Bloomfield Heights Inc. v. Holland Assoc.s Inc.

• Decision Date: 17 January 1944
• Citation: 35 A.2d 622
• Parties: BLOOMFIELD HEIGHTS, Inc., v. HOLLAND ASSOCIATES, Inc., et al.
• Court: New Jersey Circuit Court

35 A.2d 622

BLOOMFIELD HEIGHTS, Inc.,

v.HOLLAND ASSOCIATES, Inc., et al.

Circuit Court of New Jersey, Essex County.

Jan. 17, 1944.

Action by Bloomfield Heights, Incorporated, against Holland Associates, Incorporated, and Julian A. Cohen to recover on a bond secured by mortgage. On plaintiff's motion to strike out the answers of defendants.

Motion granted and summary judgment directed against the two defendants.

Harry Schaffer, of Newark, for plaintiff.

Milton M. Unger, of Newark, for defendants.

SMITH, Judge.

This action is based upon a bond made by the two defendants, Holland Associates, Inc., and Julian A. Cohen. A mortgage was given by the Holland Associates, Inc., to Harry H. Koehler, and the bond was secured by a mortgage made by the defendant Holland Associates, Inc., to said Koehler. The bond and mortgage were dated April 8, 1931 and were conditioned to pay the sum of $23,971.50 with interest on March 15, 1934. The bond and mortgage, by mesne assignments, came into possession of the plaintiff, Bloomfield Heights, Inc. In 1934 the tax collector of the Town of Bloomfield sold the mortgaged premises for unpaid taxes due to the Town of Bloomfield, which was followed by a foreclosure of the tax certificate. The defendant Holland Associates, Inc., with the mortgagee, were defendants in that proceeding; the defendant Cohen was not.

The result of the foreclosure was a barring of the right of redemption. No suit was instituted by the plaintiff to foreclose its mortgage, but after the decree of foreclosure based on the tax certificate was entered, this suit was instituted against these defendants to recover on the bond.

The facts are not in dispute, and the principal question presented on this motion to strike the answers is whether the act concerning proceedings on bonds and mortgage given for the same indebtedness and the foreclosure and sale of mortgage premises thereunder, N.J.S.A. 2:65-1 etc., hereinafter referred to as the Mortgage Act, governs the plaintiff's rights against the defendants.

It is contended by the plaintiff that the lien of the mortgage upon the premises described therein has been wiped out and that therefore the Mortgage Act referred to does not apply to the right of the plaintiff against the defendants on the bond; and it is the defendants' contention that the act does apply and that therefore, there being no foreclosure of the mortgage, no action may be instituted on the bond.

It is perfectly evident that if the act in question does apply, the answer sets up a good defense. If the statute does not apply, then the plaintiff is in the position of the holder of a bond under the common law as it existed before the passage of the 1880 Mortgage Act. The 1880 act with its supplements and amendments as contained in the revised statute hereinafter referred to is, of course, in derogation of the common law and should be strictly construed. Callan v. Bodine, 81 N.J.L. 240, 79 A. 1057; Wolf v. Schlichting, 111 N.J.Eq. 619, 161 A. 840.

There is a line of cases in this state which hold that this act does not apply to a situation where, although the indebtedness on the bond was secured by a mortgage the mortgage was not a lien upon the land therein described at the time of the commencement of the suit on the bond, the bond still being unpaid. Waters v. Dye, Ocean Circuit 1884, 7 N.J.L.J. 335; Wheeler v. Ellis, Sup.Ct. 1893, 56 N.J.L. 28, 27 A. 911; Seigman v. Streeter, Sup.Ct. 1899, 64 N.J.L. 169, 44 A. 888; Franklin L. & B. Ass'n v. Richman, Sup.Ct. 1900, 65 N.J.L. 526, 47 A. 426; Pruden v. Savage, Sup.Ct. 1904, 70 N.J.L. 22, 56 A. 690; Bower v. Bower, Err. & App. 1909, 78 N.J.L. 387, 74 A. 522; Schmidt v. Frey, Err. & App. 1914, 86 N.J.L. 215, 90 A. 1123; Echickson v. Zalenski, Err. & App. 1930, 106 N.J.L. 508, 150 A. 335; Sivade v. Smith, Err. & App. 1929, 104 N.J.Eq. 528, 146 A. 364; Pink v. Deering, Sup.Ct. 1939, 122 N.J.L. 277, 4 A.2d 790.

In Wheeler v. Ellis, supra, the bond on which the action was based was given to secure a mortgage cut off by the foreclosure on a prior mortgage. The court held that the requirement of the Mortgage Act to institute suit on the bond within six months after the sale of the mortgaged premises, did not apply, but the provision referred to applied only to the bond secured by the mortgage under the foreclosure of the prior mortgage. Justice Dixon in his opinion did not base his determination upon a narrow construction of the wording of the act by holding that the suit on the bond was not barred because there had been no sale in proceedings instituted by the plaintiff for the purpose of foreclosing the accompanying mortgage, but said:

‘But a safer guide to the proper construction of this law will be found by looking at the effect of maintaining the one and the other of these contentions.

‘If we adopt the defendant's view, then, under section 3 of the act, the conclusive character of a sale in foreclosure of a prior mortgage will not be ascertained until every subsequent mortgage necessarily made a party to the foreclosure proceedings, has had six months...