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Cherokee LCP Land, LLC v. City of Linden Planning Board

Supreme Court of New Jersey

August 2, 2018

CHEROKEE LCP LAND, LLC and LINDEN 587, LLC, Plaintiffs-Appellants,
v.
CITY OF LINDEN PLANNING BOARD, GOODMAN NORTH AMERICAN PARTNERSHIP HOLDINGS, LLC, and LINDEN PROPERTY HOLDINGS, LLC Defendants-Respondents.

          Argued February 26, 2018

          On certification to the Superior Court, Appellate Division.

          Keith A. Bonchi argued the cause for appellants Cherokee LCP Land, LLC and Linden 587, LLC (Goldenberg, Mackler, Sayegh, Mintz, Pfeffer, Bonchi & Gill, attorneys; Keith A. Bonchi, of counsel and on the briefs, and Elliot J. Almanza, on the briefs) .

          Paul H. Schafhauser argued the cause for respondent Linden Property Holdings, LLC (Chiesa Shahinian & Giantomasi, attorneys; Paul H. Schafhauser, of counsel and on the briefs) .

          Anthony D. Rinaldo, Jr., argued the cause for respondent City of Linden Planning Board (Law Offices of Anthony D. Rinaldo, Jr., attorneys; Anthony D. Rinaldo, Jr., on the brief).

          Adam D. Greenberg argued the cause for amicus curiae National Tax Lien Association, Inc. (Honig & Greenberg and Taylor and Keyser, attorneys; Adam D. Greenberg and Robert W. Keyser, on the brief).

          SOLOMON, J., writing for the Court.

         This appeal tests the limits of the definition of "interested party" within the Municipal Land Use Law (MLUL), N. J.S. A. 40:55D-4, as applied to the holder of a tax sale certificate -- a tax lienholder - under New Jersey's Tax Sale Law. Specifically, the Court considers whether a tax lienholder has standing to challenge a planning board's approval of a land use application for a neighboring property.

         Defendant Goodman North American Partnership Holdings, LLC (Goodman) purchased a parcel of land in Linden, New Jersey (the Property). In 2013, after several transfers, bankruptcy proceedings, and abandonment, ownership of the adjacent parcel (the Neighboring Property), a superfund site, was purportedly transferred by quitclaim deed to Cherokee LCP Land, LLC (Cherokee), a plaintiff in this matter. That same year, non-party Cherokee Equities, LLC (Equities), purchased three tax sale certificates on the Neighboring Property from the City of Linden and initiated tax foreclosure proceedings. After filing the foreclosure complaint, Equities assigned the tax sale certificates to Linden 587, LLC (Linden 587), and Linden 587 was substituted as plaintiff in the foreclosure proceedings.

         Goodman submitted a site plan application for development of the Property to the City of Linden Planning Board (the Board). Seventeen days before Equities assigned the tax sale certificates to Linden 587, the Board held a public hearing on Goodman's application. Cherokee attended as an objector. Neither Equities nor Linden 587 attended the hearing. In part, Cherokee challenged the proposed project's elimination of certain points of access to the Neighboring Property, its interference with an existing easement on the Property, and substantial modifications to storm water management on the Property. The Board unanimously approved the application with qualifications. Thereafter, Cherokee's principal offered to sell the Neighboring Property to Goodman for 2% of the project to avoid litigation.

         Plaintiffs Cherokee and Linden 587 filed a complaint challenging the Board's approval of Goodman's application. Defendants filed motions to dismiss or for summary judgment, arguing, in part, that Cherokee and Linden 587 lacked standing.

         The trial court dismissed plaintiffs' complaint with prejudice, concluding that "Linden 587 does not have a present interest in the Neighboring Property as its ownership rights ... are conditioned upon its right of redemption which it has failed to exercise." The trial court found "that until redemption and entry of foreclosure, the holder of a tax sale certificate does not have any vested ownership or present possessory interest in a property that is subject to the tax sale certificate." As a result, the trial court determined that Linden 587 "cannot be deemed an interested party" based on its status as a tax lienholder and that, as a consequence, dismissal was warranted. Additionally, the court noted that the plaintiffs' motive was not to redevelop the Neighboring Property, but to "extract value from the Project through the sale of the Neighboring Property ... to Goodman." The Appellate Division affirmed, and the Court granted plaintiffs' petition for certification. 230 N.J. 500 (2017).

         HELD: Pursuant to N. J.S.A. 40:55D-4, a tax lienholder who can show that its "right to use, acquire or enjoy property is or may be affected" if the application is granted is an interested party and therefore may have standing to challenge a planning board's approval of a land use application.

         1. The sale of tax certificates allows a municipality to transform a non-performing asset into cash without raising taxes. However, the holder of a tax sale certificate does not have title to the land. The holder's purchase of the certificate at a tax sale does not divest the delinquent owner of his title to the land. Instead, the purchaser of a tax sale certificate acquires a lien formerly held by the municipality's taxing authority, derived from the property owner's obligation to pay real estate taxes. The lien purchaser obtains an inchoate interest that consists of three rights: the right to receive the sum paid for the certificate with interest at the redemption rate for which the property was sold; the right to redeem from the holder a subsequently issued tax sale certificate; and the right to acquire title by foreclosing the equity of redemption of all outstanding interests, including that of the property owner. By virtue of foreclosure, the purchaser of the tax sale certificate may become the owner of the property in fee simple, (pp. 13-15)

         2. The "right to acquire title" is therefore significant in resolving standing under the MLUL. Indeed, the MLUL explains standing as follows: "[a]ny interested party may appeal to the governing body any final decision of a board of adjustment approving an application for development." N.J.S.A. 40:55D-17(a). An "interested party" is defined as: "any person, whether residing within or without the municipality, whose right to use, acquire, or enjoy property is or may be affected by any action taken under [this act], or whose rights to use, acquire, or enjoy property under [this act], or under any other law of this State or of the United States have been denied, violated or infringed by an action or a failure to act under [this act]." N.J.S.A. 40:55D-4 (emphases added). New Jersey's courts have long taken a liberal approach to standing in zoning cases and thus have broadly construed the MLUL's definition of "interested party." (pp. 15-16)

         3. Although a tax lienholder does not have title to the subject property and has, at best, a limited possessory interest in it, the absence of title or possession is not determinative of standing. Indeed, the MLUL clearly and unambiguously provides that standing may be afforded to those with a "right to use, acquire, or enjoy property." N.J.S.A. 40:55D-4. The purchaser of the tax sale certificate has the right to acquire title to the property and the right to use the property in a limited manner "in order to make repairs, or abate, remove or correct any condition harmful to the public health, safety and welfare, or any condition that is materially reducing the value of the property." N.J.S.A. 54:5-86(c). Therefore, the trial court erred in dismissing the complaint based on its legal conclusion that holders of tax sale certificates who have not foreclosed upon the subject property cannot have standing, (pp. 16-18)

         4. That conclusion, however, is not in and of itself determinative of standing: to have standing pursuant to the MLUL, a tax lienholder must show that its "right to use, acquire, or enjoy property is or may be affected" by the action. N.J.S.A. 40:55D-4. Therefore, standing must be considered on a case-by-case basis. In this case, plaintiffs have alleged principally that the proposed project would eliminate certain points of access to the Neighboring Property, interfere with an existing easement on the Property, and substantially modify storm water management on the Property. Those representations - which defendants have not contested - suggest that plaintiffs' limited present possessory interest in the Neighboring Property pursuant to N.J.S.A. 54:5-86(c) may be affected, and that Linden 587 therefore may have standing. Consequently, the trial court erred in dismissing plaintiffs' complaint for lack of standing, (pp. 18-19)

         5. The Court adds the following guidance. If the Legislature had intended for only parties required to be notified to have standing, it would have restricted the standing requirements accordingly. Standing does not depend upon ownership or proximity, but rather on the definition of an "interested party." Linden 587's motive in obtaining the certificates and challenging the Board's decision is not pertinent to the determination here of standing under the MLUL. Nor is it conclusive that Linden 587 was assigned the tax sale certificates after the Board hearing; the date of acquisition is not determinative of a party's standing, (pp. 19-20)

         6. The Court stresses that it makes no findings regarding Linden 587's acquisition of the certificates; whether Cherokee did hold title to the Neighboring Property; the relationship among Cherokee, Equities, and Linden 587; whether the Neighboring Property was "abandoned," thus providing a limited possessory interest under N.J.S.A. 54:5-86(c); the extent to which plaintiffs' right to acquire or limited possessory interest "may be affected"; or the merits of plaintiffs' objections in general. The record is lacking on these matters and, to the extent relevant, they should be considered and a record developed on remand, (pp. 20-21)

         REVERSED

          TIMPONE, J., dissenting, disagrees that the holder of a tax sale certificate has the "right to acquire" property within the meaning of the MLUL. Even if a speculative, contingent interest like a tax lien could be deemed a "right to acquire" property, according to Justice Timpone, that right is not affected unless the acquisition itself is or may be affected by the Board's decision. Justice Timpone stresses that Linden 587 failed to properly plead or defend standing and expresses concern about the impact of the majority's decision.

          JUSTICES LaVECCHIA, ALBIN, PATTERSON, and FERNANDEZ-VINA join in JUSTICE SOLOMON'S opinion. JUSTICE TIMPONE filed a dissent, in which CHIEF JUSTICE RABNER joins.

          OPINION

          SOLOMON JUSTICE.

         The Municipal Land Use Law (MLUL), N.J.S.A. 40:55D-17(a), recognizes that development on one parcel of land can have consequences for others. The MLUL thus provides that "[a]ny interested party may appeal to the governing body any final decision of a board of adjustment approving an application for development," N.J.S.A. 40:55D-17(a), and defines "interested party" broadly to include "any person . . . whose right to use, acquire, or enjoy property is or may be affected by any action taken under [the MLUL]," N.J.S.A. 40:55D-4.

         This appeal tests the limits of that definition as applied to the holder of a tax sale certificate -- a tax lienholder --under New Jersey's Tax Sale Law (Tax Sale Law), N.J.S.A. 54:5-1 to -137. Specifically, we consider whether a tax lienholder has standing to challenge a planning board's approval of a land use application for a neighboring property.

         We conclude that, pursuant to N.J.S.A. 40:55D-4, a tax lienholder who can show that its "right to use, acquire or enjoy property is or may be affected" if the application is granted is an interested party and therefore may have standing to challenge a planning board's approval of a land use application.

         Accordingly, we reverse the judgment of the Appellate Division affirming the trial court's dismissal with prejudice of plaintiffs' complaint in lieu of prerogative writs pursuant to Rule 4:6-2(e), and remand for further proceedings. The record is deficient with respect to a number of factual issues, as noted throughout the opinion; to the extent that those matters are pertinent to standing or the substantive merits of this case, they should be considered and a record developed on remand.

         I.

         A.

         We glean the following relevant facts from the motion proceedings before the trial court.

         A predecessor of GAF Corporation (GAF) acquired and subsequently subdivided a property in Linden, New Jersey, into two parcels of land. GAF retained ownership of one parcel, now known as Block 587, Lots 1 and 2.01, on Linden's official tax map (the Property), and sold the other, now known as Block 587, Lots 3.01, 3.02, and 3.03, on the Linden tax map (the Neighboring Property) to Linden Chlorine Products, Inc.

         GAF transferred the Property to Linden Property Holdings, LLC (LPH), which entered into a purchase and sale agreement with Goodman North American Partnership Holdings, LLC (Goodman). The purchase and sale agreement was contingent upon Goodman procuring approval to undertake redevelopment projects on the Property.

         In 2013, after several transfers, bankruptcy proceedings, and abandonment, ownership of the Neighboring Property, a superfund site, was purportedly transferred by quitclaim deed to Cherokee LCP Land, LLC (Cherokee), a plaintiff in this matter. That same year, non-party Cherokee Equities, LLC (Equities), purchased three tax sale certificates on the Neighboring Property from the City of Linden and initiated tax foreclosure proceedings. After filing the foreclosure complaint, Equities assigned the tax sale certificates to Linden 587, LLC (Linden 587), and Linden 587 was substituted as plaintiff in the foreclosure proceedings.[1] According to the record, those proceedings are still pending.[2]

         In May 2014, Goodman submitted a site plan application for development of industrial, warehouse and distribution space on the Property to the City of Linden Planning Board (the Board). Following the submission of those plans, Goodman served notice of its application to interested parties and property owners within 200 feet of the Property, as identified by the City of Linden, including Cherokee.

         Seventeen days before Equities assigned the tax sale certificates to Linden 587, the Board held a public hearing on Goodman's application. Cherokee attended the hearing as an objector, [3] based on its status as owner of the Neighboring Property. Neither Equities nor Linden 587 attended the hearing.

         In part, Cherokee challenged the proposed project's elimination of certain points of access to the Neighboring Property, its interference with an existing easement on the Property, and substantial modifications to storm water management on the Property. Counsel for Cherokee cross-examined Goodman's witnesses and presented its engineer as a witness.

         Following the hearing, the Board unanimously approved the application with qualifications.[4] Thereafter, Cherokee's principal, Jay Wolfkind, emailed Goodman offering to sell the Neighboring Property to Goodman as a means of avoiding litigation in exchange for "just TWO (2%) PERCENT of the project."[5] The bottom of Wolfkind's email states, "[Cherokee] and Linden 587 . . . are separate legal entities from each other, and from every other Cherokee entity."[6]

         In October 2014, plaintiffs Cherokee and Linden 587 filed a complaint in lieu of prerogative writs with the Chancery Division of the Superior Court, challenging the Board's approval of Goodman's application. The complaint named Goodman, LPH, and the Board as defendants. In response, defendants Goodman and LPH filed motions to dismiss plaintiffs' complaint or, alternatively, for summary judgment, and submitted a statement of material facts in support of their motion. They argued, in part, that Cherokee and Linden 587 lacked standing. The Board joined in those motions.

         Following oral argument, the trial court noted that plaintiffs "either admitted or failed to substantively respond" to defendants' statement of material facts. The trial court thus considered the facts to be uncontested for the purposes of ruling on the motion to dismiss. The trial court granted the motion pursuant to Rule 4:6-2(e) and dismissed plaintiffs' complaint with prejudice.

         In its Statement of Reasons, the court stated that both Cherokee and Linden 587 lacked standing to challenge the Board's approval. Based on that finding, the court did "not [need to] reach the merits of the summary judgment motion." In determining that Linden 587 lacked standing, the court noted that neither "Linden 587's affiliated status with Cherokee" nor its "status as a holder of three liens on the Neighboring Property" conferred standing.

         In discussing Linden 587's affiliated status with Cherokee, the court noted that "plaintiffs have not provided any information to this court showing the nature of the relationship between the entities," adding that, as noted at the bottom of Wolfkind's email offering to sell the Neighboring Property to Goodman, the "record . . . suggests that the plaintiffs are separate legal entities." The court stated that "the injury of one separate legal corporate entity cannot be imputed to another" and reasoned that, even if imputation was permissible, it would not be appropriate because "Cherokee does not have an interest in the Neighboring Property."[7]

         The court concluded that "Linden 587 does not have a present interest in the Neighboring Property as its ownership rights, which include the use and enjoyment of the property, are conditioned upon its right of redemption which it has failed to exercise." Citing Township of Jefferson v. Block 447A, Lot 10, 228 N.J.Super. 1, 4 (App. Div. 1988), the trial court found "that until redemption and entry of foreclosure, the holder of a tax sale certificate does not have any vested ownership or present possessory interest in a property that is subject to the tax sale certificate." As a result, the trial court determined that Linden 587 "cannot be deemed an interested party" based on its status as a tax lienholder and that, as a consequence, dismissal was warranted.

         Additionally, the court noted that the plaintiffs' motive was not to redevelop the Neighboring Property, but to "extract value from the Project through the sale of ...


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