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McCloskey v. M.P.J. Co.

Decided: October 26, 1961.

JOSEPH MCCLOSKEY, PLAINTIFF-APPELLANT,
v.
M.P.J. CO., A CORPORATION OF NEW JERSEY, ET AL. , DEFENDANTS, AND JOHN F. O'NEILL AND JOHN M. CULLERTON, DEFENDANTS-RESPONDENTS



Goldmann, Foley and Lewis. The opinion of the court was delivered by Lewis, J.A.D.

Lewis

Plaintiff, Joseph McCloskey appeals from a final judgment of the Superior Court, Chancery Division, Essex County, determining that a collateral bond of defendants John F. O'Neill and John M. Cullerton was governed by N.J.S. 2 A:50-2 and that suit thereon, prior to a foreclosure of the mortgage security, was premature. The single issue on this appeal is the application of the statute to said bond obligation created under the following circumstances:

The capital stock of M.P.J. Co. and Commercial Construction Co., New Jersey corporations, was held by McCloskey (50%), O'Neill (25%), and Cullerton (25%). Personal differences as to the operation of the companies were resolved by McCloskey's selling his stock interest in both corporations to the remaining stockholders, O'Neill and Cullerton. Plaintiff had a total of "$70,000 or in excess of $70,000" invested in the two companies. The purchase price for his stock interest was fixed at $70,255, evidenced and secured by a $27,255 bond and mortgage of the Commercial Construction Co. and a $43,000 bond and mortgage of the M.P.J. Co. These mortgages were to encumber real estate holdings of the respective companies. Additionally, as part of the security, the individual stockholders O'Neill and Cullerton, to whom McCloskey sold his stock, were required to give their personal bond in the amount of $7,500. A provision of this instrument reads:

"This bond is given as collateral security to two bonds this day executed by M.P.J. Co., a New Jersey corporation and Commercial Construction Co., a New Jersey corporation to the Obligee in the amount of $70,225.00. In the event default is made in any of the payments due on said bond given by said M.P.J. Co. and Commercial Construction Co., and if said default continues for thirty (30) days, then the amount of this bond shall immediately become due and payable."

All documents were dated and delivered on April 23, 1959 when settlement between the parties was consummated. The bond and mortgage of the Commercial Construction Co. has since been paid and is not directly involved in the pending litigation.

Plaintiff instituted proceedings to foreclose the mortgage of the M.P.J. Co., reciting in his amended complaint the mortgage obligation of $43,000 and a default for a period of more than 30 days in the payment of a quarter-annual installment of taxes in the amount of $227.70. Plaintiff demanded, inter alia , judgment "adjudging that said lands be sold according to law to satisfy the amount due the plaintiff," and in a second count demanded judgment for possession and damages for mesne profits. His amended complaint also contained a separate cause of action respecting the bond of O'Neill and Cullerton, and a demand for judgment in the sum of $7,500, together with interest and costs.

There is a paragraph in the mortgage which reads: "This mortgage is also given to secure a bond collateral to the aforesaid bond in the amount of $7,500.00 executed by John F. O'Neill and John C. Cullerton." We observe that plaintiff did not recite nor refer to this significant provision either in his amended complaint in the foreclosure action or in the statement of facts in his brief and appendix submitted to this court. It does appear, however, in the excerpt from the mortgage printed in the appendix.

The trial judge, after reception of the evidence and argument of counsel, ordered and adjudged a sheriff's sale of the mortgaged premises, and a dismissal of the second count seeking mesne profits. He then, in the judgment, provided:

"As to the Second Cause of Action, it being determined by the Court that the bond in the sum of $7500.00 made and executed by the defendants, John F. O'Neill and John M. Cullerton, is governed by N.J.S.A. 2A:50-2, which requires a prior foreclosure of the mortgage set forth in the first cause of action, and, therefore, the suit upon the said bond is prematurely brought and may only be maintained in the event of a deficiency in the foreclosure sale; it is thereupon

Ordered and Adjudged, that judgment be entered in favor of the defendants, John F. O'Neill and John M. Cullerton, on the second cause of action, but without prejudice and without costs."

It is from this final judgment on the second cause of action that plaintiff appeals, contending that the cited statute does not apply to the bond of the individual defendants because (1) it represents an absolute guarantee, and (2) it was not ...


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