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National City Mortgage v. Smith

324 N.J. Super. 509, 735 A.2d 1221 (Ch. 1999)

MORTGAGES; FORECLOSURE; ATTORNEYS FEES’—Even if a mortgage in foreclosure is decelerated by cure of the default, the statutory attorney fees are to be calculated upon the accelerated amount, not just on the amount that was in default.

This matter appeared by way of a motion to fix the amounts allowable for counsel and title search fees arising from foreclosure of a residential mortgage. A default caused the amount owned pursuant to the note and mortgage to be accelerated as permitted by the mortgage. The property owner offered to redeem the property, but a dispute arose as to how to calculate the monetary amount necessary to cure the default. The property owner sought to cure the default by tendering the arrearage plus sums incurred as a result of the default. The parties agreed on the amounts owed, except for the counsel fees and title search fees. This left a narrow issue for the Court, i.e. “whether, in the case where a defaulting mortgagor cures default prior to final judgment, the allowable statutory counsel and title search fees fixed by statute are computed by multiplying the prescribed percentage found in R.4:42-9 by the actually amount necessary to cure the debtor’s default for the amount of the fully accelerated, outstanding principal balance of the underlying debt.” Pursuant to the Fair Foreclosure Act, a debtor in default of a residential mortgage has the right at any time, up to the entry of final judgment, to cure the default and to decelerate and reinstate the residential mortgage by tendering all sums which would have been due in the absence of default. The Court found that the language of the attorneys’ and title and search fees statute was clear and required no further comment. The pertinent language in the Court rule allows counsel fees “on all sums adjudged to be paid by the plaintiff.” “Adjudge” means “[t]o pass on judicially, to decide, settle, or decree [by] Judgment of a court of competent jurisdiction.” The Court held that the word “adjudged” could not be ignored as mere surplusage. It found that the outstanding principal balance of the mortgage had been accelerated as permitted by contract. It held that when institutional lenders begin the foreclosure process there is a substantial expense involved. “Counsel fees and title search fees mount up quickly. Even when the counsel fees are based on the accelerated amount there are few who would argue that those amounts fully compensate the mortgagee when a cure occurs. To base the fees only upon the defaulted payments would mean that the mortgagee would realize only a pittance for their efforts to collect upon a mortgagor’s default. It must be remembered that it is the default of the mortgagor that causes these expenditures. Such a result could not have been the intention of the drafters of the rule. It should not be given undue effect through scholastic strictness of definition or concept.” The Court found ample authority for the proposition that “statutory interpretive technique permits the deletion and disregard of legislative language when the rejection thereof is essential to reach and carry out the purpose of the Legislature. More to the point, the reliance of defendant’s argument on the use in the rule of the word ‘adjudged’ is misplaced. Defendant’s position assumes that the judgment referred to by R. 4:42-9 is an adjudication of foreclosure.” The Appellate Division held that even a judgment of dismissal, as was the case here, constitutes an adjudication and therefore the counsel and title search fees could properly be based upon the full accelerated amount due.


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