Light v. Granatell

• Decision Date: 20 December 1979
• Parties: Sol J. LIGHT, Plaintiff-Respondent, v. Thomas GRANATELL, Defendant-Appellant.
• Court: New Jersey Superior Court — Appellate Division

Page 557

171 N.J.Super. 557

410 A.2d 266

Sol J. LIGHT, Plaintiff-Respondent, v. Thomas GRANATELL, Defendant-Appellant.

Superior Court of New Jersey, Appellate Division.

Submitted Dec. 11, 1979.

Decided Dec. 20, 1979.

Kalb, Friedman & Siegelbaum, Newark, for defendant-appellant (Marc S. Friedman, Newark, on the brief).

Evans, Hand, Allabough & Amoresano, West Paterson, for plaintiff-respondent (Joseph Bernadino, West Paterson, on the brief).

Before Judges LORA, ANTELL and PRESSLER.

The opinion of the court was delivered by

LORA, P. J. A. D.

On January 23, 1969 defendant Thomas Granatell borrowed $275,000 from Newram Realty Corp. (Newram), secured by a bond and mortgage covering property in the City of Newburgh, Orange County, New York. Newram assigned the bond and mortgage to plaintiff Sol J. Light.

In June 1974, at Granatell's request, the parties entered into an extension agreement which provided, among other things, for the monthly amortization of the balance outstanding on the bond over five years at a rate of interest of 8% Annually. The extension agreement was executed in New Jersey, where both Light and Granatell were then residents.

The first installment payment became due on July 1, 1974, but Granatell did not, however, make the payment and has not made any of the succeeding installment payments. Light thereupon elected to accelerate the maturity of the debt pursuant to an applicable provision of the extension agreement.

During his ownership of the property Granatell failed to pay the City of Newburgh real estate taxes and water charges, said arrearages being then in excess of $300,000. The City of Newburgh perfected its priority lien against Granatell's property. Although Light had instituted foreclosure proceedings on the mortgage in New York, the City of Newburgh on December 30, 1976 foreclosed its tax lien and thereby extinguished Light's mortgage lien on the property. Light thereafter commenced this action on the bond in New Jersey, and on motion for summary judgment and cross-motion for dismissal of the complaint, the trial judge entered judgment for plaintiff from which defendant now appeals.

Defendant contends that Article 13 of the New York Real Property Actions and Proceedings Law, § 1301 (RPAPL), is controlling and principles of comity bar the plaintiff from maintaining this action. The cited section provides:

1. Where final judgment for the plaintiff has been rendered in an action to recover any part of the mortgage debt, an action shall not be commenced or maintained to foreclose the mortgage, unless an execution against the property of the defendant has been issued upon the judgment to the sheriff of the county where he resides, if he resides within the state, or if he resides without the state, to the sheriff of the county where the judgment-roll is filed; and has been returned wholly or partly unsatisfied.

2. The complaint shall state whether any other action has been brought to recover any part of the mortgage debt, and, if so, whether any part has been collected.

3. While the action is pending or after final judgment for the plaintiff therein, no other action shall be commenced or maintained to recover any part of the mortgage debt, without leave of the court in which the former action was brought.

Although it is admitted by defendant that Newburgh has foreclosed its tax lien on the subject property, he asserts that plaintiff's action in New York remains pending and that § 1301 RPAPL requires that plaintiff pursue his remedies in the foreclosure action in New York or at least secure leave of the New York court to maintain this action on the bond in New Jersey. See Kamerman v. CDC Furniture Mfg. Corp., 5 Misc.2d 27, 162 N.Y.S.2d 999, 1000-1001 (Sup.Ct.1956), in which it was held that the predecessor statute to § 1301 RPAPL indicated a general legislative policy of the State of New York to prohibit another action on the debt without leave of court while the foreclosure action is pending or after final judgment. In Stern v. Itkin Bros., Inc., 87 Misc.2d 538, 385 N.Y.S.2d 753, 755 (Sup.Ct.1975), the court stated "It has been repeatedly held that although the owner and holder of a bond or note or mortgage has two remedies in enforcement; (1) to recover a judgment for the debt, or (2) to foreclose the mortgage securing the debt, both remedies may not be pursued at the same time." But see D'Agostino v. Wheel Inn, Inc., 65 Misc.2d 227, 317 N.Y.S.2d 472, 475-476 (Cty.Ct.1970).

Plaintiff counters that the procedural laws governing New York mortgage foreclosures should not be applied to a New Jersey action on the bond indebtedness.

Section 1301 RPAPL does not set forth the procedure to be followed where a plaintiff commences an action to foreclose a mortgage on property situated in New York and while such action is pending, the security is exhausted. Plaintiff, in such a situation, is relegated to the position of a holder of a bond without security and, exhausting the remedy against the security as otherwise required by § 1301 RPAPL would appear to serve no legitimate purpose.

N.J.S.A. 2A:50-2, "Order of proceedings; foreclosure; action on bond; limitations; parties," reads as follows:

Where both a bond and a mortgage have been given for the same debt, all proceedings to collect the debt shall be:

First, a foreclosure of the mortgage; and

Second, an action on the bond for any deficiency, if, at the sale in the foreclosure proceeding, the mortgaged premises do not bring an amount sufficient to satisfy the debt, interest and costs.

The action on the bond shall be commenced within 3 months from the date of the sale or, if confirmation is or was required, from the date of the confirmation of the sale of the mortgaged premises. In such action judgment shall be rendered and execution issued only for the balance due on the debt and interest and costs of the action.

No action shall be instituted against any person answerable on the bond unless he has been made a party in the action to foreclose the mortgage.

Our statute directs that where both a bond and mortgage are given for the same debt, a foreclosure of the mortgage is required before any action can be instituted on the bond. Schwartz v. Bender Investments, Inc., 58 N.J. 444, 446, 279 A.2d 100 (1971). The purpose of N.J.S.A. 2A:50-2 is to prevent a multiplicity of actions for the recovery of a debt secured by a mortgage and a bond, thereby obviating the possibility, if not indeed the probability, of irreconcilable determinations of that issue. Ledden v. Ehnes, 22 N.J. 501, 509, 126 A.2d 633 (1956); Montclair Savings Bank v. Sylvester, 122 N.J.Eq. 518, 524-525, 194 A. 811 (E. & A.1937).

However, it has long been settled law in New Jersey that the statute obviously cannot apply if the mortgage securing the bond has previously been extinguished by foreclosure of a superior mortgage or other lien, by a tax sale, by condemnation, or in some other manner. 30 N.J.Practice (Cunningham & Tischler, Law of Mortgages ), § 392 at 347; Bloomfield Heights, Inc. v. Holland, etc., 22 N.J.Misc. 61, 64-65, 35 A.2d 622 (Cir.Ct.1944). See, also, Goldberg v. Fisher, 11 N.J.Misc. 657, 662, 168 A. 232 (Sup.Ct.1933), where a plaintiff's second mortgage was wiped out by the foreclosure of the first mortgage embracing the same premises and it was held that it was unnecessary for the plaintiff to first foreclosure her mortgage before proceeding upon the bond. And see Court Investment Co. v. Spatola, 136 N.J.L. 519, 520, 56 A.2d 874 (E. & A.1948), where a first mortgage was foreclosed and the lien of the second mortgage thereby cut off, it was held that the second mortgagee is relegated to the position of a holder of a bond without security, and therefore the statute requiring the holder of a mortgage to first exhaust his remedy against the security has no application to the holder of such second mortgage. Additionally, it has been held that N.J.S.A. 2A:50-2 does not apply to an action in New Jersey to recover on a bond prior to foreclosure, where the mortgage securing the bond covers land outside New Jersey, "for it assumes to regulate foreclosures and sales, and this would be impossible extraterritorially." Colton v. Salomon, 67 N.J.L. 73, 50 A. 588 (Sup.Ct.1901); Phila., etc., Society v. Disston, 16 N.J.Misc. 129, 134, 198 A. 212, 215 (Cir.Ct.1937).

The threshold question, then, is whether § 1301 RPAPL should be given extraterritorial effect, or, if under principles of comity, the New York statute should be binding upon our courts. There have been adjudications in cases where a mortgagor has pleaded the existence of a foreign anti-deficiency statute in effect at the situs of the mortgaged property in defense of an In personam suit for a deficiency, that the foreign statute in question did not extinguish the right to a deficiency but merely the remedy, and, as such, the remedial measure would have no...