HIMC Inv. Co. v. Siciliano

• Decision Date: 20 August 1968
• Docket Number: No. L-8940,L-8940
• Citation: 103 N.J.Super. 27,246 A.2d 502
• Parties: , 5 UCC Rep.Serv. 846 HIMC INVESTMENT COMPANY, a Corporation of the State of Pennsylvania, Plaintiff, v. Thomas F. SICILIANO and Phyllis Siciliano, Jointly and Severally, Defendants. Jointly and Severally, Defendants.
• Court: New Jersey Superior Court

Page 27

103 N.J.Super. 27

246 A.2d 502, 5 UCC Rep.Serv. 846

HIMC INVESTMENT COMPANY, a Corporation of the State of Pennsylvania, Plaintiff, v. Thomas F. SICILIANO and Phyllis Siciliano, Jointly and Severally, Defendants. Jointly and Severally, Defendants.

No. L-8940.

Superior Court of New Jersey Law Division.

Aug. 20, 1968.

Clarence Blitz, Atlantic City, for plaintiff

Donald M. Karp, East Orange, for defendant. (Lesnik & Amoscato, Newark, attorneys).

HORN, J.S.C.

This is an action on a promissory note secured by a mortgage second in lien upon a house owned by defendants. Defendants counterclaim for the cancellation of the mortgage and for the discharge of the underlying obligation. A jury was not demanded.

On December 10, 1965 defendants Thomas F. Siciliano and his wife Phyllis Siciliano, in response to a newspaper advertisement in the Asbury Park Evening Press, called the 'First Prudential Co. of Penna.,' listed in the advertisement at 'S.E. Cor. 21st & Ranstead, Philadelphia, Pa. 19103,' at the New Jersey telephone number referred to in the advertisement. At that time they supplied some information over the telephone as to their assets and earnings. They subsequently executed and submitted a loan application form.

On December 21, 1965 defendants received a telephone call from someone representing himself to be associated with National Consumer Service, Inc., telling them that The next day, December 22, 1965, defendants went to the address to which they had been directed, and were first met by a man named 'Vic.' They spent about 15 minutes discussing the loan with him and were told that they would have to pay a $600 commission, and also that because of their youth, earning capacity and assets, they could borrow only $2,800 rather than the $4,000 they sought.

their loan application had been approved and to come to an address on 21st Street in Philadelphia the following day with a record of their outstanding debts and the deed to their property.

Vic then went out of the room and returned with one Hass, who repeated that they could only borrow $2,800 and that the amount of commission would be $600-- $500 for lender and $100 for National Consumer Service, Inc., which he represented, and that if they made their payments on time, they might be eligible to borrow more. Then Vic and Hass left them alone to discuss whether they wanted to go through with the transaction because of the commission. Before they made up their minds they were told that the commission would only be $500.

Defendants agreed to the loan and signed their names to a number of legal instruments under Hass' direction. These included the promissory note for $4,431, payable to the order of Equity of Asbury Park, Inc. (Equity), on which the action was brought; a mortgage indenture in the same amount, also payable to Equity, and a closing statement detailing the disbursement of the borrowed moneys. The amount of the note was based on the principal purportedly loaned together with interest computed pursuant to the provisions of the Secondary Mortgage Loan Act, N.J.S.A. 17:11A--21, payable $73.85 per month for 60 months. They were given four checks signed by Hass, drawn upon the account of Provident Abstract Co., three of which they think they took with them, and the fourth, for $500, they endorsed and gave back to Hass. This check was subsequently endorsed by National Consumer Service, Inc. 'for Two of the three checks that defendants believe they took with them, in the amounts of $804.87 and $845.72, were respectively made payable jointly to defendants and National State Bank, and to defendants and Fidelity Union Trust Co. to whom they were indebted. These, they believe, were endorsed by them and mailed to the respective banks. The words 'Proceeds of Loan' were written at the bottom left-hand side of the third check for $649.41 which they took with them. This check was taken to the drawee bank and paid to defendants on the same day.

deposit only.' In the lower left-hand corner of this check, in Hass' handwriting, there was written the letter 'C'. Hass denied that this letter stood for 'commission,' but he could not offer any further explanation for it.

The mortgage loan was stated to be $3,268.32 on the closing statement. It represented $2,300, the sum of the above amounts of $804.87, $845.72 and $649.41, and the following: $500 actually taken by National Consumer Service, Inc. for commissions; $85.96 'Credit Life Insurance'; $93.94 'Accident and Health Insurance,' and $288.42, the aggregate of charges for 'Attorney's Fee,' 'Appraisal and Inspection Fee,' ,'Search Fee,' 'Credit Investigation Fee' and 'Recording Fee.' Although the insurance charges were marked 'Optional' on the statement, I find that defendants actually had no real choice and were compelled to accept the charges.

At the conclusion of the transaction defendants requested some memorandum of the transaction and were given a long-hand note by Hass, acknowledging that the loan was made 'pursuant to the secondary lien act of 1965 (passed about July),' an apparent reference to the New Jersey Secondary Mortgage Loan Act of 1965, N.J.S.A. 17:11A--1 et seq. (sometimes referred to herein as the 'act'), which was approved on June 9, 1965. Before they left, Vic gave them a small clock radio as a gift.

The mortgage was assigned by Equity to M. Lippincott Mortgage Investment Co. (Lippincott) by an assignment originally dated December 22, 1965 and later changed to A short time after this transaction defendants received a letter from National Consumer Service, Inc. acknowledging their being customers and saying that if they supplied five names of possible customers they would receive a pocket radio as a gift. They supplied the names and received the radio. They subsequently received a coupon book directing them to make their monthly payments to 'HIMCO' in Hammonton, New Jersey. Pursuant thereto they made four payments of $73.85 each, for January, February, March and April 1966. 'HIMCO' is the same entity as plaintiff.

the 23rd by writing over the '22.' It was acquired by plaintiff from Lippincott on December 30, 1965 for $3,275.42. The note provided for payment to be made in Hammonton, New Jersey, where Lippincott maintained a one-man office in the same building (but not in the same office) as plaintiff. The location of Equity's office was not disclosed.

Some months later, when defendants finally received copies of the papers, Mr. Siciliano felt that they had been overcharged. He alleged that he then learned for the first time that they had executed a second mortgage upon a one-family dwelling they owned. Defendants consulted an attorney, and in May 1966, through their attorney's efforts and upon order of the New Jersey Banking Department, Equity returned to defendants the bill of sale for their automobile, which had apparently been obtained by it from National State Bank when the bank was paid.

In June 1966, again apparently as a result of efforts of their attorney, defendants recovered $500 from National Consumer Service, Inc., for which they executed a release discharging National Consumer Service, Inc. from any obligation in connection with the loan agreement but reserving all rights or defenses 'in respect to third parties, relating to or arising out of a certain alleged mortgage dated December 22, 1965.'

This transaction comes within the definition of a 'secondary mortgage loan' contained in the New Jersey Secondary Mortgage Loan Act of 1965, N.J.S.A. 17:11A-- No question of constitutionality of the act has been raised, as in Crescent Investments Co. v. Commissioner of Banking and Insurance, N.J.Super., 246 A.2d 493 (Ch.Div.1968). In any event, Judge Wick there held generally that the act was constitutionally valid.

1(a). The statutory definition includes 'a loan made to an individual * * * not to be repaid in 90 days or less which is secured in whole or in part by a mortgage upon any interest in real property used as a dwelling with accommodations for not more than 4 families, which property is subject to the lien of one or more prior mortgages * * *.' Equity was licensed under that law.

CHOICE OF LAW

Plaintiff urges that this transaction is governed by the laws of the State of Pennsylvania, which laws, if applicable, would allegedly treat this transaction as a usurious one, with a forfeiture of interest only. This is in contrast to the treatment under the provisions of the New Jersey Secondary Mortgage Loan Act of 1965, which provides that 'No obligation arising out of a secondary mortgage loan shall be enforceable in the courts of this State unless such loan was negotiated and made in full compliance with the provisions' of said act. N.J.S.A. 17:11A--29.

In choice of law cases, the courts favor a rule which resolves the question by applying the law of the state possessing the most substantial contacts with the transaction, and considers the public policy of the states which are involved, rather than the mere mechanical application of a rule based on ease of application and convenience, rather than reason and rational analysis. Mellk v. Sarahson, 49 N.J. 226, 229 A.2d 625 (1967); Kievit v. Loyal Protective Life Ins. Co., 34 N.J. 475, 170 A.2d 22 (1961); Mount Vernon Fire Ins. Co. v. Gillian, 95 N.J.Super. 279, 230 A.2d 892 (App.Div.1967); Present v. United States Life Ins. Co., 96 N.J.Super. 285, 232 A.2d 863 (Law Div.1967).

An analysis of the contacts and the respective interests of the states involved, Pennsylvania and New Jersey, leads The borrowers were New Jersey residents; the mortgage was on realty in New Jersey; the forum State is New Jersey; the solicitation for the loan in a New Jersey newspaper; the defendants were invited to call the advertised New Jersey telephone number; the place of payment of the loan as originally provided in the promissory note is in New Jersey; and significantly, the lender's representative, both by written note given to ...