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Scult v. Bergen Valley Builders Inc.

Decided: August 15, 1962.


Pashman, J.s.c.


On November 10, 1961, plaintiffs Morris Scult and Charles Bromberg, trading as Bromor Associates (hereafter Bromor), instituted an action to foreclose a certain real estate mortgage covering property in New Milford, New Jersey. The matter proceeded in a normal fashion -- some of the defendants filing answers, others defaulting -- and on April 5, 1962 the remaining parties appeared before the court for a pretrial conference. On this date the factual picture presented involved a dispute between the plaintiffs and defendants Walter Hertel, Doris Hertel, Benno Finkelstein and Selma Finkelstein. The substance of the plaintiffs' allegations at the conference was that they had a right, as against these defendants who were the holders of subsequent unrecorded contracts to purchase, to foreclose a mortgage which the plaintiffs held dated July 21, 1960 and recorded on July 26, 1960. The Hertels and the Finkelsteins disputed the validity of the plaintiffs' mortgage and stated that in any event said mortgage had been discharged by either a subsequent mortgage covering the properties in question or a conveyance of a certain tract of land in Piermont, New York. The issues reserved for disposition at trial were: (1) who is entitled to possession of the respective premises in question; and (2) are the plaintiffs entitled to foreclose their mortgage.

It was discovered for the first time on May 3, 1962, which was the date set for the trial of this matter, that the mortgage which the plaintiffs were seeking to foreclose did not embrace all of the tracts which the original parties to the mortgage allegedly intended. A discussion between the court and counsel for the respective parties resulted in an agreement giving the plaintiffs the right to file an amended complaint seeking, in a new count, reformation of the

mortgage which it sought to foreclose. The plaintiffs thereafter filed said amended pleading including a request for reformation which the defendants disputed on the ground, inter alia , that they were bona fide purchasers for value without actual notice of any claim of the plaintiffs in or to the tracts purchased by the defendants.

The land which is the subject matter of this litigation consists of four building tracts and was originally purchased by the defendant Bergen Valley Builders, Inc. (hereafter Bergen) from two different grantors in two separate deeds. On July 21, 1960, which was during the initial and formative stages of the development of these properties, Bergen Valley Builders entered into an agreement with the plaintiffs whereby the former obligated itself to the latter on a $28,000 real estate mortgage and promissory note in return for a loan of $25,000 from Bromor. It is this mortgage which the plaintiffs presently seek to foreclose.

The $28,000 mortgage alluded to in the preceding paragraph was drawn by George Dailey, Esquire, who acted as the attorney for Bergen Valley Builders. (It is interesting to note that although the plaintiffs did not retain separate counsel in connection with this matter, Mr. Dailey had represented them in the past in other unrelated transactions.) Mr. Dailey testified, and I find as a fact, that when he drafted the mortgage he included only the description contained in one of the two deeds into Bergen Valley Builders. Although Mr. Dailey attempted to justify his palpable mistake by explaining that he had lost his Bergen Valley Builder file when his office was moved, there can be no excuse for what was obviously more than an insignificant oversight.

The next transaction involving the four tracts occurred on October 24, 1960 when Bergen Valley Builders conveyed the properties to defendant A. E. Wassberg, Inc. (hereafter Wassberg). Mr. Dailey represented both parties in this transaction, receiving remuneration from Bergen Valley

Builders for drawing the deed and reimbursement from Wassberg for the recording expenses. As was Mr. Dailey's practice in the previous mortgage transaction with the plaintiffs, no closing statement was drawn nor was a title search or certificate of title given to the purchaser. Strangely enough, the deed covered all four tracts originally purchased by Bergen.

After Wassberg received a conveyance of the land from Bergen, it continued with the development of the properties and on July 10, 1961 entered into a contract to sell one tract to defendants Finkelstein for $27,000, of which $2,700 was immediately paid as a deposit.

A short time after the contract between Wassberg and the Finkelsteins was consummated, a mortgage agreement (including a promissory note) was made between Wassberg and the plaintiffs whereby Wassberg obligated itself to pay $22,400 to the plaintiffs within one year from July 24, 1961, which was the date the said mortgage was executed. This mortgage was recorded on August 4, 1961 and it covered all four tracts.

The next transaction of importance occurred on August 25, 1961, when Wassberg entered into a contract to sell a tract to defendants Hertel for $26,000, of which $2,600 was immediately paid as a deposit. Thereafter the Hertels and the Finkelsteins each paid an additional $2,000 to Wassberg and both moved into the homes which were on their respective tracts -- the Finkelsteins on September 25, 1961 and the Hertels on October 6, 1961.

The real difficulty in the instant case arises out of the undisputed fact that the mortgage which the plaintiffs seek to foreclose, that is, the July 21, 1960 mortgage between the plaintiffs and Bergen, does not cover all four tracts. More specifically, that mortgage includes ten feet in the rear of the Hertels' property, approximately two-thirds of the Finkelsteins' property (including part of their home), and the other two tracts. A determination must be made therefore as to whether or not, and to what extent (if at

all) the plaintiffs are entitled to reform the July 21, 1960 mortgage. Even if reformation is not warranted or justified, the broad general question of the plaintiffs' rights as ...

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