FWDSL & ASSOCIATES, LP VS. RICHARD BEREZANSKY (F-033373-15, SOMERSET COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5385-15T2
FWDSL & ASSOCIATES, LP,
Plaintiff-Appellant,
v. APPROVED FOR PUBLICATION
RICHARD BEREZANSKY, DONNA December 5, 2017
BEREZANSKY, wife of Richard
Berezansky, and STATE OF NEW APPELLATE DIVISION
JERSEY,
Defendants,
and
BANDI PROPERTY GROUP, LLC,
Intervenor-Respondent.
___________________________________
Argued November 14, 2017 – Decided December 5, 2017
Before Judges Fisher, Fasciale and Sumners.
On appeal from Superior Court of New Jersey,
Chancery Division, Somerset County, Docket No.
F-033373-15.
Keith A. Bonchi argued the cause for appellant
(Goldenberg, Mackler, Sayegh, Mintz, Pfeffer,
Bonchi & Gill, attorneys; Mr. Bonchi, of
counsel and on the brief; Elliott J. Almanza,
on the brief).
Michael Burns argued the cause for respondent
(Burns & Isen, LLC, attorneys; Mr. Burns, on
the brief).
The opinion of the court was delivered by
FISHER, P.J.A.D.
Following the Supreme Court's admonition more than fifty
years ago that "heir hunting" was of "no social value," Bron v.
Weintraub, 42 N.J. 87, 95 (1964), the Legislature amended the
applicable statutes in a way that prohibited, as the Court later
observed, "anyone from becoming a party to a tax-foreclosure
proceeding or from exercising the right to redeem" if that person's
interest in the property was "acquired for a nominal
consideration," Wattles v. Plotts, 120 N.J. 444, 450 (1990). More
recently, the Supreme Court recognized that the Tax Sales Law1
"does not prohibit a third-party investor from redeeming a tax
sale certificate" so long as the investor "pays the property owner
more than nominal consideration for the property." Simon v.
Cronecker, 189 N.J. 304, 311 (2007). Against that backdrop, we
reject the foreclosing plaintiff's contention that Cronecker
renders unlawful profit-sharing agreements like that formed
between the intervenor and the property owners here, as well as
its argument that the former only obtained title and a right to
redeem by providing the latter with only nominal consideration.
1
N.J.S.A. 54:5-1 to -137.
2 A-5385-15T2
At a 2013 auction, plaintiff FWDSL & Associates purchased a
tax sale certificate on Richard and Donna Berezansky's Manville
home. After waiting the required two years and paying all accruing
municipal taxes, plaintiff filed a foreclosure complaint in
October 2015 against the Berezanskys, as well as the State of New
Jersey, which possessed a $70,000 judgment against Richard
Berezansky. On February 25, 2016, the court entered an order
setting the date, time, and place for redemption. The following
month, prior to the expiration of the time for redemption, Bandi
Property Group – claiming it held title and was a party to a
profit-sharing agreement with the Berezanskys – moved to intervene
and redeem.
In so moving, Bandi first explained how it came to be involved
with the property. Bandi claimed it learned from public records
that: the "equalized assessed value of the [p]roperty is
$314,792.13"; the property was encumbered by approximately $43,000
in tax liens; and the State's $70,000 judgment against Berezansky
was the "only other known judgment" with a potential to affect
title. Bandi explained it had offered to purchase the property
from the Berezanskys and described the discussions leading up to
its eventual financial arrangement with the Berezanskys.
Because the Berezanskys advised they could not afford to pay
off the outstanding tax lien, Bandi proposed a profit-sharing
3 A-5385-15T2
agreement in exchange for Bandi's "satisf[action] [of] all liens
and judgments affecting title" and payment to the Berezanskys of
$10,000. To obtain clear title, Bandi agreed, by way of a profit-
sharing agreement, to "improve the [p]roperty to maximize its
resale value" and "cause the property to be sold at a price
reflecting the fair market value." Bandi also agreed to give the
Berezanskys "a rent-free use and occupancy period through July 2,
2016." Once the property sold, and "certain fixed expenses . . .
deducted," the net proceeds would be divided: thirty-five percent
to Bandi and sixty-five percent to the Berezanskys.
Chancery Judge Margaret Goodzeit concluded, in a thorough and
well-reasoned written decision, that the consideration given by
Bandi for and the benefits obtained by the Berezanskys from the
profit-sharing agreement were not nominal. Plaintiff appeals the
order entered in Bandi's favor, arguing, among other things, that
the judge should not have found the profit-sharing agreement lawful
within the meaning of the legal authorities cited in the opening
paragraph of this opinion because:
I. THE PROFIT[-]SHARING AGREEMENT MODEL IS
CONTRARY TO PUBLIC POLICY.
II. THE CONSIDERATION FROM BANDI IS ILLUSORY
AND ULTIMATELY PAID FOR BY DEFENDANTS OUT OF
THEIR OWN EQUITY.
III. IT IS IMPOSSIBLE TO KNOW HOW MUCH 65% OF
NET PROCEEDS WILL COME TO, HENCE IT IS
4 A-5385-15T2
IMPOSSIBLE TO CONDUCT A MEANINGFUL NOMINAL
CONSIDERATION ANALYSIS.
IV. THE OUTCOME IN THIS CASE SHOULD BE
CONTROLLED BY WATTLES, AND THE TRIAL COURT
ERRED IN CONCLUDING OTHERWISE.[2]
We reject these arguments.
N.J.S.A. 54:5-89.1 bars a party from intervening in a tax
foreclosure action when claiming a right in the property that was
acquired "for a nominal consideration." In considering the effect
of this statute and the profit-sharing agreement on this
foreclosure action, we start by rejecting plaintiff's argument
that the Supreme Court has determined that N.J.S.A. 54:5-89.1
renders unlawful all profit-sharing agreements in this setting.
To the contrary, the Court recognized that the statute was not
designed to bar investors from "helping property owners in
desperate need of financial assistance." 189 N.J. at 328. There
is nothing contained in the Cronecker decision that limits the
form such financial assistance must take or that which it may not
take. The focus, instead, must be aimed in the direction of the
consideration conveyed. See id. at 330-31.
In defining what constitutes nominal consideration, the Court
rejected previously-recognized, mathematical approaches, id. at
2
We have renumbered plaintiff's arguments.
5 A-5385-15T2
333-34,3 in favor of "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," id. at 334-35. Consequently,
the Court directed courts to be "reluctant to strike-down a third-
party financing arrangement that will provide some meaningful
monetary relief to the property owner." Id. at 335.4 We thus reject
3
The Court rejected both "the so-called percentages test"
recognized in Savage v. Weissman, 355 N.J. Super. 429, 439 (App.
Div. 2002), and the economic realities test and the windfall
profits test discussed in Corestates/N.J. Nat'l Bank v. Charles
Schaefer Sons, Inc., 386 N.J. Super. 554, 564-65 (App. Div. 2006).
See Cronecker, supra, 189 N.J. at 333-34. In so holding, the Court
recognized that "[s]trict mathematical equations cannot address
the varying circumstances that may bear on a fair determination
of the issue," and emphasized that courts must only ascertain
whether the financial arrangement with the intervenor provides the
property owner with "some meaningful monetary relief." Id. at 335.
4
We must approach such disputes by recognizing that the
contestants – that is, the tax sale certificate holder and the
intervenor – pursue the same goal: a lucrative return on their
efforts. Id. at 330. Their professed concerns about the
municipality's collection of taxes or the property owner's right
to freely convey title are certainly of interest to the court and
are often served when these market forces are applied. But, in
reality, the contestants' interests in those matters are secondary
at best to what they are truly after, and we should not be swayed
or distracted by either contestant's attempt to seize the moral
high ground in such matters. Indeed, if it was actually out to
shield the Berezanskys from entities such as Bandi, plaintiff
could have taken steps to protect them as well as its own
interests. As the Supreme Court noted in Cronecker, the tax sale
certificate holder always "control[s] [its] own fate[]." Id. at
329. Plaintiff here, like the plaintiffs in Cronecker, "could have
beat [the third-party investor] to the punch and offered to
purchase title to the property directly from the owner[]." Id. at
330.
6 A-5385-15T2
the argument that our jurisprudence calls for a blanket rejection
of all profit-sharing agreements in this context.
The Cronecker Court left no doubt that it is not the nature
of the financial arrangement that matters but whether the
consideration given to the property owner was only nominal. The
Court emphasized that the statute does not "prohibit a third-party
investor, who intervenes timely in a foreclosure action, from
purchasing the property owner's interest for more than nominal
consideration," id. at 331, and that which is "more than nominal
consideration" is that which "is not insubstantial under all the
circumstances" but rather "an amount, given the nature of the
transaction, that is not unconscionable," id. at 335. In defining
what the Legislature meant by nominal consideration, the Court
referred not only to what has historically been viewed as nominal,
such as $25 or $50, but also to the fact that the Legislature had
responded to Bron, where the intervenor offered the owner only
"one-fiftieth" of the property's value. Id. at 332-33. In assessing
the Legislature's intentions in N.J.S.A. 54:5-89.1, the Court
ultimately recognized that a court's view of nominal consideration
should be "more flexible" and should consider all the circumstances
with an eye toward the benefit received by the owners when
considering they are "facing forfeiture of [their] land." Id. at
334-35. We take this to require not only a traditional examination
7 A-5385-15T2
of whether the consideration is more than "small" or "trifling,"
id. at 332, but also an examination of that question from the
property owner's standpoint. In this latter respect, we cannot
avoid comparing the benefits conveyed by the financial arrangement
between Bandi and the Berezanskys and the catastrophic financial
impact facing the Berezanskys if their agreement with Bandi is not
given effect.
Consequently, we agree with the chancery judge that Bandi
gave more than nominal consideration; the Berezanskys are far
better off with the Bandi agreement than otherwise. In fact,
plaintiff concedes that the $10,000 payment provided the
Berezanskys with "a real and tangible benefit." That payment alone
constitutes more than "nominal consideration" for entry into the
profit-sharing agreement, and any doubt about the legal question
posed is erased by Bandi's additional obligations to: pay the
outstanding approximate $43,000 tax lien; satisfy the State's
$70,000 judgment against Richard Berezansky; and allow the
Berezanskys with a rent-free, use-and-occupancy period. Although
an amount equal to that paid by Bandi to satisfy the tax lien and
judgment will be recouped by Bandi from the sale proceeds prior
to the sixty-five/thirty-five split – thus offering some support
for plaintiff's argument that part of the consideration may appear
illusory – the initial $10,000 payment and the use-and-occupancy
8 A-5385-15T2
agreement are certainly real and more than a trifle, and we do not
interpret the profit-sharing agreement as allowing reimbursement
of those items to Bandi off the top of the sale proceeds.5
To summarize, 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.6 And – not to be ignored – the Berezanskys secured a
5
Plaintiff contends that the use-and-occupancy agreement was not
free and was at least partially illusory. It argues that the
profit-sharing agreement requires a retention of $5000 from the
Berezanskys' share of the net proceeds to be released to the
Berezanskys only upon the termination of their occupancy; in short,
plaintiff claims that the Berezanskys are actually paying for
their use and occupancy of the property. We disagree. The provision
does call for a $5000 retention, but that stipulation's express
purpose was to ensure the Berezanskys' timely departure at the
conclusion of the use and occupancy period and also to further
answer for any property damages that might occur during that
period. So long as the Berezanskys depart when promised without
causing any damage to the premises, that $5000 remains theirs.
6
Plaintiff discounts the significance of the obligation to satisfy
the $70,000 judgment by arguing "there is no evidence that the
State is attempting to enforce [this] judgment." There is no
dispute that the judgment exists and is outstanding; being free
of this debt can hardly be viewed as something nominal.
9 A-5385-15T2
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.
Affirmed.7
7
During the appeal's pendency, plaintiff moved to strike Bandi's
brief and appendix because Bandi included materials outside the
trial court record. In response, Bandi cross-moved to supplement
the record, and plaintiff opposed that motion. Another panel of
the court reserved, leaving those cross-motions for this panel to
decide. Because we have decided this appeal solely through
consideration of the factual information provided to the trial
court, we deny both motions. To be clear, we have denied the motion
to supplement; in denying plaintiff's motion, we have not stricken
Bandi's brief or appendix but have simply disregarded any materials
and arguments based on materials not put before the trial court.
10 A-5385-15T2