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Stewart Title Guaranty Company v. Lewis

347 N.J. Super. 127, 788 A.2d 941 (Ch. Div. 2001)

MORTGAGES; FORECLOSURE; ATTORNEY FEES— No matter how a foreclosed owner acts to delay and obfuscate a foreclosure proceeding, the statutory attorneys’ fee cannot be enhanced.

A husband and wife owned a piece of property. When the husband died, the wife was unable to pay real estate taxes and other expenses. “To enable her to stay in the family home, [her] children orchestrated a strategy whereby the property was first transferred to her son… . [Her son] then obtained a mortgage loan” from a bank and granted his mother a life estate. He soon failed to pay the real estate taxes and mortgage installments, causing the bank to commence a foreclosure action. Then, the woman’s daughter purchased the property from her brother and applied for a mortgage loan. She certified that she had paid far more for the property than she actually paid to her brother. Her affidavit of title failed to mention her mother’s alleged life estate. The loan was made and she defaulted, whereupon her lender commenced a foreclosure action. This began an extremely protracted series of proceedings, including the borrower’s bankruptcy proceeding, followed by a successful motion for the lifting of the automatic stay. Under Rule 4:42-9(a)(4), the foreclosing lender was allowed less than $1,500 in attorney’s fees. The lender’s actual legal fees were approximately $23,000. With that in mind, the lender asked the Court to exercise its discretion and increase the attorneys’ fee award for equitable reasons. In 1999, another Chancery Division Court claimed the discretion to adjust the fee award downward. New Jersey courts have a view of counsel fee awards known as the “American rule.” Simply speaking, “the prevailing litigant is ordinarily not entitled to collect a reasonable attorneys’ fee from the loser.” Consequently, the applicable court rule “commences with the directive that ‘[n]o fee for legal services shall be allowed ... except’ as contained therein.” Mortgage foreclosures are one of the listed exceptions but the fee is carefully limited through the application of certain percentages. “Why the rule ended up being crafted this way is not entirely clear. Long before the first appearance of a court-generated rule, the power to make (and limit) such awards was recognized as being within the inherent power of the Chancery Court.” The Court “probed” the percentage-based rule to see if it allowed for discretion. It first observed that the rule required that the “allowance shall be calculated as follows.” If the word “shall” intoned “an imperative application,” no discretion would be permitted. However, the Court surveyed a series of cases which led it to understand that the manner by which courts interpret the word “shall” does not always lead to that result. Here, however, although the Court was “quite convinced that plaintiffs [had] been greatly wronged by the machinations of defendant and her family members in the charade” described by the Court and believed that “an award of the fee sought would constitute a most equitable and desirable result,” it was also “abundantly satisfied that” the court rule prohibited such a result. Therefore, “[b]ecause of the rule’s unmistakable rigidity, the Court conclude[d] that no ... discretion exists and decline[d] [the lender’s] invitation to apply the rule expansively.”

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