On appeal from the Superior Court of New Jersey, Law Division, Civil Part, Essex County, L-9855-98.
Before Judges Pressler, Kestin and Alley.
The opinion of the court was delivered by: Alley, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
The City of Orange condemned real property owned by appellant/cross-respondent Nwakozoh Remi Okafor (Okafor) and deposited the condemnation proceeds into court. IMC Mortgage Company (IMC), the holder of the mortgage on the property, contends that Okafor, as mortgagor, was obligated under the mortgage note to make mortgage payments to IMC at the stated interest rate of 13.5 percent after the condemnation proceeds were deposited into court. Okafor contends that the making of the deposit, the amount of which was more than sufficient to pay the principal balance he owed, triggered a duty on the part of IMC to withdraw the funds, thus satisfying Okafor's obligation to IMC under the mortgage. The funds on deposit with the court earned interest at the rate of 5.5 percent. Okafor appeals from a Law Division order requiring him to pay IMC on the mortgage note, at an interest rate specified therein of 13.5 percent, for the period after the condemnation proceeds were deposited with the court and available to be withdrawn. We reverse.
The core facts are straightforward. Okafor owned residential real property in Orange, and on August 1, 1996, he entered into a mortgage transaction as mortgagor with Empire Mortgage Services (Empire) as mortgagee by executing a mortgage note for $50,000 and a mortgage to secure the loan. The note required Okafor to make interest payments of 13.5 percent per year. Empire remained actively in the picture for but a brief time, assigning its rights to IMC later that month on August 28, 1996.
Orange filed its condemnation complaint with respect to Okafor's property on September 18, 1998, and it also filed and recorded a declaration of taking in which it estimated just compensation for the taking to be $50,000. On October 7, 1998, pursuant to an order of the court, Orange deposited the $50,000 in estimated compensation with the Clerk. As of the date of the deposit, the unpaid principal balance of the mortgage was $47,499.56. On November 6, 1998, Orange amended its complaint to join IMC as an additional defendant.
Three commissioners were appointed to examine and appraise the property. Their report, dated February 24, 1999, increased the award by $25,000 to $75,000. On June 25, 1999, Assignment Judge Alvin Weiss entered an order for final judgment confirming the commissioners' award as just compensation and directing that the balance of the award be deposited with the Clerk. The funds deposited with the Clerk were to earn 5.5 percent interest. See R. 4:57-1 to -3 and R. 4:42-11(a). Orange then deposited the remaining $25,000 with the court and on September 16, 1999, issued a notice of deposit of final judgment proceeds. Orange gave notice of the deposit to all interested parties, including IMC.
Not until January 19, 2000, did IMC move for an order seeking payment to it of funds from the condemnation proceeds on deposit with the court. It sought $61,750.03, and Okafor filed a cross-motion seeking an order directing the Clerk to pay him all of the funds held in deposit. A Law Division judge entered an order on April 24, 2000, authorizing the release to IMC of the balance allegedly then due and owing on its mortgage, namely $47,499.56 in principal and $14,845.76 in interest and alleged delinquency and other charges, for a total of $62,345.32. Okafor allegedly had not made payments to IMC since about September 10, 1998, shortly before Orange had deposited the initial $50,000 estimated compensation payment with the court.
The principles of condemnation of private property for just compensation were outlined recently by our Supreme Court in Township of West Windsor v. Nierenberg, 150 N.J. 111, 125-26 (1997):
When private property is condemned for public use, the condemnor is required to pay "just compensation" to the property owner. U.S. Const. amend. V; N.J. Const. art. I, ¶ 20. The previous landowner is entitled to that amount of money that will make him whole. See, e.g., Bowers v. Town of Bloomfield, 81 N.J. Eq. 163, 165 (E. & A.1913); Port of New York Auth. v. Howell, 59 N.J. Super. 343, 347 (Law Div. 1960), aff'd, 68 N.J. Super. 559 (App. Div.), certif. denied, 36 N.J. 144 (1961). Eminent domain proceedings are therefore required to produce a "fair market value" for the subject parcel. State v. Gorga, 26 N.J. 113, 115 (1958); State v. Cooper, 24 N.J. 261, 268, cert. denied, 355 U.S. 829, 78 S.Ct. 41, 2 L.Ed.2d 42 (1957).
Condemnation procedures are set forth in the Eminent Domain Act of 1971, N.J.S.A. 20:3-1 to -50 (Act), and in R. 4:73-1 to -11. Under the Act, "title to property condemned and acquired by the condemnor ... [is] in fee simple, free and discharged of all right, title, interest and liens of all condemnees ...." N.J.S.A. 20:3-20. IMC was promptly joined in this case by an amendment to the complaint, and indeed, when mortgaged land is the subject of the condemnation, all mortgage holders must be joined as ...