On appeal from Superior Court of New Jersey, Law Division, Hudson County, Docket Nos. C-52-90, L-3049-90 and F-3225-89E.
Before Judges Coburn, Wells and C.S. Fisher.
The opinion of the court was delivered by: Fisher, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
After eleven years, the rent receiver in these consolidated actions sought, among other things, to be discharged and permitted an allowance for the attorneys' fees it had incurred. The request for fees was disallowed solely because the rent receiver never sought the court's approval of its employment of its attorneys prior to the incurring of those fees. We reject the adoption of such an"absolute rule" in these circumstances, and remand for consideration of the necessity and reasonableness of the fees sought.
On July 13, 1990, appellant Zepka/Goldberg Real Estate Company, Inc. (Zepka) was appointed to act as rent receiver for sixteen condominium units in Jersey City; in addition, because of the poor financial condition of the condominium association, Zepka assumed the role of the association's property manager. After serving as rent receiver for eleven years, Zepka moved, on August 15, 2001, to be discharged and compensated for its troubles and expenses.
An order was entered by a Law Division judge on September 24, 2001, which discharged Zepka, but required Zepka to file a final accounting by October 14, 2001. This deadline was later extended to January 31, 2002. Zepka filed an accounting within that time frame which lumped together the amounts received and paid out during the entire period of its stewardship. By order dated March 1, 2002, Zepka was directed to render a final accounting which segregated the income and expenses"per unit, per month for the entire term of the receivership." Zepka complied. The March 1, 2002 order also directed Zepka to move, by May 31, 2002,"nunc pro tunc for the Court's review and approval of the receiver's paying itself $55,131 as a management fee and $38,192 for professional fees."*fn1
Pursuant to the court's direction, Zepka filed a timely motion for approval of the fees already paid to its attorneys, as well as the fees paid to itself. Zepka explained how it had previously accounted on a periodic basis and why it felt that the compensation sought was more than reasonable, and recounted how it had submitted monthly operating reports to the judge who made the appointment. When that judge ceased handling the case, Zepka asserted, but was unable to demonstrate, that it continued to mail monthly reports to the court.
Zepka indicated that, although it has been in the property management business for over twenty years, the fees it sought to have approved"were below the normal and customary fees" charged for managing similar properties. Zepka also claimed that the fees of the attorneys it hired in 1993 were below normal rates. These attorneys charged for their work in the tenancy actions arising over the years at the rate of $100 per hour. This retainer agreement, according to Zepka, allowed the beneficiaries of Zepka's work to receive"legal services for nine years at a rate far below the rates normally charged by other firms for the same services." This contention was supported by the attorney's certification which indicated that the rate of $100 per hour constituted a significant reduction from their customary rates ranging between $175 to $275 per hour.
Zepka's motion was opposed by plaintiff Halpat Partnership Limited (Halpat), a mortgagee, who, as a result of its foreclosure action, obtained title to twelve of the sixteen units in question on June 27, 1991.*fn2 Halpat argued that Zepka was not entitled to be reimbursed for attorneys' fees because the court had not approved Zepka's employment of the attorneys. Halpat also sought compensation for having incurred its own attorneys' fees in litigating the sufficiency of Zepka's accounting.
The Chancery judge*fn3 agreed with Halpat in both respects. Accordingly, Zepka's request for approval of its prior payment of $33,542.92 in counsel fees from the rents received was denied, and Halpat's request for $7,883.75 in counsel fees incurred during the litigation about the accounting was granted.
In rejecting Zepka's request, the Chancery judge applied an"absolute rule" forbidding the rent receiver's compensation for the fees of attorneys whose employment was never approved by the court. We reject the adoption of this"absolute rule" to applications by rent receivers because (a) the court rules relied upon by the Chancery judge -- R. 4:53-3 and R. 4:53-5 --apply to statutory receivers, custodial receivers and other trustees for distressed business associations and not to rent receivers, and (b) the"absolute rule" which we announced in In re ...