(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
Argued November 28, 1994 -- Decided May 15, 1995
STEIN, J., writing for a unanimous Court.
The issue on appeal is whether Resolution Trust Corporation (RTC), in its capacity as receiver for
City Savings, F.S.B. (City Savings), must pay William Lanzaro, the Sheriff of Monmouth County (Sheriff), a
"fee" in the amount of $275,075. The fee is authorized by N.J.S.A. 22A:4-8 for services rendered by the
Sheriff at the execution sale of property secured by mortgages held by RTC and at which RTC was the
successful bidder.
As receiver for City Savings, RTC held the first and third mortgages on Stony Hill Apartments.
When the mortgagor defaulted, RTC filed a complaint for foreclosure. In May 1991, the Superior Court
entered final judgment of foreclosure in favor of RTC. That judgment provided for the sale of the property
and directed that certain sums be paid from the sale proceeds in order to resolve the mortgages.
A writ of execution was obtained and delivered to the Sheriff, who levied on the property, duly
advertised the execution sale with notice of its conditions, and scheduled the sale for September 16, 1991.
On the day of the sale, before the bidding, the Sheriff read the conditions of sale, which included the
condition that the successful bidder pay the Sheriff's fee computed in accordance with N.J.S.A. 22A:4-8.
RTC was the successful bidder and signed the conditions of sale.
Pursuant to N.J.S.A. 22A:4-8, the Sheriff's fee was $275,075. The Sheriff prepared the deed and
agreed to deliver it to RTC on payment of that fee plus costs for administrative services rendered to RTC.
The services performed by the Sheriff's office required about ten hours of work. RTC refused to pay the
fee, claiming an exemption under the Financial Institutions Reform, Recovery and Enforcement Act of 1989
(FIRREA). RTC instituted suit, alleging that the Sheriff was barred from assessing fees authorized by
N.J.S.A. 22A:4-8 against RTC in its capacity as receiver of a failed thrift because such fees constitute a tax
from which RTC is exempt. RTC argued that the imposition of the fee in connection with the sale bore no
relation to the value of the administrative services provided by the Sheriff and his staff.
The Chancery Division held that the Sheriff's commission for the execution sale was a fee and not a
tax. As such, RTC was not exempt from the fee and was required to pay it. In reaching its conclusion, the
court reasoned that the Sheriff's fee was simply a cost in the furtherance of RTC's business not unlike fees
paid to lawyers, appraisers and other similar professionals. The court also found RTC's argument that the
fee bore no relation to services rendered as overly simplistic.
On appeal, the Appellate Division affirmed substantially for the reasons expressed in the Chancery
Division opinion. The Appellate Division did note that the reasonableness of the relationship between the
fee and the services rendered is properly determined not by a single transaction but by the overall statutory
scheme, which is designed to provide self-support for this function of the Sheriff's office.
The Supreme Court granted certification.
HELD: For the purposes of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, and its statutory exemption of Resolution Trust Corporation from state and local taxation, the charge
sought by the Sheriff of Monmouth County is essentially equivalent to a tax measured by the sale
price of foreclosed property. As such, it cannot lawfully be imposed on RTC.
1. RTC was created in an effort to resolve the financial crisis that threatened the stability of the savings
and loan industry and the Federal Savings and Loan Corporation (FDIC). To better perform its statutory
mission, RTC was exempted from state and local taxation. (pp. 6-8)
2. According to cases in this State, if the primary purpose of the fee is to raise general revenue, it is a
tax. If, however, the primary purpose is to reimburse the municipality for services reasonably related to
development, it is a permissible regulatory exaction. Moreover, the power to regulate includes the right to
charge a fee to defray costs, but that fee cannot exceed the reasonable costs of providing the services
rendered. Federal case law reveals a similar focus on the reasonableness of regulatory fees in distinguishing
valid fees from impermissible taxes. Federal cases hold that the proper standard is not value derived by the
recipient but rather value conferred on the recipient. Thus, the fee assessed must bear a reasonable
relationship to the cost of the services conferred by the agency to identifiable recipients. (pp. 8-16)
3. Regardless of its statutory designation as a fee, both State and federal precedents view as controlling
the relationship between the amount of the charge and the cost of the services rendered. Here, there is an
enormous disparity between the charge and the services rendered. Where the disproportion between the
charge and the cost of services is excessive, the conclusion is inescapable that the charge imposed is intended
primarily to raise revenue rather than compensate the governmental agency for the cost of providing its
service. In addition, the success of the fee schedule as a revenue source cannot justify imposition of the fee
on an entity that Congress has declared to be totally exempt from such exactions. (pp. 16-20)
Judgment of the Appellate Division is REVERSED and the matter is REMANDED to the Chancery
Division for further proceedings consistent with this opinion.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, O'HERN and GARIBALDI
join in JUSTICE STEIN'S opinion. JUSTICE COLEMAN did not participate.
SUPREME COURT OF NEW JERSEY
A-
53 September Term 1994
RESOLUTION TRUST CORPORATION,
AS RECEIVER FOR CITY SAVINGS,
F.S.B.,
Plaintiff-Appellant,
v.
WILLIAM LANZARO, AS SHERIFF OF
MONMOUTH COUNTY,
Defendant-Respondent.
Argued November 28, 1994 -- Decided May 15, 1995
On certification to the Superior Court,
Appellate Division, whose opinion is reported
at
271 N.J. Super. 189 (1994).
Kevin M. Crotty, a member of the New York
bar, argued the cause for appellant (Cassidy,
Foss & San Filippo, attorneys; Mr. Crotty and
Harold J. Cassidy, on the briefs).
Fredrick P. Niemann, Assistant County
Counsel, argued the cause for respondent
(Malcolm V. Carton, Monmouth County Counsel,
attorney; Mr. Niemann and Daniel W.
Roslokken, on the briefs).
The opinion of the Court was delivered by
STEIN, J.
The question presented is whether Resolution Trust Corporation (RTC), in its capacity as receiver for City Savings, F.S.B. (City Savings), must pay the Sheriff of Monmouth County (Sheriff), William Lanzaro, a "fee" in the amount of $275,075. The fee is authorized by N.J.S.A. 22A:4-8, for services rendered
by the Sheriff at the execution sale of property secured by
mortgages held by RTC and at which RTC was the successful bidder.
The Chancery Division held that RTC's exemption from state,
county, and local taxation under the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 (FIRREA),
12 U.S.C.A.
§1441a(g), was inapplicable because the Sheriff's
charge was a fee and not a tax.
271 N.J. Super. 425 (1992). The
Appellate Division affirmed substantially for the reasons stated
by the Chancery Division.
271 N.J. Super. 189 (1994). We
granted certification,
137 N.J. 166 (1994), and now reverse.
The essential facts are undisputed. As receiver for City Savings, RTC held the first and third mortgages on Stony Hill Apartments, a 376-unit residential apartment complex located in Eatontown, securing the indebtedness of the mortgagor Stony Hill Associates. On default of the mortgagor, RTC filed a complaint for foreclosure in September 1990. In May 1991, the Superior Court entered final judgment of foreclosure in favor of RTC, which provided for the sale of the property and directed that the following sums be paid from the sale proceeds in the order indicated:
First. Plaintiff (RTC): $13,446,065.52 together with interest, counsel fees and costs.
Second. Provident Associates [holder of the
second mortgage]: $5,723,220.74 with
interest.
Third. Plaintiff (RTC): $3,370,178.50 with
interest.
A writ of execution was obtained and delivered to the
Sheriff, who levied execution on the property, duly advertised
the execution sale with notice of its conditions, and scheduled
the sale for September 16, 1991. On the day of the sale, before
undertaking the bidding, the Sheriff read the conditions of sale,
which included the condition that the successful bidder would pay
the Sheriff's fee computed in accordance with N.J.S.A. 22A:4-8.
Competitive bidding ensued between RTC and the holder of the
second mortgage, Provident Associates. Because RTC's bid of
$11,000,000 was the highest bid received, the Sheriff declared
RTC the successful bidder. RTC then signed the conditions of
sale.
Pursuant to N.J.S.A. 22A:4-8, the Sheriff's fee was equal to
four percent of the first $5,000 of RTC's successful bid, and
two-and-one-half percent of the amount exceeding the first
$5,000. The Sheriff informed counsel for RTC that he had
prepared the deed and would deliver it to RTC on payment of
$275,075, the Sheriff's fee for conducting the sale pursuant to
N.J.S.A. 22A:4-8, in addition to $369.58 in Sheriff's costs. The
Sheriff's office's activities in connection with the sale
consisted of receiving and recording the writ of execution,
levying on the property, preparing the publication of the notice
of sale, presiding over the sale and the bidding, preparing
necessary documentation, such as the deed and conditions of sale,
and making return on the writ. The Sheriff and various employees
of his office had devoted about ten hours to those tasks. RTC
refused to pay the fee, claiming an exemption under FIRREA.
RTC instituted this action, alleging that the Sheriff was
barred from assessing the fees authorized by N.J.S.A. 22A:4-8
against RTC in its capacity as receiver of a failed thrift
because such fees constitute a tax from which RTC is exempt. RTC
contended that the imposition of the fee in connection with the
sale bore no relation to the value of the administrative services
provided by the Sheriff and his staff. The parties agreed that
the Sheriff will neither demand payment of the fee nor
readvertise the property for sale pending resolution of this
appeal.
The Chancery Division held that the Sheriff's commission for
the execution sale was a fee and not a tax. 271 N.J. Super. at
429. The court noted that RTC had made the decision to institute
the foreclosure action, and that the statutory fee was imposed
not only on RTC but on all purchasers at foreclosure sales.
Ibid. The court thus found that "[u]nder those circumstances the
payment of the [S]heriff's fee [was] simply a cost in the
furtherance of [RTC's] business, similar to the fees it pays its
lawyers, appraisers, property managers and other like
professionals." Ibid. In respect of RTC's argument that the
Sheriff's services in connection with the execution sale bore no
relation to the fee, the court deemed that argument to be "overly
simplistic," id. at 430, stating that the fee-charging structure
has "a most reasonable relationship to the cost of maintaining
all of the functions of a [Sheriff's office]." Id. at 431.
Moreover, the court asserted that because the Sheriff's office is
required to remit all fees collected to the county treasurer and
is dependent on the county freeholders to fund the Sheriff's
office, the Sheriff's fee cannot be viewed as an "ill-disguised
revenue raising" tax. Id. at 433. Therefore, the court
dismissed RTC's complaint, holding that RTC was not exempt from
paying the Sheriff's fee following its successful bid at the
sale, and ordering it to pay the fee. Ibid.
The Appellate Division affirmed, substantially for the
reasons stated in the Chancery Division's opinion. 271 N.J.
Super. at 190-91. The Appellate Division emphasized "that the
reasonableness of the relationship is properly determined not by
a single transaction but rather by the overall statutory scheme,
which is designed to provide for the self-support of this
function of the [S]heriff's office." Id. at 191. Furthermore,
it added that "reasonableness may be evaluated in terms of the
benefit conferred upon the person required to pay as well as in
terms of the expense to the [S]heriff in providing the service."
Id. at 191-92.
RTC, a federal governmental instrumentality that acts as receiver or conservator of failed thrift institutions, was established by Congress in 1989. 12 U.S.C.A. §1441a(b). It was created as part of a comprehensive effort to resolve the financial crisis that threatened the stability of the savings and loan industry and the Federal Savings and Loan Insurance Corporation. H.R. Rep. No. 54(I), 101st Cong., 1st Sess. 308 (1989), reprinted in 1 989 U.S.C.C.A.N. 86, 104. RTC's essential function is "to manage and dispose of the assets acquired from failed thrifts." Id. Congress expressly required that RTC conduct its operations "in a manner which * * * maximizes the net present value return from the sale or other disposition" of thrift assets entrusted to it. 12 U.S.C.A. §1441a(b)(3)(C)(i).
To enhance RTC's ability to achieve its statutory mission, Congress exempted RTC and "its capital, reserves, surpluses, or assets [and income]" from all "state, municipal, and local taxation except taxes on real estate held by the Corporation, according to its value as other similar property held by other persons is taxed." 12 U.S.C.A. §1441a(g). Congress's purpose in exempting RTC from State and local taxation is analogous to its purpose for granting a similar exemption to the Federal Deposit Insurance Corporation, which the Court of Appeals for the Fifth Circuit described in Irving Independent School District v. Packard Properties, 970 F.2d 58, 62-63 (1992):
The FDIC enjoys sovereign immunity from
state tax penalties to facilitate its
reconsolidation of failed banks; in addition
to the Constitutional requirements, an
admirable goal underlies that immunity.
Whenever the FDIC can reduce the charges
connected to property it has acquired, it can
increase the value of the property, decrease
its own losses, expedite resale, and save the
nation's taxpayers and insured depositors a
great deal of money.
Implementing its statutory authority to "establish * * * policies
* * * [and] issue such rules, regulations, * * * guidelines, and
statements as the Corporation considers necessary or appropriate
to carry out its duties,"
12 U.S.C.A.
§1441a(b)(11)(A), RTC has
adopted a policy concerning payment of state and local taxes that
provides in part:
Other Related Taxes
The Corporation is immune from taxes
other than ad valorem real property taxes.
Taxes on sales, transfers, or other
dispositions of Corporation property are
generally in the nature of excise taxes which
are levied on the transaction and not on the
property (although the calculation of the
amount of tax may be based on the property's
sale price); the Corporation is immune from
such taxes.
[Statement of Policy Regarding the Payment of
State and Local Property Taxes,
56 Fed. Reg. 23426, 23427 (1991).]
The character of the charge imposed on RTC by the Monmouth County Sheriff, although denominated a "fee" by the statute authorizing its collection, N.J.S.A. 22A:4-8, ultimately must be determined by standards established under federal law for
distinguishing between fees and taxes. See Resolution Trust
Corp. v. Winslow,
12 Cal. Rptr.2d 510, 515 (Ct. App. 1992)
("Congress has provided that all actions involving the RTC arise
under federal law * * * . * * * While section 1441a, subdivision
(l)(i) is a jurisdictional statute, it also implies that Congress
intended federal law to govern actions involving the RTC."). In
Macallen Co. v. Massachusetts,
279 U.S. 620,
49 S. Ct. 432,
73 L. Ed. 874 (1929), the Supreme Court addressed the
constitutionality of a Massachusetts excise tax imposed on
corporations and based in part on interest received from
securities, including United States Liberty Bonds and Federal
Farm Loan Bonds that under federal law were exempt from state
taxation. The Supreme Judicial Court of Massachusetts had held
that the state tax was not imposed on income from the federal
bonds, but that such income simply constituted one of the factors
used to compute the amount of the tax. Reversing, the Court held
that state law was relevant but not conclusive in determining
whether the tax was an unconstitutional levy on exempt income:
The words of the act and the opinion of
the state court as to the nature of the tax
are to be given consideration and weight; but
they are not conclusive. As it many times
has been decided, neither state courts nor
legislatures, by giving the tax a particular
name, or by using some form of words, can
take away our duty to consider its nature and
effect. And this court must determine for
itself by independent inquiry whether the tax
here is what, in form and by the decision of
the state court, it is declared to be,
namely, an excise tax on the privilege of
doing business, or, under the guise of that
designation, is in substance and reality a
tax on the income derived from tax-exempt
securities.
[Id. at 625-26, 49 S. Ct. at 433-34, 73
L. Ed. at 879 (citations omitted).]
See also California v. Buzard,
382 U.S. 386, 393,
86 S. Ct. 478,
483,
15 L. Ed.2d 436, 442 (1966), ("Although the [California]
Revenue and Taxation Code expressly denominates the tax 'a
license fee,' there is no persuasive evidence Congress meant
state labels to be conclusive; therefore, we must decide as a
matter of federal law what 'licenses, fees, or excises' means in
the [Soldiers' and Sailors' Civil Relief Act of 1940].")
(citation omitted).
Although federal law ultimately will determine whether the
Sheriff's charge is a permissible fee or a prohibited tax, our
own precedents are instructive, specifically those dealing with
municipal ordinances purporting to be regulatory but challenged
on the ground that they were designed primarily to raise revenue
and therefore were ultra vires. Thus, in Daniels v. Borough of
Point Pleasant,
23 N.J. 357 (1957), a building contractor
challenged the constitutionality of an amendment to the local
building code increasing the fees for building permits. The
contractor's fees under the ordinance prior to the amendment
averaged about eighteen dollars per house, and the corresponding
fee under the amended ordinance would be about $262 per house.
The record indicated that the fees to be raised under the new
ordinance would exceed by over 700" the municipality's cost for
the services rendered by the building inspector. The amendment
was challenged as an impermissible tax, unauthorized by the
Legislature. The Borough contended that its authority to
regulate and control building within its borders included the
power to charge fees to defray the cost of regulation.
Concluding that the ordinance had been designed primarily to
raise revenue and therefore exceeded the authority delegated by
the Legislature, this Court invalidated the ordinance:
Inherent in the power to regulate and control
is the power to charge license fees primarily
designed to defray the costs of such control.
They must not, of course, exceed the bounds
of reason considered in connection with the
service and the cost of the service granted *
* * .
What the Borough of Point Pleasant is
attempting to do here is to defray the
general cost of government under the guise of
reimbursement for the special services
required by the regulation and control of new
buildings.
Here, the difference between the cost to the borough of regulating and controlling new construction bears no reasonable relation to the amount of revenue raised by the new amendatory ordinance. The record indicates that approximately the same services will now be rendered as were rendered in the prior years by the building inspector, and that the fees raised by the new ordinance exceed by more than 700" the cost of inspecting the buildings and regulating the construction. Admittedly, the purpose of the ordinance was to raise revenue to defray the increased cost of school and other government services. The philosophy of this ordinance is that the tax rate of the borough should remain the same and the new people coming into the
municipality should bear the burden of the
increased costs of their presence. This is
so totally contrary to tax philosophy as to
require it to be stricken down * * * .
See also Holmdel Builders Ass'n v. Township of Holmdel, 121 N.J. 550, 582 (1990) ("If the primary purpose of the fee is to raise general revenue, it is a tax. If, however, the primary purpose is to reimburse the municipality for services reasonably related to development, it is a permissible regulatory exaction.") (citation omitted); Moyant v. Borough of Paramus, 30 N.J. 528, 546 (1959) ("The power to regulate includes the right to charge a fee designed to defray the costs thereof, but such must not 'exceed the bounds of reason considered in connection with the service and the cost of the service granted.'" (quoting Daniels, supra, 23 N.J. at 361)); Salomon v. City of Jersey City, 12 N.J. 379, 393-94 (1953) ("[T]he comprehensive municipal license tax imposed without any accompanying regulation by Jersey City's ordinance on all businesses including retailers, wholesalers and manufacturers and measured by gross receipts, payroll and footage, has no precedent whatever in our annals and was beyond all legislative contemplation * * * ."); cf. Automatic Merchandising Council v. Township of Edison, 102 N.J. 125, 128 (1986) (observing that subject to reasonable limits municipal fees can exceed regulation costs); Public Serv. Elec. v. New Jersey Dep't of Envtl. Protection, 101 N.J. 95, 110-11 (1985) (noting that fees graduated on basis of volume or quantity are
not illegal per se); Gross v. Township of Ocean,
92 N.J. 539
(1983), rev'g on dissent
184 N.J. Super. 144, 157 (App. Div.
1982) (invalidating as prohibited tax township's bidding
procedure auctioning right to tow abandoned cars and observing
that "[r]egardless of whether the bidder's payment is
characterized as a license fee, a tax, or a franchise fee, in
every realistic sense its primary purpose is to nourish the
municipal treasury"); Bellington v. Township of East Windsor,
17 N.J. 558, 565 (1955) (sustaining local ordinance imposing license
fees and regulations on trailer camps and observing that "[w]here
the primary object is police regulation, it does not necessarily
matter that the incidental result is revenue above the actual
cost of supervision and control of the business; * * * e contra,
where revenue is the principal objective of the tax, it is not
sustainable under the police power alone").
Federal case law reveals a similar focus on the
reasonableness of regulatory fees in distinguishing valid fees
from impermissible taxes. In Federal Land Bank of New Orleans v.
Crosland,
261 U.S. 374,
43 S. Ct. 385,
67 L. Ed. 703 (1923), an
Alabama statute that imposed a mortgage-recording fee based on
the amount of indebtedness secured by the mortgage was challenged
as unconstitutional by a Federal land bank, asserting that its
mortgages and income derived therefrom had been exempted from
state and local taxation by federal law. Although the Alabama
Supreme Court acknowledged that the Alabama statute effectively
imposed a tax on mortgages, it sustained the statute's
application to the bank on the basis that the payment was
optional because the bank was not obligated to record its
mortgages. Reversing, the Supreme Court observed that under
Alabama law recording was essential to protect the bank's lien
against purchasers without notice. Id. at 377-78, 43 S. Ct. at
386, 67 L. Ed. at 705. Although acknowledging that Alabama could
charge a reasonable recording fee reflecting the cost of the
service, Justice Holmes, writing for the Court, observed that a
charge measured by the amount of indebtedness constituted an
invalid tax as applied to the land bank:
Of course, the state is not bound to
furnish its registry for nothing. It may
charge a reasonable fee to meet the expenses
of the institution. But in this case the
legislature has honestly distinguished
between the fee and the additional
requirement that it frankly recognizes as a
tax. If it attempted to disguise the tax by
confounding the two, the courts would be
called upon to consider how far the charge
exceeded the requirement of support, as when
an excessive charge is made for inspecting
articles in interstate commerce. But it has
made no such attempt. It has levied a
general tax on mortgages, using the condition
attached to registration as a practical mode
of collecting it. In doing so, by the
construction given to the statute by the
supreme court, it has included mortgages that
it is not at liberty to reach.
[Id. at 378, 43 S. Ct. at 386, 67 L. Ed. at
705 (citation omitted).]
In Massachusetts v. United States, 435 U.S. 444, 98 S. Ct. 1153, 55 L. Ed.2d 403 (1978), the issue was the validity of an
aircraft-registration tax collected by the federal government in
respect of a helicopter operated by Massachusetts for police
purposes. The Supreme Court adhered to the principle that a valid
fee could be distinguished from an invalid tax primarily on the
basis of the reasonableness of the charge in relation to the cost
of providing the service. Sustaining the imposition of the
registration fee, the Court observed:
Whatever the present scope of the
principle of state tax immunity, a State can
have no constitutional objection to a revenue
measure that satisfies the three-prong test *
* * . So long as the charges do not
discriminate against state functions, are
based on a fair approximation of use of the
system, and are structured to produce
revenues that will not exceed the total cost
to the Federal Government of the benefits to
be supplied, there can be no substantial
basis for a claim that the National
Government will be using its taxing powers to
control, unduly interfere with, or destroy a
State's ability to perform essential
services. The requirement that total
revenues not exceed expenditures places a
natural ceiling on the total amount that such
charges may generate and the further
requirement that the measure be reasonable
and nondiscriminatory precludes the adoption
of a charge that will unduly burden state
activities.
[Id. at 466-67, 98 S. Ct. at 1167, 55 L. Ed.
2d at 420.]
Capital Cities Communications, Inc. v. Federal Communications Commission, 554 F.2d 1135 (D.C. Cir. 1976), involving a challenge by a broadcaster to fees charged by the Federal Communications Commission (FCC) on the transfer of control of broadcast licenses, reflects a similar approach. The fees were contested
in part on the ground that the FCC's fee schedule took into
account the consideration paid for the transfer (or the gross
revenue of the station), which exceeded the Commission's
statutory authority. Setting aside the FCC's fee schedule, the
court of appeals noted that the appropriate standard was the
value of the service rendered by the Commission, not the benefit
received by the station.
Second, we find the Commission's use of
the consideration for the transfer (or the
gross revenues of the station) as a measure
of the fee to be not in accord with our
decision, expressed in a companion case, that
the proper standard is not value derived by
the recipient but rather value conferred on
the recipient. In our view, this standard
requires the fee assessed to bear a
reasonable relationship to the cost of the
services rendered to identifiable recipients.
This standard is not met where the persons
who receive essentially the same physical
services from the agency are charged a
grossly variable fee solely for the reason
that some are larger or have more income than
others. If the cost to the agency of the
services rendered in approving the transfer
of a station for a consideration of $1
million are approximately the same as the
costs in approving the transfer of a station
for $2 million, the fee charged for
performing the service cannot be doubled in
latter instance. The same rule would apply
if the fee were based on average gross
revenues. * * * Such a fee structure would
not comply with section 483a because it would
not take into consideration the cost to the
Government and would on this record not
appear to bear any reasonable relation to the
cost of the value conferred by the agency.
See also National R.R. Passenger Corp. v. City of New York,
695 F. Supp. 1570, 1575 (S.D.N.Y. 1988) (holding that rents charged
Amtrak by New York City did not violate Amtrak's immunity from
state taxes, and noting that whereas "[a] tax need not have any
relation to governmental costs[,] * * * [a] user fee, on the
other hand, must be no greater than the government's costs"),
aff'd,
882 F.2d 710 (2d Cir. 1989).
We find unpersuasive the Appellate Division's reliance on Liquifin Aktiengesellschaft v. Brennan, 446 F. Supp. 914 (S.D.N.Y. 1978). In response to a hostile tender offer by Liquifin, the Ronson Corporation obtained an order attaching $1,500,000 of Liquifin's funds deposited in support of the tender offer. Liquifin obtained an order discharging the attachment conditioned on its payment of the New York City Sheriff's statutory fees and expenses, which, calculated on the basis of the sum attached, amounted to $75,625. Liquifin challenged the fees as a deprivation of its property without due process, in violation of its constitutional rights. The district court determined that the Sheriff's charge was a fee and not a tax, but that even if denominated a tax it was constitutionally sustainable based on the benefit derived by Liquifin:
Even assuming, however, that poundage is a tax, the Court finds that it withstands constitutional scrutiny because it bears a direct relationship to services utilized by
Liquifin. As observed by the United States
Supreme Court, "[t]he simple but controlling
question is whether the state has given
anything for which it can ask return."
Liquifin, of course, contends that it
received no benefit from the state and
certainly no benefit sufficient to warrant
the exaction of $75,625 in poundage fees. * *
*
The sum exacted from Liquifin, $75,625,
was concededly quite large and would be
considered unreasonably so were the Court
comparing this sum to the actual work
expended by the sheriff in effectuating the
discharge order. Compared, instead, to the
benefit that accrued to Liquifin by virtue of
the discharge--the release of $1,500,000
frozen at the Franklin National Bank--and to
the legitimate state interest of supporting
the judiciary, the poundage paid by Liquifin
was not an arbitrary deprivation of its
property without due process of law.
Based on the Liquifin court's analysis, the Appellate Division observed that "reasonableness may be evaluated in terms of the benefit conferred upon the person required to pay as well as in terms of the expense to the [S]heriff in providing the service." 271 N.J. Super. at 191-92. The flaw in that conclusion is that the Liquifin court held only that reasonableness based on benefit can be sufficient to sustain a tax against a due process challenge, but its holding cannot be read to suggest that a governmental charge, excessive if measured by the cost of the service, nevertheless can be classified as a fee and not a tax based on the benefit conferred. That reading of Liquifin is directly contradicted by the decision of the Court of Appeals for
the District of Columbia in Capital Cities Communications, supra,
554 F.
2d at 1138.
In its decision sustaining the Sheriff's fee, the Chancery
Division observed that
[t]he RTC decided to be the highest bidder to
take title (rather than money) and thereby
control the timing of a later resale at a
better price. * * * [T]he RTC's decision does
not cause the [S]heriff's fee to become a
"tax." * * * Under those circumstances the
payment of the [S]heriff's fee is simply a
cost in the furtherance of [RTC's] business *
* * .
That RTC elected to outbid others at the foreclosure sale obviously is not dispositive of the issue whether the Sheriff's charge is a prohibited tax. Irrespective of its statutory designation as a fee, both our own cases and the federal precedents view as controlling the relationship between the amount of the charge and the cost of the service rendered. This record reveals an enormous disparity: the services rendered by the Sheriff and employees of his office required approximately ten hours of work; the fee imposed, determined solely on the basis of the amount of the successful bid for the property, was $275.000. Where the disproportion between the charge and the cost of the service is excessive, as it is here, the conclusion is inescapable that the charge imposed is intended primarily to raise revenue and not to compensate the governmental entity for
the cost of providing its service. Daniels, supra, 23 N.J. at
362.
Nor is the revenue-raising characteristic of the Sheriff's
fee diminished by the statistics, emphasized by the lower courts,
demonstrating that the annual amount of the fees collected by the
Sheriff and remitted to the County defray a substantial portion
of the cost of operating the Sheriff's office. That the
Sheriff's fees are substantial enough to offset approximately
one-third of the budgeted costs of operating his office may well
substantiate the soundness of the fee schedule as a mater of
legislative policy. But the success of the fee schedule as a
revenue source cannot justify imposition of the fee on an entity
that Congress has declared to be totally exempt from such
exactions.
Moreover, we note that Congress specifically exempted RTC
from state and local taxation in respect of its acquisition of
assets from failed thrift institutions. Pursuant to FIRREA,
12 U.S.C.A.
§1441a(b)(4), RTC is authorized to exercise all of the
powers conferred on the Federal Deposit Insurance Corporation
(FDIC) by sections 11, 12, and 13 of the Federal Deposit
Insurance Act,
12 U.S.C.A.
§§1821, 1822, and 1823. In
accordance with § 13 of that Act, FDIC, and hence RTC, can
acquire from itself as receiver assets previously owned by
failed thrift institutions,
12 U.S.C.A.
§1823(d), and in such
event FDIC, and RTC, shall be exempt from state and local
taxation to the same extent as FDIC, in its capacity as receiver,
is exempt from such taxation pursuant to
12 U.S.C.A.
§1825(b).
That statutory exemption from state and local taxation, afforded
to RTC when it acquires assets sold by itself or another acting
as receiver, forecloses any argument that RTC's general exemption
from state and local taxation did not apply when it acquired
title to the Stony Hill Apartments at the foreclosure sale.
We are fully satisfied that for purposes of FIRREA, and its
statutory exemption of RTC from state and local taxation, the
charge sought to be imposed by the Sheriff of Monmouth County is
essentially equivalent to a tax measured by the sale price of the
foreclosed property. As such, it cannot lawfully be imposed on
RTC.
We reverse the judgment of the Appellate Division and remand the matter to the Chancery Division for further proceedings consistent with this opinion.
Chief Justice Wilentz and Justices Handler, Pollock, O'Hern, and Garibaldi join in this opinion. Justice Coleman did not participate.
NO. A-53 SEPTEMBER TERM 1994
ON APPEAL FROM
ON CERTIFICATION TO Appellate Division, Superior Court
RESOLUTION TRUST CORPORATION,
AS RECEIVER FOR CITY SAVINGS,
F.S.B.,
Plaintiff-Appellant,
v.
WILLIAM LANZARO, AS SHERIFF OF
MONMOUTH COUNTY,
Defendant-Respondent.
DECIDED May 15, 1995
Chief Justice Wilentz PRESIDING
OPINION BY Justice Stein
CONCURRING OPINION BY
DISSENTING OPINION BY