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Kanter v. Forrest

A-5021-06T1 (N.J. Super. App. Div. 2008) (Unpublished)

FORECLOSURE; TAX SALES — A tax collector can reject a tax sale redemption payment where the funds are directly derived from a contract deposit posted by a contract-buyer who, in effect, is indirectly seeking to redeem the tax sale certificate by advancing the required sum in the form of the contract deposit.

A tax lien on real property was sold to an individual who filed a foreclosure complaint approximately two and one half years later. A redemption date was set for six months after that. On the day before the redemption date, the property owner contracted to sell the property. The contract deposit was sufficient to redeem the tax certificate. The funds were brought to the tax collector who rejected the payment. A few days later, a final judgment of foreclosure was entered. The owner moved to vacate the judgment and the third party buyer moved to intervene in the action.

The lower court’s adjudication was impacted by subsequent New Jersey Supreme Court decisions which generally held that third party investors are barred from acting to further the redemption of tax sale certificates if they had not intervened in the pending foreclosure action. On appeal, the Appellate Division found that the contract-buyer indirectly sought to redeem the tax sale certificate by advancing the sum required to the property owner in the form of a contract deposit. It found that the tax collector correctly rejected the redemption because the third party had not intervened in the foreclosure proceeding. Thus, the Court upheld the lower court order that imposed a constructive trust on behalf of the tax lien holder on the contract of sale between the property owner and the contract-buyer.

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