On cross-motions for summary judgment.
In this action to declare a promissory note in default, both plaintiff and defendants have moved for summary judgment. Plaintiff seeks further leave to amend its complaint.
The admitted facts are as follows: On February 18, 1957 the defendants made and delivered their promissory note in the sum of $25,493.71 payable to the order of plaintiff, 120 months after date, which note was given in substitution for a note for the same amount, dated December 31, 1956. At the same time the defendants executed and delivered to plaintiff a mortgage, which, together with the above-mentioned note, was recorded the same day in the Ocean County
Clerk's office. The mortgage contained the customary default clause providing that upon the failure of the defendants to pay taxes or municipal assessments upon the mortgaged lands and premises within 30 days after such became due, then, at the option of the holder of the mortgage, the entire amount secured by said mortgage would immediately become due and payable. The mortgage refers to the note which it secures, but the note is devoid of reference to the mortgage.
On November 16, 1960 Esther Hausvater, mother of defendant Gustave Brown, departed this life. Thereafter under the terms of her will the defendant executor was qualified on January 10, 1961.
On February 1, 1961 the tax record for the Township of Dover disclosed that the first quarter taxes for 1961 were due and owing.
On May 19, 1961 the plaintiff caused to be served upon the defendants Gustave Brown and his wife Helen Brown a notice of their failure to pay the 1961 preliminary taxes when the same became due and payable, and further notified said defendants of its election to accelerate the mortgage. On May 26, 1961 the plaintiff served upon the executor a formal proof of claim against the estate of Esther Hausvater, which claim was denied by the executor on June 26, 1961.
On May 31, 1961 the arrearage in taxes in the amount of $91 together with penalty interest of $2.43 was paid by defendants. Subsequently, on August 31, 1961 the plaintiff instituted suit against the defendants on their promissory note, alleging that the terms of same had become accelerated by reason of the default in the payment of taxes as called for in the mortgage.
The question before this court is whether an acceleration provision in a mortgage securing a note, which note contains nothing upon its face to indicate that it is subject to the acceleration provision, enters into and becomes part of the note so that the maturity of the note is advanced in like manner with the maturity of the mortgage, thus affording the holder of the note and mortgage the right to sue on the note
and recover thereon before the date of maturity expressed on the face of the instrument.
A search of authority reveals no reported cases in this jurisdiction specifically deciding this point. Counsel have relied upon equity decisions involving mortgage foreclosure suits involving facts analogous to those at bar. Haase v. Moser , 120 N.J. Eq. 437 (Ch. 1936), affirmed 121 N.J. Eq. 344 (E. & A. 1936), appears to be the earliest reported case in this State in which the court had before it an action to foreclose a mortgage on the ground that the debt for which the mortgage was given as security was accelerated under a clause in the mortgage providing that the whole indebtedness shall become due if the taxes remain unpaid for a given period, where the same were paid before the commencement of the foreclosure suit. In that case the vice-chancellor held:
"* * * the weight of authority seems to be that if default is made in the payment of taxes, which, under the terms of the mortgage, would accelerate the payment of the principal, and the taxes in arrear have been paid before the bill to foreclose is filed, such payment re-establishes the mortgage contract and banishes the default which would entitle the mortgagee to foreclose. Under the pleadings in this case, it would not be equitable to allow the complainant to proceed with the foreclosure suit, since complainant's security was not impaired or the acceleration clause of the contract violated at the time of the filing of the bill."
The equitable principle enunciated in the Haase case, supra , was subsequently followed in Gilbert v. Pennington Traprock Co. , 135 N.J. Eq. 587 (Ch. 1944); Ewald v. William Fairchild, Inc. , 139 N.J. Eq. 449 (Ch. 1947); Williams v. Evenstein , 2 N.J. 60 (1949); S.D. Walker, Inc. v. Brigantine Beach Hotel Corp. , 44 N.J. Super. 193 (Ch. Div. 1957).
This principle has also found support with leading text writers. Wiltzie on Mortgages (4 th ed.) 96; 2 Jones on Mortgage (8 th ed.) 1006.
The plaintiff in the case at bar, however, is not seeking to foreclose the mortgage but is seeking a judgment in a law court on the note. This he is permitted to do without first
foreclosing the mortgage. Asbury Park & Ocean Grove Bank v. Giordano , 3 N.J. Misc. 555, 129, A. 202 (Sup. Ct. 1925), affirmed in 103 N.J.L. 171 (E. & A. 1926). Contrariwise, if the plaintiff held a bond and mortgage instead of a note and mortgage, he could not proceed on ...