Before Judges Dreier, Keefe and P.g. Levy.
The opinion of the court was delivered by: Keefe, J.A.D.
On appeal from the Superior Court of New Jersey, Law Division, Essex County (A-5665-96T5F) and Atlantic County (A-2251-97T5F & A-2253-97T5F).
This case requires the court to construe N.J.S.A 46:10A-6(d), pertaining to a lender's right to pass along its attorney fees to residential borrowers for the review of certain loan documents. These consolidated cases come to us from two Law Division rulings that conflict in their interpretation of the statute. In Kelly v. Chase Manhattan Mortgage Corp. and Iverson v. Collective Bank, considered together by the same Law Division Judge, the Judge construed N.J.S.A. 46:10A-6(d) to mean that a lender was prohibited from requiring a borrower to pay any fee charged by the lender's attorney, except when the borrower or the borrower's attorney submitted documents that created "extra work" for the lender's attorney. The trial Judge also determined that federal regulations did not preempt N.J.S.A. 46:10A-6(d) as to defendant Collective Bank, a federally chartered savings and loan association.
In contrast, in Turner v. First Union, a different Law Division judge interpreted the statute literally and determined that although a lender may pass along its attorney's fee to the borrower for the review of loan documents submitted "by or at the request of borrower's attorney," no such fee could be required where the borrower is unrepresented by counsel and/or where the borrower himself submits or directs the loan documents to be submitted to the lender.
We hold that N.J.S.A. 46:10A-6(d) permits lenders to pass along attorney fees associated with the review of "loan documents," as that term is defined in the statute, regardless of whether the "loan documents" are submitted by or at the direction of the borrower's attorney or the borrower. Thus, we reverse both judgments under review with respect to their interpretation of N.J.S.A. 46:10A-6(d). As to the preemption issue, we agree with the Law Division that federal regulations do not preempt state law concerning attorney fees.
The facts in all of the consolidated matters have been stipulated by the parties. The defendants are lenders licensed and authorized under the laws of the United States and the State of New Jersey to engage in the business of making mortgage loans. The defendants make several thousand loans each year secured by mortgages on real property located in the State of New Jersey. Of the three defendant lenders, Collective is the only lender that is a federally chartered savings and loan association organized under the laws of the United States.
The representative plaintiffs in these consolidated matters all obtained mortgage loans from the defendant lenders. All of the loans were secured by a mortgage on real property located in the State of New Jersey, on which the principal structure is a one-to-four family residence.
As a pre-condition for receiving the loans from defendant lenders, the plaintiffs were required to obtain title insurance. In addition, each of the defendant lenders required that the plaintiffs pay a review fee, whether they were represented by an attorney (as in Iverson and Kelly) or not (as in Turner), and to reimburse the lender for attorney fees incurred to review title documents submitted by the plaintiffs. At closing, the lenders' charge for reviewing the loan documents submitted by plaintiffs ranged from $100 to $170. *fn1 This charge to the borrowers, both represented and not represented by an attorney, was limited to a review of "loan documents," as that term is defined in N.J.S.A. 46:10A-6(d).
N.J.S.A. 46:10A-6(d) provides, in relevant part, that d. If a loan is made to a person or persons primarily for personal, family or household purposes and is secured by real property located in this State: (1) on which the principal structure is a one-to-four family residence; or (2) on which a one-to-four family residence is to be the principal structure to be constructed with the use of the loan proceeds, the lender shall not require the borrower to reimburse the lender for, or to pay all or any portion of, any fee or expense charged by the lender's attorney except to the extent of a fee for the review of the loan documents prepared or submitted by or at the direction of the borrower's attorney or such other work or services as requested by borrower or borrower's attorney. Any other legal fee or expense of the lender's attorney shall be the sole responsibility of the lender.
For the purposes of this subsection, "loan document" means a promissory note, loan agreement, mortgage, affidavit of title, power of attorney, survey and survey affidavit, title documents and searches and commitments for title insurance and modification of any promissory note, mortgage or loan agreement. (emphasis added)
As clearly demonstrated by the language of the statute, the general rule is that a lender's attorney's fees may not be passed along to the buyer, "except to the extent of a fee for the review of the loan documents prepared or submitted by or at the direction of the borrower's attorney or such other work or services as requested by the borrower or borrower's attorney." (emphasis added). The focus of the parties' dispute is the interpretation of the exceptions.
Recognizing that the representative plaintiff in Turner was not represented by an attorney during the mortgage transaction, the Law Division Judge concluded that the statute is "clear and unambiguous . . . that a lender may only require a fee when the loan documents are prepared or submitted at the direction of the borrower's attorney, but not when they are submitted by the borrower herself [or himself]." According to the Judge, "it is not manifestly absurd or contrary to public policy to find that the Legislature reasonably intended to allow a fee to be charged only when an attorney submits the loan documents." Accordingly, the Judge granted plaintiffs' motion for summary judgment.
As in Turner, the issue before the Law Division in Kelly and Iverson was whether the statute permitted lenders to charge attorney review fees. Unlike Turner, however, the representative plaintiffs in Kelly and Iverson were represented by counsel. In addition, in the Iverson matter, defendant Collective also presented the issue of whether federal regulations preempted N.J.S.A. 46:10A-6(d).
The Judge concluded that the statute does not permit lenders to charge borrowers a fee for the review of loan documents submitted by the borrower, regardless of whether the borrower is represented by counsel. According to the Judge, the statute only permits lenders to charge review fees where the borrower's attorney prepares or submits documents which create "extra work" for the lender's attorney. For example, the statute would allow lenders to charge a fee for the review of documents if the borrower's attorney submits a different form of the mortgage note than that normally used by the lender. That is so, according to the Judge, because the lender's attorney would have to expend additional time and effort to review that document. Where, however, the borrower's attorney merely undertakes the "ministerial act" of gathering title work and submits it to the lender, the Judge held that the lender may not charge the borrower any attorney fees associated with the review of such documents. In addition, the Judge held that federal regulations do not preempt N.J.S.A. 46:10A-6(d). Accordingly, plaintiffs' motions for summary judgment were granted in both matters.
We granted leave to appeal in all of the matters and consolidated all three cases for review. Subsequently, we granted the motion of New Jersey Bankers Association and New Jersey League of Community and Savings Bankers to participate as amici curiae.
As the Court recognized in its recent decision in Cornblatt v. Barow, 153 N.J. 218, 231 (1998), the surest indicator of the Legislature's intent is in the language of the statute itself. Thus, "`[i]f the language is plain and clearly reveals the meaning of the statute, the court's sole function is to enforce the statute in accordance with those terms.'" Ibid. (quoting State, Dep't of Law and Pub. Safety v. Bigham, 119 N.J. 646, 651 (1990)).
In the context of the mortgage transactions in Iverson and Kelly, in which the borrowers were represented by counsel, it is clear on this record that the lenders' charge for fees were associated with the review of "loan documents." In fact, this was stipulated to by the parties. *fn2 Thus, applying the foregoing principle of statutory construction to Iverson and Kelly, it is clear that the express terms of the statute permit a lender to pass along its attorney's fees to the borrower for the review of "loan documents." This is so whether the "loan document" is simply forwarded to the lender at the direction of the borrower's attorney, in the case of a title search or a survey, or where the borrower's attorney drafts or prepares a promissory note or loan agreement. Both are treated the same under the statute, regardless of how much or how little "work" the submission creates for the lender's attorney. The only requirement, under the express terms of the statute, is that the documents "prepared or submitted by or at the direction of the borrower's attorney" fall within the definition of "loan document," as defined in the statute.
Although plaintiffs claim that the word "submitted" is ambiguous, that claim is without merit. A court must interpret the words of a statute based on their "normal and accepted connotations as well as their ordinary and well understood meanings." State v. Hoffman, 149 N.J. 564, 580 (1997). The word "submitted" means "to send for or commit for consideration, study or decision," or "to ...