Usbe Bldg. & Loan Ass'n v. Ocean Pier Realty Corp.

• Decision Date: 08 April 1933
• Parties: USBE BUILDING & LOAN ASS'N v. OCEAN PIER REALTY CORPORATION et al.
• Court: New Jersey Court of Chancery

165 A. 580

USBE BUILDING & LOAN ASS'N

v. OCEAN PIER REALTY CORPORATION et al.

Court of Chancery of New Jersey.

April 8, 1933.

Syllabus by the Court.

1. An assumption of a mortgage by a grantee creates no liability unless his grantor is bound to pay the debt.

2. Release of an obligor-mortgagor of his liability is not a defense to a suit to foreclose the mortgage given to secure his bond, but, if pleaded and decided, is forever conclusive.

3. A former judgment is res adjudicata of all pleadable defenses whether set up or not; it is also a bar to a second suit for a cause of action or defense pleaded, tried, and decided in a former action between the same parties.

4. A decree in foreclosure against the obligor-mortgagor is conclusive only as to amount of the debt in a suit on his bond for deficiency. Defenses to liability on the bond are available in an action at law on the bond.

5. Where an obligor in a foreclosure suit counterclaims an equitable defense to liability on the bond, the counterclaim will be retained pending the decree of foreclosure and sale, unless the complainant disclaims a right to sue for deficiency.

Suit by the Usbe Building & Loan Association, a corporation of New Jersey, against the Ocean Pier Realty Corporation, a New Jersey corporation, and others, and Fred Nieburg and others, who filed counterclaims. On motion to dismiss answer and counterclaims.

Motion granted.

Schotland & Schotland, of Newark, for complainant.

Cohen & Klein, of Newark, for defendants.

BACKES, Vice Chancellor.

The bill, in the ordinary form to foreclose a building and loan association mortgage, discloses that the mortgage, upon property in Long Branch, was executed June 10, 1926, by the D. & D. Realty Company, Inc., to the complainant to secure the bond of the company, Fred Nieburg, Emanuel Kramer, Harry Davis, Joseph Davis, and five others, for $75,000, to be paid in monthly installments in the manner of such mortgages. The bond and the mortgage contain acceleration clauses that, if installments of dues or interest fall in arrears three months, the principal shall become due at the option of the complainant. The mortgaged premises were successively conveyed four times subject to the mortgage, and in the fourth and last conveyance, May 1, 1929, to Ocean Pier Realty Corporation, that corporation assumed the payment of the mortgage. On August 13, 1932, the Ocean Pier Realty Corporation and three individuals, bound themselves to "make payment on account of complainant's mortgage in the same manner as payment of dues, interest, penalties, etc., are provided for by the constitution and by-laws of complainant association," to induce the complainant to withdraw its suit to foreclose the mortgage, then recently commenced. The suit was discontinued. More than three months' dues and interest are in arrears, and the Ocean Pier Realty Corporation and the three individuals also defaulted in their agreement. The prayer is for an accounting, a sale to make the money found due, and a foreclosure of the equity of redemption.

Though the mortgagor, the D. & D. Realty Company, Inc., parted with the title, it and the nine bondsmen are joined as party defendants. They are proper parties for discovery, but not for relief. They are also proper parties under the statute as noticees. P. L. 1932, p. 509 (Comp. St. Supp. § 134—48). The four bondsmen above named answer and counterclaim that the agreement of August 13, 1932, by the complainant with the Ocean Pier Realty Corporation et al., was a novation, relieving them from liability on their bond; they also plead that thereby (by discontinuing the foreclosure suit) the time for the payment of the debt was extended and consequently they were discharged from their obligation on the bond. The prayer of the counterclaim is that they be decreed to be absolved. The motion is to strike the answer and counterclaim.

Assuming that the agreement of August 13, 1932, had the effect of absolving the defendants from their obligation on the bond, it affords no defense to foreclosure; the mortgage debt remains unpaid; the mortgage security is unimpaired; and the complainant is entitled to a decree. The defense, however, is not interposed to defeat foreclosure. The defendants anticipate a suit at law for deficiency on their bond, and feel they must make their defenses here, or else be barred at law by the rule of res adjudicata.

The agreement of August 13, 1932, was not a novation. It was further security, and the security was personal to the complainant, as was the agreement to extend the time personal to the Ocean Pier Realty Corporation, and for this reason: The assumption of the mortgage by the Ocean Pier...