This is an action brought by the plaintiff, Isidore Feldman, to foreclose a mortgage held by him on a tract of real property described as the " business area ," being a part of a larger tract of land set aside for urban development known as St. John's Project in Jersey City. The title to said property is vested in a corporation known as Urban Commercial, Inc. Only one of the defendants, the Jersey City Redevelopment Agency, contests the validity of the mortgage and has counterclaimed for a declaration that the mortgage is null and void for the reason that it is in violation of certain deed restrictions. Said defendant further seeks a judgment requiring said tract be reconveyed to it as a result of the breach of a contract entered into with the defendant, Urban Developers, Inc., and assumed by the defendant, Urban Commercial, Inc. The plaintiff, Feldman, has filed a third-party complaint against The Title Guarantee Company, which issued a title policy insuring said mortgage.
Prior to the trial upon the merits the parties by written stipulation submitted an agreed statement of certain facts and presented two questions for determination by Judge Victor S. Kilkenny upon motion and cross-motion for partial summary judgment, reserving other factual and legal issues for the trial of the cause. Feldman v. Urban Commercial, Inc. , 64 N.J. Super. 364 (Ch. Div. 1960).
At the outset of the trial, by agreement between the parties the third-party action was severed from this proceeding pending a determination of the issues raised by the complaint and counterclaim.
The facts presented to Judge Kilkenny on the cross-motions for summary judgment and which were undisputed at the trial of the cause are as follows:
Prior to October 25, 1955 Jersey City Redevelopment Agency (hereinafter called Agency) under the authority of Title I of the Housing Act of 1949, as amended, 42 U.S.C.A., sec. 1441, et seq. , and of the Urban Redevelopment Law, N.J.S.A. 40:55C-1 et seq. , acquired title to land in Jersey City commonly known as the St. John's Project Area (hereinafter called the Project Area). On October 25, 1955 Urban Developers, Inc. (hereinafter called Developers) entered into a redevelopment contract with Agency to develop the Project Area.
On June 11, 1956 Agency conveyed two tracts of the Project Area to Developers, one tract to be developed as a residential area and the other to be developed as a business area. On said date Developers by letter requested the permission of Agency to reconvey the business area to another corporation, Urban Commercial, Inc. (hereinafter called Commercial). The stockholders in Developers and Commercial were identical. Commercial by letter on said date informed Agency of its intention to take title to the business area; that it was aware of the terms of the redevelopment contract, and that it assumed all the obligations therein set forth. Agency on said date consented to the transfer, whereupon Developers conveyed the business area tract to Commercial.
On said date Commercial executed and delivered a mortgage note in the face amount of $450,000, "or so much thereof as may be advanced," secured by a mortgage upon the business area of the same date to the plaintiff, Isidore Feldman. Agency did not give its written consent to the making of said mortgage.
On said date plaintiff advanced on account of the mortgage $250,000, which was paid over to Agency as the consideration for the conveyances of the residential and business tracts above mentioned.
Thereafter, between August 22, 1956 and December 14, 1956, the plaintiff made additional advances on account of the principal sum of said note and mortgage, totaling $100,000.
Prior to April 2, 1958 plaintiff's mortgage was past due and was in default both as to principal and interest, and on said date plaintiff entered into an extension agreement with Commercial, extending the due date to January 11, 1959. By the terms of said extension agreement Commercial agreed that the amount of principal to become due on January 11, 1959 should be increased from $350,000 to $392,000.
On October 23, 1959, Commercial being in default of its obligations to pay principal and interest due and in payment of municipal taxes due against the mortgaged premises, the plaintiff filed his complaint to foreclose his mortgage.
On February 12, 1959 both Developers and Commercial were in default of their obligations provided for in the redevelopment contract with Agency and of the covenant contained in the deeds for said properties which required them to complete all of the buildings and improvements in the Project Area within 32 months from the date of conveyance. On said date the plaintiff knew that the buildings and improvements had not been completed.
On March 20, 1959 Agency adopted a resolution declaring Commercial to be in default and so notified Commercial. No notice of such default was given to the plaintiff prior to August 27, 1959.
On July 22, 1959 Agency purchased all of the right and interest of Developers in its contract of October 25, 1955 at an execution sale conducted by the Hudson County sheriff following the entry of a judgment obtained by Agency.
The first question submitted to Judge Kilkenny on the motions for partial summary judgment was:
"A. Whether the mortgage transaction between Commercial and plaintiff was a transfer or conveyance in violation of the terms, conditions and covenants of the contract and deeds entitling Agency to compel a reconveyance of the premises to it unencumbered by any lien of plaintiff's mortgage?"
The court held that the answer to the foregoing question was:
" No, especially at this time."
The deeds to the property conveyed and the redevelopment contract contained the following provision:
"The party of the second part, for itself, its successors and assigns further covenants not to sell, lease, transfer or convey any of the land and premises hereinbefore described prior to the actual completion of all of the buildings and development operations as provided in the said Redevelopment Plan and pursuant to the agreement between the parties herein, without prior written consent of the party of the first part, its successors and assigns." (Emphasis supplied)
Judge Kilkenny held that the mortgage transaction did not violate the terms, conditions, restrictions and covenants of the redevelopment contract and the deeds delivered pursuant thereto, and that the mortgage transaction, " as it now stands ," did not entitle Agency to compel a reconveyance of the premises to it unencumbered by the lien of plaintiff's mortgage. He held that if plaintiff proceeds with the foreclosure to execution sale and a transfer of title thereunder, such transfer would constitute a violation of the terms, conditions, restrictions and covenants in the said contract and deeds, if in fact the defendant Agency did not consent to, acquiesce in, ratify or approve the mortgage transaction.
The second question submitted to Judge Kilkenny on the motions for partial summary judgment was:
"B. Whether the default against the terms, conditions and covenants of the contract and deeds relating to the time for completion of construction
entitles Agency to compel a reconveyance of the premises to it, unencumbered by any lien of plaintiff's mortgage?"
The court held that the answer to the foregoing question was a qualified "yes," but subject to an equitable lien against the property in favor of the plaintiff to the extent that his money has been used for the acquisition of this property.
It is conceded by the parties that the sum of money paid to acquire the business area was $148,254.59; hence the decision of Judge Kilkenny held that plaintiff was entitled to an ...