On appeal from the Supreme Court.
For the plaintiff-respondent, Merritt Lane.
For the defendants-appellants, Hannoch & Lasser (Herbert J. Hannoch, of counsel).
Amicus curiae, Sol Phillips Perlman.
The opinion of the court was delivered by
CASE, J. The action is at law to recover from the obligors on the bond the deficiency remaining due on the mortgage debt after crediting thereon the proceeds of the sale
had in Chancery in the foreclosure proceedings. The answer, in so far as now relevant, rests strictly and exclusively upon Pamph. L. 1933, ch. 82, amendatory of an act entitled "An act concerning proceedings on bonds and mortgages given for the same indebtedness and the foreclosure and sale of mortgaged premises thereunder," approved March 12th, 1880. 3 Comp. Stat., p. 3420, pl. 47, et seq. The amendment was passed not merely after the making of the bond in suit, but subsequent to the conclusion of the proceedings in Chancery to foreclose and subsequent also to the institution of the present action on the bond. Mr. Justice Parker, sitting below, struck the answer for the reason that the amendatory statute was unconstitutional in so far as it related to the right to enforce mortgage contracts made and delivered prior to the enactment. Defendants appeal and present the constitutional question as the single issue.
It was the right of the mortgagee, the order in Chancery confirming sale having been duly made and still subsisting, to recover the deficiency in an action upon the bond. That was his right, arising from his contract, under the 1880 statute (as amended Pamph. L. 1881, ch. 147, p. 184), supra, which provided that a creditor holding a bond and mortgage, given for the same debt, must in proceeding to collect first foreclose the mortgage but that if, at the foreclosure sale, the premises should not sell for a sum sufficient to satisfy the debt, interest and costs, it would then be lawful to proceed on the bond for the deficiency. The deficiency was the amount by which the debt, as adjudged by the Court of Chancery in the foreclosure decree, exceeded the proceeds from the sale conducted by that court. Murray v. Pearce, 95 N.J.L. 104. The 1880 statute was effective when the contract was made, and that statute therefore entered into the contract without need for express stipulation to that effect. Bronson v. Kinzie, 1 How. 311; 11 L. Ed. 143. The mortgagee instituted such an action on the bond and then, and not until then, came the 1933 amendment. That amendment provides that the obligor may, by his answer in an action on the bond for the deficiency, dispute the amount of the deficiency and -- not in the forum
which conducted the sale, but in the action at law on the bond -- raise an issue on the "fair market value of the mortgaged premises at the time of the sale under the foreclosure proceedings," whereupon the court which is trying the action on the bond, sitting with or without a jury, shall assess the "fair market value" and determine the deficiency by deducting that value from the debt. There can be no doubt that the amendment substitutes the "fair market value" determined in the subsequent action on the bond in place of the proceeds of the sale in foreclosure as the credit to be allowed the debtor in reduction of the debt. It is apparent that when an obligee on a bond has, as an incident to his contract, the right to recover a liquidated sum, first by receiving the proceeds from the sale of the pledged property and supplementarily by a personal action, and a statute is thereafter passed, the direct effect of which is to provide an opportunity to the debtor for reducing the sum recoverable, his contract is impaired. It might well happen in a given case that under the questioned statute the entire right sued upon in the law action would dissolve.
We are considering the statute. It is unimportant that the foreclosure sale in the case at bar was to the mortgagee himself. The statute applies, without distinction, whether the sale be to the mortgagee or to a third party, and the statute is incapable of dissection so that it may be held to apply in the one instance and not in the other. There is no legal obligation upon a mortgagee either to bid up, or to bid in, the property at the foreclosure sale, and the impairment of his contract is the more obvious when the property is struck off to a third person at a figure less than that subsequently fixed in the action on the bond as the "fair market value." In such a posture the mortgagee has no further recourse to the property itself; the property is gone with no right of redemption in him. He is compelled to forfeit a part of the debt which his contract, valid and ...