Halpern, Larner and King. The opinion of the court was delivered by Halpern, P.J.A.D.
[154 NJSuper Page 165] The narrow issue on this appeal is whether an amendment to N.J.S.A. 46:10B-2, which limits the amount that a lending institution may charge for prepayment
of a mortgage, applies to mortgage agreements entered into prior to the effective date of the amendment.
On March 15, 1973 plaintiffs executed a bond and mortgage to defendant for $63,700, to be paid over a term of 30 years at 7 1/2% interest. At that time N.J.S.A. 46:10B-2 prohibited mortgage prepayment fees in excess of 3% of the face amount if paid within the first year, 2% if prepaid within the second and third years, and 1% if prepaid during the fourth and fifth years. The bond executed by the parties set forth a prepayment schedule in conformance with the statute.
Effective December 6, 1973, N.J.S.A. 46:10B-2 was amended to reduce the maximum prepayment fees allowable to not more than 3% of the balance due the first year, 2% during the second year and 1% during the third year. In 1975, during the third year of the mortgage, plaintiffs sold their home and prepaid the mortgage. Defendant demanded the 2% prepayment fee allowed in the bond. Plaintiffs contended that defendant could collect only a 1% prepayment fee. Nonetheless, plaintiffs paid the 2% demanded by defendant.
Plaintiffs then brought suit for the return of the entire prepayment fee. They alleged that defendants had knowingly demanded and received a prepayment fee in excess of that allowed by statute, and therefore plaintiffs were entitled to the return of the entire prepayment fee by virtue of N.J.S.A. 46:10B-5.*fn1 Following cross-motions for summary judgment, the court held that plaintiffs were entitled to a return of 1% of the prepayment fee, but that defendant could keep the other 1% because, in the court's view, N.J.S.A.
46:10B-5 did not apply to this transaction. Defendant appealed the judgment entered in favor of plaintiffs, and plaintiffs cross-appealed from the judge's refusal to order the return of the entire prepayment fee.
As indicated, the issue is whether the judge erred in holding the 1973 amendment to N.J.S.A. 46:10B-2 applicable to a mortgage executed prior to its effective date. Retrospective legislation operates on transactions which have occurred, or rights and obligations which existed, before passage of the act. 2 Sutherland, Statutory Construction (4 ed. Sands, 1973), § 41.01 at 245. In holding the statute applicable to a prior transaction, the judge applied the 1973 amendment retrospectively.
A fundamental tenet of statutory construction is that statutes ought not to apply retrospectively unless they are so clear, strong and imperative that no other meaning can be ascribed to them, or unless the Legislature clearly intended a retrospective application. Skulski v. Nolan , 68 N.J. 179, 202 (1975); Kopczynski v. Camden Cty. , 2 N.J. 419, 424 (1949); 2 Sutherland, op. cit. , § 41.04 at 252. Sutherland states the rule thusly:
It is a fundamental principle of jurisprudence that retroactive application of new laws involves a high risk of being unfair. There is general consensus among all people that notice or warning of the rules that are to be applied to determine their affairs should be given in advance of the actions whose effects are to be judged by them. The hackneyed maxim that everyone is held to know the law, itself a principle of dubious wisdom, nevertheless presupposes that the law is at least susceptible of being known. But this is not possible as to law which has not been made. [ Id. , § 41.02 at 247]
Here the record is barren of any indication that the Legislature intended N.J.S.A. 46:10B-1 et seq. , or the amendment thereto, to have a retrospective application. The original statute limiting prepayment fees was enacted in 1968. N.J.S.A. 46:10B-1 et seq. Prior to this legislation a mortgagor had no absolute right to prepay a mortgage. See ...