[44 NJSuper Page 196] Plaintiff brings this foreclosure action as subsequent assignee of a $100,000 mortgage given by defendant company to Sara S. Washington (later Sara S. Washington Logan), now deceased, covering its hotel property at Brigantine, New Jersey. The complaint alleges the following defaults under the bond and mortgage and the mortgage extension agreement entered into between Mrs. Logan's executors and the defendant: (1) non-payment of $2,000 interest which fell due April 3, 1956; (2) non-payment of municipal taxes for the first two quarters of 1956; (3) non-production of receipts for tax installment
payments within ten days of such payments; and (4) non-payment of installments on account of mortgage principal in the respective amounts of $2,000 in 1955 and $3,000 in 1956.
Only the defendant hotel company answered. It claims that plaintiff may not foreclose because on June 4, 1956 (the actual date was June 1) defendant paid all taxes then due, and on that date also made written tender to plaintiff of the interest due April 3, 1956, as well as the $2,000 installment of mortgage amortization then believed to be due, together with interest on both these sums from April 3 to June 4, 1956. Accompanying this written tender was a certified check in the sum of $4,041.37. Defendant says its tender has been a continuing one, and it has been and is willing to make immediate payment of not only the $4,041.37 but any other sums that may be due plaintiff under the mortgage. The tender has been rejected although, defendant alleges, plaintiff's president first took the check into his possession but later returned it. Further, defendant claims that plaintiff has never given formal notice of its election to default the mortgage, nor ever demanded payment of interest, taxes or amortization. It contends that any delay in paying taxes and interest before this action was instituted was due to pending negotiations with Mrs. Logan's residuary legatees for the purchase of the mortgage, and also the understanding between the hotel company and Mrs. Logan, the original mortgagee, permitting it to pay taxes and interest during the summer season when funds were available. Defendant insists that it acted with dispatch to cure any alleged default or defaults when it paid all taxes due and made its June 4, 1956 tender, inasmuch as it had been unable to ascertain to whom the residuary legatees (the first assignees of the mortgage) had assigned the mortgage, no notice of the later assignment to plaintiff having come to defendant's attention until it was recorded on May 25, 1956.
It is admitted that the first and second quarter taxes for 1956 became due February 1 and May 1, respectively; that a half year's interest fell due on April 3, 1956; that the residuary legatees served notice of default on defendant on
May 15, 1956 demanding payment of the mortgage in full; and that defendant paid all taxes due and delinquent on June 4, 1956 (June 1).
The core issue for determination is whether, in the circumstances here presented, defendant had defaulted under the terms and conditions of the bond and mortgage and the extension agreement; and if there was a default, is plaintiff in equity and good conscience entitled to foreclose at this time?
The $100,000 bond and mortgage were given by defendant to Sara S. Washington (Logan) on April 3, 1950, payable in three years, with interest at 4%. The instruments included the usual 30-day default clause for failure to pay taxes or semi-annual interest or to produce tax receipts within ten days after payment, the whole principal to become due and payable immediately at the option of the mortgagee, her heirs or assigns.
The hotel company fell into difficulties soon after; receivership proceedings were brought against it in our former Court of Chancery at the close of 1950, and the company then sought relief in the federal courts under the Bankruptcy Act, 11 U.S.C.A. § 1 et seq. It apparently was not discharged until April or May 1953, interest and taxes meanwhile having fallen far in arrears. At this point the executors of the Logan estate, with the approval of the referee in bankruptcy, wrote defendant on May 20, 1953 agreeing to extend the mortgage for ten years on certain terms and conditions, among them payment of back taxes and interest. The extension was to run from April 3, 1953, with interest at 4%, principal to be amortized according to a schedule later incorporated in a formal extension agreement described below.
Mrs. Logan, the original mortgagee, died testate March 23, 1953, leaving her residuary estate (into which the mortgage fell) in equal shares to Joan Washington (Hayes) and Joshua Wynn of Atlantic City, Verna Gosnell of Baltimore, Maryland, and Ida Ellen Phillips Johnson of Reading, Pennsylvania. She named William Gosnell of Baltimore and William
A. Dart of Atlantic City, executors, and William E. Stringer, Atlantic City attorney, proctor. Shortly after, these four residuary legatees entered into an agreement with Shumpert Logan, decedent's husband, of Atlantic City, that he would share equally with them in the residuary estate.
The hotel company paid off back taxes and interest, as had been agreed with the executors, and undertook to pay quarterly taxes and semi-annual interest thereafter, although on an irregular schedule. Many payments were made within the 30-day grace period, but the following were paid outside the grace period: 1954 taxes, second quarter (61 days late), third quarter (173 days late) and fourth quarter (81 days late) -- the third and fourth quarters were paid on January 20, 1955; 1955 taxes, first quarter (246 days late), second quarter (157 days late) and third quarter (65 days late) -- these three quarters were paid October 4, 1955 -- and fourth quarter (61 days late). It has already been noted that the taxes due February 1 and May 1, 1956 were not paid until June 1, 1956, after notice of default and before action begun.
Semi-annual interest of $2,000 was paid outside the grace period as follows: that due April 3, 1953, paid 123 days late; that due April 3, 1954, balance of $1,000 paid 94 days late; that due October 3, 1954, $1,000 paid 33 days late, and $1,000 balance paid 100 days late; that due April 3, 1955, $1,000 paid 95 days late and the $1,000 balance paid 100 days late; the $2,000 interest due April 3, 1956 was, as noted, part of the tender made June 4, 1956.
On February 16, 1956 the executors of the Logan estate and defendant finally formalized the mortgage extension letter sent by the executors some three years before. (The cause for the delay is not clear; plaintiff blames it on defendant's officers.) The agreement refers to that letter and provides that the mortgage be extended for a period of ten years from April 3, 1953, the $100,000 to be amortized as follows: no amortization for the first two years; "the third year of the extended term two percent (2%) amortization shall be paid; the fourth year of the extended term three percent (3%) shall be paid; and the fifth and succeeding
years during the extended term, five percent (5%) amortization shall be paid in each year, and the balance of unpaid principal, together with unpaid interest, shall be due and payable at the end of the extended term, to wit: April 3, 1963." The executors agreed not to demand payment of the principal, except for amortization, during the extended ...