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Harvester Building and Loan Association of Newark v. Elbaum

Decided: January 26, 1938.


On appeal from the Essex County Circuit Court.

For the appellant, Leber & Ruback.

For the respondents, Simon M. Seley.

On the brief, Lester Sandles and Richard E. Silberman.


The opinion of the court was delivered by

WELLS, J. This is plaintiff's appeal from a judgment entered in the Essex County Circuit for the defendants, on an order striking the plaintiff's reply to the defendants' answer.

The facts as found in the plaintiff's pleadings and supporting affidavits were conceded as true for the purpose of the argument before the court below and will be accepted as true for the purpose of this appeal.

It appears that on July 20th, 1935, the plaintiff instituted foreclosure proceedings on a $14,000 mortgage given by the defendants, and three days later filed the lis pendens. In the latter part of August, the plaintiff, who, as a mortgagee had taken possession of the mortgaged premises previous to the institution of foreclosure proceedings, rented one of the two apartments to Louis and Agnes Brown. These tenants took possession on September 1st. On October 29th, of the same year, the subpoena in the foreclosure was tested and on November 7th served on the defendants. On March 1st, 1936, the assistant secretary of the plaintiff building and loan company served notice upon the tenants Louis and Agnes Brown to vacate the apartment on April 1st, 1936. On March 31st, the mortgaged premises were sold at sheriff's sale to the plaintiff for $100. At this sale the attorney for the plaintiff publicly announced that: "The within premises are sold subject only to taxes and assessments unpaid and a lien against said premises and such state of facts as an accurate survey would disclose and are specifically sold free of all tenancies or rights of tenants in the property and possession will be given upon delivery of the sheriff's deed." Sometime within the first week in April the tenants vacated the apartment. On April 11th, 1936, the sale was confirmed by the Chancellor and on May 5th, 1936, the deed was actually delivered.

Within the proper time, the plaintiff commenced its suit

in the Essex County Circuit Court on the bond against the defendants for the resultant deficiency. The defendants set up in their answer the failure of the plaintiff to make the Browns, the tenants, parties to the foreclosure suit, alleging that their leasehold was not cut off by the foreclosure decree and that plaintiff had not therefore exhausted its security before suing on the bond as provided in Pamph. L. 1933, p. 172. The plaintiffs moved to strike this defense as "sham and/or frivolous" and in support of this motion presented affidavits containing the facts above set forth. The court below denied this motion on the ground that the recent decision of this court in American Italian Building and Loan Association v. Liotta, 117 N.J.L. 467, was controlling.

The plaintiff thereafter filed a reply in which it alleged that: "At said sheriff's sale held on March 31st, 1936, neither the vendible value of the mortgaged lands and premises nor the bidding therefor was in any way lessened or affected by the circumstance that on that day there existed the aforementioned tenancy of Louis Brown, which tenancy was then subject to the force and operation of the aforementioned notice of termination and which tenancy actually terminated the following day, viz., April 1st, 1936, and approximately ten days before said sheriff's sale was duly confirmed by the Chancellor of the State of New Jersey." The defendants then moved to strike this reply as sham and frivolous. In opposition to this motion the plaintiff presented affidavits by its assistant secretary and a local real estate expert supporting the allegations set forth in its reply. The court below was of the opinion that the additional facts alleged in the reply and supported by affidavits did not free the instant case from the controlling force of the Liotta case, supra, and therefore granted the defendants' motion and struck the reply as frivolous.

In doing this, we think the court below failed to observe the material distinction between the instant case and the Liotta case. In the Liotta case, the plaintiff neither alleged in its pleading nor attempted to prove at the trial that the ...

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