Fidelity Union Tr. v. Multiple Realty

26 A.2d 155, 131 N.J. Eq. 527, 1942 N.J. Ch. LEXIS 75, 30 Backes 527
CourtNew Jersey Court of Chancery
DecidedApril 30, 1942
DocketDocket 122/267
StatusPublished
Cited by5 cases

This text of 26 A.2d 155 (Fidelity Union Tr. v. Multiple Realty) is published on Counsel Stack Legal Research, covering New Jersey Court of Chancery primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Fidelity Union Tr. v. Multiple Realty, 26 A.2d 155, 131 N.J. Eq. 527, 1942 N.J. Ch. LEXIS 75, 30 Backes 527 (N.J. Ct. App. 1942).

Opinion

By this bill the complainant seeks a money decree against the defendants for a deficiency arising out of a suit to foreclose a mortgage executed by the defendant Multiple Realty and Construction Company on July 1st, 1929. The bond which said mortgage was given to secure was executed by the defendant Multiple Realty and Construction Company, George Grossman and Irving Rubin. The defendant Neville N. Russell is a grantee of the mortgaged premises who expressly assumed and agreed to pay said mortgage. Only the defendant Russell has answered the bill of complaint. The defendant Grossman was not served with process and a decree pro confesso has been entered against the defendants Multiple Realty and Construction Company and Irving Rubin. The foreclosure bill was filed on August 23d 1937, and a final decree entered therein on January 3d 1938, in the sum of $41,787.46 with interest from December 15th, 1937, and taxed costs of $477.25. At the sheriff's sale held on March 8th, 1938, the mortgaged premises were purchased by the complainant for the sum of $100, and the sale was duly confirmed on March 19th, 1938. Notice of this suit was filed in the office of the register of Essex County on May 31st, 1938, and the bill of *Page 529 complaint was filed on June 7th, 1938. Subpoena was issued under date of June 8th, 1938. The amount of the deficiency claimed is $42,845.12. The answer of the defendant Russell asserts "no knowledge or information sufficient to form a belief" as to the principal statements of the bill of complaint, and also asserts a right to a credit of the fair value of the mortgaged premises as of the date of the sheriff's sale pursuant to the doctrine ofFederal Title and Mortgage Guaranty Co. v. Lowenstein,113 N.J. Eq. 200; Young v. Weber, 117 N.J. Eq. 242, and kindred cases. The answer also alleges that at the time of the sheriff's sale the fair market value of the mortgaged premises was $45,000; the existence of a general economic depression; the absence of competitive bidding; the inability of this defendant to refinance the mortgage; that the retention of the mortgaged premises and a decree for the deficiency claimed would result in a double satisfaction of the mortgage debt, and other facts bringing this controversy within the purview of the cases cited. This defendant also, by way of counter-claim, alleges that he was unaware of the fact that the deed by which the mortgaged premises were conveyed to him contained a covenant for the assumption of the mortgage indebtedness until June 10th, 1938, when he was served with subpoena in these proceedings; and he seeks the reformation of the deed by deleting therefrom the said assumption clause and covenant. The answer was filed on July 12th, 1938. The matter now comes before the court on a motion to strike paragraphs 1 to 16 of the answer, except paragraph 3, as sham, and paragraphs 17 to 21 as frivolous, and the argument advanced in support of this motion is that the foreclosure decree and order confirming the sale are res adjudicata as to the amount of the deficiency and cannot be collaterally attacked. Affidavits filed in support of the motion fully establish the principal factual allegations of the bill.

This suit is on all fours with Better Plan Building and LoanAssociation v. Holden, 114 N.J. Eq. 537. In that suit the complainant sought a money decree for a deficiency against the original obligor and an assuming grantee after the foreclosure and a sale of the mortgaged premises at a nominal figure of $100. The defenses interposed by the defendants *Page 530 there were similar to those advanced here, and on a motion to strike said defenses Vice-Chancellor Buchanan held that as the complainant was seeking equity it must do equity, and refused to strike the answer. That decision controls the decision here unless it has been overruled. It has been frequently cited in this court with approval, and, so far as my research discloses, has never been expressly criticised or disapproved in any court. However, counsel for complainant claims that it has been impliedly overruled by the decisions of the Court of Errors and Appeals in Fruzynski v. Jablonski, 117 N.J. Eq. 117; Broadman v. Colonial Building-Loan Association, 118 N.J. Eq. 275, andHarvester Building and Loan Association v. Kaufherr, 122 N.J. Eq. 373, and in this court by Meranus v. Lawyers' andHomemakers' Building and Loan Association, 118 N.J. Eq. 586. Counsel for the answering defendant, in opposing the motion to strike, relies upon Better Plan Building and Loan Association v. Holden, supra; Baader v. Mascellino, 113 N.J. Eq. 189; reversed (on question of evidence only), 116 N.J. Eq. 126, and other decisions of this court in which the equitable maxim of "he who seeks equity must do equity" has been applied.

At the outset it should be noted that R.S. 2:65-3 and2:65-5 have no application to this controversy, as the mortgage here involved was executed in July, 1929. However, a review of some of the pertinent statutes might be helpful.

Under the provisions of a supplement to the Chancery Act, approved March 29th, 1866 (Nix. Dig. 119), a mortgagee might, in a suit to foreclose his mortgage, obtain a money decree for a deficiency arising upon the foreclosure sale as well as a decree of foreclosure and sale; but by P.L. 1880 ch. 170 p. 256 ¶ 3, that practice was discontinued and by that act and the amendment thereof in P.L. 1881 ch. 147 p. 185, it was provided that no action for deficiency on the mortgage bond should be maintained until after foreclosure and sale. Those statutes further provided that upon recovery of a judgment for such deficiency "suchrecovery shall open the foreclosure and sale of said premises and the owner of the property at the time of said foreclosure and sale may redeem." (Italics mine.) The act of 1881 merely extended the right to *Page 531 redeem to any person against whom a judgment had been recovered.P.L. 1915 ch. 178 p. 339 contains the same provisions as the 1880 and 1881 acts, but provides further that reasonable expenses for taxes, c., should be added to the amount necessary for redemption. Thus the law stood until the enactment of chapter 82,P.L. 1933 p. 172. Section 2 of that act provided, amongst other things, that the obligor or obligors on said bond may file an answer in the suit disputing the amount of the deficiency claim, in which event both parties might introduce evidence as to the "fair market value" of the mortgaged premises at the time of the foreclosure sale, which fair market value should be determined by the court with or without a jury; and further, that the amount of such fair market value should be credited to the deficiency claim before the entry of judgment. That act also provided that where the parties liable for the deficiency shall have answered disputing the amount of the deficiency as claimed, the right to redeem was terminated and recovery of judgment shall not openthe foreclosure and sale. (Italics mine.) These provisos were adopted by R.S. 1937, 2:65-3-4-5.

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Bluebook (online)
26 A.2d 155, 131 N.J. Eq. 527, 1942 N.J. Ch. LEXIS 75, 30 Backes 527, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fidelity-union-tr-v-multiple-realty-njch-1942.