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Haven Savings Bank v. Zanolini

416 N.J. Super. 151, 3 A.3d 608 (App. Div. 2010)

UNCLAIMED PROPERTY — Under New Jersey’s Unclaimed Property Act, a party seeking a contingent fee must, in a written agreement, set forth the net amount that the property owner will recover after deduction of the fee.

Two property owners lost their properties through foreclosure. The sheriff sold the properties to third-parties and, after paying off the mortgage balances, the excess proceeds were deposited into the state’s unclaimed property trust fund. A company’s business involved assisting customers with reclaiming funds from the trust fund. The company would search court dockets, deeds, mortgages, and other documents to determine if individuals were owed any money and then it would locate those individuals and offer to assist then in obtaining those funds from the trust fund.

The company entered into agreements with two property owners to assist them in reclaiming the excess proceeds from the trust fund. Both agreements listed the value of the property in question, the estimated legal fees, and set forth a thirty-five percent contingent fee payable to the company if it was successful in reclaiming the money. Only one of the agreements included the estimated net funds that would be payable to property owners if the company was successful in reclaiming the funds.

When the company successfully assisted the property owners in recovering the excess proceeds from the trust fund, it sought an order from the chancery court to be paid its thirty-five percent commission for each of the two matters. The Chancery Division, however, found the agreements to be unconscionable contracts of adhesion and it awarded the company substantially less than the agreed-upon contingent fee. The company appealed, and the Appellate Division affirmed in part and reversed in part.

In doing so, the Court noted that, under the New Jersey Uniform Unclaimed Property Act, N.J.S.A. 46:30B-106, a company is specifically allowed to charge contingent fees up to thirty-five percent of the value of the property being recovered if the agreement is executed before the property is deemed abandoned and turned over to the state treasurer. In order to be valid, the agreement must be in writing and signed by the parties, it must list the value of the property in question, and it must list the estimated net recovery by the property owner. If all of these requirements are followed, the contract is valid and enforceable. The Court found that the chancery court’s blanket ruling that the thirty-five percent contingent fee was unreasonable because the statute itself authorized a contingent fee as long as it did not exceed thirty-five percent of the property’s value.

However, the Court held that in order for the contract to be valid, it had to state the estimated net recovery by the property owner. In one case, the company listed the estimated net recovery in the agreement, and therefore its contract was valid. However, the Court objected to the company’s attempt to first deduct its legal fees and costs from the gross proceeds before it calculated its fee. It found that the statute did not permit that deduction. In the other case, where the company failed to list the estimated net recovery in the agreement, the Court found the agreement was invalid. Therefore, it affirmed the lower court’s finding that the company was not entitled to a thirty-five percent contingent fee.

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