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Corestates/New Jersey National Bank v. Chas. Schaefer Sons, Inc.

A-6578-06T3 (N.J. Super. App. Div. 2008) (Unpublished)

FORECLOSURE; TAX SALES; INTERVENTORS — Where a mortgagee’s assignee has no connection to, and provides no benefit to, the property owner or the original lender, and has paid only nominal consideration for the assignment, it will not be permitted to intervene in tax sale proceedings especially at a late date.

A property owner defaulted on its mortgage. The lender sued to foreclose and also sued to recover the amounts due under the note. The owner defaulted in both actions and the lender obtained a foreclosure judgment as well as a monetary judgment for about $5.7 million. The lender then assigned a portfolio of its assets, including this particular mortgage and note, to an investor for about $324,000.

The owner had also failed to pay its property taxes and a buyer purchased the resulting tax sale certificates. The certificate buyer then filed tax foreclosure complaints. After the owner failed to respond, a court entered judgment and set a deadline for redeeming the property from the tax liens. The portfolio investor sold its interest in the note and mortgage for $20,000, and for up to an additional $200,000 if its assignee realized a profit of at least $45,000 from the sale of the property. The assignee moved to intervene in the tax foreclosure proceedings and to redeem the tax liens. The lower court found that the assignee, as a third-party, could not intervene in the tax sale because it only paid a nominal sum for its interest in the property. The lower court held that when determining if a third-party can intervene in a tax foreclosure proceeding, a court must look at the totality of the circumstances to determine whether the third-party paid more than nominal consideration. According to the lower court, allowing an assignee who paid only nominal consideration to intervene in tax sale proceedings would frustrate the public policy favoring the use of tax sale certificates to raise municipal revenue. Here, it believed that allowing this particular assignee to intervene was inappropriate because the assignee had no connection to, and provided no benefit to, the property owner or the original lender. Further, if the assignee were permitted to intervene at such a late date with such a small investment, it would discourage investment in tax sale certificates.

The assignee appealed, and the Appellate Division affirmed, finding that a third-party cannot intervene in a tax sale if it only pays nominal consideration. It agreed with the lower court’s holding that one must take all of the circumstances into account, and not just determine if the third-party would receive a windfall. The Court also agreed with the lower court’s finding that the assignee did not pay more than nominal consideration, based in part on the fact that the assignee’s profit would be astronomical in comparison to the actual amount it paid for the assignment of the note and mortgage.

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