D TSC, LLC v. Alexander L. Fraenkel and Heather Hein, No. MRSL-718-09. In response to a motion for summary judgment filed by M&D in that action, the mother of Alexander, Alice Fraenkel, filed a June 2, 2009 certification stating that, in 1987, Jean had deeded her one-half interest in the property to Alice and Rene Fraenkel for the sum of $150,000 in connection with her divorce from Alexander. An unrecorded deed was produced as evidence of that transaction. Correspondence from Jean, generated in connection with the ejectment proceeding, confirmed the transaction. M&D has moved to supplement the record with this evidence. It argues in the brief in support of its motion that "[t]his new information renders Appellant's entire appeal moot. This is because in this appeal Appellant seeks a reduction in the amount to redeem Respondent's tax lien on the basis that Respondent had obtained a one-half interest in this Property by obtaining a deed in lieu of foreclosure from Jean Frankel."

Needle has filed a cross motion to supplement the record with additional evidence that purports to indicate that R&D was aware of the 1987 property transfer at the time that it purchased its half interest in the property in September 2007. As the result of this evidence, Needle claims that the chancery court's judgment should be vacated and M&D's action should be dismissed. Alternatively, he seeks a remand of the action and consolidation with an action filed in Morris County on June 26, 2009, captioned Fraenkel v. M&D TSC, LLC, No. MRS-C-128-09, in which Alexander and Alice are seeking to stay an order of ejectment filed on June 26, 2009 and the right to redeem the underlying tax sale certificate in this case. As a third alternative, Needle seeks a hearing by the trial court to determine whether the judgment in this matter should be vacated and/or whether the record should be reopened or supplemented.

Our review of the motion and cross-motion filed in this matter satisfies us that a material issue of fact bearing on the merits of this appeal exists. We therefore remand the case to the Chancery Division for resolution of the competing claims of the parties and a determination of the effect of that resolution on the orders that are the subjects of this appeal. At the same time, the trial court can determine whether consolidation of this matter with any other pending matter involving the Fraenkels should occur.

Remanded for further proceedings. Jurisdiction is ...

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