Stuchin v. Kasirer

• Court: New Jersey Superior Court — Appellate Division
• Writing for the Court: DREIER
• Citation: Stuchin v. Kasirer, 568 A.2d 907, 237 N.J.Super. 604 (N.J. Super. App. Div. 1990)
• Decision Date: 11 January 1990
• Parties: Miles M. STUCHIN, Administrator c/t/a of the Estate of Bernard H. Stuchin, Plaintiff-Respondent, Cross-Appellant, v. Jacob KASIRER and Rose Kasirer, his wife, Defendants-Appellants, Cross-Respondents.

Page 604

237 N.J.Super. 604

568 A.2d 907

Miles M. STUCHIN, Administrator c/t/a of the Estate of Bernard H. Stuchin, Plaintiff-Respondent, Cross-Appellant, v. Jacob KASIRER and Rose Kasirer, his wife Defendants-Appellants, Cross-Respondents.

Superior Court of New Jersey Appellate Division.

Argued Nov. 29, 1989.

Decided Jan. 11, 1990.

Gerard W. Quinn, for defendants-appellants, cross-respondents (Cooper, Perskie, April, Niedelman & Wagenheim, attorneys; Kenneth D. Wolfe, Christine M. Cote and Gerald W. Quinn, Atlantic City, on the brief).

Ronald M. Katkocin, for plaintiff-respondent, cross-appellant (Horn, Kaplan, Goldberg, Gorny & Daniels, attorneys; Ronald M. Katkocin, on the brief, John J. Markwardt, Voorhees, of counsel).

Before Judges DREIER, SCALERA and D'ANNUNZIO.

The opinion of the court was delivered by

DREIER, J.A.D.

Defendants, Jacob and Rose Kasirer, the title owners of 210 Grammercy Place, Atlantic City on which is located a convalescent center, appeal from a summary judgment striking defendants' defenses and entering a judgment of foreclosure. Defendants attack the ruling upholding a post-default interest rate adjustment clause, the amount of attorney's fees awarded to plaintiff, and the denial of defendants' motion to reinstate an estoppel claim abandoned by them at trial. Plaintiff, Miles M. Stuchin, Administrator c/t/a of the Estate of Bernard H. Stuchin, the mortgagee, has filed a cross-appeal from the trial judge's denial of plaintiff's motion to amend his complaint to add a count for fraud, and the decision of the motion judge (not the trial judge) to vacate defendants' original default.

On January 25, 1978, defendants executed a "wrap around" mortgage ¹ note in favor of Sheldon Farber for $1,650,000, with interest payable monthly at the rate of nine percent per annum. Defendants leased the premises to Golden Crest Convalescent Inc., the nursing home operator. The monthly mortgage payments were historically paid by the tenant directly to the mortgagee. On August 21, 1985, Farber assigned his interest in the mortgage to the plaintiff. On or about January 1, 1987 there was the initial default in the monthly payment of $14,583.33. The default continued for three additional months, and at the end of April plaintiff notified defendants of his intention to accelerate the mortgage. Defendants contended that the tenant was delinquent in its payments, that defendants would immediately begin a dispossess action and promised to make the payments themselves. They also asserted (although plaintiff disputes the fact) that plaintiff had agreed not to assert his legal rights until the parties had an opportunity to work out their problem. Nevertheless, plaintiff brought an immediate foreclosure action. Defendants failed to answer, and a default judgment was entered in the amount of $1,513,392.96 plus costs and counsel fees in the amount of $7,500.

Four weeks later, defendants obtained an order to show cause which the court treated as a motion to vacate the default judgment. After oral argument the court vacated the judgment on condition that defendants pay all of plaintiff's costs incurred by reason of defendants' original failure to answer the complaint; that all monthly mortgage payments from January 1, 1987 through January 13, 1988 (13 payments) be paid (and that plaintiff could accept and receive the payments without prejudice); and that an escrow be established in the amount of $196,441.94, representing additional interest claimed by plaintiff and disputed by defendants.

Defendants thereafter filed their answer raising two principal defenses, first that the mortgage clause increasing the contract rate of nine percent to two percent per month (24% per annum) after default constituted usury and therefore was unenforceable, and, second, that plaintiff should be estopped from claiming a default.

During the ensuing period of discovery, plaintiff learned that a prior attorney of defendants was also the attorney for the tenant as well as several of the principals of the tenant, and that defendants were personal friends with at least one of the tenant's principals. Furthermore, defendant Jacob Kasirer was a principal of Eastern Pines Realty Corp., the successor to Golden Crest. On this basis plaintiff moved to amend its complaint to assert fraud. This motion was denied.

Once plaintiff's motion was denied, defendants specifically relinquished their rights to pursue the estoppel defense. ² Defendants then paid off the mortgage, with the exception of about $5,000 in unpaid disputed interest, the unpaid attorneys' fees and costs in the amount of $449.16. The Sheriff's sale was stayed pending this appeal. We assume that the small balance due will be paid once this appeal is resolved.

We can briefly dispose of the estoppel issue raised by defendants as well as the fraud and vacation of default issues raised by plaintiff. The estoppel issue was not presented to the trial judge, since it was expressly waived. Consequently, we apply the principle that we "will not consider questions not properly presented to the court below when an opportunity to present them was available." Morin v. Becker, 6 N.J. 457, 460, 79 A.2d 29 (1951); Skripek v. Bergamo, 200 N.J.Super. 620, 629, 491 A.2d 1336 (App.Div.1985), certif. den. 102 N.J. 303, 508 A.2d 189 (1985). Defendants unequivocally chose to forego this known claim, clearly establishing a waiver. East Orange v. Board of Water Commissioners, 41 N.J. 6, 17, 194 A.2d 459 (1963).

Plaintiff claims that he should have been permitted to amend his complaint under R. 4:9-1 to raise the issue of fraud, since such amendments should "be freely given in the interest of justice." R. 4:9-1. Nevertheless, "there remains ... a necessary area of judicial discretion in denying such motions where the interests of justice require." Wm. Blanchard Co. v. Beach Concrete Co., Inc., 150 N.J.Super. 277, 299, 375 A.2d 675 (App.Div.1977), certif. den. 75 N.J. 528, 384 A.2d 507 (1977). The damage from the alleged fraud was the two-month delay during which plaintiff was induced to continue the lower nine percent rate based upon his assumption that defendants were in fact surprised by the tenant's default. We do not fault the trial judge in exercising his discretion, denying leave to amend. The showing of fraud was marginal at best, and the amendment would only have protracted this litigation.

Plaintiff also attacks the vacation of the original default by the motion judge (not the trial judge). The often-stated principle is that an application to vacate a default judgment is "viewed with great liberality, and every reasonable ground for indulgence is tolerated to the end that a just result is reached." Marder v. Realty Construction Co., 84 N.J.Super. 313, 319, 202 A.2d 175 (App.Div.1964), aff'd 43 N.J. 508, 205 A.2d 744 (1964). The Marder principle was applicable in this setting. See cases collected at Pressler, Current N.J. Court Rules, Comment 1, R. 4:50-1 (1989). It would have been highly inequitable to permit a default judgment to be entered on a mortgage of this size, where a substantial issue of the amount due was raised, and where alternative protection could be afforded such as the escrow of the disputed funds. Plaintiff raises this point only in the event that the trial judge's decision concerning the increased interest rate is overturned. We pass on the decision because we are remanding the matter for reconsideration by the trial judge, and wish to permit him to effect a complete adjudication on remand, without this additional issue remaining open.

The principal issue on appeal is whether the 15% increase in the interest rate on default, from nine percent to 24%, is enforceable.

We agree with the trial judge and plaintiff that the contract provision increasing the interest rate did not violate the usury laws. The version of N.J.S.A. 31:1-1(a) in effect at the inception of this transaction in 1978 set the lawful interest rate at no higher than 9.5%. Putting aside the question whether an interest increase after default constitutes the taking "directly or indirectly for loan of any money ... above the value of ... $9.50 for the forbearance of $100 for a year," as shall be prescribed in a regulation of the Commissioner of Banking N.J.S.A. 31:1-1(a) (prior to subsequent amendments), subsection (b)(1) of the Act enacted by L.1973, c. 328, (now N.J.S.A. 31:1-1(e)(1)) provides an exemption for loans "in the amount of $50,000.00 or more," subject to exceptions not here pertinent. ³ Therefore assuming arguendo that the increase in interest rate after default qualifies for the application of usury prohibitions, this loan was exempted by the Act.

Even in the absence of the specific exemption, an increase in interest rate effective only upon a borrower's default appears not to be subject to the usury laws. While this point was not raised by plaintiff, we will discuss it briefly. As noted in Restatement, Contracts, § 536 (1932):

§ 536 Bargain for Excessive Interest After Maturity.

Unless especially forbidden by statute a provision in a bargain for a loan that after maturity interest at a higher rate shall be charged than is permissible before maturity, does not render the bargain usurious unless the parties when entering into it contemplate that the loan shall not be paid at maturity.

(The subject matter is not encompassed within the Restatement, Second, Contracts ). This principle also has been stated to be the law in New Jersey. The only New Jersey case directly in point is Ramsey v. Morrison, 39 N.J.L. 591 (Sup.Ct.1877). ("If the gain to the lender, beyond the legal rate of interest, is, by the contract, made dependent on the will of the borrower, as where he may discharge himself from it by the punctual payment of the principal, the contract is not usurious." Id. at 593). Ramsey was relied upon in dictum in Feller v. Architects Display Buildings, Inc., 54 N.J.Super. 205, 213, ...