Case Law Summaries

First National Bank of Chicago v. Bridgeton Municipal Port Authority

• Opinion Date: March 23, 2001
• Real Property Law
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MORTGAGES; PORT AUTHORITIES—The statutory exemption from levy and sale by virtue of an execution against property owned by municipal port authorities bars foreclosure of a consensual mortgage on that property.

A municipal port authority purchased a parcel of real estate. There was no suggestion that the purchase was for anything other than public purposes. It then arranged for the bank loan to be secured by a note on the property. When it defaulted on the note, the bank sought to foreclose, in accordance with the terms of the mortgage. It obtained a foreclosure on default. The municipal port authority contended that the remedy of foreclosure violated N.J.S. 40:68A-60. The Court agreed. Under that act, municipalities are authorized to create port authorities. The act specifically states that all property of a municipal port authority is to be “exempt from levy and sale by virtue of an execution and no execution or other judicial process shall issue against the same ... .” The bank, without challenging the validity of the law, argued that it should be construed, contrary to its literal meaning, as applying only to involuntary liens and not to a consensual lien created by a mortgage. It argued that “a literal reading would conflict with the statutory authority to purchase land, ..., and would lead to an absurd or unreasonable result in that no lender would be willing to advance a loan secured by a mortgage on which it could not foreclose, thereby frustrating the agency’s ability to secure financing for real estate purchases that advance the public welfare.” The Court disagreed, holding that public policy principles have no application “since a literal reading of this statute effects the legislative purpose and leads to a result that is neither absurd, anomalous, otherwise inconceivable or, as suggested by [the bank], inconsistent with any other portion of the legislation.” In fact, a number of other similar statutes provide the same protection using essentially the same language. Moreover, according to the Court, those statutes are “essentially restatements of a settled common-law principles affording governmental entities precisely the same protection from execution.”

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