Price, Gaulkin and Sullivan. The opinion of the court was delivered by Sullivan, J.A.D.
Plaintiff, as trustee, brought two actions to foreclose two mortgages given by the defendants H. Ernest Strubbe, Sr. and Eleanor Strubbe, his wife. One mortgage covered property on Stiles Street, Elizabeth, N.J., which was owned by Eleanor Strubbe; the other covered three properties in Essex County, one of which was situate on Central Avenue, East Orange, and was owned by the Strubbes as tenants by the entirety, and the other two were situate on Fourth Avenue, East Orange and University Court, South Orange, respectively, and were owned by H. Ernest Strubbe, Sr. The mortgages were given as collateral security for a $600,000 note and mortgage dated July 3, 1956, due one year from date and made by West Albany Warehouses, Inc. to plaintiff on certain property in West Albany, New York. The West Albany note and mortgage were executed by Mr. and Mrs. Strubbe as president and secretary respectively of the corporation. All of the mortgages and the note were executed on the same date as were two agreements in which the Strubbes personally guaranteed payment of the West Albany note and mortgage. When the note became due on July 3, 1957, and demand for payment was not met, foreclosure proceedings were commenced in New York on the West Albany mortgage.
H. Ernest Strubbe was adjudicated a bankrupt in 1957 and a trustee appointed for him. The instant proceedings were commenced in 1958 to foreclose the two collateral security mortgages on the Elizabeth, East Orange and South Orange properties and answers were filed herein which, inter alia , charged that the $600,000 loan was usurious and had actually been made to Strubbe, individually, although disguised as a corporate loan to circumvent the usury laws.
A separate suit was also filed in 1958 by Eleanor Strubbe
alleging fraud, misrepresentation, lack of consideration and lack of independent advice in her execution of the mortgage on the Elizabeth property and her guaranty of the West Albany debt, and seeking to void both instruments on these grounds.
All three actions were consolidated and tried together.
The trial judge ruled that the laws of New Jersey were applicable to the transaction and that the loan was usurious and was made to Strubbe, individually, but that in order to avoid the defense of usury the corporate cloak was used. The court therefore struck the $70,000 charge made by the mortgagee for the loan and reduced the amount of the debt to $530,000.
The court also found that there was fraud in this case practiced upon Mrs. Strubbe by her husband; that constructive notice of the fraud was brought home to the plaintiff by the circumstances of the case; that the doctrine of unclean hands should be applied against plaintiff and that the mortgage on the Elizabeth property should be declared null and void as should the guaranty agreements as far as Mrs. Strubbe was concerned. The opinion of the trial court is reported in 56 N.J. Super. 274 (Ch. Div. 1959). Plaintiff appeals.
Since the trial and pending appeal H. Ernest Strubbe died and Eleanor Strubbe, individually and as executrix under the will of H. Ernest Strubbe, Sr., and herself, Edward August Strubbe and H. Ernest Strubbe, Jr., individually and as trustees under the will of H. Ernest Strubbe, Sr., have been substituted as defendants in place of H. Ernest Strubbe, Sr.
The evidence presented at the trial discloses a complicated financial transaction, the background and details of which are accurately and comprehensively set forth in the opinion of the trial court, and no useful purpose would be served by restating them here.
On the issue of usury, a review of the record satisfies us that there was ample credible ...