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Varsolona v. Breen Capital Services Corp.

180 N.J. 605, 853 A.2d 865 (2004)

TAXATION—The bulk buyer of a municipality’s tax sales certificates can be given the authority to enter into private instalment payment agreements with the underlying, individual delinquent property owners.

A municipality sold tax sale certificates, in bulk. This generated immediate funds for the municipality. The municipality gave the buyer the authority to enter into installment payment plans with the delinquent property owners. The delinquent owners were given three options: pay installments at eighteen percent interest; redeem the certificates in a lump sum; or submit to foreclosure. Owners who chose to enter into the installment plan retained the right to redeem the certificates at any time by complying with the Tax Sale Law’s redemption procedures.

Some owners who chose the installment plan sued the buyer claiming that the installment payment plans executed were inconsistent with the Tax Sale Law, beyond the buyer’s authority, and violated the Consumer Fraud Act. The lower court granted summary judgment for the property owners. It held that the Tax Sale Law did not permit private parties to enter into installment plans with property owners, and held that the buyer’s solicitation of the plans constituted a per se violation of the Consumer Fraud Act. The Appellate Division reversed, based on the principle that private contracts not specifically prohibited by statute are generally permitted. This led to an appeal to the New Jersey Supreme Court.

The Supreme Court noted that, by statute, municipalities can sell tax sale certificates, in bulk, for a bond, note or other obligation. The Court inferred a legislative intent from the statute to further facilitate the collection of property taxes by permitting investors to purchase tax certificates in bulk, thereby reducing the municipality’s administrative costs. Although the Legislature was silent in respect to installment payment plans when it enacted the enabling statue, the Court concluded that it was in line with the legislative purpose to allow a municipality to authorize a bulk purchaser of tax sale certificates to enter into such plans in the same manner as could the municipality itself.

A court is required to broadly construe municipal powers delegated by the Legislature, and refuse to intervene as long as the use of such powers does not conflict with express statutory limitations. Accordingly, the Supreme Court held that statutory authority to enter into installment payment plans can be transferred with the bulk sale of its tax sale certificates, as long as the terms of such plans are not inconsistent with the statutory terms that would have protected the taxpayer had it been the municipality itself that executed the plans. It noted that such a transfer can make an investment more attractive because the holder is not limited to the expensive and time-consuming task of foreclosure. For that reason, the Supreme Court affirmed the Appellate Court’s decision to dismiss the claims.

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