Simon v. Cronecker; Grivas v. Smyth, 189 N.J. 304

Summary

The Supreme Court of New Jersey considered whether a third-party investor may purchase a property interest and redeem a tax sale certificate after the filing of a foreclosure complaint. The Court held that the Tax Sale Law permits such conduct when the investor timely intervenes in the foreclosure action and pays more than nominal consideration to the property owner. Because Cherrystone Bay failed to intervene before arranging redemption, the Court imposed constructive trusts and allowed the tax certificate holders to succeed in the investor’s place.

Holdings

1. The Tax Sale Law does not prohibit a third-party investor from purchasing a property owner's interest for more than nominal consideration and redeeming or assisting in the redemption of a tax sale certificate after a foreclosure complaint has been filed, provided the investor timely intervenes in the foreclosure action and obtains court approval.
2. A third-party investor who acquires an interest in property subject to a pending tax-sale foreclosure must intervene and obtain judicial authorization before directly or indirectly arranging redemption of the tax certificate.
3. More than nominal consideration means consideration that is not insubstantial under all the circumstances and is not unconscionable in light of the nature of the transaction and the benefit to the property owner.
4. The appropriate remedy is to impose constructive trusts on Cherrystone's contractual rights, allowing the tax certificate holders to succeed to those rights after reimbursing Cherrystone for amounts expended to redeem the certificates and purchase the properties.

Questions Presented

1. Whether the Tax Sale Law permits a third-party investor to acquire a property interest and arrange redemption of a tax sale certificate after a foreclosure complaint has been filed.
2. Whether a third-party investor must intervene in the foreclosure action before directly or indirectly redeeming the tax sale certificate.
3. What standard determines whether consideration paid to a property owner is more than nominal under N.J.S.A. 54:5-89.1.
4. What equitable remedy is appropriate when a third-party investor paid more than nominal consideration but failed to intervene before arranging redemption.

Disposition

reversed_and_remanded