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Left Field Properties, L.L.C. v. James F. Keeney, L.L.C.

A-3300-03T1 (N.J. Super. App. Div. 2006) (Unpublished)

TAXATION; LIENS—A property owner need not wait until it is finally resolved as to who actually owns a property before redeeming a tax sales certificate because anyone claiming a right of ownership as well as anyone in possession has a right to redeem.

In 1997, in an attempt to satisfy an outstanding tax lien, property owners borrowed money and delivered the money to a third party, believing the third party would purchase the tax sale certificates for their benefit. The third party purchased the tax sale certificates but, in April 1999, prosecuted a tax sale foreclosure proceeding to judgment. Afterwards, in October 1999, the third party purchased the property at a Sheriff’s sale. The previous property owners remained in physical possession paying monthly rent to the third party. Notwithstanding the Sheriff’s sale, the previous owners continued to pay the property taxes. The taxes were paid to the third party and not to the municipality. The third party never remitted the taxes to the municipality. As a result, in June 2000, the municipality sold another tax certificate to an innocent purchaser. Meanwhile, the same third party had borrowed approximately $157,000 from its own lender, and in an effort to satisfy the concerns of its lender, the third party secured its loan in December 1999 by granting a mortgage on the property. The lender subsequently discovered that the third party was not making real estate tax payments, jeopardizing the mortgage. In August 2002, the third party deeded the property to its lender in lieu of foreclosure. In September 2002, the innocent purchaser of the tax sale certificate commenced a foreclosure action against the third party, the lender, and the previous property owners. In October 2002, the third party’s lender (and holder of the deed) sued to evict the previous property owners. In July 2003, the innocent purchaser sold the tax sale certificate to a separate entity owned by the third party’s lender.

As their defense to the innocent purchaser’s tax sale foreclosure action, the original property owners claimed that until there was a final resolution as to who owned the property, they were unable to exercise their right of redemption. The lower court rejected this argument, ruling that anyone claiming a right of ownership, as well as anyone in possession, has a right to redemption. Finding that the previous property owners failed to redeem, the lower court entered judgment in this tax sale foreclosure action in favor of the innocent purchaser.

The original property owners then sought an order to compel the innocent purchaser to show cause why they, the original owners, should not be allowed to redeem the tax sale certificate. Their principal argument was that the third party, the lender, and the purchaser of the tax sale certificate sold by the innocent purchaser conspired to defraud them of their property. Although the lower court ruled there is no right to subrogation under the tax sale law, its stayed entry of judgment pending an investigation into the relationship between the third party, its lender, and the purchaser of the tax sale certificate. When the original property owners failed to comply with certain conditions of the stay, the lower court entered final judgment on the tax sale certificate and substituted the tax sale certificate purchaser in place of the innocent purchaser. On a motion for reconsideration, the lower court found no evidence of fraud or conspiracy, and denied the original property owner’s motion. The Appellate Division affirmed.

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