French v. Johnson

• Decision Date: 10 May 1910
• Citation: 79 A. 681,77 N.J.E. 146
• Parties: FRENCH et al. v. JOHNSON et al.
• Court: New Jersey Supreme Court

79 A. 681

77 N.J.E. 146

FRENCH et al.

v. JOHNSON et al.

Chancery Court of New Jersey.

May 10, 1910.

Suit by Thomas E. French and others, receivers of the State Mutual Building & Loan Association, against E. Bartine Johnson and others. Exceptions to master's report overruled.

Thomas E. French and George J. Bergen, for receivers.

Eli H. Chandler, for exceptants.

LEAMING, V. C. Complainants are receivers of an insolvent building and loan association. Defendant is a borrowing member, who has executed a mortgage and pledged his shares to the association as security for the payment of the money so borrowed. The present suit is for the foreclosure of that mortgage. The association ceased business and went into voluntary liquidation in April, 1907, pursuant to the act of 1904. P. L. 1904, p. 44. It was subsequently determined that the association was at that time insolvent, and receivers in insolvency were appointed in the place of the trustees in liquidation. The bond secured by the mortgage now in question contains a clause to the effect that if default should be made by mortgagor in the payment of interest, premiums, or fines for 30 days after the same should become payable, "the whole principal debt aforesaid should at the option of the said the State Mutual Building & Loan Association of New Jersey, its successors or assigns, become due and payable, immediately, and payment of said principal debt, and all interest thereon, might be enforced and recovered at once."

At the date of suspension of business by the association interest was in default on defendant's mortgage for a period in excess of the period above referred to; but it is now claimed by defendant that no affirmative action had been taken by the association whereby it exercised its option to declare the entire mortgage debt due by reason of the default. The question now presented is whether defendant is entitled to credit on his mortgage debt for the premiums which have been paid by him. In the case of in re State Mutual Building & Loan Association, 74 N. J. Eq. 807, 71 Atl. 251, 19 L. R. A. (N. S.) 588, it was determined by the Court of Errors and Appeals of this state that a mortgagor of that association was not entitled to credit for premiums paid in a case in which the mortgage was due by its terms at the time of suspension of business of the association. That case was first heard before me in this court upon the theory that the association had not exercised its option to declare the principal of the mortgage due. It appears, however, that the petition filed in that case contained an averment to the contrary, and by a stipulation in the case the facts stated in the petition were admitted. For that reason it is now urged that the Court of Errors and Appeals has expressed no opinion touching a case in which the option to declare the mortgage due had not been exercised by the association at the date of its suspension of business.

The opinion of the appellate court in the case referred to defines with great clearness the theory upon which a nondefaulting mortgagor becomes entitled to credit, in the event of insolvency, for premiums theretofore paid by him. It is there pointed out that his premiums are paid in reliance upon the consummation of a plan whereby his shares shall mature, and at their maturity shall discharge his mortgage indebtedness. As insolvency of the association operates to defeat the consummation of the scheme, in the absence of any contract contemplating that contingency, equitable considerations arise which entitle him to a return of such premiums as he may have paid. As to mortgages due and payable at the time business is suspended, the...