Falcon Bldg. & Loan Ass'n v. Schwartz

Decision Date14 August 1936
Citation186 A. 696
PartiesFALCON BUILDING & LOAN Ass'n et al. v. SCHWARTZ et al.
CourtNew Jersey Court of Chancery

Syllabus by the Court.

1. Where a statute provides for the interposition of certain defenses in an action at law, the defendant therein is entitled to rely upon that statute until it is declared invalid, as unconstitutional or otherwise, by a court of competent jurisdiction.

2. The delay in applying to the Court of Chancery for equitable relief, incident to the interposition of statutory defenses, declared unavailable because of the unconstitutionality of the statute providing them, is not fatal to an application here for such relief, provided such application is made with reasonable promptness after the unavailability of those defenses at law is determined.

3. The entry of a deficiency judgment at law, resulting from the unavailability of equitable defenses in the law action, is no bar to equitable relief in the Court of Chancery and restraint of the enforcement of the judgment at law pending such relief.

4. Section 64 of the Chancery Act (1 Comp.St.1910, p. 434, § 64) has no application to a petition to open a foreclosure decree and sale and for restraint against the enforcement of a deficiency judgment pending action on such petition.

Suit by the Falcon Building & Loan Association and others against Samuel C. Schwartz and others, wherein one defendant filed a petition to open a mortgage foreclosure decree, to set aside the foreclosure sale, to vacate an order confirming the sale, and to restrain the execution of a judgment at law for a deficiency, and wherein complainants filed a motion to dismiss the petition. Motion denied.

Kraemer, Siegler & Siegler, of Newark, for the motion.

Harry Kaplan, of Newark, opposed.

BERRY, Vice Chancellor.

The facts recited in the petition, undisputed on this motion, are that final decree was entered in the foreclosure proceeding for $11,232.73 on February 13, 1935, pursuant to which the mortgaged premises were sold by the sheriff of Essex county on April 23, 1935, to the complainant on his nominal bid of $100. The sale was confirmed without objection on May 4, 1935. (Chapter 88, P.L.1935 [N. J.St.Annual 1935, §§ 134—49(1) to 134— 49(3) and note], approved March 22, 1935, was then apparently the law of this state. "Upon it the defendant had a right to rely, presuming its validity.) On May 24, 1935, complainant instituted suit at law in the Essex county circuit court for an alleged deficiency arising out of the foreclosure and sale. On June 6, 1935, the defendant filed an affidavit of merits, and on June 20, 1935, a stipulation was entered into between the attorneys for plaintiff and defendant under the terms of which the complaint was amended and the time to answer extended to June 24, 1935, on which date the defendant filed its answer setting up two separate defenses under chapter 88, P.L.1935, demanding determination by a jury of the fair market value of the premises foreclosed and a set-off of such fair valuation against the deficiency claim. On July 10, 1935, notice of a motion to strike the answer was served upon counsel for the defendant in the law action and the motion argued on July 26, 1935, when an order was entered striking the answer on the ground that chapter 88, P.L.1935 (N. J.St.Annual 1935, §§ 134—49(1) to 134— 49(3) and note) was unconstitutional on the authority of Sayre v. Duffy, 179 A. 459, 13 N.J.Misc. 458; and a deficiency judgment for $11,795.45 was accordingly entered forthwith. As the decision of the Essex county circuit court in Sayre v. Duffy was not officially reported until June 15, 1935, it is conceivable that counsel for the defendant in the law action, who also represents the petitioner here, may not have known of this decision when his answer was filed. The affidavits on this motion are silent on this point. The present petition was filed on August 9, 1935, and prays that the order confirming sale in the foreclosure proceedings be vacated and a resale ordered; or, in the alternative, that the fair value of the mortgaged premises be credited upon the deficiency judgment, and that enforcement of said judgment unless and until the said credit is given be restrained. The petitioner also alleges that the property has a fair value of $15,000; his inability to obtain a loan or refinance the mortgage which was the subject of foreclosure because of the existence of a financial emergency, and other jurisdictional facts mentioned in Young v. Weber, 117 N.J.Eq. 242, 175 A. 273; also, that in January, 1933, petitioner assigned to the complainant stock in the complainant association having a par value of $750, and again, in January, 1934, stock having a par value of $510 in said association, which was applied on account of the arrearages of installments and interest then due; and offered, and still offers, prepaid stock in said association of the par value of $4,000 on account of principal, arrearages, etc. None of these facts are controverted on this motion.

On the present motion counsel for complainants rely upon Fruzynski v. Jablonski, 117 N.J.Eq. 117, 175 A. 112, and Broadman v. Colonial Building-Loan Association, 118 N.J.Eq. 275, 178 A. 775. It is also claimed that the petitioner's appeal to this court is premature, as he has not exhausted his remedies in the law courts by appeal to the Court of Errors and Appeals from the order striking his answer. Also, that under section 64 of the Chancery Act (1 Comp.St. 1910, p. 434, § 64) this court has no power to stay proceedings at law after judgment "unless a sum of money * * * shall be first deposited with the clerk of the court * * * or unless said applicant shall give such security, by bond, as the chancellor shall deem good, * * * in double the amount then due on such verdict or judgment and the costs at law, with condition to abide such order or decree as the chancellor shall make in the premises," and that petitioner has not complied with this requirement of the statute. I will dispose of the grounds upon which this motion is rested in the inverse order of their statement.

The statute (see section 64, Chancery Act) was not intended to apply to cases of this kind and will not be applied where inequity will result. Meranus v. Lawyers' & Homemakers' Building & Loan Association, 116 NJ.Eq. 402, 406, 174 A. ISO.

On the question as to whether or not the petition is premature I think it may well be said that in view of the decision of the Court of Errors and Appeals in Vanderbilt v. Brunton Piano Company, 111 N.J.Law, 596, 169 A. 177, 89 A.L.R. 1080, in which chapter 82, P.L. 1933, N. J.StAnnual 1933, §§ 134—48, 134—49 (an act having for its object the accomplishment of the same and for which chapter 88, P.L. 1935, N.J.St.Annual 1935, §§ 134— 49(1) to 134—49(3) and note, was designed), and in view of the decision of the Essex county circuit court in Sayre v. Duffy, supra, and the action of the same court in striking petitioner's answer in the law action here involved, the petitioner was not only acting within his rights, but pursuing his plain duty, in promptly applying to this court for relief upon his answer in the law action being stricken. Further justification for the petition may be found in the recent decision of the Supreme Court in Fidelity Union Trust Company v. Bryant, 183 A. 825, 14 N.J.Misc. 243, in which chapter 88, P.L.1935, is again declared unconstitutional as an impairment of the obligation of a contract entered into prior to its enactment. (The bond and mortgage here involved antedated chapter 88, P.L.1935.) Until the decision of the Essex county circuit court on the motion to strike petitioner's answer filed in the law action, the petitioner had a right to rely upon the remedy provided in chapter 88, P.L.1935, and was justified in interposing that act as a defense and claiming the benefit of its provisions in order to obtain a credit of that to which he was equitably entitled and expressly reserved to him by the act in question, namely, a credit on the deficiency claim of the amount of the fair value of the foreclosed premises.

By section 2 of chapter 88, P.L. 1935, p. 261 (N.J.St.Annual 1935, § 134— 49(2), the recovery of a judgment for deficiency on foreclosure "shall open the foreclosure and sale of said premises" and the judgment debtor "may redeem." It is further provided that the subordinate liens are not thereby revived and that a suit for redemption must be brought within six months after the entry of judgment. It would seem that both the foreclosure and sale should be considered as open for the purpose of redemption. The act contains the further provision that the filing of an answer disputing the amount of the deficiency shall terminate the right to redeem and the entry of a judgment shall not open the foreclosure and sale. But if this answer is unavailing by virtue of the unconstitutionality of the act in whole or in part, then the right to redeem remains as before the act; or if that part which says that foreclosure and sale is open is not invalid, the foreclosure and sale are open for all purposes, to redeem or to apply to a court of equity for relief. The original statute (3 Comp.St.1910, p. 3422. § 49) provides that upon recovery of a deficiency juelgment "such recovery shall open the foreclosure and sale" for purposes of redemption. That the delay in applying to this court for relief until after sale and confirmation...

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5 cases
  • Johnson v. Cyklop Strapping Corp.
    • United States
    • New Jersey Superior Court — Appellate Division
    • October 6, 1987
    ...occasion for citing authorities in support of it." Calaf v. Fernandez (C.C.A.), 239 Fed.Rep. 795. See also Falcon B. & L. Assn. v. Schwartz, 121 N.J.Eq. 27, 31, 186 A. 696 (Ch.1936). There is no indication we can discover in the formative years following the adoption of the 1948 State Const......
  • Siren v. Behan
    • United States
    • New Jersey Superior Court — Appellate Division
    • March 24, 1988
    ...795 [1st Cir.1917]. [ Id. at 516, 183 A. 472]. Moreover, the power was commented upon and supported in Falcon B. & L. Assn. v. Schwartz, 121 N.J.Eq. 27, 31, 186 A. 696 (Ch. 1936). The issue of the trial court's power to modify its interlocutory orders was addressed in Ford v. Weisman, 188 N......
  • Silk City Building and Loan Association, A Corp. v. Torah
    • United States
    • New Jersey Court of Chancery
    • January 2, 1942
    ...Bluestone B. & L. Ass'n v. Glasser, 117 N. J.Eq. 392, 176 A. 314; Meyer v. Blacker, 120 N.J.Eq. 35, 184 A. 191; Falcon B. & L. Ass'n v. Schwartz, 121 N.J.Eq. 27, 186 A. 696; Miller v. Bond & Mortgage Guaranty Co., 121 N.J.Eq. 197, 188 A. 678; Harvester B. & L. Ass'n v. Kaufherr, 121 N.J.Eq.......
  • Miller v. Bond and Mortgage Guaranty Company, A New Jersey Corporation
    • United States
    • New Jersey Court of Chancery
    • December 16, 1936
    ...action at law. The jurisdiction and power of the Court of Chancery to do so cannot, however, be questioned. Falcon Building & Loan Association v. Schwartz (N.J. Ch.) 186 A. 696, 698. It was entirely proper, therefore, for the complainant to seek relief in this court by independent bill, but......
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