Crest Sav. and Loan Ass'n v. Mason

• Citation: 581 A.2d 120,243 N.J.Super. 646
• Parties: CREST SAVINGS AND LOAN ASSOCIATION, A corporate body of the State of New Jersey, Plaintiff, v. William W. MASON and Charlotte A. Mason, his wife; Chrysler Leasing Corporation; American National Bank and Trust of New Jersey; Broadway Bank & Trust Company; Leo Lemle; Atlantic City Electric Company; State of New Jersey; Rutgers, the State University and Hackensack Water Company, Defendants.
• Decision Date: 08 February 1990
• Court: New Jersey Superior Court

Page 646

243 N.J.Super. 646

581 A.2d 120

CREST SAVINGS AND LOAN ASSOCIATION, A corporate body of the

State of New Jersey, Plaintiff, v. William W. MASON and Charlotte A. Mason, his wife; Chrysler

Leasing Corporation; American National Bank and Trust of

New Jersey; Broadway Bank & Trust Company; Leo Lemle;

Atlantic City Electric Company; State of New Jersey;

Rutgers, the State University and Hackensack Water Company,

Defendants.

Superior Court of New Jersey, Chancery Division,

Cape May County.

Decided Feb. 8, 1990.

P. Martin Way, III, for plaintiff (Way & Belasco, Wildwood, attorneys).

David Paul Daniels, Camden, for defendants William W. Mason and Charlotte A. Mason.

RIMM, J.T.C. (temporarily assigned).

This matter is before the court on plaintiff's complaint to foreclose a mortgage made by defendants, William W. Mason and Charlotte A. Mason, to bar their equity of redemption to the mortgaged premises, to obtain possession of the premises, and to recover damages and costs. The property in question is known as Block 227, Lots 29.2, 30, 31.1, on the tax map of the City of Wildwood, New Jersey and is commonly known as 221 East Glenwood Avenue.

Plaintiff moved for summary judgment arguing that defendants' answer set forth no genuine issues as to any material fact. Defendants opposed the motion claiming that plaintiff had not given them proper credit for all payments they had made and that plaintiff had incorrectly calculated the amount of principal and interest due under the mortgage note and mortgage.

Partial summary judgment was granted on November 2, 1989. The court held there was no genuine issue of material fact as to the validity or priority of the mortgage being foreclosed or plaintiff's right to foreclose, but there was a genuine issue of material fact concerning the amount due. The court reserved decision on the legal issues relating to plaintiff's right to charge late fees on the monthly payments due after the filing of the complaint and relating to the right of plaintiff to compound interest. Trial was also scheduled on the issues of payments made and credits given.

Compound Interest.

Plaintiff claims N.J.S.A. 17:12B-48(14) gives it authority in this case to compound interest by adding it to the principal sum due. This court does not agree, and plaintiff may not compound interest.

N.J.S.A. 17:12B-48(14) gives a savings and loan association operating pursuant to the Savings and Loan Act (1963) the power to "compute interest upon any direct reduction loan, on designated payment dates and add the same to the unpaid balance of such loan." However, even though N.J.S.A. 17:12B-48(14) gives plaintiff authority to charge compound interest, an agreement between the parties is necessary to do so. In Shadow Lawn Sav. and Loan Ass'n v. Palmarozza, 190 N.J.Super. 314, 463 A.2d 384 (App.Div.1983), defendant defaulted. Shadow Lawn sought to justify charging compound interest on the ground that it was authorized under N.J.S.A. 17:12B-48(14). The court held that the statute merely gives an association the authority to compound interest. In the absence of an express contractual provision for compound interest or an express incorporation of the statutory provision in the contract, interest may not be compounded. There is no such provision nor incorporation in the mortgage before the court.

Late Charges.

Late payment charges, or late charges, are collectable as liquidated damages if there is a provision for them in the mortgage instruments. When there is such a provision, an issue may arise as to whether the late charge constitutes valid liquidated damages or an invalid penalty. If the late charge is compensation to the mortgagee for its administrative expenses and the cost of money wrongfully withheld, it is a proper charge as liquidated damages. Garrett v. Coast & So. Fed. S. & L. Ass'n, 9 Cal.3d 731, 108 Cal.Rptr. 845, 511 P.2d 1197 (1973); Nelson and Whitman, Real Estate Finance Law, (2d ed. 1985) at 443 et seq. ¹

In the present case there is no dispute between the parties concerning the collection of late charges on payments due before the filing of the complaint. However, plaintiff seeks to include in the amount of the judgment late charges on all monthly payments claimed to be due until the entry of judgment. Defendants dispute plaintiff's right to late charges on payments claimed to be due after the filing of the complaint.

Late charges for nonpayment of installments claimed to be due after the filing of the complaint cannot be collected. Upon the filing of the complaint, plaintiff formally accelerated payment of the debt and repudiated the right of defendants to make installment...