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Robinhood Properties, LLC v. Nj Tlc Holdings and Arianna Financial Corp.


January 25, 2011


On appeal from the Superior Court of New Jersey, Chancery Division, Union County, Docket No. C-40-08.

The opinion of the court was delivered by: Cuff, P.J.A.D.


Argued: January 6, 2010

Before Judges Cuff and Payne.

The opinion of the court was delivered by CUFF, P.J.A.D.

Plaintiff Robinhood Properties, LLC (Robinhood) acquired an interest in real property located in Elizabeth in which defendant NJ TLC Holdings (TLC) and its successor in interest, defendant Arianna Financial Corp., LLC. (Arianna), also held an interest. Plaintiff filed a partition action and sought contribution from TLC and Arianna for their proportionate share of the redemption of a tax sale certificate encumbering the shared property. This appeal is limited to the portion of the February 17, 2009 order that provides that TLC shall reimburse Robinhood two-thirds of the $47,332.41 or $31,570.72 paid by Robinhood to redeem the tax sale certificate. We affirm.

On June 7, 2004, Phoenix Funding, Inc. (Phoenix) purchased a tax sale certificate for a parcel of property located in Elizabeth. It continued to pay taxes on the property to preserve and increase the value of its lien. On January 22, 2007, it filed a complaint to foreclose the tax sale certificate and the property owners' right of redemption.

We discern from the record that title to the property was held by six persons as tenants in common. Phoenix settled with three of the co-owners on October 25, 2006, by accepting a deed in lieu of foreclosure to a one-third undivided share of the property. On March 27, 2007, it settled with two other co-owners, who held an undivided one-third interest in the property. Phoenix promptly assigned its rights to TLC.

The remaining property owner did not settle with Phoenix but conveyed his one-third share of the property to Robinhood. Their agreement provided for a purchase price of $35,000 and further provided that the sale was contingent on Robinhood's successful intervention in the pending foreclosure action initiated by Phoenix. A third-party investor, such as Robinhood, must intervene and obtain permission from the court before redeeming a tax sale certificate. Simon v. Cronecker, 189 N.J. 304, 320-22 (2007); N.J.S.A. 54:5-89.1 and N.J.S.A. 54:5-98.

The court granted Robinhood's motion to intervene. The court accepted Robinhood's representation that it would assume responsibility for redemption of the lien, and after being informed that the full $35,000 purchase price constituted the remaining owner's net consideration for the property, it concluded that Robinhood offered more than nominal consideration. Robinhood acquired the last one-third share of the property on January 31, 2008, and redeemed the lien for $47,332.41 on February 4, 2008. Pursuant to statute, funds given to the municipal tax collector for redemption, which cover the certificate holder's initial investment, subsequent tax payments, costs, interest, and a statutory premium, are remitted to the certificate holder upon surrender of the certificate. N.J.S.A. 54:5-54 to -55, -57 to -58, and -60 to -61.

Robinhood then filed its complaint for partition on March 10, 2008. The court entered partial summary judgment resolving some issues but not Robinhood's claim for contribution by order dated September 25, 2008. TLC and Robinhood filed cross motions for summary judgment. Following oral argument, Judge Malone entered an order partitioning the property, appointed a realtor to sell the property, and apportioned certain expenses between the parties. The judge also granted Robinhood's contribution claim. In his oral opinion addressing plaintiff's request for contribution, Judge Malone stated

[W]here there are co-tenants, . . . of the property, they are each entitled to contribution from the other co-tenant for payments made to preserve the property.

And I think taxes are, clearly, one of those payments made to preserve the property.

When Robinhood paid $47,332.41, it was certainly acting to protect its own interest, but incidentally, it worked to protect the interest of the co-owner.

[C]ontribution . . . from the co-owner is -- mandated by -- the case law.

On appeal, TLC argues that Robinhood is judicially estopped from receiving contribution based on its representations to the court in its intervention motion. TLC also contends that Robinhood lacks standing to obtain contribution for anything, including taxes prior to January 31, 2008, and that case law and public policy preclude contribution for past taxes, past maintenance and past upkeep. We disagree and affirm.

As the record is presented to this court and as it appeared before the trial court, there are no disputed issues of fact. The record sets forth when and under what circumstances Robinhood and TLC acquired their respective interests in the property. The record also reveals the amount expended by each party on the property. Whether Robinhood is entitled to contribution for taxes due and owing and paid by it at the time it acquired its interest is a question of law subject to resolution by summary judgment. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).

Here, TLC did not dispute the need for partition. It also does not dispute that generally, on partition, a tenant, who has assumed responsibility for certain expenses necessary to maintain common property or preserve its own and its co-tenants' interests therein, may seek contribution from its co-tenants to the extent of their proportionate share of those expenses. Baird v. Moore, 50 N.J. Super. 156, 164-65 (App. Div. 1958). Courts have long categorized the payment of taxes or redemption of a common lien as just such an expense warranting contribution. Estate of Colquhoun v. Estate of Colquhoun, 88 N.J. 558, 564 (1982); Roll v. Everett, 73 N.J. Eq. 697, 702-03 (E. & A. 1908); Egan v. Egan, 98 N.J. Eq. 487, 490 (Ch. 1925). Defendants nonetheless contend this equitable principle is

inapplicable here due to the nature and timing of the parties' shared tenancy. TLC insists only the owner of the share acquired by Robinhood could seek contribution, and only then from TLC's predecessors. In other words, only the prior owners could seek contribution from each other and only for the period in which they contemporaneously owned a share of the property. Moreover, TLC argues that Robinhood's predecessor did not assign his right to contribution to plaintiff, and also released TLC from any claim for reimbursement for tax payments in an agreement signed six months after he sold his interest to Robinhood.

A party has standing to maintain a suit as long as it has "a sufficient stake and real adverseness with respect to the subject matter" and a "substantial likelihood of some harm visited upon [it] in the event of an unfavorable decision." In re Adoption of Baby T., 160 N.J. 332, 340 (1999) (citing Crescent Park Tenants Ass'n v. Realty Equities Corp., 58 N.J. 98, 107 (1971)). Ordinarily, a party may not assert the rights of another, even if it otherwise has standing. Jersey Shore Med. Ctr.-Fitkin Hosp. v. Estate of Baum, 84 N.J. 137, 144 (1980).

Here, Phoenix paid the taxes before Robinhood acquired its share of the property. As it did so, the amount required to redeem grew and Phoenix could have moved to foreclose on its certificate. The property remained encumbered and placed the entirety of both parties' interests in jeopardy without reference to when the debt accrued and no matter when either party acquired its interest in the property. The property remained encumbered until redemption or foreclosure of the certificate. The person from whom Robinhood acquired its interest never paid the taxes ultimately paid by Robinhood. Nor for that matter did TLC. Therefore, the party who paid the taxes conferred a benefit on all owners of an interest in the property.

We consider TLC's reliance on Newman v. Chase, 70 N.J. 254, 268 (1976) misplaced. There, the Court granted the out of possession tenant an accounting for half of the rental value of the property, less a credit for half the mortgage payments made by the tenant in possession. The accounting applied only from the date the tenant in possession commenced occupancy of the property. Id. at 266-68. The Court restricted the equitable remedy to that period because the tenant in possession's exclusive occupancy rather than the common tenancy justified the accounting. Id. at 267. In this case, however, both parties acquired their shares subject to the same lien, most of which was incurred prior to acquisition of their shares but with full knowledge that it would encumber the property until satisfied.

We also reject TLC's argument that the redemption of the tax certificate conferred no benefit on it to warrant contribution. This argument ignores the benefit conferred on co-tenants when a tax sale certificate is redeemed. Redemption protects their interests from foreclosure. Dorf v. Tuscarora Pipe Line Co., 48 N.J. Super. 26, 35-36 (App. Div. 1957). The presumption that redemption by one co-tenant inures to the benefit of the other may be rebutted, but only insofar as that investment serves to diminish rather than protect the others' interest. See Heck v. Cannon, 24 N.J. Super. 534, 539 (Ch. Div. 1953) (co-tenant purchased tax sale certificate but then initiated foreclosure action against others to establish exclusive ownership).

Here, TLC was left with two-thirds of the property unencumbered by the lien, and Phoenix received the full amount of its investment with interest and statutory premium.*fn1 Equity demands that no party should receive more or less than its due. Donnelly v. Capodici, 227 N.J. Super. 310, 313 (Ch. Div. 1987).

We also cannot accept TLC's position that contribution in this instance frustrates the public policy favoring settlement of foreclosure actions. TLC urges that to hold it responsible for contribution essentially places responsibility on the certificate holder for a proportionate share of its own certificate and creates a disincentive for certificate holders to settle.

A certificate holder should be bound by the legal consequences of its decision to employ a nominally separate entity in the settlement process to avoid either foreclosing on its right of redemption or redeeming its own certificate. See Somerset Apts., Inc. v. Dir., Div. of Tax., 134 N.J. Super. 550, 555 (App. Div. 1975) (holding that the party who "chose to utilize the corporate structure to enable it to obtain . . . financing . . . cannot now deny [that structure's] existence in order to avoid the tax consequences" of its choice.). Responsibility for contribution is one of the consequences here.

Moreover, a certificate holder, such as Phoenix, which settles with some co-tenants and transfers its interest to another entity, such as TLC, cannot reasonably expect to hold the remaining co-tenants ultimately responsible for more than their combined proportionate share of the lien. Ordinarily, a lien holder expects either reimbursement for its investment plus interest and a premium if the property owners redeem the certificate, or title to the property if they do not. Simon, supra, 189 N.J. at 319. Although the statute does not expressly address this intermediate situation,*fn2 the non-settling co-tenant (the person from whom Robinhood acquired its interest) or intervening third-party investor (Robinhood) may redeem the entire certificate pursuant to the statute and then seek contribution from its co-tenants in accordance with their proportionate shares. See Lonsk v. Pennefather, 168 N.J. Super. 178, 183 (App. Div. 1979) (stating that co-tenant must redeem entire certificate but may seek contribution from the others), certif. denied, 82 N.J. 285 (1980).

Indeed, the result urged by TLC is not only inequitable but also frustrates the public policy of fostering settlement. Contribution in this situation protects property owners from exploitation. See Simon, supra, 189 N.J. at 320 (noting that a property owner who has not redeemed before a foreclosure action is filed is probably in severe financial circumstances and vulnerable to manipulation and overbearing speculators). Allowing a party who acquires a minor share of a property to receive contribution from other holders of interests in the property following redemption of the certificate favors rather than frustrates fair treatment to a person who holds a minor interest in property. The prospect of contribution may increase the number and amount of offers for the minor interest; whereas, the inability to receive contribution may lead to fewer offers or no offers at all. If a certificate holder desires to avoid competition and interference from other third-party investors, it retains the option of making favorable offers to the holders of the outstanding interests.

Finally, we agree with the motion judge and are not persuaded that any representation made by Robinhood in the foreclosure action bars its contribution claim in the partition action. The only issue before the court on Robinhood's application to intervene in the foreclosure action was the net consideration paid by it for the remaining one-third interest in the property. Unless the position advanced in the first proceeding leads to inconsistent results or fosters the perception that the court has been misled, the extraordinary remedy of judicial estoppel will not be applied. Kimball Int'l, Inc. v. Northfield Metal Prods., 334 N.J. Super. 596, 608 (App. Div. 2000), certif. denied, 167 N.J. 88 (2001). Such a situation is not presented in this case.

We, therefore, affirm the order requiring TLC to contribute to the amount paid by Robinhood to redeem the tax sale certificate in proportion to its ownership of the property.


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