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Silver v. Williams

Decided: March 7, 1962.

BENJAMIN SILVER, PLAINTIFF,
v.
THOMAS WILLIAMS, SR., ET AL., DEFENDANTS, AND PHILIP MITCHELL, ASSIGNEE OF G & S DUO HOLDING CO., DEFENDANT-APPELLANT, AND STANDARD DISCOUNT CORP., ASSIGNEE OF ALLEN F. ROULHAC AND ELTON E. HILL, DEFENDANTS-RESPONDENTS



Conford, Gaulkin and Kilkenny. The opinion of the court was delivered by Conford, S.j.a.d.

Conford

The issue here is the narrow one of the respective priorities of certain subsequent encumbrances in surplus moneys realized on a sheriff's sale upon foreclosure of a first mortgage. The sole parties on this appeal are the respondent Standard Discount Corp. ("Standard" hereinafter), assignee of two judgments recovered December 6, 1954 against the then owner of the property, and Philip Mitchell, assignee of a note and recorded mortgage on the property executed July 14, 1960, judgment having been entered on the note January 24, 1961, followed by issuance of execution thereon February 15, 1961 and consequent levy on the right, title and interest of the then owner of the property April 26, 1961.

The foreclosure action was instituted January 12, 1961 and lis pendens filed January 19, 1961. The final judgment in the foreclosure was entered July 25, 1961, while the order for distribution of surplus moneys, awarding Standard priority over Mitchell, was made November 22, 1961 pursuant to an opinion filed in the Chancery Division after a hearing on an application for surplus moneys. The order fixed the priorities also of holders of another judgment and of two other mortgages, but those interests were not joined as parties in this appeal nor has any question been raised with respect to them in the notice of appeal or on argument. We therefore confine our consideration to the relative priorities of the Standard and Mitchell judgments.

The trial court determined, preliminarily, and Standard concedes, that ordinarily the holder of a judgment junior in time gains priority of lien over a senior judgment by first levying upon the land under execution issued on the judgment. N.J.S. 2A:17-39, as consistently construed by the courts; Clement v. Kaighn , 15 N.J. Eq. 47 (Ch. 1862); Bogert v. Lydecker , 45 N.J.L. 314 (Sup. Ct. 1883); Lippincott v. Smith , 69 N.J. Eq. 787 (E. & A. 1906); Vineland Savings & Loan Assn. v. Felmey , 12 N.J. Super. 384 (Ch. Div. 1950). The Court of Errors and Appeals has held that the reversal of chronological priority follows from the prior execution and levy by the junior judgment holder, regardless of who first sells the land or the mode of sale. Lippincott v. Smith, supra (69 N.J. Eq. , at p. 791).

However, the trial court here held that Mitchell could not gain priority for his judgment by execution and levy because the obligation on which it was based was also secured by a mortgage on the land levied upon. Supporting New Jersey cases cited in the opinion, and also partly relied upon by Standard, are Lydecker v. Bogert , 38 N.J. Eq. 136 (Ch. 1884); Van Mater v. Conover , 18 N.J. Eq. 38 (Ch. 1866), and Severns v. Woolston's Ex'rs , 4 N.J. Eq. 220 (Ch. 1842). We are unable to concur in the conclusion of the trial judge that the mere fact that an obligation is secured by a mortgage ipso facto invalidates an execution and levy pursuant to judgment on the obligation upon the mortgaged lands.

If Mitchell's chose were a bond secured by a mortgage rather than, as it is, a note , he would have been precluded from proceeding upon the bond before foreclosing the mortgage and sustaining a deficiency on the debt at the sale, by virtue of N.J.S. 2A:50-2, which makes it mandatory that foreclosure of the mortgage be first resorted to. But had the lien of the mortgage in such case been extinguished by the foreclosure of a prior mortgage and sale of the premises he would have been remitted to an action

on the bond subsequent thereto, provided it were commenced within one year of the sale, or of its confirmation if required. N.J.S. 2A:50-8. But these statutes do not apply where the obligation secured by the mortgage is a note. In that case the obligee is free to pursue his ordinary remedies on the obligation without regard to the mortgage. Asbury Park and Ocean Grove Bank v. Giordano , 3 N.J. Misc. 555, 129 A. 202, (Sup. Ct. 1925), affirmed o.b. 103 N.J.L. 171 (E. & A. 1926); Chodosh v. Schlesinger , 119 N.J.L. 405 (E. & A. 1938). Since Mitchell's obligation was in the form of a note he was free to proceed to recover upon and collect the obligation free from the restrictions and inhibitions of the statutes cited.

The Lydecker and other cases cited above as relied upon by Standard do not support its position. As for the Lydecker case itself (38 N.J. Eq. 136), most frequently cited in respect of this general subject, the facts showed that the holder of a bond and mortgage had recovered a judgment at law on the mortgage debt, and bought in the premises at an execution sale. The bill of complaint involved in the cited opinion was filed to restrain the obligee from selling other lands of the complainant to satisfy the balance due on the obligation after crediting the proceeds of the sale. The opinion of the court suggested that the injunction sought would issue unless defendant credited plaintiff on his debt "what he ought to credit, in view of his purchase of the property under the circumstances" (at p. 142) and directed an inquiry whether defendant "ought, under the circumstances, to be permitted to raise any more money by execution, on account of the debt, and if anything, how much." Ibid. While the body of the opinion is not entirely clear as to the court's assessment of the legal or equitable effect of the initial judgment sale, or with regard to its discussion of precedents involving comparable situations, it is perfectly plain that it intimated no view that the execution and sale was irregular or void by mere reason of the fact that it was based upon a judgment taken upon

a debt secured by a mortgage and that the property sold was covered by the mortgage.*fn1 The most for which the case can fairly be cited in relation to Standard's position is that if the manner by or attending circumstances under which a creditor holding a mortgage for his chose sells the mortgaged land through judgment execution are inequitable to the owner he will be restrained from so doing upon application by the owner. None of the earlier New Jersey cases cited in Lydecker , which we need not analyze in detail, holds an execution-sale upon a judgment obtained for a debt secured by a mortgage covering the property sold to be void or illegal per se. In Copperthwait v. Dummer , 18 N.J.L. 258 (Sup. Ct. 1841), (not cited in Lydecker), it it was held to be no bar to an action on a bond that a suit was pending in Chancery to foreclose a mortgage given to secure the bond. (This was, of course, prior to the enactment of L. 1880, p. 255; see footnote.)

Later cases have cited Lydecker as merely a ruling on the procedure for compelling the mortgage creditor to deal equitably with the owner upon undertaking to realize on the obligation. See Lanahan v. Lawton , 50 N.J. Eq. 276, 281, 282 (Ch. 1892); Pettingill v. Hubbell , 53 N.J. Eq. 584, 587 (Ch. 1895); Brady v. Carteret Realty Co. , 66 N.J. Eq. 243, 250 (Ch. 1904). As recently as Reid v. McMichael Holdings , 56 A. 2 d 435 (Ch. 1947) (not officially reported), so ripe an equity mind as Judge (then Vice-Chancellor) Jayne found nothing untoward in the circumstance that two banks contesting for priority of liens, where both held mortgages on a specific parcel, had each sold and bought in the property on execution sales ...


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