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MMU, LLC v. Savo

A-0630-07T2 (N.J. Super. App. Div. 2008) (Unpublished)

FORECLOSURE; TAX SALES — A certificate holder’s acceptance of a redemption by a non-owning party does not relieve that non-owning party of the obligation to intervene in the foreclosure proceeding and the redemption may be set aside for that reason.

A homeowner failed to pay real estate taxes and the municipality sold a tax sale certificate. The certificate holder advised the tax collector that it was filing a tax sale foreclosure complaint and did so. Because of the property’s poor condition, the homeowner asked a married couple to purchase the property to help pay his debts. A purchase contract was executed under which the homeowner would remain at the property as a tenant. At closing, the couple paid the amount necessary to redeem the tax sale certificate. The tax collector notified the certificate holder of this redemption, and the holder, thinking the redemption was thereby lawful, surrendered the certificate.

The certificate holder later discovered the couple had not intervened in the foreclosure action. It then sued to have the redemption declared unlawful and to impose a constructive trust on the property. This remedy was granted by way of summary judgment though the redeeming couple was awarded a credit of $11,700 for repairs made to the property based on fairness principles.

On appeal, the Appellate Division affirmed the lower court’s ruling. It held that one who acquires a post-complaint interest in property under foreclosure and who is neither named in the court’s order of redemption nor moves to intervene in the action is barred from redeeming the property. The Court also held that the certificate holder’s acceptance of the redemption before discovering the redeemers’ identity did not relieve the couple of their obligation to intervene. It also upheld the grant of the repair credit based on a proper exercise of discretion.

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