Resolution Trust Corp. v. Lanzaro

• Decision Date: 15 May 1995
• Citation: 140 N.J. 244,658 A.2d 282
• Parties: RESOLUTION TRUST CORPORATION, as Receiver for City Savings, F.S.B., Plaintiff-Appellant, v. William LANZARO, as Sheriff of Monmouth County, Defendant-Respondent.
• Court: New Jersey Supreme Court

Page 244

140 N.J. 244

658 A.2d 282

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

Supreme Court of New Jersey.

Argued Nov. 28, 1994.

Decided May 15, 1995.

Kevin M. Crotty, New York City, a member of the New York bar, for appellant (Cassidy, Foss & San Filippo, Red Bank, attorneys; Mr. Crotty, New York City and Harold J. Cassidy, Red Bank, on the briefs).

Fredrick P. Niemann, Asst. County Counsel, for respondent (Malcolm V. Carton, Monmouth County Counsel, attorney); Mr. Niemann and Daniel W. Roslokken, on the briefs).

The opinion of the Court was delivered by

STEIN, J.

The question presented is whether Resolution Trust Corporation (RTC), in its capacity as receiver for City Savings, F.S.B. (City Savings), must pay the Sheriff of Monmouth County (Sheriff), William Lanzaro, a "fee" in the amount of $275,075. The fee is authorized by N.J.S.A. 22A:4-8, for services rendered by the Sheriff at the execution sale of property secured by mortgages held by RTC and at which RTC was the successful bidder. The Chancery Division held that RTC's exemption from state, county, and local taxation under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), 12 U.S.C.A. § 1441a(g), was inapplicable because the Sheriff's charge was a fee and not a tax. 271 N.J.Super. 425, 638 A.2d 931 (1992). The Appellate Division affirmed substantially for the reasons stated by the Chancery Division. 271 N.J.Super. 189, 638 A.2d 812 (1994). We granted certification, 137 N.J. 166, 644 A.2d 614 (1994), and now reverse.

I

The essential facts are undisputed. As receiver for City Savings, RTC held the first and third mortgages on Stony Hill Apartments, a 376-unit residential apartment complex located in Eatontown, securing the indebtedness of the mortgagor Stony Hill Associates. On default of the mortgagor, RTC filed a complaint for foreclosure in September 1990. In May 1991, the Superior Court entered final judgment of foreclosure in favor of RTC which provided for the sale of the property and directed that the following sums be paid from the sale proceeds in the order indicated:

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

Second. Provident Associates [holder of the second mortgage]: $5,723,220.74 with interest.

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

[271 N.J.Super. at 426, 638 A.2d

931.]

A writ of execution was obtained and delivered to the Sheriff, who levied execution on the property, duly advertised the execution sale with notice of its conditions, and scheduled the sale for September 16, 1991. On the day of the sale, before undertaking the bidding, the Sheriff read the conditions of sale, which included the condition that the successful bidder would pay the Sheriff's fee computed in accordance with N.J.S.A. 22A:4-8. Competitive bidding ensued between RTC and the holder of the second mortgage, Provident Associates. Because RTC's bid of $11,000,000 was the highest bid received, the Sheriff declared RTC the successful bidder. RTC then signed the conditions of sale.

Pursuant to N.J.S.A. 22A:4-8, the Sheriff's fee was equal to four percent of the first $5,000 of RTC's successful bid, and two-and-one-half percent of the amount exceeding the first $5,000. The Sheriff informed counsel for RTC that he had prepared the deed and would deliver it to RTC on payment of $275,075, the Sheriff's fee for conducting the sale pursuant to N.J.S.A. 22A:4-8, in addition to $369.58 in Sheriff's costs. The Sheriff's office's activities in connection with the sale consisted of receiving and recording the writ of execution, levying on the property, preparing the publication of the notice of sale, presiding over the sale and the bidding, preparing necessary documentation, such as the deed and conditions of sale, and making return on the writ. The Sheriff and various employees of his office had devoted about ten hours to those tasks. RTC refused to pay the fee, claiming an exemption under FIRREA.

RTC instituted this action, alleging that the Sheriff was barred from assessing the fees authorized by N.J.S.A. 22A:4-8 against RTC in its capacity as receiver of a failed thrift because such fees constitute a tax from which RTC is exempt. RTC contended that the imposition of the fee in connection with the sale bore no relation to the value of the administrative services provided by the Sheriff and his staff. The parties agreed that the Sheriff will neither demand payment of the fee nor readvertise the property for sale pending resolution of this appeal.

The Chancery Division held that the Sheriff's commission for the execution sale was a fee and not a tax. 271 N.J.Super. at 429, 638 A.2d 931. The court noted that RTC had made the decision to institute the foreclosure action, and that the statutory fee was imposed not only on RTC but on all purchasers at foreclosure sales. Ibid. The court thus found that "[u]nder those circumstances the payment of the [S]heriff's fee [was] simply a cost in the furtherance of [RTC's] business, similar to the fees it pays its lawyers, appraisers, property managers and other like professionals." Ibid. In respect of RTC's argument that the Sheriff's services in connection with the execution sale bore no relation to the fee, the court deemed that argument to be "overly simplistic," id. at 430, 638 A.2d 931, stating that the fee-charging structure has "a most reasonable relationship to the cost of maintaining all of the functions of a [Sheriff's office]." Id. at 431, 638 A.2d 931. Moreover, the court asserted that because the Sheriff's office is required to remit all fees collected to the county treasurer and is dependent on the county freeholders to fund the Sheriff's office, the Sheriff's fee cannot be viewed as an "ill-disguised revenue raising" tax. Id. at 433, 638 A.2d 931. Therefore, the court dismissed RTC's complaint, holding that RTC was not exempt from paying the Sheriff's fee following its successful bid at the sale, and ordering it to pay the fee. Ibid.

The Appellate Division affirmed, substantially for the reasons stated in the Chancery Division's opinion. 271 N.J.Super. at 190-91, 638 A.2d 812. The Appellate Division emphasized "that the reasonableness of the relationship is properly determined not by a single transaction but rather by the overall statutory scheme, which is designed to provide for the self-support of this function of the [S]heriff's office." Id. at 191, 638 A.2d 812. Furthermore, it added that "reasonableness may be evaluated in terms of the benefit conferred upon the person required to pay as well as in terms of the expense to the [S]heriff in providing the service." Id. at 191-92, 638 A.2d 812.

II

RTC, a federal governmental instrumentality that acts as receiver or conservator of failed thrift institutions, was established by Congress in 1989. 12 U.S.C.A. § 1441a(b). It was created as part of a comprehensive effort to resolve the financial crisis that threatened the stability of the savings and loan industry and the Federal Savings and Loan Insurance Corporation. H.R.Rep. No. 54(I), 101st Cong., 1st Sess. 308 (1989), reprinted in 1989 U.S.C.C.A.N. 86, 104. RTC's essential function is "to manage and dispose of the assets acquired from failed thrifts." Ibid. Congress expressly required that RTC conduct its operations "in a manner which * * * maximizes the net present value return from the sale or other disposition" of thrift assets entrusted to it. 12 U.S.C.A. § 1441a(b)(3)(C)(i).

To enhance RTC's ability to achieve its statutory mission, Congress exempted RTC and "its capital, reserves, surpluses, or assets [and income]" from all "state, municipal, and local taxation except taxes on real estate held by the Corporation, according to its value as other similar property held by other persons is taxed." 12 U.S.C.A. § 1441a(g). Congress's purpose in exempting RTC from state and local taxation is analogous to its purpose for granting a similar exemption to the Federal Deposit Insurance Corporation, which the Court of Appeals for the Fifth Circuit described in Irving Independent School District v. Packard Properties, 970 F.2d 58, 62-63 (1992):

The FDIC enjoys sovereign immunity from state tax penalties to facilitate its reconsolidation of failed banks; in addition to the Constitutional requirements, an admirable goal underlies that immunity. Whenever the FDIC can reduce the charges connected to property it has acquired, it can increase the value of the property, decrease its own losses, expedite resale, and save the nation's taxpayers and insured depositors a great deal of money.

Implementing its statutory authority to "establish * * * policies * * * [and] issue such rules, regulations, * * * guidelines, and statements as the Corporation considers necessary or appropriate to carry out its duties," 12 U.S.C.A. § 1441a(b)(11)(A), RTC has adopted a policy concerning payment of state and local taxes that provides in part:

Other Related Taxes

The Corporation is immune from taxes other than ad valorem real property taxes. Taxes on sales, transfers, 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.

[Statement of Policy Regarding the Payment of State and Local Property Taxes, 56 Fed.Reg. 23426, 23427 (1991).]

The character of the charge imposed on RTC by the Monmouth County Sheriff, although denominated a "fee" by the statute authorizing its collection, N.J.S.A. 22A:4-8, ultimately must be determined by standards established under federal law for distinguishing between fees and taxes. See Resolution Trust Corp. v. Winslow, 9 Cal.App.4th 1799, 12 Cal.Rptr.2d 510, 515 (1992) ("Cong...