On appeal from the Supreme Court.
For the appellant, Nicholas A. Tomasullo and Maurice A. Scotch.
For the respondents, Eugene Liotta.
Amici curiae, John Warren, Allen B. Endicott, Jr., and Israel B. Greene.
Amicus curiae, John Lloyd, Jr.
The opinion of the court was delivered by
PERSKIE, J. By concession, the basic question requiring decision, in this cause, is whether the failure to join a tenant, here a monthly tenant, as a party defendant to a foreclosure suit, and the barring of his interest, constituted a valid defense to a suit thereafter instituted by the mortgagee against the mortgagors on the bond of the latter, and which bond was secured by the mortgage so foreclosed, for the resultant deficiency arising from the foreclosure of the mortgaged premises.
The facts are not in dispute. Respondents, who were defendants below, executed and delivered their bond to appellant, who was the plaintiff below, in the penal sum of $30,000 conditioned for the payment of the just sum of $15,000. This bond was secured by a building and loan association mortgage on respondents' property located in Elizabeth, New Jersey. Respondents defaulted; appellant took possession of the mortgaged premises. One Chauncey Holmes was at the time a tenant in possession of part of the premises so taken. Holmes attorned to appellant and continued in possession of the premises in pursuance of an agreement with appellant as a monthly tenant. About two years after appellant had taken possession of the premises, as aforesaid, it filed a bill in chancery to foreclose the mortgaged premises but did not make Holmes a party defendant to the suit. The deficiency arising out of the foreclosure amounted to $8,768.62.
Thereafter appellant instituted the instant suit against respondents on their bond to recover the aforesaid deficiency. Respondents filed a general denial of liability in the premises, and, in addition thereto, set up the separate defenses (1) that appellant was not entitled to recover because it failed to join Holmes as a party defendant to the foreclosure suit, and thus failed to comply with the provisions of the act relating to the procedure on bond where debt is not satisfied by foreclosure (Pamph. L. 1880, p. 255, amended by Pamph. L. 1881, p. 183; 3 Comp. Stat. 1709-1910, p. 3421, as further
amended by chapter 82, Pamph. L. 1933, p. 172), and, (2) that appellant had not exhausted its security before it had instituted the instant suit on respondents' bond.
Proofs were taken and the truth of the facts as stated by respondents in their answer was admitted; their legal efficacy only was challenged.
The learned trial judge concluded "that the statute requires that all tenancies in the mortgaged premises be foreclosed as a condition precedent to a deficiency action," and since it was conceded that Holmes was not made a party defendant to the foreclosure suit, he directed that "judgment be entered in favor of the defendants and against ...