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B&B Realty Associates, LLC v. J&S Management Enterprises, Inc.

A-1002-06T1 (N.J. Super. App. Div. 2008) (Unpublished)

FORECLOSURE; TAX SALES; INTERVENORS — When a contract-buyer of a property that is involved in a tax sale foreclosure proceeding fails to seek intervention in the proceeding prior to an attempt to redeems or prior to the end of the foreclosure redemption period, it will not be entitled to redeem the property and the court may impose a constructive trust on that contract-buyer’s interest in the property for the benefit of the property owner.

A homeowner transferred his title to a residential property to his closely-held corporation. He then died leaving no will, and no one sought to administer his estate. At the time of his death, the homeowner was divorced. His one daughter decided not to pursue any interest that her own minor daughter might have had in the property. Following her father’s death, no one occupied or maintained the property. About six months later, the municipality held a tax sale for unpaid taxes and an investor purchased the tax sale certificate. Over a year later, the investor sued to foreclose the tax sale certificate, alleging the property had been abandoned under statutory law. The investor unsuccessfully attempted to serve the deceased homeowner who, at the time of his death, was the registered agent of the closely-held corporation. It then served the New Jersey Department of Treasury. The matter proceeded as uncontested and an order was entered setting the amount, time, and place for redemption of the property. A buyer who was in the business of acquiring properties subject to foreclosure became interested in the property and located the deceased’s daughter and granddaughter. He then negotiated purchase of the granddaughter’s interest in the property. The daughter attempted to effectuate a redemption of the property with funds advanced by the buyer. The municipality ultimately rejected the redemption. A final judgment in the foreclosure action was entered. It divested the closely held corporation of all rights to redeem and awarded the tax sale certificate holder ownership of the property.

The daughter filed for emergent relief, asking to be permitted to intervene for the purposes of vacating this final judgment and to redeem the property. The buyer similarly sought to intervene. When the matter was called for trial, the granddaughter, by her guardian, agreed that the buyer would obtain her rights in the property in exchange for $130,000. The lower court ultimately concluded that the buyer could not intervene because it had not sought to intervene prior to the attempted redemption or prior to the close of the redemption period. Its application to vacate the final judgment was denied, entitling the tax certificate holder to file the foreclosure action. The lower court imposed a constructive trust on the buyer’s interest in the property for the benefit of the minor granddaughter. The buyer appealed.

The Appellate Division affirmed, holding that the lower court’s imposition of the constructive trust was fair consideration for the minor child’s interest, and that case law dictated that the buyer’s attempt to intervene was untimely, the redemption period had ended, and final judgment was to be entered. It held that the buyer had advanced the money that had been tendered on behalf of the granddaughter in order to redeem the property, and at that time of redemption, none of the buyer, daughter, or other guardian on behalf of the granddaughter had sought to intervene in the foreclosure action. The Court also found that the certificate holder had filed the foreclosure timely, the property was indeed abandoned under law because it had not been occupied for six months, and there were further unpaid property taxes. Lastly, it found that the certificate holder made good service of process on the decedent’s corporation when it attempted to serve the deceased registered agent and then served the New Jersey Department of Treasury.

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