The complaint in this matter was for the foreclosure of a second mortgage given to secure a part of the purchase price of the house which defendants bought from the plaintiff. By way of counterclaim the defendants sought a rescission of the sale and cancellation of the bond and mortgage.
As limited by the pretrial order, the issues were as follows:
"a. Whether or not the defendant is entitled to a rescission of the contract and the voiding of the deed and bond and mortgage as a result of alleged false representations made by the plaintiff's officers.
b. If the defendant is not entitled to a rescission, are they entitled to an abatement in the amount of the mortgage as a result of improper construction of the house.
c. What damages, if any, the defendant is entitled to by reason of the alleged misrepresentations of the officers of the plaintiff."
Plaintiff is the owner of a tract of land in the Township of West Milford, upon which it has erected five or six dwellings. In March of 1948, defendants, who were living in the vicinity, visited the development and inspected the house which they subsequently purchased. At that time the house, save for the interior decoration, had been practically finished, and was completed before the defendants executed the contract for its purchase.
Before agreeing to buy the home, defendants examined it several times. On those occasions they were accompanied by
salesmen employed by the plaintiff and also by the man in charge of construction. And it was then, according to defendants' story, that misrepresentations were made to them concerning the quality of the workmanship and materials used in the erection of the house. The making of any misrepresentations was denied. And I am unable to conclude that the defendants relied on any statements made to them. They examined the house carefully, liked it and wanted to buy it. It was not until they were threatened with foreclosure that they made charges of fraud.
The agreement for sale was executed in May, 1948. Defendants took possession immediately. Then, they testified, defects in the construction of the house began to appear. And by November, when title was closed, all the alleged defects of which they now complain, were known to the defendants. Yet they accepted a deed without protest and continued to make payments on the mortgage until July of 1949, expressing at that time their appreciation of the consideration shown to them.
Defendants made no offer to reconvey the property to the plaintiff. They did not vacate the premises until September, 1950, a year and a half after the mortgage was in default and almost two years after discovery of the alleged fraud. And during that period defendants made no payments of principal, interest or taxes. Under such circumstances there can be no rescission. Dennis v. Jones , 44 N.J. Eq. 513 (E. & A. 1888); Industrial Savings & Loan Co. v. Plummer , 84 N.J. Eq. 184 (E. & A. 1914).
During the pendency of the trial the first mortgage on the property was foreclosed. No defense to that action was interposed by the defendants herein. The plaintiff, Cedar Knoll Realty Company, sought only to have determined the amount due upon its mortgage. The property was sold by the sheriff and, ...