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Hatch v. T & L Associates

319 N.J. Super. 644, 726 A.2d 308 (App. Div. 1999)

MORTGAGES; NOTES; COLLECTION COSTS—Absent express language in a note providing for collection of post-judgment collection expenses, a judgment creditor is not entitled to reimbursement for those expenses.

This appeal arose from the customary provision of a mortgage note by which, upon default, the borrower agrees to pay the balance of principal and interest due and the lender’s cost of collection, including attorney’s fees. The issue here was whether the lender, after obtaining judgment on the note, including reasonable attorney’s fees, is then entitled to have the judgment thereafter amended to include an additional allowance for post-judgment collection costs. In the underlying matter, a default judgment was entered in favor of the lender. The judgment was not satisfied in full for more than a year. During that year, supplementary discovery proceedings took place, writs of execution were issued, and various other legal work was performed, all directed at collecting the judgment. When the lender applied for these additional attorney’s fees, the lower court denied the application on the ground that the lender’s rights under the note merged into the original judgment and could not be independently pursued thereafter. The Appellate Division affirmed the denial, but on other grounds. The Court pointed out that “it has long since been well settled that our courts will enforce the customary attorney fee clause in a promissory note or other instrument of obligation to the extent that the attorney fees requested as part of the judgment on the note are reasonable.” It was, however, unable to find a reported opinion deciding the question of whether that clause also covered attorney’s fees incurred by the lender after entry of judgment in the effort to satisfy the judgment. It concluded that under the facts of this case, the attorney-fee clause could not be read as extending to post-judgment collection efforts. In reaching this conclusion, it began with the jurisprudential principle that “the sound administration of justice is best advanced by having the parties bear the burden of their own counsel fees except in those few circumstances designated” in the Court Rules. Consequently, the corollary of that commitment to the “so-called American rule of litigants paying their own fees is that such agreements will be strictly construed.” Following this guideline of strict construction, the Court would not conclude that it was within the parties’ contemplation and expectation that the borrower understood at the time the note was executed that the cost of collection included post-judgment fees. It did not express a view as to whether parties can expressly provide for post-judgment attorney fees in their agreements. The Court was of the view, however, that at the least, such an obligation would have to be clearly and specifically set forth, and that the note at issue had not done so. The Court also expressed a second reason for declining to award post-judgment collection costs. In its view, the lender had the option of foreclosing on the mortgage rather than suing on the note. Had the lender done so, the award of attorneys’ fees would be limited by Court Rules. Under those Rules, the imposable fees would have been substantially less than the amount sought by the lender. Consequently, the court hinted that it was concerned that it would be inequitable to burden the borrower with legal fees beyond those which would have been included in a foreclosure proceeding judgment.


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