GRAND MADISON LLC VS. BERNADETTE ROTONDA (F-003270-18, ESSEX COUNTY AND STATEWIDE) ( 2020 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited . R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3057-18T3
GRAND MADISON LLC,
Plaintiff-Appellant,
v.
BERNADETTE ROTONDA,
FRANKLIN SOCIETY FEDERAL
SAVINGS & LOAN ASSOCIATION,
n/k/a HSBC BANK, NA,
MIDLAND FUNDING LLC, and
STATE OF NEW JERSEY,
Defendants,
and
HUNTINGTON ASSOCIATES, LLC,
Intervenor-Respondent.
________________________________
Argued February 26, 2020 – Decided April 13, 2020
Before Judges Koblitz, Whipple and Gooden Brown.
On appeal from the Superior Court of New Jersey,
Chancery Division, Essex County, Docket No. F-
003270-18.
Keith Alan Bonchi argued the cause for appellant
(Goldenberg, Mackler, Sayegh, Mintz, Pfeffer, Bonchi
& Gill, attorneys; Keith Alan Bonchi, of counsel and on
the briefs; Elliot J. Almanza, on the briefs).
Michael S. Burns argued the cause for intervenor-
respondent (Burns & Isen, LLC, attorneys; Michael S.
Burns, on the brief).
PER CURIAM
In this tax lien foreclosure action, plaintiff Grand Madison LLC appeals
from the January 16, 2019 Chancery Division order staying the entry of final
judgment, permitting intervention and redemption by intervenor Huntington
Associates, LLC (Huntington), and denying plaintiff's cross-motion for a
constructive trust. Guided by Simon v. Cronecker, 189 N.J. 304 (2007) and
FWDSL & Associates, LP v. Berezansky, 452 N.J. Super. 408 (App. Div. 2017),
we affirm.
We glean these facts from the record. As a result of the accrual of unpaid
real estate taxes, on July 6, 2011, Robert Rothman purchased tax sale certificate
no. 11-05417, encumbering property owned by Bernadette Rotonda. For the
next seven years, Rothman paid the delinquent taxes and allowed Rotonda to
continue to reside on the property. However, on February 14, 2018, Rothman
filed a tax foreclosure complaint pursuant to N.J.S.A. 54:5-86 to -87 of the Tax
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Sale Law, N.J.S.A. 54:5-1 to -137,1 which proceeded as an uncontested
foreclosure. An Order Setting Time, Place and Amount of Redemption was
entered on May 30, 2018, fixing the redemption amount at $104,605.06, and the
last day to redeem as July 27, 2018. On August 27, 2018, Rothman assigned the
certificate to Grand Madison, an entity he controlled. On the same date, Grand
Madison moved to substitute in as plaintiff and for final judgment.
On August 31, 2018, prior to the entry of final judgment, Huntington
entered into a "profit-sharing" sales agreement with Rotonda to purchase the
property (the agreement). According to the agreement, because the property was
"subject to a tax lien foreclosure action" and Rotonda did "not have the funds
needed to redeem the tax lien," Huntington agreed "to provide the necessary
funds to redeem the tax lien and repair the [p]roperty to increase its resale
1
The Tax Sale Law provides a mechanism for individuals or entities to purchase
tax liens from municipalities and initiate foreclosure actions against property
owners who are delinquent in paying their property taxes. The foreclosure
process begins when a property owner fails to pay the property taxes, as the
unpaid balance becomes a municipal lien on the property. N.J.S.A. 54:5-6.
"When unpaid taxes . . . remains in arrears on the [eleventh] day of the eleventh
month in the fiscal year when the taxes . . . became in arrears, the collector . . .
shall enforce the lien by selling the property . . . ." N.J.S.A. 54:5-19. Upon
completion of the sale, a certificate of tax sale is issued to the purchaser,
N.J.S.A. 54:5-46, conveying the property to the purchaser, "subject to a person
with an interest in the property having the right to redeem the certificate, as
prescribed by statute." Cronecker, 189 N.J. at 318 (citing N.J.S.A. 54:5-31 to -
32, -46).
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value." In consideration, Huntington would pay $10,000 to Rotonda as "[i]nitial
[c]losing [p]roceeds" upon Rotonda transferring title to the property to
Huntington (the initial sale). Then, "[u]pon completion of the [r]epair [w]ork,"
Huntington would sell the property at "fair market value" (the resale).
Pursuant to the agreement, once the property was resold, Huntington
would "receive one hundred percent of the net proceeds obtained in connection
with a sales price of . . . up to $225,000 . . . and then [Huntington] and [Rotonda]
[would] each receive fifty percent . . . of any excess proceeds" above the
$225,000 threshold. Additionally, Huntington agreed to pay $115,000 for the
outstanding tax lien certificate, and to satisfy $4000 in personal judgments
against Rotonda. Further, an amendment to the agreement executed on
September 11, 2018, specified that Rotonda would "be permitted to continue to
reside on the property rent-free . . . for sixty . . . days after the [i]nitial [s]ale."
However, the entire agreement was contingent upon Huntington succeeding in
its motion to intervene in the foreclosure action. Otherwise, the agreement
would "be deemed null and void."
Armed with the agreement, on September 12, 2018, Huntington moved to
stay entry of final judgment, intervene in the foreclosure action, and redeem the
tax sale certificate. In support, Huntington's attorney and member certified that
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based on the recent sale of comparable property, the property was "worth no
more than $145,000," and "likely significantly less since it [was] in worse
condition." However, "a real estate broker" "verbally advised . . . that the
renovated [p]roperty will likely sell in the range of $250,000." 2 The attorney
averred that the agreement was entered "[a]fter arms-length negotiations" with
Rotonda, and the terms "represent[ed] more than 'substantial consideration'"
regardless of "the ultimate sales price of the renovated property."
Rotonda supported Huntington's motion and certified she understood she
was only "guaranteed $10,000 and . . . may or may not get more depending on
what the property sells for." She also understood that "Huntington is a real estate
investor and is doing this deal to make money." However, she believed that
"Huntington has been upfront and honest," and "put no pressure on [her]
whatsoever." She explained that once her live-in "boyfriend of over [twenty-
five] years" "became disabled and lost his job," they "were unable to keep up
with the taxes or . . . maintain the property." She acknowledged that Huntington
was "putting significant time, effort and expense into this deal," and "[w]ithout
Huntington's involvement, there [was] no doubt that [she] would have lost the
2
In a later certification, the attorney averred that based on his visual inspection
of the property, "a full and complete renovation" would "cost in the range of
$50,000 to $75,000."
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property through the foreclosure action." She felt "the amount offered by
Huntington [was] real and substantial money for the property" and was "a very
big benefit to [her]."
Grand Madison opposed Huntington's motion and filed a cross-motion for
a constructive trust. In opposing Huntington's motion to intervene, Rothman
asserted the "purported profit[-]sharing agreement [was] misleading, deceptive
and against public policy." To support his application for a constructive trust to
allow him to acquire Huntington's contractual rights under the agreement,
Rothman certified he was "prepared to write a check to [Rotonda] for the sum
of $20,000[] or double what Huntington [was] offering to her." He would also
"allow . . . Rotonda to stay in the property for six months . . . at no cost and the
reduced rate of $825[] per month for an additional six months."
"In the alternative," Rothman would "allow [Rotonda] an additional six
months" to "list the property with a realtor, sell it, redeem [the tax] lien and keep
100% of the net proceeds," rather than "hav[ing] to pay it over to a predatory
title raider such as Huntington." Rothman submitted that if the motion judge
was inclined to deny his cross-motion, then he "request[ed] discovery" in order
"to develop a full record of what was told to . . . Rotonda in order for her to
agree to give almost all of her equity over to [a] title[]raider." In a responding
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certification, Rotonda rejected Rothman's offer, stating that although it s terms
were more favorable than Huntington's, "[she] was aware . . . when [she] signed
the agreement" that Rothman "[might] try to make an offer,"3 despite the fact
that Rothman "never contacted [her] over the last [seven] years to offer [her]
anything."
On October 12, 2018, the motion judge conducted oral argument on both
motions. The judge posited that under Cronecker and its progeny, "the real issue
. . . [was] whether or not [Huntington's] offer amounts to more than nominal
consideration." According to the judge, to make that determination, he needed
to evaluate "the amount received, versus the fair market value, versus the equity
in the property[,] and . . . the [windfall] profit to the purchaser." Because he
was missing "admissible . . . evidence, under [Rule] 1:6-6, that would support
the conclusion[] that th[e] property [was] worth no more than [$145,000]," as
claimed by Huntington, the judge gave both parties ten days to "supplement the
record."
Thereafter, the parties each submitted appraisal reports for the property
from real estate professionals, each using the sales comparison approach.
3
The agreement specified that "[b]y signing," Rotonda "waive[d her] right to
accept any other offers, agreements or arrangements related to the sale of the
[p]roperty."
A-3057-18T3
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Huntington's appraiser determined that the property was valued "as is" at
"$145,000." Although Huntington's appraiser subsequently corrected the
appraisal to indicate that instead of a single lot, the property actually consisted
of "two lots," with "the dwelling . . . located on one" and "a non-buildable side
yard" on the other, the appraised value remained unchanged. In contrast, Grand
Madison's appraiser established a value of "$210,000." Additionally, Grand
Madison submitted the municipal assessment for the property, indicating an
assessed value of "$148,100 for the land and $81,300 for the improvements,"
for a total of "$229,400."
After reviewing the appraisals, on January 16, 2019, the judge granted
Huntington's motion. In an oral decision, preliminarily, the judge found
Huntington's motion to intervene "timely because it was filed before the entry
of the final judgment." Next, while acknowledging Grand Madison's argument
that the consideration was "illusory" or merely "contingent," the judge noted
that in addition to the $10,000 guaranteed payment, Rotonda was receiving
"benefit[s]" under the agreement such as "stay[ing] in the house for [sixty] days"
after closing rent free, and "the satisfaction of [her] personal judgments" as well
A-3057-18T3
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as "[fifty] percent of the profit over [the] $225,000" threshold "after Huntington
completes what it describe[d] as significant and costly renovations." 4
In examining the appraisals, the judge determined that notwithstanding
Grand Madison's contention that "Huntington has not provided a competent
valuation of the property," he now "ha[d] competent proof" based on the
appraisals "submitted from licensed appraisers." The judge reasoned that the
$65,000 difference between Huntington's $145,000 appraisal and Grand
Madison's $210,000 appraisal was "not a significant amount" when assessing
whether the consideration was nominal.
Noting that "appraisals of property . . . are imprecise" and subject to "a lot
of variables," the judge elaborated:
if Huntington's right, you have . . . a property that's
worth $145,000 with about $120,000 in liens and
judgments. . . . [U]sing that number, . . . it results in
. . . there being $25,000 in equity. And if [calculated]
. . . on a percentage basis, . . . then . . . Rotonda would
be getting [forty] percent of the equity . . . by way of
the cash payment. And then obviously additional
payment through . . . profit that came from the sale, if
there was profit.
....
4
The judge noted "the parties concede[d] . . . the property [was] in poor
condition and in need of substantial repair."
A-3057-18T3
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And . . . if Grand Madison's right, then we [have]
a $210,000 property with $120,000 in expenses. And
so we [have] $90,000 in equity that arguably . . . would
belong to . . . Rotonda. And . . . what's she getting out
of the deal? She's getting [$]10,000. So what is that?
About . . . [eleven] percent of the equity is all she's
going to get.
Applying N.J.S.A. 54:5-89.1, Cronecker and Berezansky, the judge
concluded the agreement with Huntington was enforceable because "the
consideration . . . [was] more than small or trifling" and "provide[d] some
meaningful monetary relief to [Rotonda,]" who continuously indicated "she
[chose] to sell to [Huntington]" and "not to deal with [Grand Madison]." The
judge distinguished the "ratio[s]" present "in Cronecker and some of the other
cases" and determined that, "[h]ere, . . . the tolerances [were] much less," "[t]he
numbers [were] much closer," "the range [was] not that big," and "[t]he
differences [were] not that great between [$145,000] and [$210,000]."
The judge explained that under either appraisal,
$10,000 is more than nominal in this case. . . .
[A]long with, of course, the potential profit and . . . the
free rent, . . . this offer is [not] so extremely one-sided
in favor of Huntington that it would be, could be, [and]
should be deemed unconscionable under the
circumstances.
....
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Clearly, there's a benefit to . . . Rotonda. She gets
money that she . . . loses if the foreclosure continues.
And she loses whatever equity . . . she has in the
property, whatever that equity is. Here, . . . she does
get a benefit under the circumstances.
The judge ordered Grand Madison "to accept" Huntington's "tender [of]
the amount necessary to redeem the tax sale certificate" "through and with the
Belleville tax collector," and directed that "upon redemption, . . . the tax lien
foreclosure action would be dismissed" and the "[lis] pendens would be
discharged." Additionally, the judge denied Grand Madison's application for a
"constructive trust" and "discovery" on "Rotonda's motivation," on the ground
"that those issues [were] moot." The judge entered a conforming order and this
appeal followed.
On appeal, Grand Madison raises the following points for our
consideration:
POINT ONE
THE CONTRACT BETWEEN [ROTONDA] AND
HUNTINGTON IS NOT A PERMISSIBLE PROFIT-
SHARING AGREEMENT, BUT INSTEAD A
PREDATORY ARRANGEMENT THAT
CONTRAVENES THE PRINCIPLES OF
CRONECKER AND THE PURPOSE OF N.J.S.A.
54:5-89.1.
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A. THIS CASE IS SIGNIFICANTLY
DISTINGUISHABLE FROM THE
BEREZANSKY DECISION.
B. THE BEREZANSKY DECISION IS
FATALLY FLAWED IN ANOTHER
WAY.
POINT TWO
THE TRIAL COURT ERRED IN CONCLUDING
THAT THE DISPARITY IN VALUES BETWEEN
THE TWO APPRAISALS WAS INSIGNIFICANT
[BECAUSE] $10,000 PLUS $4,000 OF DEBT RELIEF
IS "NOMINAL CONSIDERATION" FOR A
PROPERTY VALUED AT $210,000 WITH $90,000
OF EQUITY.
A. HUNTINGTON'S APPRAISAL IS
DEFECTIVE AND INCREDIBLE.
B. THE SO-CALLED "PROFIT
SHARING" AND [SIXTY] DAYS OF
RENT-FREE USE AND OCCUPANCY
ARE ILLUSORY AND NOT
CONSIDERATION.
As framed by Grand Madison's arguments, our review focuses on whether
the proposed purchase price for the property contained in the agreement
provided more than nominal consideration. In that regard, we will not disturb
the findings and conclusions of the judge if they are supported by substantial,
credible evidence in the record. Rova Farms Resort, Inc. v. Inv'rs Ins. Co. of
Am., 65 N.J. 474, 483-84 (1974). However, "[a] trial court's interpretation of
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the law and the legal consequences that flow from established facts are not
entitled to any special deference." Manalapan Realty L.P. v. Twp. Comm. of
Manalapan, 140 N.J. 366, 378 (1995).
"N.J.S.A. 54:5-89.15 bars a party from intervening in a tax foreclosure
action when claiming a right in the property that was acquired 'for a nominal
consideration.'" Berezansky, 452 N.J. Super. at 412 (quoting N.J.S.A. 54:5-
5
N.J.S.A. 54:5-89.1 provides in pertinent part:
In any action to foreclose the right of redemption in any
property sold for unpaid taxes . . . , all persons claiming
an interest in or an encumbrance or lien upon such
property, by or through any conveyance, mortgage,
assignment, lien or any instrument which, by any
provision of law, could be recorded, registered, entered
or filed in any public office in this State, and which
shall not be so recorded, registered, entered or filed at
the time of the filing of the complaint in such action
shall be bound by the proceedings in the action so far
as such property is concerned, in the same manner as if
he had been made a party to and appeared in such
action, and the judgment therein had been made against
him as one of the defendants therein; but such person,
upon causing such conveyance, mortgage, assignment,
lien, claim or other instrument to be recorded,
registered, entered or filed as provided by law, may
apply to be made a party to such action. No person,
however, shall be admitted as a party to such action, nor
shall he have the right to redeem the lands from the tax
sale whenever it shall appear that he has acquired such
interest in the lands for a nominal consideration after
the filing of the complaint . . . ."
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89.1). In Cronecker, our Supreme Court weighed the equities posed by the
respective interests of the property owner, the tax sale certificate holder, and the
third-party investor and concluded, "the Legislature intended to extend judicial
scrutiny to financial arrangements between third-party investors and property
owners [made] during the post-foreclosure complaint period" by enacting
N.J.S.A. 54:5-89.1 "to ensure that the third-party investors do not exploit
vulnerable owners by offering only nominal consideration for their property
interests." 189 N.J. at 328.
In defining "more than nominal consideration" in the context of N.J.S.A.
54:5-89.1, the Cronecker Court
adopt[ed] a more flexible, under-all-the-circumstances
approach that will keep the focus on the benefit to the
property owner facing forfeiture of his land. Strict
mathematical equations cannot address the varying
circumstances that may bear on a fair determination of
the issue. The court may consider a number of factors,
including but not limited to the amount received by the
owner in comparison to the property's fair market value
and to his equity in the property. The court also may
give some weight to a windfall profit to be made by the
third-party. A court should rightly be reluctant to
strike-down a third-party financing arrangement that
will provide some meaningful monetary relief to the
property owner. In the end, more than nominal
consideration under N.J.S.A. 54:5-89.1 means
consideration that is not insubstantial under all the
circumstances; it is an amount, given the nature of the
transaction, that is not unconscionable.
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[Id. at 334-35.]
In Berezansky, we interpreted the Cronecker Court's definition of "more
than nominal consideration" "to require not only a traditional examination of
whether the consideration is more than 'small' or 'trifling,' but also an
examination of that question from the property owner's standpoint." 452 N.J.
Super. at 414 (quoting Cronecker, 189 N.J. at 332) (citation omitted). To that
end, in Berezansky, we "compar[ed] the benefits conveyed by the financial
arrangement between Bandi [Property Group, the third party investor,] and
[Richard and Donna] Berezansky[, the property owners,] and the catastrophic
financial impact facing the Berezanskys if their agreement with Bandi [was] not
given effect." Ibid.There, the "plaintiff FWDSL & Associates purchased a tax sale certificate
on . . . [the] Berezansky's Manville home," and "filed a foreclosure complaint
. . . against the Berezanskys, as well as the State of New Jersey, which possessed
a $70,000 judgment against Richard." Id. at 410. "[P]rior to the expiration of
the time for redemption," Bandi, "claiming it held title and was a party to a
profit-sharing agreement with the Berezanskys—moved to intervene and
redeem." Ibid. Under the profit-sharing agreement, Bandi would satisfy all
liens and judgments affecting title, consisting of the State's $70,000 judgment
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as well as $43,000 in tax liens, pay the Berezanskys $10,000, give the
Berezansky's a rent-free use and occupancy period in the property, improve the
property to maximize resale value, and, once the property was sold and certain
expenses deducted, divide the net proceeds thirty-five percent to Bandi and
sixty-five percent to the Berezanskys. 6 Id. at 411.
In upholding the agreement, we held
Bandi's financial obligations are not insubstantial and
certainly represent more than nominal consideration.
Even though the tax payments, the repairs, and the
satisfaction of the $70,000 judgment will be returned to
Bandi following the property's sale, their payment prior
to the sale constitutes a benefit that exceeds the nominal
threshold; indeed, should the property never sell for a
profit, the Berezanskys would obtain a considerable
benefit from being relieved of the $70,000 judgment.
And—not to be ignored—the Berezanskys secured a
right to recover sixty-five percent of the net proceeds
that would not be available if the Bandi agreement were
found ineffectual or unlawful. We are satisfied that the
form of the Bandi-Berezansky financial arrangement
was not barred by N.J.S.A. 54:5-89.1 as that statute has
been interpreted and enforced by our Supreme Court,
and that Bandi gave more than nominal consideration
in obtaining title and the right to redeem.
[Id. at 415 (footnote omitted).]
6
Although no appraisals were discussed, "Bandi claimed it learned from public
records that: the 'equalized assessed value of the [p]roperty [was] $314,792.13.'"
Id. at 411 (first alteration in original).
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Likewise, here, we discern no basis to set aside the judge's finding that
the payments Huntington proposed under the agreement provided Rotonda more
than nominal consideration. Although the appraised value of the property was
disputed, it is but one of "a number of factors" reviewed when analyzing all of
the circumstances under Cronecker's "under-all-the-circumstances approach."
Id. at 334-35. Further, as we did in Berezansky, we reject Grand Madison's
"argument that our jurisprudence calls for a blanket rejection of all profit -
sharing agreements in this context." 452 N.J. Super. at 413. Indeed, "[t]here is
nothing contained in the Cronecker decision that limits the form such financial
assistance must take or that which it may not take." Id. at 412 (citing Cronecker,
189 N.J. at 330-31).
Similarly, as we noted in Berezansky, even if "part[s] of the consideration
may appear illusory—the initial $10,000 payment and the use-and-occupancy
agreement are certainly real and more than a trifle," and the $10,000 "payment
alone," "constitutes more than 'nominal consideration' for entry into the profit-
sharing agreement." Id. at 414. We are satisfied that in granting Huntington's
motion to intervene and redeem, the judge considered all applicable
circumstances in his analysis, and reached a conclusion that is supported by the
record and legally sound. Moreover, the judge correctly denied the cross-motion
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to impose a constructive trust to allow Grand Madison to succeed to
Huntington's contractual rights because, as the Cronecker Court noted, as a
commercial investor itself,
Plaintiff[] . . . controlled [its] own fate[]. Before filing
the foreclosure complaint[], plaintiff[] could have beat
[the third party investor] to the punch and offered to
purchase title to the property directly from the owner[].
Instead, plaintiff[], at [its] own peril, chanced that [it]
could acquire the property through foreclosure without
any further financial commitment.
[Id. at 329-30 (footnote omitted).]
Affirmed.
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