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Regency Savings Bank, F.S.B. v. Southgate Corporate Office Center

October 25, 2006


On appeal from Superior Court of New Jersey, Chancery Division, Morris County, F-3943-04.

The opinion of the court was delivered by: Coburn, P.J.A.D.



Argued October 4, 2006

Before Judges Coburn, R.B. Coleman, and Gilroy.

This dispute between the Morris County Sheriff and plaintiff, Regency Savings Bank, F.S.B., as mortgagee, arose after Regency obtained a judgment in foreclosure, issued a writ of execution to the sheriff, and then settled with defendants before the sheriff's sale. The primary question to be resolved is the amount of the fee due to the sheriff under N.J.S.A. 22A:4-8.

The sheriff based his fee claim on the amount of the foreclosure judgment, almost $36 million. He asserted that sum was the settlement received by Regency from defendants in consideration of the cancellation of the sheriff's sale and that the applicable statutory percentages would result in a fee of over $730,000. Regency contended that N.J.S.A. 22A:4-8 is unconstitutional and that the sheriff's claim was untimely. Alternatively, Regency argued that the sheriff was only entitled to the $50 minimum statutory fee or, at most, application of the statutory percentages to the $250,000 in cash it received from defendants to cancel the sale, which sum, it asserted, was the settlement. Under that theory, the fee would be $5,050.

The Chancery Division rejected plaintiff's constitutional and procedural arguments, agreed that the fee had to be based on the settlement, but ruled that the settlement was $250,000 and awarded the sheriff a fee of $5,050.*fn1 The sheriff appealed, and Regency cross-appealed. At argument, Regency agreed that we need not resolve its constitutional claim if we were satisfied that that the sheriff's fee was no more than the $5,050 awarded by the Chancery Division. Since we are so satisfied, we will limit our discussion to the alleged procedural bar and to the meaning of the statute in this context.*fn2

The material facts are undisputed. In August 2004, Regency, the mortgagee of property owned by defendant Southgate Corporate Office Center ("Southgate"), obtained a final foreclosure judgment of $35,825.162.20, and sent a writ of execution to the Morris County Sheriff, who scheduled a sale for March 14, 2005.

In late February, Regency entered into a written contract with Southgate. Although the contract is complex, in essence, Regency agreed that in return for a nonrefundable payment of $250,000, it would cancel the sheriff's sale and give Southgate ninety days to obtain refinancing. If successful, Southgate would pay Regency about $32 million, and if it failed, it would convey its interest in the property to Regency's designee. The money and deed were to be held in escrow by Regency's attorneys.

On March 8, Regency's attorneys wrote to the sheriff by fax and mail asking for cancellation of the sale and "return of the Writ of Execution marked 'Not Satisfied.'" On March 9, the sheriff replied, asking what funds, if any, had been received from defendants in consideration of the cancellation so that fees and commissions could be calculated. Later that day, Regency's attorneys responded, writing that Regency has not received any funds in satisfaction of the debt at this time, and has only received $250,000 which is being held by this firm in escrow and which will be applied at a future date toward the payment of outstanding real estate taxes on the property at issue.

On May 2, the sheriff again wrote to Regency's attorneys, refusing to return the writ of execution until he was advised about the reason for the cancellation and whether any funds were received. Regency's attorneys responded by fax and mail on May 16, 2005, reiterating the position taken in their letter of March 9. Later the same day, the Morris County Counsel, on behalf of the sheriff, sent a fax and letter to Regency's attorneys demanding a fee of $731,773.62, which was based on the assertion that the settlement was for the amount of the foreclosure judgment of over $35 million dollars including interest. On May 26, the sheriff filed a notice of motion in aid of litigant's rights asking the Chancery Division for an order requiring Regency to submit the money previously demanded. At the end of May, the option expired unexercised and the deed and $250,000 were released from escrow. The sheriff never offered proof respecting the actual value of the property subjected to the writ of execution.

The sheriff's right to compensation in connection with execution sales is governed by N.J.S.A. 22A:4-8, which contains these pertinent provisions:

When a sale is made by virtue of an execution the sheriff shall be entitled to charge the following fees: On all sums not exceeding $5,000.00, 6%; on all sums exceeding $5,000.00 on such excess, 4%; the minimum fee to be ...

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