Goldmann, Freund and Conford. The opinion of the court was delivered by Goldmann, S.j.a.d.
Plaintiff Atlantic Seaboard Company filed its bill of complaint in the former Court of Chancery to foreclose a mortgage for $75,000, dated February 6, 1929, made by Arlington Beach Company ("Arlington") to Tradesmens National Bank and Trust Company of Philadelphia ("Tradesmens Bank"). Plaintiff alleged that it held the bond and mortgage as an assignee, and that the full amount of the principal, with interest from the date of the mortgage, was due.
The defendant Borough of Seaside Park, owner of the mortgaged property, filed an answer and defenses, and also a counterclaim asking that the mortgage be cancelled and discharged of record.
Upon the trial of the cause in the Chancery Division, the court found in favor of defendant borough and rendered judgment, inter alia , (b) that the plaintiff's action be dismissed, and (c) that the mortgage be cancelled of record (3 N.J. Super. 501 (1949)).
On appeal the Appellate Division held that Arlington was a necessary party to the cause and reversed the judgment, except that as to part (b) dismissing the action the court directed that the cause be remanded to the Chancery Division with instructions that plaintiff join Arlington as a party, and that upon such joinder the Chancery Division should take further proceedings; should plaintiff fail to make the company a party, as directed, the judgment of dismissal would be affirmed (8 N.J. Super. 188 (1950)).
Plaintiff then sought certification to the Supreme Court, which was denied.
Thereafter Arlington, having been brought in by service of summons and complaint, filed an answer and counterclaim, and also a cross-claim against the defendant borough, in which it claimed the mortgage should have been assigned to it and further claimed the right to foreclose for the amount thereof, with interest. The borough thereupon filed its answer setting up several defenses, as well as a counterclaim against Arlington demanding the mortgage be declared void and cancelled.
Pursuant to a further order of the Chancery Division, William H. Cummings, Cummings Brothers Company and the Tradesmens Bank were also brought into the case by service of summons and complaint. They filed no answers, and their defaults were entered. A letter in the nature of a disclaimer of interest in the case was received by counsel for plaintiff from the attorney for Tradesmens Land Title Bank and Trust Company, successor by merger to certain banks, including the Tradesmens Bank.
Upon the retrial of the cause the Chancery Division rendered judgment of foreclosure in favor of plaintiff for the sum of $188,175, representing the principal amount of the bond and mortgage ($75,000) and interest from the date thereof, February 6, 1929, with costs, to be raised and paid
out of the mortgaged premises, and plaintiff's costs upon the former appeal. The counterclaim of defendant borough and the cross-claim of defendant Arlington were dismissed, without costs.
The borough appeals from the whole of the judgment, except the dismissal of the cross-claim of defendant Arlington. Arlington appeals only from that part of the judgment dismissing its cross-claim against the borough.
With few exceptions, the facts are not in dispute. We set them out at some length in order fully to develop the factual basis for our application of equitable principles.
For almost half a century defendant William H. Cummings ("Cummings") has been engaged in the real estate development business, part of the time in association with his brother George S. Cummings, who died in 1932. They were incorporated as Cummings Brothers Company. Cummings testified that in the course of his business career he made use of some 35 different corporations, the names of four of them including the words "Cummings Brothers." His counsel for over 30 years was E.G.C. Bleakly, Esq., of Camden.
Three of the corporations had some part in the events leading up to the present litigation. They are parties to the action:
(1) Cummings Brothers Company, whose stock was owned in equal parts by Cummings and his brother George. The company lost its charter in 1937, and since then Cummings has been acting as surviving director and statutory trustee.
(2) Arlington Beach Company, in which the controlling stock interest was held by Cummings and his brother George until the death of the latter in 1932. In the settlement of George's estate all of the stock of the company was turned over to his widow who held it until 1939 and then transferred it to Cummings' wife. In January 1947 she gave all the stock to her two sons, William Jr. and Cyrus, to help set
them up in business. They still own the stock and are conducting the business.
(3) Atlantic Seaboard Company, the nominal plaintiff in the case. Its stock is owned by Cummings, but a few shares are held by his sons, William Jr. and Cyrus, "just to qualify" them.
Early in 1929 Tradesmens Bank made a loan of $50,000 on the promissory note of the Cummings Brothers Company, endorsed personally by its stockholders, William H. and George S. Cummings. As collateral security Arlington on February 6, 1929 gave its bond and mortgage to the bank as an accommodation to the Cummings Brothers Company, William H. Cummings and George S. Cummings. William signed both as secretary of the company. Neither instrument mentions the note or indicates the collateral nature of the transaction. The bond was for $150,000, conditioned upon the payment of $75,000 within one year with interest, and was in the usual form. The mortgage covered a tract of land under the waters of Barnegat Bay in the Borough of Seaside Park, Ocean County, and was duly recorded in the office of the County Clerk. This is the mortgage which plaintiff, as assignee, seeks to foreclose in the present action. Nothing has ever been paid on the bond.
On October 22, 1929 Arlington conveyed the land described in the mortgage, together with other lands, to Cummings Brothers Company, one of the accommodated parties. The deed recites one dollar and "other valuable consideration," contains no reference to the mortgage, and ends with a ...