ATLANTIC COUNTY SHERIFFS and JOSEPH O‘DONOGHUE v. STATE OF NEW JERSEY; JPMORGAN CHASE BANK, NATIONAL ASSOCIATION v. ETHEL J. BROOME; WELLS FARGO BANK, N.A. v. ERICA FISCHER; DITECH FINANCIAL LLC v. MICHAEL J. MACECSKO and CYNTHIA MACECSKO; PNC BANK, NATIONAL ASSOCIATION v. THOMAS A. COPPOLECCHIA; U.S. BANK TRUST NATIONAL ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS OWNER TRUSTEE FOR RCF 2 ACQUISITION TRUST v. LOUIS TENORE; SPECIALIZED LOAN SERVICING LLC v. MARTHA MELINDA, JAMIE SORKIN, LISA ANNE CLOUD, STATE OF NEW JERSEY, and UNITED STATES OF AMERICA; WELLS FARGO BANK, N.A. v. JASON T. GECK; FEDERAL HOME LOAN MORTGAGE CORP., AS TRUSTEE FOR THE BENEFIT OF THE FREDDIE MAC SEASONED CREDIT RISK TRANSFER TRUST, SERIES 2019-3 v. BARBRA MEYERS and DAVID MEYERS, and WELLS FARGO BANK, N.A.; U.S. BANK v. FRANK ENDICOTT; NEWREZ LLC v. ALEC SOUTTER, a/k/a ALEC WINSTON SOUTTER; BANK OF AMERICA N.A. v. MARGARET G. NELSON, BO WINKLER, STATE OF NEW JERSEY, and UNITED STATES OF AMERICA, and HAMILTON POINTE HOMEOWNERS ASSOCIATION, INC.; U.S. BANK v. ROBERT CURRY; COUNTY OF BURLINGTON, JOSEPH DEVLIN and BARBARA DEVLIN
DOCKET NO. A-1098-25
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION
Decided July 10, 2026
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Gooden Brown, Torregrossa-O‘Connor, and Rosero.
On appeal from an interlocutory order of the Superior Court of New Jersey, Chancery Division, Mercer County, Docket No. C-000094-24.
Jennifer Davenport, Attorney General, attorney for appellant State of New Jersey (Benjamin M. Shultz and Deborah E. Wassel, Assistant Attorneys General, of counsel; Chandra M. Arkema, Deputy Attorney General and Jonathan Peitz, Assistant Attorney General, on the briefs).
Robertson, Anschutz, Schneid, Crane & Partners, PLLC, attorneys for respondent Wells Fargo Bank, N.A. (John D. Krohn, on the brief).
Malamut & Associates, LLC, attorneys for respondent County of Burlington (James K. Grace, on the brief).
Ballard Spahr LLP, attorneys for respondent PNC Bank, N.A. (William P. Reiley, on the brief).
McGovern Legal Services, LLC, attorneys for respondents Joseph Devlin and Barbara Devlin (David W. Merritt, of counsel and on the brief; Damon M. Kress, on the brief).
N. Lynne Hughes, County Counsel, attorney for respondents Atlantic County Sheriffs Office and Joseph O’Donoghue, join in the brief of respondents.
Friedman Vartolo LLP, attorneys for amicus curiae American Institute of Servicing and Legal Executives (Catherine Nicole Aponte, on the brief).
Arising from several consolidated cases, the question presented on appeal as a matter of first impression is whether subsection (g) of the Community Wealth Preservation Program Act (CWPP),
I.
These consolidated cases arise in the wake of the United States Supreme Court‘s decision in Tyler v. Hennepin Cnty., 598 U.S. 631 (2023), and our Supreme Court‘s decision in 257-261 20th Ave., Realty, LLC v. Roberto, 259 N.J. 417 (2025). The Tyler Court held by keeping the surplus equity from a tax debt forfeiture of a homeowner‘s property under Minnesota‘s tax foreclosure
The consolidated cases include: JPMorgan Chase Bank, National Ass‘n v. Broome, No. SWC-F-6681-22; Wells Fargo Bank, N.A. v. Fischer, No. SWC-F-19248-19; Ditech Financial LLC v. Macecsko, No. SWC-F-36919-14; PNC Bank, National Ass‘n v. Coppolecchia, No. SWC-F-5870-22; U.S. Bank Trust National Ass‘n v. Tenore, No. SWC-F-999-24; Specialized Loan Servicing LLC v. Melinda, No. SWC-F-5732-23; Wells Fargo Bank, N.A. v. Geck, No. SWC-F-1361-22; Federal Home Loan Mortgage Corp. v. Meyers, No. SWC-F-3667-23; U.S. Bank v. Endicott, No. SWC-F-79-20; NewRez LLC v. Soutter, No. SWC-F-3541-24; Bank of America N.A. v. Nelson, No. SWC-F-76-23; and U.S. Bank v. Curry, No. SWC-F-12040-22.
In his decision, the trial judge focused on Coppolecchia, Tenore, Meyers, and Soutter. Although each consolidated case contains its own set of facts that are not pertinent to the appeal, all share a common legal challenge to a single
On January 12, 2024, the CWPP was signed into law to “promote equity and fairness in foreclosure sales by providing opportunities for foreclosed-upon residents and their next of kin, tenants, and other prospective owner-occupants—along with nonprofit community development corporations—to purchase and finance a foreclosed-upon home.” Press Release, Off. of the Governor, Governor Murphy Signs Legislation Establishing Community Wealth Preservation Program 1 (Jan. 12, 2024). The CWPP was enacted in response to concerns that New Jersey‘s foreclosure market, one of the highest in the nation by percentage of properties entering foreclosure, primarily benefitted investors and for-profit corporations, not individual residents. Ibid. The CWPP amended
At the sheriff‘s sale, the CWPP grants an individual homeowner, their next of kin, or a tenant occupying the foreclosed-upon property a “right of first refusal.”
Subsection (g) of the CWPP, the provision at issue in this appeal, grants a nonprofit community development corporation (NCDC) the “right of second refusal.”
When an NCDC exercises its right of second refusal, other parties, including junior lienholders, are prevented from bidding on the foreclosed-upon property. As a result, if the property is worth more than the senior lien, junior lienholders cannot bid beyond the amount of the senior lien to acquire the property to mitigate their losses.4 Furthermore, because an NCDC is only required to pay the upset price, in most scenarios, junior lienholders will not
On August 28, 2025, the judge entered an order holding subsection (g) of the CWPP violated the Takings Clause of the Federal and State Constitutions as applied to junior lienholders and property owners. The impetus for the order was several motions to vacate or stay sheriff‘s sales occurring throughout the State in accordance with
Plaintiffs—Atlantic County Sheriff‘s Office, Atlantic County Sheriff Joseph O‘Donoghue, numerous banks and parties across New Jersey—argued, among other things, subsection (g) is unconstitutional because it deprives property owners of their right to surplus equity and junior lienholders of their interest in surplus funds. Defendants—the State of New Jersey5 and several NCDCs—argued, among other things, the Legislature provided adequate safeguards for parties to vacate sheriff‘s sales to protect their interests,
After considering the parties’ arguments, the judge entered the August 28, 2025 order. In an accompanying statement of reasons, the judge explained:
Property owners have a protected property interest in surplus equity, and any taking without just compensation is unconstitutional. In the present cases, [s]ubsection (g) unconstitutionally took the owners’ surplus equity by allowing [NCDCs] to purchase the property for the upset price. As a result, junior lienholders also lost the right to redeem potential surplus funds.
The judge elaborated:
Although [Rule] 4:64-6(b) permits a junior lienholder to engage in discussions regarding the upset price, [s]ubsection (g) does not. As a result, the foreclosing mortgagee may set the upset price at the balance remaining on only its mortgage, which bars both property owner(s) and junior lienholder(s) from recovering their surplus equity and potential surplus funds. Plaintiffs provide myriad examples of third-party [NCDCs] who paid the upset price, which often was far lower than what other members of the public were willing to pay. Permitting these [NCDCs] to purchase these properties for the upset price extinguishes the property owner‘s right to obtain surplus equity, and, later, the junior lienholder‘s entitlement to redeem the surplus funds. Subsection (g) permits unconstitutional takings of surplus equity
without just compensation and is unconstitutional as applied to [p]laintiffs.
In expressly rejecting the State‘s reliance on the procedures contemplated under the Rules to provide adequate safeguards to protect property owners’ rights and junior lienholders’ interests, the judge stated,
The [Rules d]efendant provides are insufficient to protect property owners’ right to surplus equity because the motions they concern are discretionary. Under the [CWPP], in some cases, a sheriff‘s sale may be procedurally proper but lead to an allegedly unjust result. Furthermore, motions to vacate a sale often rely on whether the sale price was fair market value. Under [s]ubsection (g), the upset price could be far below fair market value. Even if the courts overturn specific sales, the subsequent sales will still follow [s]ubsection (g). Relying on discretionary rules could present the same problem the parties presently face, which could result in a never[]ending motion cycle. This [c]ourt finds these rules inadequate to protect property owners’ rights and junior lienholders’ interests.
We granted the State‘s ensuing motion for leave to appeal the August 28, 2025 order. Joseph and Barbara Devlin, the junior lienholders in Coppolecchia, Wells Fargo Bank, N.A. (Wells Fargo), PNC Bank, N.A. (PNC), Burlington County, and amicus curiae American Institute of Servicing and Legal Executives (AISLE), a mortgage loan servicing trade association, are the only other parties
II.
“[W]henever a challenge is raised to the constitutionality of a statute, there is a strong presumption that the statute is constitutional.” State v. Muhammad, 145 N.J. 23, 41 (1996). Indeed, “[o]ne of the basic guidelines in analyzing the constitutionality of a statute is ‘the presumption that the [L]egislature acted with existing constitutional law in mind and intended the act to function in a constitutional manner.‘” NYT Cable TV v. Homestead at Mansfield, Inc., 111 N.J. 21, 26 (1988) (Handler, J., concurring) (quoting State v. Profaci, 56 N.J. 346, 349 (1970)). “Thus, any act of the Legislature will not be ruled void unless its repugnancy to the Constitution is clear beyond a reasonable doubt,” Muhammad, 145 N.J. at 41, and “[a]nyone challenging the constitutionality of a
“[A] law that is challenged for facial vagueness is one that is assertedly impermissibly vague in all its applications.” State v. Cameron, 100 N.J. 586, 594 (1985). “Conversely, a law that is challenged ‘as applied’ is not necessarily vague in all respects but is vague as applied to facts of a particular case.” Dempsey v. Alston, 405 N.J. Super. 499, 510 (App. Div. 2009) (quoting Cameron, 100 N.J. at 594).
However,
[i]n either a facial or as-applied vagueness attack, the level of judicial scrutiny and degree of required clarity will depend on the purpose of the statute, the context in which the law is challenged, the conduct that is subject to its strictures, the nature of the punishment that is authorized, and, finally, the potential impact of the statute upon activities and interests that are constitutionally protected.
[Ibid. (alteration in original) (quoting Cameron, 100 N.J. at 594).]
“The Takings Clause ‘was designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.‘” Tyler, 598 U.S. at 647 (quoting Armstrong v. United States, 364 U.S. 40, 49 (1960)). “Even if just compensation is paid, ‘one person‘s property may not be taken for the benefit of another private person without a justifying public purpose.‘” Roberto, 259 N.J. at 446 (quoting Thompson v. Consol. Gas Utils. Corp., 300 U.S. 55, 80 (1937)).
Importantly:
A constitutional taking may occur in one of two ways: 1) via physical taking, in which the government takes title to private property or “authorizes a physical occupation [or appropriation] of property“; or 2) via
regulatory taking, through which a government regulation deprives the property owner of all economically viable use of their land.
[Klumpp, 202 N.J. at 405 (alteration in original) (quoting Yee v. City of Escondido, 503 U.S. 519, 522 (1992)).]
In Tyler, Hennepin County sold Tyler‘s home “for $40,000 to satisfy a $15,000 tax bill” that accrued after Tyler‘s family moved her to a senior community for her safety but neglected to pay the property taxes due on her home. 598 U.S. at 634-35. “Instead of returning the remaining $25,000, the County kept it for itself.” Id. at 634. This was consistent with Minnesota‘s tax forfeiture law, which afforded taxpayers one year to pay their annual property tax assessment. Id. at 635. “If [a taxpayer] does not timely pay, the tax accrues interest and penalties, and the County obtains a judgment against the property, transferring limited title to the State.” Ibid.
“The delinquent taxpayer then has three years to redeem the property and regain title by paying all the taxes and late fees.” Ibid. If the taxpayer remains delinquent, at the end of the three years, “absolute title [would] vest[] in the State,” thereby extinguishing the delinquent taxpayer‘s debt, and Minnesota could “keep the property for public use or sell it to a private party.” Ibid. “If the property is sold, any proceeds in excess of the tax debt and the costs of the
The Court highlighted that “[s]tates have long imposed taxes on property” and “[s]uch taxes are not themselves a taking.” Id. at 637. The Court also acknowledged that in collecting taxes from delinquent taxpayers, states “may impose interest and late fees” and “may also seize and sell property, including land, to recover the amount owed.” Id. at 637-38. However, the Court posited whether the money remaining after the seizure constituted “property under the Takings Clause” protected from “uncompensated appropriation[s] by the State” remained an open question. Id. at 638.
Drawing on state law, “traditional property law principles,” “historical practice,” and precedent, the Court determined Tyler retained a property interest in the excess value of her home above the taxes owed.7 Id. at 638-39 (quoting Phillips v. Wash. Legal Found., 524 U.S. 156, 167 (1998)). According to the Court, because Hennepin County “confiscate[d] more property than was due,” it “effected a ‘classic taking in which the government directly appropriate[d]
The Tyler Court distinguished Nelson, where:
New York City foreclosed on properties for unpaid water bills. Under the governing ordinance, a property owner had almost two months after the city filed for foreclosure to pay off the tax debt, and an additional [twenty] days to ask for the surplus from any tax sale. No property owner requested his surplus within the required time. The owners later sued the city, claiming that it had denied them due process and equal protection of the laws. In their reply brief before th[e] Court, the owners also argued for the first time that they had been denied just compensation under the Takings Clause.
[Tyler, 598 U.S. at 643-44 (citations omitted).]
In rejecting the belated argument, the Court explained:
New York City‘s ordinance . . . permitted the owner to recover the surplus but required that the owner have “filed a timely answer in [the] foreclosure proceeding, asserting his property had a value substantially exceeding the tax due.” Had the owners challenging the ordinance done so, “a separate sale” could have taken place “so that [they] might receive the surplus.” The owners did not take advantage of this procedure, so they forfeited their right to the surplus. Because the New York City ordinance did not “absolutely preclud[e] an owner from obtaining the surplus proceeds of a judicial sale,” but instead simply defined the process through which the owner could claim the surplus, [the Court] found no Takings Clause violation.
The Court continued, in contrast,
[u]nlike in Nelson, Minnesota‘s scheme provides no opportunity for the taxpayer to recover the excess value; once absolute title has transferred to the State, any excess value always remains with the State. The County argues that the delinquent taxpayer could sell her house to pay her tax debt before the County itself seizes and sells the house. But requiring a taxpayer to sell her house to avoid a taking is not the same as providing her an opportunity to recover the excess value of her house once the State has sold it.
Our Supreme Court adopted Tyler in Roberto. See Roberto, 259 N.J. at 440 (“Under the Supremacy Clause, [Tyler] is the source of authority on the Takings Clause for federal and state courts alike.” (citing Cooper v. Aaron, 358 U.S. 1 (1958))). Roberto involved a challenge to the Tax Sale Law (TSL),
Our Supreme Court held that “the TSL . . . [was] unconstitutional to the extent it allow[ed] for the forfeiture of surplus equity without just compensation.” Ibid. The Court clarified that “because private lienholders act jointly with local governments under the TSL to perform a traditional public function[,] . . . they [were] . . . state actors” and the State recognizes a “property right to surplus equity in real property.” Id. at 427-28. The Court also determined the “public purpose” requirement was met as the TSL “enables municipalities . . . to collect taxes.” Id. at 446.
The Court stated, “New Jersey‘s [TSL], like Minnesota‘s scheme, ‘permit[s] foreclosure of a property owner‘s equity’ ‘above the lien amount owed.‘” Id. at 431 (second alteration in original) (quoting 257-261 20th Ave. Realty, LLC v. Roberto, 477 N.J. Super. 339, 362 (App. Div. 2023)). “Under the TSL, unpaid property taxes create a continuous lien on a property for taxes
These certificates are sold at auction, and “[t]he successful bidder ‘agrees to pay . . . the municipality the taxes or assessments due.‘” Id. at 433 (omission in original) (citing Cronecker, 189 N.J. at 319). During this stage, “[t]he delinquent owner still has title to the property” but the successful bidder “acquires an ‘inchoate interest [that] consists of three rights: the right to receive the sum paid for the certificate with interest‘; ‘the right to redeem’ any later issued tax sale certificate; ‘and the right to acquire title by foreclos[ure].‘” Ibid. (alterations in original) (quoting Varsolona v. Breen Cap. Servs. Corp., 180 N.J. 605, 618 (2004)). Property owners retain the right to redeem even at this stage, but if they choose not to redeem, “the purchaser of the certificate can file an action in court ‘to foreclose the right of redemption,‘” ibid. (quoting
[i]n a civil action for foreclosure or satisfaction of a mortgage, money raised from the sale of the mortgaged property “shall be applied to pay off and discharge the moneys ordered to be paid, and the surplus, if any, shall be deposited with the court and . . . shall be paid to the person or persons entitled thereto, . . . as the court shall determine.”
N.J.S.A. 2A:50-36 ,-37 . The defendant in a foreclosure action, among other claimants, may apply for the “withdrawal of surplus moneys.”R. 4:64-3(a) ,(b) ; see alsoN.J.S.A. 2A:50-37 ; Danes v. Smith, 30 N.J. Super. 292, 301-02 (App. Div. 1954) (acknowledging that when a “sheriff‘s sale produced a substantial surplus beyond the mortgage debt,” the surplus was “available for distribution according to the respective interests of the parties“).[Roberto, 259 N.J. at 443 (citations reformatted).]
See also Morsemere Fed. Sav. & Loan Ass‘n v. Nicolaou, 206 N.J. Super. 637, 642 (App. Div. 1986) (explaining that after foreclosure judgment, junior lienholders were entitled to surplus funds). The Court concluded while “lienholders are entitled to recover [the] debts they are owed,” “they are not entitled to surplus equity in property that exceeds that amount.” Roberto, 259 N.J. at 448.
Further, though private, NCDCs may be considered state actors. As the Roberto Court pointed out:
The Supreme Court in Lugar v. Edmondson Oil Co., 457 U.S. 922, 937 (1982), articulated a two-part approach to determine whether actions by a private party may be “fairly attributable to the State“:
First, the deprivation must be caused by the exercise of some right or privilege created by the State or by a rule of conduct
imposed by the State or by a person for whom the State is responsible. . . . Second, the party charged with the deprivation must be a person who may fairly be said to be a state actor. This may be because he is a state official, because he has acted together with or has obtained significant aid from state officials, or because his conduct is otherwise chargeable to the State. More recently, the Court reviewed the state action doctrine and highlighted three distinct circumstances as examples of when a private party can be considered a state actor: “(i) when the private entity performs a traditional, exclusive public function; (ii) when the government compels the private entity to take a particular action; or (iii) when the government acts jointly with the private entity.” Manhattan Cmty. Access Corp. v. Halleck, 587 U.S. 802, 809 (2019) (citations omitted).
[Roberto, 259 N.J. at 444 (citations reformatted).]
Here, our State government acts with NCDCs to curb investors and for-profit entities from participating in the State‘s foreclosure market by providing NCDCs with the right of second refusal. NCDCs’ mission “includes community revitalization” and preservation of “affordable housing,”
We now turn our focus to whether there are adequate procedural mechanisms present, like in Nelson, for property owners and junior lienholders to recover any excess value to forestall a Takings Clause violation. In Nelson, on which the State relies, the New York City ordinance gave “a property owner . . . almost two months after the city filed for foreclosure to pay off the tax debt, and an additional [twenty] days to ask for the surplus from any tax sale.” Tyler, 598 U.S. at 644; see Nelson, 352 U.S. at 104 n.1 (detailing the ordinance). In contrast, the CWPP is silent on whether property owners may receive the surplus equity or whether junior lienholders may receive the surplus funds if an NCDC exercises its right of second refusal. As such, this case more closely aligns with Tyler and Roberto than Nelson.
Although Tyler and Roberto involved tax foreclosure laws, the same underlying principles apply. The holdings correlate with our mortgage foreclosure law, specifically the CWPP, because the central issue is not the type of foreclosure involved but whether the statutory scheme results in an unconstitutional taking. Based on our analysis of Nelson, Tyler, Roberto, and the CWPP, we conclude that subsection (g) of the CWPP does. The
The State contends
Turning to
A sheriff who is authorized or ordered to sell real estate shall deliver a good and sufficient conveyance in pursuance of the sale unless a motion for the hearing of an objection to the sale is served within [ten] days after the sale or at any time thereafter before the delivery of the conveyance. Notice of the motion shall be given to all persons in interest, and the motion shall be made returnable not later than [twenty] days after the sale, unless the court otherwise orders. On the motion, the court may summarily dispose of the objection; and if it approves the sale and is satisfied that the real estate was sold at its highest and best price at the time of the sale,
[(Emphasis added).]
Once again,
Once the right of second refusal is exercised by the NCDC, the CWPP‘s mechanics quashes competitive bidding and eliminates the lienholder‘s right of redemption, allowing the property to be conveyed at a deflated purchase price and leaving aggrieved parties with no legal mechanism to protect their property right to equity in the property. Under these circumstances, discretionary judicial intervention does not suffice to prevent a constitutional injury. As such,
Equally unavailing is the State‘s contention that alternative remedies, such as the right of redemption or pursuing the property owner‘s personal assets as unsecured debts, provide adequate opportunities for junior lienholders to protect their interests in surplus equity. Such reasoning effectively abrogates both Tyler, 598 U.S. at 644, and Roberto, 259 N.J. at 435-36, where the respective Courts held that the value of the lien itself, rather than the underlying debt, was the property interest protected by the takings clause.
The CWPP contains a severability provision that reads:
If any provision or section of this act shall be held to be unconstitutional, said provision or section shall be exscinded and the remainder of the provisions and sections of the act as amended or supplemented shall be and remain valid with the same effect as if said provision so held to be unconstitutional had never been a part of the act.
[
N.J.S.A. 2A:50-2.4 .]
“An entire statute will not be invalidated when one clause is found to be unconstitutional unless that clause is so intimately interconnected with the whole that it can be reasonably said that the Legislature would not have enacted
Affirmed.