Bater v. Cleaver, 53.

• Decision Date: 24 January 1935
• Docket Number: No. 53.,53.
• Citation: 176 A. 889
• Parties: BATER v. CLEAVER et al.
• Court: New Jersey Supreme Court

176 A. 889

BATER

v. CLEAVER et al.

No. 53.

Court of Errors and Appeals of New Jersey.

Jan. 24, 1935.

Appeal from Supreme Court.

Action by William Bater, Jr., against Elizabeth C. Cleaver and others. From a judgment for plaintiff, the defendant Atlantic Guaranty & Title Insurance Company appeals.

Judgment reversed, and a venire de novo awarded.

See, also, 110 N. J. Law, 259, 164 A. 442.

Thompson & Hanstein, of Atlantic City, for appellant.

William Charlton, of Atlantic City, for respondent.

HEHER, Justice.

The judgment under attack was entered on a directed verdict for plaintiff. The complaint is in two counts. The gravamen of the first is that a sum of money, $2,131.50, escrowed with appellant, Atlantic Guaranty & Title Insurance Company, became plaintiff's property by reason of the fulfillment of the stipulated condition. The gist of the second is that the check of plaintiffs assignor, in the mentioned sum, payable to appellant, was "deposited" with the latter, upon condition that it was not to be "used" until appellant executed an accompanying written stipulation, outlining the terms and conditions of the deposit; that although appellant refused to assent to the terms of the agreement, and for that reason withheld execution, it cashed the check and still retains the proceeds thereof, although no agreement for the disposition of the fund has been made.

These are the circumstances: On July 22, 1930, one Joseph S. Byrne, acting for and on behalf of the Atlantic Hotels Corporation, agreed, in writing, to purchase from Morris Elfman a tract of land, situate in the city of Atlantic City, which was incumbered by a mortgage in the sum of $10,000, made to defendant Cleaver, and assigned by her to defendant Margate Trust Company as collateral security for unpaid loans. The mortgage was then in default, and foreclosure proceedings were Imminent. There were tax arrears amounting to the first mentioned sum. The vendee was anxious to avert foreclosure, and he asked for six months' extension of time for the payment of the mortgage from the date of the consummation of the sale. The contract of sale provided for the delivery of the deed and final settlement on October 1, 1930, or on November 15th following, in event of the mortgage "being extended to" the date last mentioned, or any period beyond that date. There was evidence tending to establish that these negotiations eventuated in an agreement to grant the requested extension of time, and, in consideration thereof, to deposit the money in question upon the terms and conditions set forth in the paper which accompanied the deposit and which the depositary refused to execute, viz., that the depositary would, on December 1, 1930, "repay the same to Byrne, if on said day the abovementioned mortgage has been satisfied or all taxes, now a lien on the above mentioned premises, have been paid"; that "if said mortgage has not been satisfied or said taxes not paid" the depositary "is to continue to hold said money until the abovementioned mortgage has been fully satisfied, and if the above mentioned mortgage is foreclosed and the mortgagee does not receive the full amount of the indebtedness, then and in that event so much of the said $2131.50 as is necessary to fully satisfy said indebtedness shall be paid to the abovementioned mortgagee," and "the balance, if any, to be returned to the said Byrne, or his assigns." Counsel for the mortgagee, called as a witness by appellant, testified the understanding was that the deposit in question would be "paid to us in the event we have to foreclose and we buy the property in at the foreclosure sale and do not realize the money coming to us." The title officer of appellant, so the witness said, participated in the conference that resulted in this agreement. The deposit was made on September 30, 1930. As pointed out, it was the money equivalent of the taxes then in arrears.

Now, this is what occurred: Byrne and his principal failed to consummate the sale. The taxes in arrears were not paid on December 1st, or thereafter, and the mortgage remaining unsatisfied, the mortgagee, Cleaver, on January 5, 1931, instituted foreclosure proceedings, which eventuated in the sale of the mortgaged lands to the Margate Trust Company, on May 28, 1931, for $100. On June 10th following, the sale was confirmed. On that day, Cleaver and the trust company contracted for the sale of the lands to another for $12,000; $2,000 in cash, and the balance to be secured by a purchase-money mortgage. The amount due on the decree, on the day of sale, was $11,000.01, and there were additional fees due the sheriff of $66.72, making the total amount $11,066.73. The unpaid taxes, then totaling $3,366.75, were paid by the mortgagee purchaser. The net amount realized by the latter from the subsequent sale, including the mentioned purchase-money mortgage, was $11,633. Immediately after the sheriffs sale, the mortgagee purchaser demanded and received from appellant the deposit in question, which, with interest, amounted to $2,447.28. There was no deficiency suit. The mortgagee, on June 10, 1931, accepted $300 from Elfman, $100 in cash, and a note for $200, in full satisfaction of the obligation evidenced by the bond. It will be observed that the ultimate net loss to the mortgagee was $53.20.

Appellant contended at the trial that "this money was payable immediately after the foreclosure sale, if the sale did not bring enough to satisfy Mrs. Cleaver," without regard to the mortgagee's ability to respond for the deficiency. Respondent, on the other hand, maintained (1) that there was no contract between the parties; and (2) that, if the so-called escrow agreement accurately states the contract, the depositor of the fund was responsible, to the extent of the deposit, for the payment of the obligation evidenced by the bond, and secured by the mortgage, "in the event it was not collected from Mr. Elfman," and this latter obligation having been discharged by the release, the depositor's assignee was entitled to a return of the fund. Respondent's counsel stated this issue thus: "I say the release is the important thing, and not his (the obligor's) responsibility."

The trial judge determined, as a matter of law, that while the draft of agreement which accompanied the deposit of the check, in form a receipt, was not signed by appellant, it was "expressive of the terms and conditions upon which the maker of the check delivered it to the defendant, and obviously, under the evidence, the only terms upon which the defendant was entitled to retain the check, and thereafter dispose of its proceeds," and "must be taken as a statement of the terms and conditions of the delivery of the check to this defendant, or that there were no terms and conditions agreed upon between the maker of the check and the title company with respect to the retention of the check by the title company, and the disposal of its proceeds." He concluded that, in the latter event, the depositary was "simply a holder of the check and of the proceeds thereof for the use of the plaintiff"; that, in the former, "the mortgagee, in legal effect, chose to accept the mortgaged premises, to retain the premises to the end that she might convey them, and chose also to release, as a part of this transaction, the obligor from any liability upon the bond, and had thus, in legal effect, acknowledged satisfaction of the mortgage indebtedness"; that the "mortgagee, by her acts, discharged the primary debtor from the very mortgage indebtedness to which the proceeds of this cheek were to be applied, if necessary"; that "the receipt itself recognizes a primary obligation, evidenced by the bond and mortgage"; that the sum in question "was only a secondary fund to be resorted to if necessary"; and that the "extinguishment of the primary obligation, namely, decision on the part of the mortgagee to retain the property under the foreclosure sale and convey it, and her release of the mortgage indebtedness was, in legal effect, a full satisfaction of the mortgage."

In so ruling the trial judge fell into error. First, the existence of a contract vel non was, under the evidence, a question of fact to be determined by the jury. Appellant's title officer, in acknowledging by letter receipt of the check and the memorandum of terms, advised plaintiff's assignor that he did "not believe that the agreement properly covers the...