In Re Loehwing
NJ Bankruptcy Court Decision re: Sheriff Commissions
Dateline: February, 2005
By: Vincent DiMaiolo, Jr.
Issue: Who is responsible for the payment of a sheriff’s commission after issuance of the writ of execution when the property is sold by a bankruptcy trustee?:
This recent case was successfully argued by Shareholder Vincent DiMaiolo, Jr. before the Bankruptcy Court.
In In re Loehwing the debtor owned property with a first mortgage in the amount of $610,000. After default, the mortgagee commenced foreclosure, obtained a judgment and proceeded to issue the writ of execution to the sheriff to schedule a sale of the property. After two adjournments of the sale at the request of the debtor, the debtor filed for bankruptcy relief under chapter 7 of the Bankruptcy Code. The Trustee in bankruptcy marketed and procured a sale of the subject property in the amount of $1,275,000. Upon request of the payoff, this office, as counsel for the mortgagee, issued a letter to the Trustee advising that the payoff was $719,335.06 plus the sheriff commission of $14,422.44. The trustee only remitted the $719,335.06 and demanded that the mortgage be discharged of record. We refused to do so until the sheriff’s commission was accounted for. The Trustee brought an adversary action against the Sheriff and the foreclosing mortgagee.
The trustee in this case first tried to argue that the Sheriff was not entitled to a commission (relying on an opinion of another judge in this vicinage) and second, if the sheriff was entitled to a commission, it was the responsibility of the foreclosing mortgagee to cover the cost. She further argued that the commissions could not be added to the secured claim of the foreclosing mortgagee since the underlying document which served as the basis of the secured claim (i.e. the mortgage), no longer existed as it merged into the final judgment of foreclosure.
After a very thorough analysis, The Court ruled that pursuant to New Jersey law, the sheriff was entitled to ½ of the statutory commission upon a “settlement” of the writ of execution. Further, although the statute does not specify who is responsible for the payment of this commission; and the Court reasoned that it was the foreclosing mortgagee who was responsible for the payment of same. The Court, however, did find that this cost was part of the foreclosing mortgagee’s secured claim even though the cost was not procured until after the mortgage merged with the final judgment of foreclosure.
As a result of this opinion, mortgage holders should be cognizant that the court has now opined that sheriff’s commissions are part of the creditor’s secured claim and therefore should be included in their proofs of claim.