MEMORANDUM

TO: NEW JERSEY LAW REVISION COMMISSION

FROM: JOHN M. CANNEL, EXECUTIVE DIRECTOR

DATED: JANUARY 10, 2005

RE: ENFORCEMENT OF JUDGMENTS

The version below (sections C-3 and C-3½) reflects the Commission’s decisions last spring, but the marked text (strikeouts and underlines) indicates the major changes from the Commission’s original report.

C-3. By whom issued Collection orders against personal property or earnings

a. A collection order against any property personal property or earnings of the judgment debtor may be issued:

(1) by the Clerk of the Superior Court if the judgment is recorded in the judgment docket of the Superior Court.

b. A collection order against personal property or earnings may be issued (2) by the Clerk of the Special Civil Part if the judgment is recorded in the case records of the Superior Court, Law Division, Special Civil Part but not in the judgment docket of the Superior Court.

c. b. A clerk may issue as many collection orders with respect to a particular judgment as the judgment creditor requests, and may issue a collection order to more than one county at the same time.

Source: 2A:17-4; 2A:17-17

COMMENT

Subsection (a)(1) of this proposed section continues the rule in current law that if a judgment is docketed in the Superior Court, the clerk of that court issues the collection order, even if the judgment originally was obtained in the Special Civil Part. In addition, subsection (b) continues the rule under current law that the clerk of the Special Civil Part issues a collection order on judgments that have been obtained in that Part but not docketed in the Superior Court. Subsection (c) restates 2A:17-4. It also makes it clear that successive orders may issue after the return of the order or its expiration. See Vitale v. Hotel California, Inc., 184 N.J. Super. 512, 520-21 (Law. Div. 1982), aff'd 187 N.J. Super. 464.

Note that the Clerk of the Superior Court may issue a collection order against any kind of property, including real property, while collection orders issuing from the Special Civil Part are limited to personal property and earnings. This distinction is consistent with the current statutes; see 2A:17-17.

C-3½ . Collection orders against real property

a. A collection order against real property of the judgment debtor may be issued only by a judge.

b. A judge shall enter a collection order against real property if the judge finds:

(1) the creditor has diligently attempted to ascertain the property of the debtor in accordance with standard commercial practice and the personal property found is insufficient to satisfy the judgment;

(2) the debtor has been notified at the debtor’s last known address and has not supplied information concerning personal property sufficient to satisfy the judgment; and

(3) the amount owed on the judgment exclusive of interest and costs is $10,000 or more.

c. A collection order shall be docketed in the Superior Court Judgment Docket.

COMMENT

In its original report on this subject, the Commission recommended that collection orders against real property be available for all judgments docketed in the Superior Court, whether or not personal property of the debtor had been exhausted. That recommendation engendered substantial controversy. Some people suggested this it might cause debtors to lose their homes even though they had other property from which the judgment might be satisfied. While the Commission does not believe that that would have been the result of its original position, It has reexamined its recommendation. This section continues the current law that requires personal property to be exhausted before execution against real property. The section adds an additional safeguard to debtors in subsection (b)(3); real property cannot be used to satisfy a judgment or less than $10,000. Under current law, however, it is difficult to sell real property because the sale may be set aside if, after the sale, it appears that personal property has not been exhausted. This section provides for determination before the sale whether there is a need to execute against real property. An order is entered only when the standards have been met to allow execution against real property. When an order is entered, it is docketed in the Judgment Docket and serves as proof that the sale of real property was authorized. As a result, better title can be produced by an execution sale.

One possible approach allowing a creditor freer access to real property is to change section 3½ so that it focuses on the debtor’s primary residence. It is still necessary for a decision to be made whether the real property is a primary residence. As a result orders for the sale of real property must be signed only by judges. I am assuming that the Commission will want some circumstances when even a primary residence can be reached to satisfy a judgment. As a result, I have included provisions from the earlier draft to allow that.

C-3½ . Collection orders against real property

a. A collection order against real property of the judgment debtor may be issued only by a judge.

b. A judge shall enter a collection order against real property constituting the primary residence of the debtor if the judge finds:

(1) the creditor has diligently attempted to ascertain the property of the debtor in accordance with standard commercial practice and the personal property found is insufficient to satisfy the judgment;

(2) the debtor has been notified at the debtor’s last known address and has not supplied information concerning personal property sufficient to satisfy the judgment; and

(3) the amount owed on the judgment exclusive of interest and costs is $10,000 or more.

c. A collection order shall be docketed in the Superior Court Judgment Docket.

Another approach that is more like a homestead exemption can be produced with a different amendment to section 3½.

C-3½ . Collection orders against real property

a. A collection order against real property of the judgment debtor may be issued only by a judge.

b. A judge shall enter a collection order against real property constituting the primary residence of the debtor if the judge finds that sale of the real property is likely to yield in excess of $40,000 and the amount owed on the judgment exclusive of interest and costs is $10,000 or more. If a collection order is entered against real property constituting a primary residence, the order shall state that the minimum bid that may be made in the sale shall be $40,000 plus the costs of the sale.

c. A collection order shall be docketed in the Superior Court Judgment Docket.

It has been suggested that determinations that must be made before real property can be sold can cause a cloud of title to the real property and that cloud reduces the amount that can be raised by a judicial sale. To reduce this problem, a change could be made in one of the sections on public sale.

S-11. Delivery by deed

a. In the case of a public sale of real property, the purchaser shall prepare a deed to the property sold and present it to the sheriff if the property was sold by the sheriff and otherwise to the clerk of the court under which authority the property was sold. The sheriff or clerk shall execute the deed if, after examination, the sheriff or clerk determines;

(1) that the purchaser has paid the balance of the purchase price and interest on the balance due, from the 11th day after sale;

(2) that the deed complies with this section;

(3) that the sale has not been set aside by a court and no objection to the sale is pending;

(4) that, if the sale was not conducted by the sheriff, the sale was confirmed by the court; and

(5) if redemption of the property is permitted by law, that the time for redemption has passed and that the property has not been redeemed.

b. The deed shall state the person whose interest in the real estate was sold and the execution or other legal proceeding for which the real estate was sold.

c. The purchaser shall pay the cost of preparing and recording the deed and any realty transfer tax.

d. The sheriff shall attach a copy of the affidavit required by N.J.S. 46:15-6.1 to the deed.

e. A deed executed pursuant to this section shall transfer all interests of the execution defendant in the same manner as a deed by that person to a purchaser for value. The deed shall extinguish any lien resulting from the judgment executed and any lien subordinate to that lien. The deed shall transfer all interests of the execution defendant notwithstanding any defect or irregularity in the collection order or the sale.

Source: 2A:17-40; 2A:17-41; 2A:50-37.

Comment

Subsection (a) is new. While the practice is that the purchaser is responsible for preparing the deed, statutes appear to put that duty on the sheriff. See 2A:50-37. No specific provision delays execution of a deed until the time for objections to the sale and redemption of the property is passed, but such a delay is fairly implied by statutes and rules on those subjects.

Subsection (b) is substantially similar to 2A:17-40. Subsection (c) is new but reflects consistent statewide practice. Subsection (d) implements the requirements the requirement of 46:15-6.1. See also Section 2.

Subsection (e) is substantially similar to 2A:17-41 and to relevant parts of 2A:50-37. See also, 2A:61-9.

ENFORCEMENT OF JUDGMENTS–MEMORANDUM JANUARY 10, 2005 –

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