*1 ORDER of HACK- that CHARLES W. SOMMERS is It ORDERED his be stricken from the and that name be disbarred ENSACK it immediately; State, effective attorneys roll of further SOMMERS, be and here- W. JR. that CHARLES
ORDERED law; enjoined practicing permanently restrained and it is further with Administrative respondent comply
ORDERED Attorney dealing with Ethics 23 of the Office Guideline No. attorneys; is further disbarred the Ethics Financial respondent reimburse ORDERED that appropriate administrative costs. Committee ASSOCIATES, LIMITED NEWA JERSEY MAIN STREET LOWER HOUSING ASSO- AND A LIMITED DIVIDEND PARTNERSHIP ASSOCIATES, CIATION; A NEW JERSEY PLAZA AND UNION DIVIDEND HOUS- AND A LIMITED PARTNERSHIP LIMITED ASSOCIATION, AND CROSS- PLAINTIFFS-APPELLANTS ING RESPONDENTS, AND MORTGAGE JERSEY HOUSING v. NEW JERSEY, AGENCY, DEFENDANT- NEW STATE OF FINANCE AND CROSS-APPELLANT. RESPONDENT 13, 1988 February Argued September Decided *2 argued appellants Frederic K. cause Becker attorneys, cross-respondents (Wilentz, Spitzer, Goldman & *3 Golum, of counsel and on K. Becker J. Frederic and Gordon briefs). the General, argued Evert, Attorney the Deputy L.
Richard Edwards, respondent cross-appellant (Cary At- cause General, Deputy Attorney torney attorney, Clancy, Michael R. General, counsel). by delivered opinion
The the Court was STEIN, J. Housing 1984, Mortgage and Finance Jersey the
In New rule, 5:80-5, regulat- (HMFA) adopted a new Agency N.J.A.C. housing projects ownership interests in ing transfer of predecessors, Housing Agency financed (HFA) Mortgage Agency Finance Finance 2090-95). (15 We consider this case (MFA). N.J. Reg. part regulations adopted as validity of three challenges to prohibits prepayment of mort- of the Rule. N.J.A. C. 5:80-5.10 HMFA; 5:80-5.8 prior approval N.J.A.C. gage loans without sold and the agency-financed project if provides that an eight-per- of an mortgage prepaid, excess underlying equity paid must be to HMFA an on the cent return seller’s sale; 5:80-5.9 approval fee for of the and N.J.A.C. additional in connection with on sellers imposes processing various fees housing projects. agency-financed the sale of pursuant to Rule appeal Appellate to the Division a direct (Lower 2:2-3(a)(2), Associates plaintiffs, Lower Main Street (Union), contended that the Main) and Union Plaza Associates agree financing their regulations contrary to the terms of were enabling legis HFA, HMFA’s and inconsistent with ments with regulations violated They also claimed that lation. constitutions, U.S. and state contracts clauses of the federal Const, Const, 7, 3, IV, para. I, 10, art. art. N.J. § § constitution. “takings” of the federal clause as well as Const, Appellate Division and XIV.1 amends. V U.S. those regulations, three validity upheld the of two on in the and the return limiting right down project, but struck agency-financed of sale of an event thus excessive and closing “patently imposition of fees * * Hous. & Jersey v. New Main Assocs. *.” Lower invalid (1987). Super. 219 N.J. Agency, Fin. Mortgage invalidat- Appellate Division judgment We affirm 5:80-5.9. fees, C. N.J.A. closing ing imposes agency-fi- on respect to the restriction With Appellate Divi- in accord with mortgages, we are nanced construed mortgages cannot be plaintiffs’ conclusion that sion’s prepay at time right to mortgagors the on the to confer Thus, the are redeemable. underlying bonds after in conflict with is not restricting prepayment *4 Never- and HMFA. plaintiffs agreements underlying provides invalid because theless, regulation be hold we of discre- HMFA’s exercise guide no standards whatsoever prepay- requests for approve determining in whether tion also conclude mortgage loan. We agency-financed ment of an grounds, we on non-constitutional of this matter our 1In view of disposition regulations are contentions and do not address plaintiffs’ need not unconstitutional. restricting equity, after sale of an return on underlying of the agency-financed reconciled with the present in form be mortgage, cannot moreover, authorization; underlying statutory part, purpose in for a adopted, at least appears to been have Accordingly, we by HMFA. from that advanced different part re- affirm in We thus N.J.A.C. 5:80-5.8. invalidate Appellate Division. part judgment verse in I. Housing and Mort- HMFA, Jersey New established Act), A1983, (HMFA c. Act of 1983 gage Agency Finance Jersey prior agencies, the New Hous- of two is a consolidation Mortgage (HFA), Jersey Agency and the New ing Finance (MFA). Prior to the establishment Finance HMFA, of moderate-income HFA financed construction tax-exempt N.J.S.A. through the issuance of bonds. housing Act, at 55:14J-34(f) HMFA codified N.J.S.A. (repealed by HMFA assumed -44). HMFA Under the 55:14K-1 to 55:14K-4d, bonds, and was obligations of the HFA N.J.S.A. finance tax-exempt bonds order to its own authorized to issue 55:14K-2e(2); housing. See N.J.S.A. and moderate-income low- 55:14K-20. or- partnerships, limited Union are Main and
Lower respectively, the Limited- under ganized in 1969 and 1970 Law, 55:16-1 Corporations Housing N.J.S.A. Dividend $5,835,000 in 1969 from HFA -22. Union borrowed City. Lower housing project Union a 240-unit to construct to finance con- $7,665,000 from HFA 1971 Main borrowed Rahway. Both loans housing project a 288-unit struction of projects, respective of the cost of ninety percent were for HFA issued short-term fifty-year maturities. and had required the funds generate in 1971 to anticipation notes bond for the loans.. *5 loans, in closing compliance
Concurrently with the (repealed enabling legislation, with HFA’s N.J.S.A. 55:14J-9 -44), at 55:14K-1 to Main HMFA codified N.J.S.A. Lower HFA that regulatory agreements into with and Union entered repaid. The loans were to remain in effect until the were rents, management, and agreements imposed limitations on amount of annual distri- eligibility, and also limited the tenant eight percent Main to of their butions to Lower and Union housing projects. in respective equity investment 1972, Housing A Loan HFA issued its 1972 Series General proceeds to retire the short-term bond and used Bond mortgage financ- anticipation provide permanent *6 5:80-5.10, upheld prohibits prepay- late Division which N.J.A.C. mortgage approval, HMFA and also ment of loans without 5:80-5.8, prof- restricts the amount of sustained N.J.A.C. which project may if the sponsor agency-financed it a of an retain mortgage prepaid. Appel- project sold and the 5:80-5.9, imposes vari- late Division invalidated N.J.A. C. agency-fi- processing conjunction fees in with the sale of ous granted plaintiffs’ petition for certifica- projects. nanced We cross-petition granted also HMFA’s addressed to N.J. tion and (1988). A.C. 5:80-5.9. N.J.
II. 5:80-5.10, provides prepayment regulation, HMFA’s N.J.A.C. by “[prepayment Agency the loan made the that approval agency.” prohibited prior the written of the without challenge regulation Although plaintiffs incidentally this principal by the HMFA their contention is unauthorized right that conflicts with the mortgages- by plaintiffs expressly by conferred executed project argue Plaintiffs and HMFA to secure the loans. express that contradicts an adopt HMFA cannot recognizes plaintiffs’ right prior agreement by the prepay mortgages. their to rely specifically following excerpt on the
Plaintiffs mortgages: conforming paragraph 6 of Mortgagor to shall not make advance payment prior That any principal Mortgagee for the the date on which all of the Bonds issued by purpose Mortgage With obtaining Loan are redeemable. funds to make this with which payment permitted thereafter, respect principal so advance (i) aggregate Mortgagor an to the shall amount equal principal pay (as Obligations Mortgagor’s Mortgage Loan determined of the pursu- amount treatment afforded the HFA to such with the by would "be treated consistently proceeding the Office of Administrative projects." before other In a related seeking Main is enforcement A-11-86T7, No. Lower Law, aspect Docket contending agreement, has a similar the HFA permitted of the ownership. convert to cooperative Resolution) (ii) remaining Mortgagor’s Housing ant to the Bond unpaid, Resolution) (as Obligations Bond Fund Finance determined to the pursuant (iii) Mortgagee remaining on all of the the interest accrue Bonds unpaid, making Mortgagee of such advance be redeemed by upon principal (iv) Mortgagor, to the call date thereof not next payment previously paid by (v) call if on the Bonds so to be the cost redeemed, any, premium, effecting Mortgagee of the Bonds so to be redemption expenses Bond less the amount of monies available under the redeemed, provisions of the Bonds so to be redeemed, Resolution the redemption application * * added.) Mortgagee (Emphasis *. determined by paragraph six of their Main and Union contend that Lower mortgagors only respective mortgages bars Relying are HMFA. underlying until the bonds redeemable *7 phrase, respect any principal payment to on the advance “[w]ith thereafter,” permitted mortgagors the plaintiffs so assert that any prepayments at unconditionally “permitted” to make are redemption. the subject to Because time after the bonds are 1982, 1, redemption after resolution authorizes November bond 1983, 1, maturing plaintiffs of on or after November all bonds at time mortgages authorizing prepayment construe the as 1, after November of Appellate rejected plaintiffs’ construction Division Acknowledging conforming mortgages. six the
paragraph of statutory right or mortgagors had no “common law that the loans,” court N.J.Super. at the mortgage the prepay six in context of the paragraph of the provisions the considered the plaintiffs the HFA when conform- relationship and ing mortgage executed: was the "so conclude that these we mind, phrase With principles interpretative conforming mortgages was intended to permit in the thereafter”
permitted the of the finance bonds permitted by after only redeemability prepayment regulatory agree- mortgages mortgagee, from the and HMFA. What is clear agency lending signed funds to out was carry ments by plaintiffs financing of for the construction private industry public purpose: provide mortgage housing. Plaintiffs rental accepted affordable middle-income enjoy and a of interest rates the benefits low for that proceeds purpose regulatory agreed control mortgage turn, term plaintiffs of 50 years. recognize over agency. control All units parties management charges project rental tenants, selection prospective regulatory mortgages, contracts by since with the life co-extensive mortgages. satisfaction of the upon their terms very expire Considering of the loans and the attendant benefits purpose enjoyed intending clause must be by plaintiffs, prepayment interpreted agency mortgages in the unfettered control over when and how the can repose mortgagors be satisfied after the bonds become redeemable. could Otherwise, the benefits of the HMFA terms thereafter at will reap prepay escaping regulatory once the finance bonds become con- redeemable, thereby flight trol. To allow would invite from the low and middle-income prepayment frustrating thus market, of the HMFA scheme. very purpose statutory removing Plaintiffs alone would have the from the affordable capacity housing mortgages. market 528 units of the We cannot upon prepayment building conceive that the intended to foster and maintain affordable parties housing for the the finance bonds remain unredeemable. only period Rather, keeping legislative goals is in with the to conclude that the intended to parties housing mortgages. affordable for the life of the We are therefore provide language satisfied that the “so thereafter” was intended to maintain permitted HMFA control over after of the finance bonds. [Id. redeemability at 271-72.] fully Appellate
We are in accord with the Division’s reasoning concerning proper and conclusion construction of paragraph six mortgage. additionally We would observe paragraph mortgage may to the extent six be read any prepayment, to authorize must include components five components that are identical to the of an payment specified advance corresponding provision in the bond resolution: (i) Mortgagor’s Mortgage Obligations amount of the Loan principal remain- (ii) ing Mortgagor’s Housing Obligations remaining Finance Fund unpaid, (iii) making the interest to accrue all on Bonds to be redeemed unpaid, upon Mortgage of such Advance Amortization to the next call date thereof *8 Payment (iv) Mortgagor, not the call on the Bonds so to previously paid by premium (v) effecting and redeemed,
be the costs and expenses * * of the Bonds so to be redeemed *. redemption Significantly, components these of an authorized mortgagor appear to have been included in the expressly purpose meeting requirements for the HMFA’s redemption, the event of a under bond the bond resolu- Thus, entirely Agency’s tion is a matter within the discretion. very definition of an authorized under mortgage bespeaks necessity approval by of advance agency, redemption neither a without which bond nor a mort- gage prepayment permissible.
235 inconsistency find chal Accordingly, we no lenged regulation forbidding prepayment the HMFA’s without underlying mortgages. approval and the terms of Never theless, find the invalid in view of its failure to we guide agency criteria or specify suggest or standards to grant approval in the exercise of its discretion to or withhold request prepay agency-financed mortgage a borrower’s an loan. enabling legislation subject pre is silent
HMFA’s on the concerning payment. Although we have no doubt issue, power by rulemaking to act on the it is now a settled agencies, particularly principle that administrative where the silent, underlying statute is should “articulate the standards discretionary principles govern their decisions Dep’t possible.” Jersey much detail as v. New Crema of Envtl. Protection, 286, (1983) (quoting 301 Environmental 94 N.J. 584, Fund, Ruckelshaus, (D.C.Cir. 439 F. 2d 598 Inc. v. Defense 1971)). principle at issue is no less than a matter of due process: “ can to structure means that administrators must do what ‘[D]ue process they through safeguards, standards, and confine their princi- discretionary powers * * * balancing and rules.’ This no but
ples principle employs approach simply holds that due some both substantive standards, procedur- process requires agency v. New Envtl. discretion.” [Crema Jersey Dep’t of control al, Springs, Inc. v. (quoting 94 N.J. at 301 Historic Green Protection, supra, Bergland, (E.D.Va.1980)).] 839, F.Supp. on several occasions invalidated the actions of We have agencies significant there failure to administrative when was regulatory provide statutory either or standards would agency discharging public guide inform the Department function. Envtl. Protection v. authorized See 425, (1986); Stavola, Department Labor v. 103 N.J. 436-38 (1985); Co., v. New 12-18 Crema Titan Constr. N.J. Protection, 286. We do supra, 94 N.J. Jersey Dep’t of Envtl. prejudice anticipate that invalidation of this will not because, regulatory Appellate as the Divi- Agency’s efforts *9 236 statutory recognized, right
sion there is no or common-law prepay mortgages.3 N.J.Super, these 219 at 270. role in of
Our traditional the review administrative inclination, highly strong is circumscribed. Our based on the principle government coordinate branches of should not responsibilities, agency encroach on each other’s defer to legislative action grant power. consistent with of Mastrangelo, Department Protection, A.A. Inc. v. 90 of Envtl. 666, (1982); Jersey Hearing N.J. New Guild Aid Dis pensers Long, (1978). v. N.J. But deference does require judiciary not abdication its function to assure agency rulemaking conforms with basic tenets of due process, provides guide regulator standards both Thus, regulated. we invalidate 5:80-5.10 in N.J.A.C. view standards, of adequate its omission and we leave to the agency reformulating the task of in a manner principles expressed opinion. consistent with the in this
III. complex 5:80-5.8, A posed by more issue is N.J.A.C. provides part that if an project HMFA-financed is sold and underlying mortgage prepaid, any profits exceeding an eight-percent return on the be seller’s must remitted to agency as an fee approval additional for of the sale. Ironically, regulation purports to limit when an agency-financed project, by virtue the under lying mortgage, is sold free and clear of the restric 5:80-5, Summary Agency’s 3We also observe that the of Rule which deals generally ownership housing projects, with the transfer of in HMFA indicates that the Rule "a assumes continuation of the status of the after it is Reg. Accordingly, likely appears N.J. transferred." 16 favorably disposed requests mortgage prepayments would be that were regulated housing project. conditioned on continuation of the status of the illustrative, exhaustive, might appropriately This is but not of the criteria that regulation designed provide be included in a fair notice factors that guide discretionary authority prepayment requests. will HMFA's over *10 tions; on when an regulation imposes no limit but the prepayment agen of the agency-financed project is sold without subject agency’s all the restric cy’s mortgage and remains to .4 regulations and tions it is the perplexing The when examined also provi- statutory provisions and the underlying of the context agreement agency-financed hous- regulatory of sions the Act sign. to The HMFA itself ing sponsors required are profits, operation or specific limit on either from imposes no However, by Agency. the projects of financed N.J.S.A. sale 55:14K-7(a)(6) projects the financed provides sponsors agreements Agency limiting HMFA must enter into with the by return, operations rate as well sale sponsor the to a from by by from to time project, the to be fixed HMFA time prevailing of return on regulation, taking into account rates investments, project, associated with the other similar risks agreements provides that between factors. The statute also predecessors shall sponsors and the continue be is as follows: 4The full text of N.J.A.C. 5:80-5.8 equity Return on 5.80-5.8 (a) equity calculating equity on base allowable return shall used development by Agency the total cost of be determined the function of price purchase price purchase project the less unless rather than the purchase price development be cost in which case will than the total by Agency equity base. used to determine Agency's (b) conjunction permitted prepayments of the mort- with gage, mortgagor on its invest- be limited to a cumulative return shall any per percent return from This limit shall include ment of 8 annum. project. project operations or sale of on thereon, any disposition project Upon or interest sale or other of the paid percent any be seller in excess of 8 shall amounts realized Agency approving fee for the transfer. as an additional regard to do not involve 2. With transfers which approve any recognize agency’s right agency’s mortgage which preserve the low moderate income nature and/or rules, regulations comply project fully all and which only operations apply policies, from limit to revenues received shall apply money earned on on such limit return shall no any ownership other interests. or sale sale subject prior imposed by restrictions on rate of return law, regulations. unless modified HMFA’s 7(a)(6)
The reference in section of the HMFA Act to “restric- imposed by prior implicates tions on rate of return law” provisions of the HFA controlling which was the law when regulatory agreements plaintiffs and HFA were portion executed. The provided relevant of the HFA Act subject agreement agency loan shall be to an between the [t]he limiting housing housing said and its qualified sponsor qualified sponsor, per to a return annum of its or stockholders, 8% *11 in principals investment of housing project qualified agency. No assisted with a loan from the any housing sponsor which is of the law under which it permitted by provisions organized is or to earn a return on its nor incorporated investment, any any housing or stockholders of such shall at time principals qualified sponsor, earn, accept greater per or receive a return than annum its invest- 8% of housing project ment agency, in assisted with a loan from the whether any upon completion project, construction or or rehabilitation of such of upon operation sale, upon assignment or thereof, or lease of such project to other association or any association person, corporation. Any person, guilty violating or who shall be found of of section corporation provisions 9(a)(6) subject of this act shall be a to a fine of not less disorderly person 9(a)(6) (repealed) (empha- than or more than c $2,500.00. [L.1967, § $500.00 added).] sis Thus, appears impose the HFA Act to an annual limit an of eight-percent sponsors return on to agency-financed of projects, generated whether the return operations from or project. sale of the specific respect The statute is not with to application projects initially to by financed the HFA but repaid. whose loans have been provisions The of the HFA Act that restrict return on invest- ment agency-financed projects from sale of appear to conflict provisions with of the Limited Dividend 55:16-1 N.J.S.A. -22, to the statute Plaza under which Lower Main and Union organized. were provides: N.J.S.A. 55:16-5 Every housing corporation stockholder of a shall be the sub- deemed, by agreed that he to or the of stock to shall at no therein, have scription receipt repayment any time receive from the in his investment sums corporation of plus in excess value the investment cumulative dividends at a of face of * * per rate not to exceed annum 8% *. the dissolution of such Upon any housing any surplus housing or association corporation excess of such paid Jersey; be shall to the State of New amounts provided, however, agreements enter where tax into may any municipality exemp- authority 18 of to or to section the act with tion provided pursuant respect any housing projects such or for the to and of association distribution corporation of said the State surplus municipality. apportionment added) omitted.) (footnote (Emphasis However, surplus appreci- N.J.S.A. 55:16-5.1 defines exclude by on of assets a ation realized the sale owned limited dividend housing corporation: As used in 5 of the act this act is a section [N.J.S.A. 55:16-5] of or and as used in statute to said
supplement, any amendatory supplementary deemed, any “surplus"shall not be the term to include increase in assets act, housing housing organized association of limited-dividend or corporation any act accordance with the of said or reason thereto, provisions any supplement realized mortgage, reduction of amortization or of or similar payments corporation disposition any housing housing the sale or assets or surplus any association the extent such can be attributed increase accruing value tangible during market real or any personalty period housing housing assets were and held or such owned such by any corporation added.) (Emphasis association. “surplus” exclusion from the definition This of sale Law, Limited resulted from a 1967 amendment to the Dividend L.1967, sponsor’s explained “the c. statement investing type housing more changes would make by enabling sponsor retain increase in attractive changes general in the real estate market.” market value due to *12 364, L.1967, No. c. Senate exempt-
Facially, provisions the of the Dividend Limited Law profits corporate ing “surplus” from from sale of assets provisions limiting HFA appear to contradict the of the Act agency-financed from sale of return on investment realized Although Limited housing projects. the amendment adopted subsequent Law to the enactment of Dividend was Act, L.1967, Housing Agency Finance c. we note 30(a) provides any if of the HFA Act other statute section provisions provisions with of the HFA “the conflicts other provisions act shall be such enforced regulations rules thereunder shall be adopted and and acts added.) (Emphasis and no force effect.” apparent statutory We need not resolve this conflict to decide However, significance matter before us. view of the regulatory agreements HMFA accorded Act to between concerning the HFA and its borrowers restrictions on rate of return, 55:14K-7a(6), we focus our attention on the N.J.S.A. provisions regulatory agreements plaintiffs of the and between agreements regulatory prohibit the HFA. Both sale of the mortgage housing projects approval agency. without of the 6(e) Paragraph regulatory agreements of the HFA and provides both Lower Main and Union follows: 6. The Owner shall not without written prior approval (e) or receive and distribution of Make, retain, assets or income of any any Project following kind of the cash” and in the any except “surplus except conditions: (1) All distributions shall be made as of and after the end of the annual only fiscal all such distributions one law; period, only permitted by per eight equity shall be limited to centum on the investment fiscal year added.) right (Emphasis to such distributions shall be cumulative. regulatory agreements provide Both they also “shall be operative mortgage until the is satisfied.”
Thus, literally, regulatory agreements read the HFA with plaintiffs, enforceability preserved by of which is enabling legislation, HMFA prohibit projects sale of the without Agency approval prohibit and also annual distributions exceed- ing eight percent of the owner’s investment. Both terminate, however, mortgage paid. restrictions when the contrast, us, 5:80-5.8, before limits N.J.A.C. agency-financed projects on sale of only the event of mortgage, and not when the face, remains in appears force. On its to conflict regulatory agreements plaintiffs, both with HFA’s with enabling legislation, recogni- HMFA’s which accords regulatory agreements provisions tion to such and to the prior agreements purport implement. law those *13 by a understanding regulation of is illuminated this Our 30, 1983, from Richard H. God- dated November memorandum HFA, Jr., Agen- Policy Development of frey. Director to Godfrey memorandum cy’s syndication subcommittee.5 concerning Agency- transfers proposed refers to arising acknowledges “confusion” projects, and financed Act Limited conflicting of the HFA provisions from profits Agency- from concerning whether sale Law Dividend The memoran- projects are restricted or unrestricted. financed or past the HFA nor federal other *14 legislation,” and advantageous “encourages because it the * * capital projects Godfrey infusion of into the mem- justifies orandum the continued limitation on when sale project conjunction of a occurs in with mortgage Agency’s providing “an alternative restriction in the our prohibition event that absolute on is defeat- ed, fact, suggests, over-op- the courts.” In the memorandum timistically appear, regulation would that the “alternative * * * prevent may challenges prohibition.” to the absolute record, appear On this the Godfrey memorandum would to be highly legislative a history concerning reliable source of the Agency’s purpose in adopting N.J.A. C. The State 5:80-5.8. has not that the contended memorandum is inaccurate mate- respect, regulation adopted entirely rial consistent the Godfrey recommendations contained in the memoran- regula- dum. Because we are otherwise unable to reconcile the enabling legislation Act, tion with the or with the HFA we find regulation unavoidable the conclusion that under review adopted many was for suggested Godfrey of the reasons in the memorandum. so, regulation
Whether or not that cannot be Apart Godfrey memorandum, regula sustained. from the adopts principle, tion by unauthorized the HMFA that only Agency-financed sales projects remaining subject to the Agency’s mortgage are free from equi limitation on return on ty. by Godfrey memorandum, Clarified regulation appears designed discourage prepayment the Agency’s mortgages, Agency’s in the prohibition prepay event the on invalidated, by sponsor ment is requiring prepays a and sells the Agency financed to forfeit to the portion profit eight-percent that exceeds an return any specific equity Act 6The HMFA eliminates limitations on on return from Agency-financed projects, Agency impose but such authorizes limitations 55:14K-7(a)(6). regulation. N.J.S.A. contrast, equity. asserts purpose on regulation regulate Agency- is to on return do Reg. Assuming as we projects. financed 16 N.J. Godfrey for the those in the the reasons are stated memorandum, Agen- a misuse constitutes rulemaking power, purpose the actual cy of its because *15 adoption portion regulation least of is different from of at a Agency. stated purpose objective
If is to restrict HMFA’s statutory responsibilities, it should deal order to achieve its by rulemaking, establishing and criteria stan- spon- agency housing-project both its guide dards to and not, appar- The as it at 236-237. should Supra sors. here, lawfully ently attempted inability do its has assume indirectly then prepayment, purport and achieve restrict accomplish lawfully. it cannot Judicial resolu- what it believes challenges asserted a will even- tion of to such Agency’s power to restrict tually clarify scope of mortgages. its prepayment of above, reviewing agency judiciary’s
As role stated at 236. But rulemaking Supra is a limited one. however be, may plainly limits judicial function circumscribed rulemaking duty agency aside unautho- encompass the to set enabling legislation. agency’s with the rized or inconsistent 25, Auth., 38-39 North Mun. 105 N.J. Bergen Parisi v. Port Comm’rs, (1987); Law Jersey v. New Election Common Cause 231, (1977); Corp. Bd. Cole Nat’l v. State 74 N.J. 227, (1970). Where, here, Examiners, 57 N.J. 231-33 rulemaking power agency has misused its appears that the also pur- regulate activity—mortgage prepayments—while one housing agency-financed porting regulate return on very process of duty compelling. and The projects, our clear public contemplates public and disclosure rulemaking notice 52:14B-4; see regulatory objectives. Bal- agency’s an N.J.S.A. Comm’n, 85 N.J. ly Mfg. Corp. Jersey v. Casino Control New Licensee, 325, Super. (1981); 224 N.J. Casino Matter of (App.Div.1988). 324-25 an When administrative disguises aspect an regulatory true purpose, it proper cannot be sustained as a exercise of the rulemaking power. Accordingly, we invalidate N.J.A.C. 5:80-5.8.
IV. Finally, fully we are Appellate accord with the Divi sion’s imposed by conclusion the fees N.J.A. C. 5:80-5.9 on agency-financed sale of an “patently are excessive N.J.Super. thus invalid.” 219 at Appellate 278. As the Division observed: slightest suggestion There is not even the the fees are related reasonably monitoring project. to the costs of the sale of a financed As we understand the regulation, cash sale $10,000,000 without federal would subsidy require (15 of fees to HMFA of 1.5 million dollars
payment of the cash percent purchase (one-half price) price). and $50,000 of one percent This purchase aggregate fee is exorbitant has no rational to the clearly relationship agency administering agency cost project. the sale of an financed [7d] judgment Appellate part Division is affirmed in part. reversed *16 O’HERN, J., concurring part, in dissenting part. in exception, With but one I concur in the opinion well-reasoned majority. Adhering expressed to views I in dissent in Study Group State, Woodland Private v. 109 N.J. 76 (1987), I join portion do not of Part II of majority opinion require agency that would regulations prior to enact exercising governmental power its permit prepayment mortgage. say Would we judgment by exercise of board directors of a commercial lender respect of a arbitrary would be unless it has regulations written in place judgment? before exercises its Why government must always have in paper place before it Smith, acts? Twilight See of Administra- “Judicialization: Law,” (administrative tive process Duke L.J. has become so sight original formalized that it has lost goal of effectuating governmental policy).
O’HERN, J., concurring part dissenting part. part and reversal pari—Justices For affirmance POLLOCK, CLIFFORD, HANDLER, GARIBALDI STEIN—5.
Opposed—None. notes on A Bonds matured ing Lower Main and Union. The Series year set forth in the principal each amounts November of maturing prior to November 1983were resolution. Bonds bond HFA; maturing on and after Novem- bonds not redeemable 1, 1982, 1, 1983, at the after November ber were redeemable option. Concurrently the issuance the Series bonds, “conform- Main and Union executed so-called A Lower mortgages consistency between the mortgages to insure ing” provisions of the resolution. bond May 1984. 16 by HMFA N.J. proposed 5:80-5 was Rule adopted by proposed in the form Reg. 951. It was 6, 1984, August 1984. 16 N.J. and became effective in June 1985, proceeding July plaintiffs instituted 2091. In Reg. regula- 2:2-3(a)(2), challenging three pursuant to Rule above, Appel- 5:80-5.2 As noted included N.J.A. tions C. HMFA, 1984, payments accumulat- Main fell behind in loan 2In Lower result, $1,994,615. point arrearages As a HMFA ing one amounted to that at action, subsequently in return which it withdrew a instituted foreclosure refinancing pursuant arrearages pay commitment Lower Main’s only pay provided Main was to plan. that Lower The terms of the settlement year arrearages monthly at until the installments interest on the payable due in full. The settlement was time the entire balance permitted agency-financed projects provided were agreement that if other also cooperative ownership, Lower Main’s or to condominium to convert
Notes
notes neither dum that syndication of agencies had realized on considered state limi- return-on-equity subject to the agency-financed projects suggests the HFA should also memorandum tations. The free limitations permit Agency-financed projects sales of encourage investment in such equity and attract on return on problem addition, addresses projects. the memorandum Agen- expressing concern that mortgage prepayments, ap- mortgages without policy prohibiting prepayment cy’s in court. proval successfully challenged be might recommen- with the Accordingly, the memorandum concludes regulation that would eliminate Agency adopt a dation equity on on for sales “maintain[ restrictions return ] * * “re- sales proposing such Agency’s resyndications have syndication^] treatment all ceive acknowledges Godfrey candidly memorandum past.” The proposed inconsistency apparent Agency should may argued that the Act: “It be and the HFA on policy respect to return issue a not Nevertheless, the God- own to contradict its statute.” appears regulation as “needed justifies proposed frey memorandum merger adoption of the regulatory fill the void created 30, 1983, Godfrey, Jr. was Richard H. memorandum of 5The November filing April with the Clerk matter to the record added Comprising Appellate Supplemental of Items a Second Statement Division Appeal. the Record on