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York Motel Associates v. Blum

Decided: November 30, 1962.


Pashman, J.s.c.


This is the continued return date of a motion by the defendant Daniel Blum for alternative relief based upon his contractual rights as a mortgagee. Stated simply, the question which the court is asked to decide is whether the defendant has the right to have a receiver of rents, issues and profits appointed without first instituting a plenary action to foreclose, or taking some similar affirmative action.

To put the subject matter of this motion in a proper perspective it is necessary, initially, to recite the nature of the instant case. Plaintiffs York Motel Associates, Palisades Motel Associates and Tollgate Motor Lodge instituted this action on December 16, 1961 in two counts against defendants Elizabeth Blum, et al. The gravamen of both counts was that defendant Daniel Blum agreed orally to modify the existing contractual obligations of York and Palisades if certain admitted defaults were cured by an agreed date. Plaintiffs sought ad interim and final injunctive relief together with a declaration that the purported modifications were valid and enforceable. The court, after considering the verified complaint of the plaintiffs, several affidavits, oral argument and extensive legal memoranda, granted a preliminary injunction to preserve the subject matter of the litigation and protect the status quo. The injunction prohibited the defendants from interfering with the plaintiffs' possession of the motels but gave the defendants leave to counterclaim, in

the main action, for foreclosure of the various real and chattel mortgages. Leave was also granted to defendants to move to vacate or dissolve the preliminary injunction if the plaintiffs failed to comply with their monthly obligations under the mortgages. Defendants, while they did not counterclaim for foreclosure, did, however, move unsuccessfully on three occasions to dissolve the restraints because of alleged defaults on the part of the plaintiffs.

In addition to the two counts mentioned in the preceding paragraph, plaintiffs subsequently amended their complaint to include a third count wherein it was alleged that the sale of the York Motel for $3,000,000 involved an illegal attempt by the defendants to evade and circumvent the usury laws of this State; see N.J.S.A. 31:1-1 et seq. and the federal income tax laws. Defendants denied the illegality charged by the plaintiffs.

The instant motion by the defendants has been made after a three-week plenary trial on the merits. After considering the papers filed by the parties, together with the oral argument, I find as a fact that defendants have established the existence of substantial defaults in payment on the part of the plaintiffs mortgagors.

Although the express terms of the mortgages held by the defendants in this case provide that the mortgagee may take possession of the mortgaged premises upon default "or have a receiver appointed forthwith without proof of the depreciation of the value of the premises," this provision does not give the mortgagee an absolute right to have the court appoint a receiver. Thus, as the court observed in Tucker v. Nabo Construction Corp. , 108 N.J. Eq. 449, 450-51 (Ch. 1931), such covenants are "not binding on the court, and does not entitle the mortgagee to the appointment of a receiver as a matter of right and without regard to the other circumstances of the case. * * * The consent of parties, especially when given several years in advance, cannot operate to move the court to exercise such powers contrary to settled practice."

The real problem in this case is whether or not this court should, or indeed can, appoint a receiver in the absence of an express foreclosure or some other similar affirmative plenary action. In my opinion, the peculiar circumstances of this case, in their present posture, justify an affirmative answer to the posited query.

The primary authority relied upon by the defendants in support of the extraordinary relief sought is two New Jersey cases which are inapposite to the matter before the court. The first case, Peterpaul v. Torp , 122 N.J.L. 476 (E. & A. 1939), involved a suit for rent due under a lease where the court stated:

"The cases are legion which hold that upon the default in a mortgage, the mortgagee is entitled to possession and that the mortgagee may take actual possession, through peaceable means or by ejectment proceedings in a court of law, or constructive possession by the appointment of a rent receiver, or the attornment of a tenant in possession." Supra , at p. 480.

The Peterpaul case did not involve the appointment of a receiver but an attornment by a tenant who was in possession. Additionally, while an attornment did in fact occur in the case, it followed a foreclosure by the new landlord. In short, the applicability ...

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