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Borough of Brooklawn v. Brooklawn Housing Corp.

Decided: January 25, 1940.

BOROUGH OF BROOKLAWN, PLAINTIFF-APPELLANT,
v.
BROOKLAWN HOUSING CORPORATION, MICHAEL R. GROSS AND WILLIAM OKIN, DEFENDANTS-RESPONDENTS



On appeal from the Supreme Court.

For the plaintiff-appellant, A. Moulton McNutt.

For the defendants-respondents, Louis B. LeDuc and Ralph W. Wescott.

Wells

The opinion of the court was delivered by

WELLS, J. This is an appeal by plaintiff, borough of Brooklawn, hereinafter called the borough, from a judgment of nonsuit entered in the Supreme Court, Camden Circuit, in favor of the defendants, Brooklawn Housing Corporation, hereinafter called the Corporation, Michael R. Gross and William Okin.

On November 4th, 1931, the Corporation entered into a contract with the United States of America, represented by the United States Shipping Board, hereinafter called the Board, whereby it agreed to purchase certain properties, and bonds and mortgages covering certain other properties, all located in the borough of Brooklawn. On August 16th, 1932, the first contract having been partially performed, the same parties entered into another agreement reaffirming the first contract and extending the time for completion of performance. To this second contract, which forms the subject-matter of this action, there was annexed a guarantee of performance given by the defendants Gross and Okin, who were the president and treasurer, respectively, of the corporation.

The borough was not a party to either of these contracts. However, the Corporation, as a part of its agreement of purchase, guaranteed the payment to the borough of "any and all taxes, assessments for public improvements, and water service or water rent charges, with interest, penalties and costs and any and all charges thereon, now assessed, levied or charged against the properties covered by the bonds and mortgages described * * * or which may be assessed, levied or charged against the same at any time prior to the delivery of the assignment or assignments of such a bond or bonds and a mortgage or mortgages * * *." In addition to this and other provisions of the contract it was agreed that "all rights of action for any breach of such contract by the party of the second part are reserved to the United States."

The rest of the contract having been performed, on September

10th, 1936, the corporation took assignments of mortgages covering six unimproved lots. These lots had been assessed by the borough for taxes and other municipal liens but the same were not collected during the time that the properties or mortgages thereon were owned by the United States or its representative, the board. One of these lots were sold at a tax sale held on September 9th, 1931, and the others were sold at a tax sale held on December 12th, 1937, the purchaser in each instance being the borough.

After taking title to the mortgages, the Corporation did not pay to the borough the taxes and assessments on these six lots which, with interest, amounted to $14,621.58. As a consequence, the borough brought this action under the contract between the board and Corporation seeking to recover the amount of taxes, &c., from the Corporation and from Gross and Okin as guarantors.

At the time of trial the borough proved the contract, the assignment of the mortgages, and the amount of municipal liens which were due on the properties concerned. Thereupon a motion for nonsuit was made on behalf of the defendants, and such motion was granted on the following grounds: (1) that the borough was not a party entitled to bring action under the contract between the board and the Corporation; (2) that there could be no recovery against the guarantors if there was no recovery against their principal; and (3) that the borough must resort to the statutory method for collection of taxes. It is from the judgment entered upon the granting of such nonsuit that this appeal is taken.

The borough contends that it is a third party beneficiary to the contract between the board and the Corporation, Gross and Okin; and that as such a beneficiary it is entitled to sue for the revenue lost by reason of the breach of the covenant guaranteeing payment of taxes, assessments and other municipal liens. Reliance is placed upon the provision of R.S. 1937, 2:26-3.6, which states: "A person for whose benefit a contract is made, either simple or sealed, may sue thereon in any court and may use such contract as ...


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