Goldmann, Conford and Haneman. The opinion of the court was delivered by Conford, J.A.D.
This is an action by the Veterans Loan Authority, an agency in the State Department of Conservation and Economic Development established under the Veterans Loan Act of 1944 (N.J.S.A. 38:23 B -1 et seq.). It is brought on a promissory note dated February 19, 1946, in the original sum of $2,500, given by the defendant, a veteran, to the Rutherford National Bank, and secured by a chattel mortgage covering certain equipment for the operation of a poultry business. After default by the defendant the note was purchased by the plaintiff, in accordance with an agreement when the loan was given, all as provided for by the said act. Loans to veterans approved by the Authority which fall in default are, under the act, guaranteed by the Authority to the lending institution and are purchased by it upon the demand of the obligee substantially for the amount in default.
According to the agreed statement in lieu of record, the note was purchased by the plaintiff from the bank on July 2, 1947. Yet it took no action to recover thereon until August 1954, when it began an action in the Superior Court. That action was dismissed for lack of prosecution in 1956. The present action was instituted January 21, 1959.
In January 1947 the defendant filed a petition in bankruptcy and listed the items covered by the chattel mortgage. The record does not indicate whether the note was listed as a debt and it is not contended that it was discharged in bankruptcy. Thereafter the trustee in bankruptcy was authorized to sell his interest in the mortgaged chattels to the mortgagee. The trustee gave the bank a bill of sale, and, according to the opinion of the trial judge, received
$10 therefor (the amount is not stated in the agreed statement of record). It is not argued by either side that this circumstance is material to the issues presented. The trial judge decided that when the bank purchased from the trustee it still held the property only as security (apparently because it paid only a nominal sum), and plaintiff does not dispute this. Subsequently the bank sold the chattels without notice to the defendant, receiving the sum of $250 and crediting $103.60 to the defendant (apparently the balance represented expenses). The chattel mortgage was not foreclosed.
Judge Brown, sitting in the trial court, held that since the mortgagee had sold the property without notice to defendant, he should be credited with the value of the goods at the time of the bank's action. Accordingly, he allowed the defendant a credit of $700, found to be the then value of the goods, less the $103.60 already allowed by the bank, thereby reducing the principal obligation due on the note from $2,185 to $1,588.60, for which he entered judgment, disallowing interest because of the circumstances of the case.
The first point raised on appeal is that the action cannot be maintained at all because the plaintiff has not complied with certain provisions of the act. The first reference is to N.J.S.A. 38:23 B -12, subd. c , which provides that the last installments of interest and principal on a note given under the act "shall be payable not exceeding six years from the date of the obligation." The note, dated February 19, 1946, is payable in installments, the last due February 19, 1952. The note is obviously payable exactly six years after its date. It is therefore not in violation of the cited provision.
It is also contended that there was a violation of Section 14, which permits extension and refinancing of a loan "provided, provision is made for complete discharge of the obligation, and interest thereon, not later than six years
from the date of the original loan." The argument is rested on the fact that no effort was made to procure a discharge of the obligation until long after the expiration of the six-year period. There is no merit in the contention. The statute does not mean that the note is invalid unless the obligee forces payment within six years, as defendant interprets the statute. It simply means that an agreement may not be made for the recasting or extension of a loan which would give the maker more than six years from the original date to pay it. No such agreement was here made. If, notwithstanding the maker has not expressly been allowed more than six years, he nevertheless defaults and ...