On certification to the Superior Court, Appellate Division, whose opinion is reported at 271 N.J. Super. 189 (1994).
Chief Justice Wilentz and Justices Handler, Pollock, O'Hern, and Garibaldi join in this opinion. Justice Coleman did not participate. The opinion of the Court was delivered by Stein, J.
The opinion of the court was delivered by: Stein
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
RESOLUTION TRUST CORPORATION V. WILLIAM LANZARO (A-53-94)
Argued November 28, 1994 -- Decided May 15, 1995
STEIN, J., writing for a unanimous Court.
The issue on appeal is whether Resolution Trust Corporation (RTC), in its capacity as receiver for City Savings, F.S.B. (City Savings), must pay William Lanzaro, the Sheriff of Monmouth County (Sheriff), a "fee" in the amount of $275,075. The fee is authorized by N.J.S.A. 22A:4-8 for services rendered by the Sheriff at the execution sale of property secured by mortgages held by RTC and at which RTC was the successful bidder.
As receiver for City Savings, RTC held the first and third mortgages on Stony Hill Apartments. When the mortgagor defaulted, RTC filed a complaint for foreclosure. In May 1991, the Superior Court entered final judgment of foreclosure in favor of RTC. That judgment provided for the sale of the property and directed that certain sums be paid from the sale proceeds in order to resolve the mortgages.
A writ of execution was obtained and delivered to the Sheriff, who levied on the property, duly advertised the execution sale with notice of its conditions, and scheduled the sale for September 16, 1991. On the day of the sale, before the bidding, the Sheriff read the conditions of sale, which included the condition that the successful bidder pay the Sheriff's fee computed in accordance with N.J.S.A. 22A:4-8. RTC was the successful bidder and signed the conditions of sale.
Pursuant to N.J.S.A. 22A:4-8, the Sheriff's fee was $275,075. The Sheriff prepared the deed and agreed to deliver it to RTC on payment of that fee plus costs for administrative services rendered to RTC. The services performed by the Sheriff's office required about ten hours of work. RTC refused to pay the fee, claiming an exemption under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). RTC instituted suit, alleging that the Sheriff was barred from assessing fees authorized by N.J.S.A. 22A:4-8 against RTC in its capacity as receiver of a failed thrift because such fees constitute a tax from which RTC is exempt. RTC argued that the imposition of the fee in connection with the sale bore no relation to the value of the administrative services provided by the Sheriff and his staff.
The Chancery Division held that the Sheriff's commission for the execution sale was a fee and not a tax. As such, RTC was not exempt from the fee and was required to pay it. In reaching its Conclusion, the court reasoned that the Sheriff's fee was simply a cost in the furtherance of RTC's business not unlike fees paid to lawyers, appraisers and other similar professionals. The court also found RTC's argument that the fee bore no relation to services rendered as overly simplistic.
On appeal, the Appellate Division affirmed substantially for the reasons expressed in the Chancery Division opinion. The Appellate Division did note that the reasonableness of the relationship between the fee and the services rendered is properly determined not by a single transaction but by the overall statutory scheme, which is designed to provide self-support for this function of the Sheriff's office.
The Supreme Court granted certification.
HELD: For the purposes of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, and its statutory exemption of Resolution Trust Corporation from state and local taxation, the charge sought by the Sheriff of Monmouth County is essentially equivalent to a tax measured by the sale price of foreclosed property. As such, it cannot lawfully be imposed on RTC.
1. RTC was created in an effort to resolve the financial crisis that threatened the stability of the savings and loan industry and the Federal Savings and Loan Corporation (FDIC). To better perform its statutory mission, RTC was exempted from state and local taxation. (pp. 6-8)
2. According to cases in this State, if the primary purpose of the fee is to raise general revenue, it is a tax. If, however, the primary purpose is to reimburse the municipality for services reasonably related to development, it is a permissible regulatory exaction. Moreover, the power to regulate includes the right to charge a fee to defray costs, but that fee cannot exceed the reasonable costs of providing the services rendered. Federal case law reveals a similar focus on the reasonableness of regulatory fees in distinguishing valid fees from impermissible taxes. Federal cases hold that the proper standard is not value derived by the recipient but rather value conferred on the recipient. Thus, the fee assessed must bear a reasonable relationship to the cost of the services conferred by the agency to identifiable recipients. (pp. 8-16)
3. Regardless of its statutory designation as a fee, both State and federal precedents view as controlling the relationship between the amount of the charge and the cost of the services rendered. Here, there is an enormous disparity between the charge and the services rendered. Where the disproportion between the charge and the cost of services is excessive, the Conclusion is inescapable that the charge imposed is intended primarily to raise revenue rather than compensate the governmental agency for the cost of providing its service. In addition, the success of the fee schedule as a revenue source cannot justify imposition of the fee on an entity that Congress has declared to be totally exempt from such exactions. (pp. 16-20)
Judgment of the Appellate Division is REVERSED and the matter is REMANDED to the Chancery Division for further proceedings consistent with this opinion.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, O'HERN and GARIBALDI join in JUSTICE STEIN'S opinion. JUSTICE COLEMAN did not participate.
The question presented is whether Resolution Trust Corporation (RTC), in its capacity as receiver for City Savings, F.S.B. (City Savings), must pay the Sheriff of Monmouth County (Sheriff), William Lanzaro, a "fee" in the amount of $275,075. The fee is authorized by N.J.S.A. 22A:4-8, for services rendered by the Sheriff at the execution sale of property secured by mortgages held by RTC and at which RTC was the successful bidder. The Chancery Division held that RTC's exemption from state, county, and local taxation under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), 12 U.S.C.A. § 1441a(g), was inapplicable because the Sheriff's charge was a fee and not a tax. 271 N.J. Super. 425 (1992). The Appellate Division affirmed substantially for the reasons stated by the Chancery Division. 271 N.J. Super. 189 (1994). We granted certification, 137 N.J. 166 (1994), and now reverse.
The essential facts are undisputed. As receiver for City Savings, RTC held the first and third mortgages on Stony Mill Apartments, a 376-unit residential apartment complex located in Eatontown, securing the indebtedness of the mortgagor Stony Hill Associates. On default of the mortgagor, RTC filed a complaint for foreclosure in September 1990. In May 1991, the Superior Court entered final judgment of foreclosure in favor of RTC, which provided for ...