Liebers v. Plainfield Spanish Homes Bldg. Co., Inc.

• Decision Date: 12 June 1931
• Citation: 155 A. 270
• Parties: LIEBERS v. PLAINFIELD SPANISH HOMES BLDG. CO., Inc., et al.
• Court: New Jersey Court of Chancery

155 A. 270

LIEBERS

v. PLAINFIELD SPANISH HOMES BLDG. CO., Inc., et al.

Court of Chancery of New Jersey.

June 12, 1931.

Syllabus by the Court.

In equity, the form in which security for a debt is given is unimportant. A tentative mortgage may be pledged, or one that has been paid and satisfied may be revived and repledged by the mortgagor.

Syllabus by the Court.

A corporation cannot plead usury; those in privity are also barred.

Syllabus by the Court.

An agreement subordinating a prior mortgage to a junior mortgage lien runs to the holder of the junior mortgage.

Suit by Isaac Liebers against the Plainfield Spanish Homes Building Company, Inc., and others.

Decree for the complainant in accordance with opinion.

Reuben Brown, of New York City, for complainant.

Bernard Devin, of Newark, for defendants.

BACKES, Vice Chancellor.

The bill is to foreclose seven mortgages for $7,000 each, conveying seven adjoining houses and lots, given by Plaintiff Spanish Homes Building Company, Inc., to Manhattan-Jersey Mortgage Corporation, April 19, 1929, and assigned to the complainant. The answering defendants are David M. Barad and his three associates. The building company purchased a tract of land from them and gave in return a purchase-money mortgage upon which there is now due $30,000. The tract was divided into fourteen lots, and dwelling houses were erected upon thirteen of them. The purchase-money mortgage provided for its subordination to a mortgage of not more than $7,000 on each house and lot, and provided further for a second mortgage to Barad et al. on each house for a proportionate share of the $30,000 mortgage, and to take its place. Six of the houses were mortgaged for $7,000 each, and the purchase-money mortgage was subordinated, and, upon the making of the seven mortgages now under foreclosure, it was subordinated to them. Later, when the building company was unable to carry on, it conveyed the thirteen houses and lots to Barad et al., subject to the mortgages, and they are in possession, either under their mortgage or the deed; they claim the deed was not accepted though delivered, and they have it. The Manhattan-Jersey Mortgage Corporation had agreed to finance the seven mortgages, whereupon Barad et al. subordinated their mortgage. The mortgage company was not presently in funds, and the building company, pressed for money to finish the houses, turned to the complainant, who advanced $15,000 temporarily to or through the mortgage company on the security of the mortgages, and the mortgage company assigned to him the mortgages; he agreeing to reassign them within two months upon repayment, the mortgage company holding out promise to finance the mortgages by that time. It defaulted. More money was needed and the complainant advanced an additional $25,000 in the same manner, and the mortgage company gave him an absolute assignment of the mortgages. Later the complainant advanced another $6,000 direct to the building company, and with that the company's creditors were satisfied. The first two sums were transmitted through the mortgage company by the complainant's checks which were handed to and indorsed and delivered by the mortgage company to the building company which cashed them.

The defendants make the point that the mortgage company had nothing to assign, that the mortgages were without life, and consequently that the assignments were nugatory. The point is unsubstantial. It is a matter of no consequence whether the complainant made the advances to the mortgage company and it paid the money over to the building company or advanced it directly to the building company on the security of the mortgages. In either case the mortgages took on legal vitality the moment the consideration was paid. The form in which the security was given is unimportant. Assuming that the mortgages were impotent in the hands of the mortgage company, it was the privilege of the mortgagor to vitalize them. Even a paid and satisfied mortgage may be revived and repledged by the mortgagor. Atwater v. Underbill, 22 N. J. Eq. 599; Martin v. B.owen, 51 N. J. Eq. 452, 26 A. 823.

After the second advancement of $25,000 was made, $12,500 was returned to the complainant. The defendants claim that $18,600 was returned, and they rest this on the fact that, after complainant's check for $25,000 was deposited to the credit of the building company, the members of that company withdrew $18,600, in three checks of $6,200 each, one to each, and that the cash was returned to the complainant. There is some mystery and a lot of recrimination and in all likelihood there was corrupt purpose in the transaction, but the complainant was not a party to it. He says he got but $12,500, and that has not been successfully controverted. Two of the members have had a falling-out with the third, a brother-in-law of the complainant, evidently over the...