131 N.J. Eq. 527 | N.J. Ct. of Ch. | 1942
By this bill the complainant seeks a money decree against the defendants for a deficiency arising out of a suit to foreclose a mortgage executed by the defendant Multiple Realty and Construction Company on July 1st, 1929. The bond which said mortgage was given to secure was executed by the defendant Multiple Realty and Construction Company, George Grossman and Irving Rubin. The defendant Neville N. Russell is a grantee of the mortgaged premises who expressly assumed and agreed to pay said mortgage. Only the defendant Russell has answered the bill of complaint. The defendant Grossman was not served with process and a decree pro confesso has been entered against the defendants Multiple Realty and Construction Company and Irving Rubin. The foreclosure bill was filed on August 23d 1937, and a final decree entered therein on January 3d 1938, in the sum of $41,787.46 with interest from December 15th, 1937, and taxed costs of $477.25. At the sheriff's sale held on March 8th, 1938, the mortgaged premises were purchased by the complainant for the sum of $100, and the sale was duly confirmed on March 19th, 1938. Notice of this suit was filed in the office of the register of Essex County on May 31st, 1938, and the bill of *529
complaint was filed on June 7th, 1938. Subpoena was issued under date of June 8th, 1938. The amount of the deficiency claimed is $42,845.12. The answer of the defendant Russell asserts "no knowledge or information sufficient to form a belief" as to the principal statements of the bill of complaint, and also asserts a right to a credit of the fair value of the mortgaged premises as of the date of the sheriff's sale pursuant to the doctrine ofFederal Title and Mortgage Guaranty Co. v. Lowenstein,
This suit is on all fours with Better Plan Building and LoanAssociation v. Holden,
At the outset it should be noted that R.S. 2:65-3 and2:65-5 have no application to this controversy, as the mortgage here involved was executed in July, 1929. However, a review of some of the pertinent statutes might be helpful.
Under the provisions of a supplement to the Chancery Act, approved March 29th, 1866 (Nix. Dig. 119), a mortgagee might, in a suit to foreclose his mortgage, obtain a money decree for a deficiency arising upon the foreclosure sale as well as a decree of foreclosure and sale; but by P.L. 1880 ch.
That the provisions of these acts that the filing of an answer disputing the amount of the deficiency claim shall terminate the right to redeem from foreclosure sale, and that recovery on the bond shall not open the foreclosure and sale *532
of the premises, as applied to pre-existing mortgages, are unconstitutional as impairing the obligation of a pre-existing contract, and in conflict with the constitutional provisions referred to, is shown by the decision of the Supreme Court inBaldwin v. Flagg,
The bond and mortgage in the instant case having been executed in 1929, prior to the date mentioned in R.S. 2:65-3, the provisions of the law in effect in 1929 must govern. Subsequent legislation did not bar the interposition of the defense in this suit which the complainant now moves to strike, and a money decree for a deficiency in this suit will open the foreclosure and sale and revive the right to redeem.
The arguments advanced by counsel for the respective parties on this motion necessitate an examination and classification of the various decisions of this court and the Court of Errors and Appeals in which a credit for the fair value of mortgaged premises against a deficiency claim has been sought or allowed on equitable principles. We are not here concerned with the statutory right, if any, to such credit. The value which has been the subject of inquiry in the cases decided in this court is "fair value" and not "fair market value," the term used in the statute. Fidelity Union Trust Co. v. Ritz Holding Co.,
The classes into which the various suits in equity involving this doctrine of fair value resolve themselves, it seems to me, are six in number, as follows:
With the first five classes of cases we need not now concern ourselves, except to say that the procedure exemplified in Class 1 lends itself to universal approval. And it is noteworthy that the doctrine of the Lowenstein Case has been expressly approved by the Court of Errors and Appeals in Vanderbilt v. BruntonPiano Co., Lurie v. Hockenjos, Fidelity Union Trust Co. v.Pasternack, National Mortgage Corp. v. Deering and FidelityUnion Trust Co. v. Dreyfuss, supra.
The procedure in Classes 2, 3, 4 and 5 has been generally disapproved, except that in Lurie v. Hockenjos, supra, the Court of Errors and Appeals considered the bill praying a restraint of the law action as a direct attack upon the decree in the former foreclosure proceedings, regarded it as a bill of review, and approved the action of the Court of Chancery *535
in allowing the order of confirmation to stand conditional upon the mortgagee's crediting the fair value of the premises on the deficiency claim, a result, it would seem, somewhat inconsistent with the later decisions in Fruzynski v. Jablonski andBroadman v. Colonial Building-Loan Association, supra. (In the still later case of Fidelity Union Trust Co. v. NorthJersey Poultry Co., supra, cited in Class 3, the appellate court said: "It is well settled that the present proceeding is like a bill of review," citing Lurie v. Hockenjos and Meranus v.Lawyers' and Homemakers' Building and Loan Association, supra); and except also that notwithstanding the comment of the appellate court in Harvester Building and Loan Association v. Kaufherr,supra, that the affirmation by the Court of Errors and Appeals in Baader v. Mascellino "did not adopt the reasoning of the court below," that reasoning was not expressly disapproved. Nor was such disapproval implicit in the opinion in the HarvesterCase as one of the factors necessary to justify a credit of fair value — the inability of the mortgagor to protect himself at the foreclosure sale — was there absent. In all of the cases cited as examples of these four classes, proceedings at law were attacked either before or after judgment, and the foreclosure decree and order confirming sale were held to be res adjudicata as to the amount of the deficiency. But they are not res adjudicata here because the defense interposed by the answer in this suit could not have been set up in defense of the foreclosure suit. Mann
v. Bugbee,
"The suit for personal judgment for deficiency against the subsequent grantee is not a suit for the same cause of action as the foreclosure suit; on the other hand, it does necessarily involve and include an assertion by plaintiff or complainant of at least one claim of right which was necessarily involved *536
in his foreclosure suit — to wit, the assertion as to the amount of the mortgage debt due and owing. In the foreclosure suit, however, he asserted a second right, i.e., to collect this amount from the lands; in the deficiency suit he asserts a different right, i.e., to collect it from the defendant personally. As to the first right, which is identical in both suits, the defendant who was also a party in the first suit, is concluded by the former decree — he can only set up allegations as to facts subsequent to that decree, such as payments on account of the mortgage debt made subsequent to the foreclosure. As to the second right — the right to require defendant personally to make payment — that right was not involved in the foreclosure suit, and the defendant can set up any and all rights which he may claim (other than anything seeking to controvert the amount of the mortgage debt remaining unpaid at the time of the foreclosure) as tending to deny, defeat or modify personal liability on his part to the plaintiff or complainant. In this respect the former decree is not an estoppel against him (unless such rights were in fact expressly pleaded, tried and determined in the former suit — Andrews v. Stelle,
True, the foreclosure decree was res adjudicata as to the amount of the mortgage debt due and owing. But the answer in this suit does not challenge that amount, it merely sets up rights "tending to deny, defeat or modify personal liability — to the complainant," rights which are peculiarly cognizable in equity.
This brings us to a consideration of the sixth class of cases exemplified by Better Plan Building and Loan Association v.Holden, Fidelity Realty Co. v. Fidelity Corporation of NewJersey and Fisk v. Wuensch, supra. It is in this class that the instant case falls. Apparently, in neither Fidelity RealtyCo. v. Fidelity Corporation of New Jersey nor Fisk v.Wuensch was it urged or considered that the foreclosure decree and order confirming sale were res adjudicata as to the amount of the deficiency. Credit for the fair value of the mortgaged premises was given as a matter of course. While *537
the cases cited in this group antedate the decisions of the Court of Errors and Appeals in the Fruzynski, Broadman, Harvester andNorth Jersey Poultry Co. cases, there is no reason to suppose that the results would have been any different had they been decided subsequent to the decisions last cited. In each of the appellate decisions there was a lack of some special equity necessary to entitle the applicant to the relief sought. Here, as in the other cases in this group, no action at law is involved, but the bill invokes the inherent jurisdiction of the Court of Chancery in suits against assuming grantees under the long-recognized doctrine of subrogation. Pruden v. Williams,
That the jurisdiction arises by virtue of this equitable right, subrogation, and does not exist in the case of an original obligor only, is settled by Princeton Savings Bank v. Martin,
This long line of decisions stood unchallenged until 1940, when our Supreme Court decided that a grantee who assumes a mortgage debt and promises to pay it makes a contract with the grantor for the benefit of the mortgagee; and that since the adoption ofchapter
Pomeroy, in his learned work on Equity Jurisprudence (4thed.) vol. 1 p. 714 ¶ 385 says:
"The meaning is, that whatever be the nature of the controversy between two definite parties, and whatever be the nature of the remedy demanded, the court will not confer its equitable relief upon the party seeking its interposition and aid, unless he has acknowledged and conceded, or will admit and provide for, all the equitable rights, *540 claims, and demands justly belonging to the adversary party, and growing out of or necessarily involved in the subject-matter of the controversy. It says, in effect, that the court will give the plaintiff the relief to which he is entitled, only upon condition that he has given, or consents to give, the defendant such corresponding rights as he also may be entitled to in respect of the subject-matter of the suit."
And in paragraph 388, page 722:
"* * * it may be regarded as a universal rule governing the court of equity in the administration of its remedies, that whatever may be the nature of the relief sought by the plaintiff, the equitable rights of the defendant, growing out of or intimately connected with the subject of the controversy in question, will be protected; and for this purpose the plaintiff will be required, as a condition to his obtaining the relief which he asks, to acknowledge, admit, provide for, secure, or allow whatever equitable rights (if any) the defendant may have, and to that end the court will, by its affirmative decree, award to the defendant whatever reliefs may be necessary in order to protect and enforce those rights. This principle is not confined to any particular kind of equitable rights and remedies, but pervades the entire equity jurisprudence, so far as it is concerned with the administration of equitable remedies."
Lord Camden, in Smith v. Clay, 3 Bro. C.C. 646, says, in part: "A court of equity * * * is never active in relief against conscience or public convenience * * *. Nothing can call forth this court into activity but conscience, good faith and reasonable diligence. When these are wanting the court is passive and does nothing."
In Miller v. Bond and Mortgage Guaranty Co., supra, it was said: "It is a far different thing for the Court of Chancery to stay its hand in granting relief unless and until the applicant for such relief does equity than to grant affirmative relief such as" there sought. And in this connection it should be borne in mind that in that case, and in all of the cases listed under classifications 2, 3, 4 and 5 above, the party seeking a credit for fair value, and not the plaintiff in the law action, or the judgment creditor, was the party invoking equity's jurisdiction.
We are thus brought back to the original question as to whether or not the decision of this court in Better Plan Building andLoan Association v. Holden, supra, is still the law *541 of this court or has been impliedly overruled by the decisions relied upon by the complainant. Or, stated in other language, whether the inherent jurisdiction of this court can be invoked by a suitor without that suitor submitting to the application of the fundamental and time-honored rules and principles of equity jurisprudence. The answer to this question, in whatever form presented, must, it seems to me, be in the negative. It would serve no useful purpose to here repeat the reasoning of Vice-Chancellor Buchanan in the Better Plan Building and LoanAssociation case, but it seems to me to be unanswerable, and I concur fully therein.
All that complainant can ask in equity is that his debt shall be paid, for "equity will not suffer a double satisfaction to be taken." Francis, Maxims of Equity (2d ed. 1739) 41; FederalTitle and Mortgage Guaranty Co. v. Lowenstein, supra; HillsideNational Bank v. Silverman,