Resolution Trust Corp. v. Lanzaro

• Decision Date: 28 May 1992
• Citation: 271 N.J.Super. 425,638 A.2d 931
• Court: New Jersey Superior Court
• Parties: RESOLUTION TRUST CORPORATION as receiver for City Savings, F.S.B., Plaintiff, v. William LANZARO, Sheriff of Monmouth County, Defendant.

Page 425

271 N.J.Super. 425

638 A.2d 931

RESOLUTION TRUST CORPORATION as receiver for City Savings F.S.B., Plaintiff, v. William LANZARO, Sheriff of Monmouth County, Defendant.

Superior Court of New Jersey, Chancery Division Monmouth County.

Decided May 28, 1992.

Harold J. Cassidy, Red Bank, for plaintiff (Cassidy, Foss and San Filippo attorneys; Mary Ellen Edwards and Rick Brodsky, on the briefs). Malcolm V. Carton, Monmouth County Counsel, for defendant; Frederick P. Niemann, Manasquan, on the brief.

McGANN, J.S.C.

In this action the Resolution Trust Corporation ("RTC") seeks a ruling that the sheriff is not entitled to collect the statutory fee allowed him for conducting an execution sale, together with an order compelling the sheriff to deliver to the RTC his deed resulting from that execution sale, despite the non-payment of his fee.

The background for this case is found in the matter of Resolution Trust Corporation, as Receiver for Cities Savings, F.S.B. v. Stony Hill Associates, a New Jersey Partnership, Docket No. F-11672-90. In that action, final judgment in foreclosure in favor of RTC was entered on May 31, 1991. It provided for sale of the property (a 376 unit residential apartment complex on 27 acres of land) and directed that there be paid from the net proceeds thereof the following sums in the order indicated:

First. Plaintiff (RTC): $13,446,065.52 together with interest, counsel fees and costs.

Second. Provident Associates: $5,723,220.74 with interest.

Third. Plaintiff (RTC): $3,370,178.50 with interest.

A writ of execution was obtained and delivered to the sheriff. Levy of the execution was made on the property. The sale was duly advertised and scheduled for September 16, 1991. On that day when the sale was called by the sheriff, active, competitive bidding took place between the holder of the second mortgage and the RTC. RTC's initial bid was $100. Bidding progressed until the last bid of the competitor was made for $10,925,000. RTC's bid of $11,000,000 was the highest received and it was declared the successful bidder. Thereafter the sheriff advised counsel for the RTC that the deed had been prepared and would be delivered upon payment of his fee of $275,075 as allowed by N.J.S.A. 22A:4-8.

At that point the RTC filed this action putting at issue the right of the sheriff to collect that fee. By agreement of counsel and pending resolution of the issue, the demand for payment of the fee has been restrained; the sheriff has been enjoined from re-advertising the sale. It is agreed that if the RTC is successful the sheriff will deliver his deed. If the RTC does not prevail it will pay the fee pending any appeal.

The return date of the order to show cause was extended to allow for necessary discovery. Extensive briefs have been filed by both sides. There is no issue of material fact. The matter is ripe for summary judgment.

N.J.S.A. 22A:4-8 is a statute which sets the fees to be paid to a sheriff for providing many and varied services. Among them are those related to execution sales. Pertinent to this case is the following:

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, 4%; on all sums exceeding $5,000.00 on such excess, 2 1/2%; the minimum fee to be charged for a sale by virtue of an execution, $20.00.

The advertised notice of sale, as well as the conditions of sale sent to the RTC and publicized in the presence of all prospective bidders before the auction commenced, gave notice to all that the sheriff's fees were to be paid by the successful bidder in addition to the amount of the bid. ¹

In syllogistic form the RTC's position is this: Congress has exempted the RTC from the payment of any taxes (save local real estate taxes); the sheriff's fee is in the nature of a tax; therefore, the RTC is not required to pay it.

RTC relies on Sec. 2(b)(1) of the Federal Deposit Insurance Act (FDIA), 12 U.S.C.A. § 1825(b)(1), which provides:

When acting as a receiver, the following provisions shall apply with respect to the Corporation:

(1) The Corporation including its franchise, its capital, reserves, and surplus, and its income, shall be exempt from all taxation imposed by any State, county, municipality, or local taxing authority, except that any real property of the Corporation shall be subject to State, territorial, county, municipal, or local taxation to the same extend according to its value as other real property is taxed, except that, notwithstanding the failure of any person to challenge an assessment under State law of such property's value, such value, and the tax thereon, shall be determined as of the period for which such tax is imposed.

In a Statement of Policy Regarding the Payment of State and Local Property Taxes, ² the RTC expresses the following view of its liability for taxes:

SUMMARY: After considering (1) the powers granted to it under the Constitution and Federal law, (2) its obligation to maximize recoveries from the disposition of financial institutions and their assets, and (3) the potential effect of its actions upon state and municipal tax schemes, the Resolution Trust Corporation (the 'Corporation') has issued the following policy statement to provide guidance as to how it will administer its statutory responsibilities in this area.

....

The Corporation is immune from taxes other than ad valorem real property taxes. Taxes on sales, transfers, ³ or other dispositions of Corporation property are generally in the nature of excise taxes which are levied on the transaction and not on the property (although the calculation of the amount of tax may be based on the property's sale price); the Corporation is immune from such taxes.

The RTC, as receiver, took title to the assets of Citizens Savings F.S.B. One of those assets was the debt owed by Stony Hill Associates to Citizens Savings together with the mortgage which secured the debt. In the language of the Federal statute that asset is part of the RTC's "capital." Just as clearly, however, the statutory fee allowed to the sheriff is not a direct tax on anyone's capital, including that of the RTC. Congress contemplated that in furtherance of its mandate, the RTC would have to pursue various state remedies and pay required state fees. It instituted the foreclosure action and paid a filing fee. No one suggests that the filing fee is a tax. It paid a fee for the writ of execution and makes no claim that such fees is a form of taxation. It used the services of the sheriff in advertising and conducting a public auction of the subject property and now claims that fee is in the nature of a tax and refuses to pay it.

The sheriff, in rendering his service, is entitled by statute to the equivalent of a limited auctioneer's commission on the sale. The standard conditions of sale used by the sheriff require the successful bidder to pay that fee. In commencing the foreclosure action in Monmouth County the RTC knew that as part of the final step (the auction sale) it might have to pay a fee to the sheriff if, but only if, it was the high bidder. If another party became the successful bidder, that person would pay the fee and the RTC would receive the full amount bid in reduction of the debt owed to it. Here, there was very competitive bidding. The RTC decided to be the highest bidder to take title (rather than money) and thereby control the timing of a later resale at a better price. That may very well be in the best interest of its overall mission; however, the RTC's decision does not cause the sheriff's fee to become a "tax." The fact that the RTC is liable for the sheriff's fee springs from a series of decisions made by it and not from state action aimed at the RTC. Under those circumstances the payment of the sheriff's fee is simply a cost in the furtherance of its business, similar to the fees it pays its lawyers, appraisers, property managers and other like professionals.

Therefore, it cannot be said that the payment of a fee in the nature of an auctioneer's commission is the equivalent of an excise tax on capital within congressional intent or within the RTC's Statement of Policy. ⁴ Ever since McCulloch v. State of Maryland, 17 U.S. (4 Wheat ) 316, 4 L.Ed. 579 (1819), it has been clear that the states, in exercising their powers of taxation, cannot tax the powers, operations or property of the United States. See also James v. Dravo Contracting Co., 302 U.S. 134, 58 S.Ct. 208, 82 L.Ed. 155 (1937); United States v. Allegheny County, 322 U.S. 174, 64 S.Ct. 908, 88 L.Ed. 1209 (1944). The RTC uses the result in this foreclosure sale, i.e., its obligation to pay a sheriff's fee of $275,075, as an appealing springboard for the argument that a "fee" of such magnitude cannot be recompense for services rendered but must in fact be such an impairment of RTC's capital as to be a "tax" and, therefore, constitutionally unenforceable.

Deposition discovery revealed that the sheriff's services in connection with an execution sale bear no relation to the amount realized at the sale. His procedures are the same whether the amount actually bid is large or small. His office receives and records the writ; makes the levy on the property; prepares and directs publication of the notice of sale; attends to any adjournments; conducts the auction; accounts for the receipt of monies; prepares the deed; and makes return on the writ. Various employees of the office and the sheriff devote about 10 hours of time to those tasks. RTC notes that the fee of $275,075 in this case results (arithmetically) in an hourly charge of $25,507.50. From that it urges that the court's sense of what is fair and just should be so shocked as to decide that the "fee" becomes an unenforceable tax. ⁵ The argument is overly simplistic.

The RTC refers to a line of cases in this State which hold that when municipalities set license charges and fees at a level which ...