On certification to the Superior Court, Appellate Division.
The issue in this appeal is whether Section 41 of the Municipal and County Utilities Authority Law, N.J.S.A. 40:14B-1 to -70 (MCUAL), authorizes municipal and county utilities authorities to charge compound interest on delinquent customer accounts.
Defendant, Camden County Municipal Utilities Authority (CCMUA) provides Camden County residents with water and sewer services. Sheila Henderson, who has been a CCMUA customer for eleven years, ceased making regular payments to CCMUA in 1993. She received a notice seven years later that her property was subject to a municipal lien and tax sale. At that time, she owed CCMUA $3,485.63, including $1,749.02 in interest charges. Henderson later learned that CCMUA had compounded interest on her delinquent account.
Henderson eventually paid the entire bill, including the compound interest charges, to avert the tax sale of her property. She then filed a class-action complaint, alleging that CCMUA's assessment of compound interest was unlawful and in violation of N.J.S.A. 40:14B-41 because that section authorized the assessment of only simple interest. She sought a judgment declaring all previously assessed compound interest charges null and void, enjoining CCMUA from charging further compound interest on delinquent accounts, and awarding monetary damages, costs, and attorneys' fees.
The trial court construed N.J.S.A. 40:14B-41 to allow CCMUA to charge compound interest and entered summary judgment in its favor. In an unreported decision, the Appellate Division reversed, concluding that the statute did not authorize compound interest, and remanded for further proceedings. Henderson moved before the trial court for an order granting class certification and CCMUA petitioned the Supreme Court for certification. The Appellate Division stayed the class certification proceedings pending the disposition of CCMUA's petition by the Supreme Court.
The Supreme Court granted CCMUA'a petition for certification.
HELD: Section 41 of the Municipal and County Utilities Authority Law, N.J.S.A. 40:14B-1 to -70, permits utilities authorities to charge only simple interest, and it was improper for the Camden County Municipal Utilities Authority to assess interest on a principal composed in part of unpaid interest charges.
1. N.J.S.A. 14B-41 provides for the accrual of interest on the "unpaid balance" of service charges at the rate of 1½% per month. (pp. 3-4)
2. If conflicting interpretations of a statute are plausible, a reviewing court should not regard that statute's meaning to be self-evident, and it should employ extrinsic aids, such as legislative intent or prior precedent, to interpret the language at issue. (pp. 4-5)
3. Compound interest, which is regarded by courts as unfairly harsh and oppressive, is disfavored at common law. No statute is to be construed as altering the common law farther than its words import. Thus, the Legislature's failure to deviate explicitly from the common-law presumption against compound interest suggests that N.J.S.A. 40:14B-41 authorizes only simp le interest. (pp. 5-6)
4. The statute's legislative history is also instructive, and to the extent that the increase of the interest rate authorized by section 41 to 1 ½% was intended to parallel the increase in the annual rate ceiling of N.J.S.A. 54:4-67 to 18%, it suggests that the interest contemplated by section 41 is simple and not compound interest. Moreover, when the Legislature has authorized compound interest, it has done so explicitly. (pp. 6-7)
5. N.J.S.A. 40:14B-41 permits utilities authorities to charge only simple interest and it was improper for CCMUA to assess interest on a principal composed in part of unpaid interest charges. (pp. 7-8)
6. Because the Court's decision implicates the statutory validity of a long-standing practice, it establishes a new rule and should be applied prospectively. Moreover, retroactive application of the Court's decision could produce substantial inequitable results. (pp. 8-10)
7. The Court applies its decision prospectively and declines to require refunds of compound interest that CCMUA customers already have paid. Going forward, CCMUA may not continue to charge compound interest on delinquent customer accounts. In addition, to the extent that any unpaid customer debt consists of compound interest charged pursuant to section 41, that debt may not be collected by CCMUA or by any party that has obtained from CCMUA the right to collect it. Further, if unpaid debt comprised of compound interest forms the basis of municipal liens on customers' property, then CCMUA must ensure that those charges are "backed out" from such liens. (p. 10)
8. Henderson is entitled to the full benefit of the new rule because of her efforts in litigating this appeal. (p. 11)
9. Since the Court's decision confers an economic benefit on a class of persons that did not contribute to the cost of the litigation, and although the Court is not directing class certification in view of its conclusion to apply its decision prospectively, Henderson is awarded attorney's fees pursuant to the fund in court doctrine. (pp. 12-15)
The judgment of the Appellate Division is AFFIRMED and the matter is REMANDED to the trial court for an award of attorneys' fees in Henderson's favor and to ensure that relief is ...