Goldmann, Foley and Leonard. The opinion of the court was delivered by Foley, J.A.D.
[66 NJSuper Page 431] Plaintiffs appeal from a judgment entered in the Chancery Division. Plaintiffs were the owners of three properties known as 245 Grand Avenue, Hamilton Township, and 1701 Brunswick Avenue and 4 Hope Street, Lawrence Township. They had paid $18,300 for the Brunswick Avenue and Hope Street properties, and $12,000 for the Grand Avenue property. The three parcels were encumbered
by two mortgages held by Roma Savings and Loan Association. The balance due as of February 1957 on the mortgage covering the adjoining Brunswick Avenue and Hope Street properties was approximately $7,950; the balance due on the Grand Avenue property, approximately $4,400. A second mortgage on all three properties was held by Peter and Josephine Barber. This mortgage had been in default for some time and there was a balance due thereon of $5,750. The Barbers sold this mortgage to the Benson Investment Co. at a $1,000 discount.
Plaintiffs were unable to meet their obligations under these three mortgages and late in 1956 Roma instituted a foreclosure suit. Plaintiffs then consulted one Jerome Kurtz, not a member of the bar, who introduced them to the defendant. A major part of defendant's business consisted in arranging loans on substandard properties. After discussing the matter with Roma's attorney plaintiffs consented to convey the three properties to defendant, who agreed that he would assume all obligations currently encumbering the properties, including the interest and counsel fees and costs which had been incurred by reason of plaintiffs' prior defaults. It was further agreed that the defendant would lease the three properties to plaintiffs for a term of three years at a monthly rental of $275, and that they would have an option to repurchase them for $18,300. The agreement also called for a repurchase down-payment of $500 and provided that the balance of the repurchase price, $17,800, be paid in monthly installments of $275, out of which installments there would first be paid taxes, insurance and 6% interest on the unpaid balance, the remainder of each payment to be credited in reduction of the principal then due.
The terms of this agreement were set forth in a letter dated February 2, 1957, to which plaintiffs endorsed their consent. Pursuant thereto, plaintiffs conveyed the properties to the defendant, who in turn executed the lease and option referred to. He paid all arrearages and counsel fees
on the Roma mortgages and also purchased the Benson mortgage for $3,300.
Within thirty days thereafter plaintiffs defaulted in their obligations under the lease. Later in 1957 plaintiffs retained an attorney, Ernest Glickman, Esq., who undertook negotiations in their behalf which resulted in a supplemental agreement dated November 15, 1957. This provided for the reinstatement of the lease, and an option to plaintiffs to repurchase the properties for $18,300 cash or, alternatively, to assume the various mortgages and pay the difference between the aggregate of these encumbrances and $10,300.
Within a short time plaintiffs were again in arrears. Again Mr. Glickman negotiated with defendant and in March 1958 a third agreement was entered into by the parties as follows: (1) the Grand Avenue property was retained by defendant; (2) credit in the amount of $6,800 was given to plaintiffs on this property, thereby reducing the indebtedness from $18,300 to $11,500; (3) under date of March 11, 1958 the Hope Street and Brunswick Avenue properties were leased to plaintiffs at a rental of $175 monthly with an option to repurchase for $11,500; (4) plaintiffs executed a general release of their rights under the original lease agreement. At that time the obligations owed by plaintiffs on the three properties, including disbursements for insurance and installments, amounted to approximately $17,300. Thereafter defendant contracted to sell the Grand Avenue property for $11,900 under a long-term conditional sales contract.
On September 16, 1958 plaintiffs filed a verified complaint in three counts seeking: (1) that plaintiffs be declared the true owners of the three properties and defendant merely the holder of an equitable mortgage thereon; also that defendant account for moneys received and expended as such mortgagee; (2) that the leases be set aside or reformed, and plaintiffs be declared the true owners; that the release above mentioned be set aside;
that defendant be required to account for profits derived from the three properties; and that compensatory and punitive damages be awarded against him for malicious prosecution; (3) that defendant be restrained from prosecuting any action for possession arising from the transactions pending an adjudication of the suit.
Prior to the final hearing the trial court put the properties in the control of the defendant and relieved plaintiffs of making further ...