Ventnor Inv. & Realty Co. v. Record Dev. Co.

• Decision Date: 15 July 1911
• Citation: 80 A. 952,79 N.J.E. 103
• Parties: VENTNOR INVESTMENT & REALTY CO. v. RECORD DEVELOPMENT CO. et al.
• Court: New Jersey Court of Chancery

80 A. 952

79 N.J.E. 103

VENTNOR INVESTMENT & REALTY CO.

v. RECORD DEVELOPMENT CO. et al.

Court of Chancery of New Jersey.

July 15, 1911.

Suit by the Ventnor Investment & Realty Company against the Record Development Company and others, in which some of the defendants file a cross-complaint. Decree as stated.

Godfrey & Godfrey (H. Starr Giddings, of counsel), for complainant.

John S. Westcott, for Record Development Co. and receiver.

Gaskill & Gaskill, for Camden Safe Deposit & Trust Company.

Bourgeois & Coulomb, for Wade and others. U. G. Styron, for Shaw and others.

Terry Parker, for Archibald Parker and others. James M. Sheen, for Birmingham and others.

Morris M. Gorson, for Gorson and others.

LEAMING, V. C. I am convinced that the several cross-complainants, who as purchasers of lots forming part of the mortgaged premises seek to avail themselves of the benefit of the covenant touching releases contained in complainant's mortgage, are entitled to the relief sought by them.

In reaching this conclusion I think it unnecessary to attempt to define any general rule to control cases of this class. As it is clearly within the power of a mortgagor and mortgagee to covenant that releases may be procured by the vendees of the mortgagor and that such releases may be procured by purchasers after default in the payment of the mortgage has occurred, it necessarily follows that the result of every controversy of this nature must be largely dependent upon the special circumstances of the case.

In the present case the covenant contained in the mortgage is as follows:

"It is hereby expressly agreed that portions of the above described premises shall and may be released from the operation of this mortgage upon the payment to said party of the second part the sum of fifty dollars for each and every lot so released; said lots being designated on a certain map or plan of said above described premises entitled 'Map of building lots in Ventnor City, N. J., owned by Wheelock Company, by E. D. Rightmire, city engineer, Ventnor City, N. J., which said map is duly filed in the clerk's office of said Atlantic county, or intended so to be.

"All sums paid for said releases shall be applied on account of the aforesaid debt of forty-one thousand three hundred dollars, and a certain mortgage owned by Camden, Atlantic and Ventnor Laud Company to secure the payment of fifty-eight thousand seven hundred dollars and deducted therefrom.

"Whereas the Camden, Atlantic and Ventnor Land Company holds a mortgage of fifty-eight thousand seven hundred dollars, which is a prior lieu to this mortgage, and whereas the holder of said mortgage has agreed to release any lot or lots from the lien of said mortgage at any time for the sum of forty dollars, for each lot so released, it is agreed that upon the payment of the sum of forty dollars for each lot released from the lien of said first mortgage that the holder of this mortgage will release such lots for the sum of ten dollars per lot"

This covenant can be adequately understood only when considered in connection with the circumstances surrounding the transaction at the time the mortgage was executed. Ten dollars per lot when multiplied by the total number of lots covered by the mortgage would amount to a sum less than the amount of the mortgage debt. There was, however, a prior mortgage, the holder of which was to receive $40 per lot for releases, and the release money from less than one-half of the lots at $40 per lot would have discharged the first mortgage. It is therefore manifest that the covenant contemplates the execution of releases by complainant for $10 per lot simultaneously with the execution of releases of the same lots by the first mortgagee at $40 per lot, and that, when the first mortgage should be discharged, complainant would become entitled to $50 per lot for each lot released. The evidence also clearly discloses that complainant's mortgage was executed in the manner stated for the primary purpose of enabling the mortgagor to make sale of the lots comprising the mortgaged premises. The entire tract was laid out into streets and lots, and the mortgagor was to embark upon the enterprise of improving the tract and procuring purchasers for the several lots, and the covenant was manifestly designed to facilitate that work. Lots were accordingly sold by the mortgagor in great numbers, and releases were from time to time executed. For such releases from the two mortgages $40 was paid to the first mortgagee and $10 to complainant. The releases executed by complainant were sometimes made to mortgagor and were frequently made to mortgagor's grantees, and not infrequently to the grantees of the grantees of mortgagor, as will fully appear by the averment of the bill. Under these circumstances, it is impossible to conclude that the covenant was regarded by the parties as a covenant personal to the mortgagor; on the contrary, it seems entirely manifest that the covenant was to facilitate sales and thus benefit the land, and was so intended and regarded by the parties to it. The benefits of such a covenant should be regarded as running with the land and passing with the land to a grantee of the mortgagor, even though in the covenant it is not expressly stated that it is for the benefit of the assigns of the mortgagor. I am not prepared to say that when a release covenant can reasonably be said to have been made merely to enable a mortgagor to relieve a portion of the mortgaged premises from the lien of the mortgage by payment of a substantial part of the mortgage...