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Bank of Commerce v. Markakos

Decided: November 5, 1956.

BANK OF COMMERCE, A BANKING INSTITUTION OF THE STATE OF NEW JERSEY, PLAINTIFF-APPELLANT,
v.
SANTOS MARKAKOS, LOUIS CHUMSKY, ET ALS., DEFENDANTS-RESPONDENTS



For dismissal -- Chief Justice Vanderbilt, and Justices Heher, Wachenfeld, Burling and Jacobs. Opposed -- None. The opinion of the court was delivered by Vanderbilt, C.J.

Vanderbilt

The plaintiff bank instituted an action to foreclose a mortgage held by it. Default was entered against all of the defendants except junior mortgagees who filed answers that did not dispute the priority of the subsequent encumbrances stated in the complaint, and apparently they have no substantial interest in the question before us.

The bank moved for the entry of a final judgment to which it was entitled, but difficulty arose over its demand that the judgment entered include an award of counsel fees calculated pursuant to a provision of the bond accompanying the mortgage, which incorporated by reference a provision that:

"In the event the mortgage accompanying this bond is referred to an attorney for foreclosure or for recovery of possession of the mortgaged property, the Obligor will pay in addition to the said Principal sum actual incidental disbursements and an attorney's fee amounting to three per cent (3%) of said Principal sum but in no event less than Seventy-five Dollars ($75.00)."

R.R. 4:55-7, on the other hand, provides as follows:

"No fee for legal services shall be allowed in the taxed costs or otherwise, except: * * *

(c) In an action for the foreclosure of a mortgage. The allowance shall be calculated as follows: on all sums adjudged to be paid the plaintiff in such an action, amounting to $5,000 or less, at the rate of 2%; upon the excess over $5,000 and up to $10,000 at the rate of 1%; and upon the excess over $10,000 at the rate of one-half of 1%."

The Chancery Division declined to enforce the provision as to counsel fees in the bond and followed the rule above quoted. On appeal the Appellate Division affirmed.

The appeal here purports to be taken as of right under Article VI, Section V, paragraph 1 (a) of the Constitution of 1947, and R.R. 1:2-1 (a).

The plaintiff's position is that our present rule does not supersede or invalidate the covenants between the mortgagor and the mortgagee for the payment of a fee in excess of that limited by rule; that the omission by the Legislature in the revision of Title 2 to enact a substitute for former R.S. 2:65-31, which established a 5% ceiling on counsel fees in uncontested foreclosure cases, implies a "legislative capitulation to the doctrine of judicial supremacy and abdication of the legislature's former prerogative of policy-making on the subject of attorney's fees in foreclosure." It seeks a determination as to "whether a substantive right of the mortgagee to indemnification and a corresponding substantive duty of the mortgagor to indemnify resulted from a contract" and therefore not a matter of practice or procedure, or "whether the covenant was but an attempt to alter the rule on costs and counsel fees, thus falling within the category of practice and procedure." It maintains that this covenant is a matter of substantive right between the mortgagor and the mortgagee and not controllable under rules relating to practice and procedure, but only by the Legislature through appropriate statutory provision. This is a specious attempt by the plaintiff to take advantage of the repeal of a statute as if it were an isolated enactment designed to "restore" the mortgagee's right to impose counsel fees on mortgagors in the event of foreclosure.

The plaintiff's contention, however, is untenable for two ...


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