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City of Englewood v. Exxon Mobile Corp.

February 10, 2009

CITY OF ENGLEWOOD, PLAINTIFF-RESPONDENT,
v.
AS TO COUNT ONE EXXON MOBILE CORPORATION, SAUDI BASIC INDUSTRIES CORPORATION, AS TO COUNT TWO SUN REFINING & MARKETING COMPANY, NEW WAY ASSOCIATES, A GENERAL PARTNERSHIP, BARRY DORN OF NEW YORK, INC., A NEW YORK CORPORATION, BARRY DORN, INC., STATE OF NEW JERSEY, DIVISION OF TAXATION, AS TO COUNT THREE FBB ENGLEWOOD, LLC, DEFENDANT-RESPONDENT, STARBUCKS CORPORATION, DEFENDANT-RESPONDENT, BANK OF AMERICA, SUCCESSOR IN INTEREST TO FLEET BANK AS SUCCESSOR IN INTEREST TO SUMMIT BANK, DEFENDANT-APPELLANT, AND STATE OF NEW JERSEY DEFENDANT-RESPONDENT.



On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-2137-06.

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

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Submitted December 10, 2008

Before Judges Parrillo, Lihotz and Messano.

In this condemnation action, defendant Bank of America (BOA) appeals from orders of the Law Division setting the rate of interest BOA is entitled to receive in satisfaction of its mortgage at less than the contractual rate, and awarding BOA counsel fees less than the full amount incurred. For reasons that follow, we affirm as to the former and reverse and remand as to the latter.

The facts are relatively straightforward. FBB Englewood, LLC (FBB) owned a parcel of land at 80 East State Highway 4 in Englewood, which is the subject matter of this appeal. BOA held a mortgage on the property with an interest rate of 7.5%.

Pertinent to this appeal, the mortgage, dated June 25, 1999, provided:

(i) Condemnation. [FBB Englewood, LCC] hereby assigns to the Bank the proceeds of any award . . . in connection with any condemnation or other taking of the Property or any part thereof under the power of eminent domain . . . . The Bank shall be entitled to payment of all expenses incurred by it in connection with any such judgment or award, including reasonable costs and attorneys' fees. After deducting expenses, the Bank may, in its absolute discretion, use all of any part of such sums received to reduce any amounts due under this Mortgage and/or the Note or may release any or all of such sum to the Mortgagor.

On March 28 and 29, 2005, plaintiff City of Englewood (City or plaintiff) filed a verified complaint and order to show cause seeking to acquire and condemn this property along with two other adjacent parcels.*fn1 FBB filed a notice of appearance and BOA, as mortgagee, filed an answer, separate defenses, cross-claim and counter-claim, asserting its interest in the condemnation proceeds and seeking an order compelling the City to "immediately deposit the sum of $1,550,000.00 . . . the estimated value of the Premises as asserted by Plaintiff," and permitting BOA to withdraw "all such sums necessary to fully discharge the Bank's Mortgage." Following a hearing on the return date, the court denied BOA's requests, declaring that the City was duly authorized to exercise its power of eminent domain, and appointed Commissioners to appraise the property and fix the condemnation proceeds to be paid by August 23, 2005.*fn2

When the Commissioners failed to file a report by the extended deadline, FBB moved, with notice to BOA, to compel the City to either file a declaration of taking and deposit just compensation with the court, or abandon the action. On January 23, 2006, the court granted FBB's motion and ordered the City to file a declaration of taking and deposit compensation into court by March 7, 2006.

In compliance therewith, on February 1, 2006, the City, pursuant to N.J.S.A. 20:3-18, filed a declaration of taking, and thereafter, on March 2, 2006, deposited $1,550,000 -- the estimated just compensation for FBB's property -- with the New Jersey Superior Court Trust Funds Unit.*fn3 One month later, on April 7, 2006, FBB moved to withdraw the deposited funds from the Trust Funds Unit, and to direct that a portion of the funds be paid to BOA to satisfy the outstanding balance on its mortgage. On April 20, 2006, BOA cross-moved for withdrawal, asserting its interest in the condemnation proceeds and requesting that it be paid the outstanding principal amount due on the mortgage, including accrued interest under the contract rate, and attorneys' fees. In response, FBB objected to both BOA's request for interest on the outstanding mortgage obligation at a rate greater than the current New Jersey Superior Court Trust Funds rate and its request for attorneys' fees. The City, however, objected to withdrawal by both parties due to concerns over possible environmental contamination on the property, and therefore requested that "the motions [for withdrawal] be adjourned for one cycle pending receipt of [environmental cleanup] cost estimates." Heeding the City's request, on May 16, 2006, the court denied both FBB's and BOA's requests for withdrawal, ordering that "remediation costs [first] be calculated before release of funds."*fn4

Apparently, the environmental issue was resolved and the City no longer sought to have any estimated remediation costs held in trust. Consequently, on June 20, 2006, FBB once again moved for withdrawal and reiterated its position that although BOA should be paid an amount equal to the outstanding principal amount due on the mortgage, it was not entitled to interest on the mortgage "at a rate greater than the current New Jersey Superior Court Trust Funds rate." FBB also restated its objection to BOA's request for attorneys' fees, even though contractually based. BOA cross-moved for withdrawal, countering that FBB was attempting to "'short' BOA on the amount due for principal and interest on the BOA note/Mortgage" and "refus[ing] to pay BOA for attorneys fees and costs." In this regard, BOA certified that the outstanding balance on the mortgage as of July 13, 2006, including interest, was $711,905.57, and that it had incurred $8,213.69 in costs and attorneys' fees.

Following argument, the court found that BOA, in addition to the outstanding principal, was only entitled to receive the 7.5% contract interest rate up to April 24, 2006 -- the date the court determined to be a reasonable period after the funds were deposited and BOA was able to apply for their withdrawal -- but that thereafter, BOA was limited to the 4% interest rate set by the Trust Funds Unit. Thus, by order of September 18, 2006, the court, citing Rule 4:42-1, awarded BOA $720,146.26, plus any interest accruing after April 24, 2006 at the Trust Funds Unit rate. The court ...


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