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Feldman v. Urban Commercial Inc.

Decided: March 25, 1963.


Pashman, J.s.c.


This is a third-party action on a title insurance policy and is the third time that Mr. Feldman has been before this court. A brief resume of the factual background is necessary for an understanding of the present action.

Prior to October 25, 1955 the Jersey City Redevelopment Agency (herein called Agency) procured the title to property in Jersey City known as the St. John's Project Area (herein called the Project Area). This purchase was under the authority of Title 1 of the Housing Act of 1949, as amended, 42 U.S.C.A. , ยง 1441 et seq. , and of the Redevelopment Agencies Law, N.J.S.A. 40:55C-1 et seq. On October 25, 1955 Urban Developers, Inc. (herein called Developers) entered into a redevelopment contract with Agency to develop said project area.

On June 11, 1956 Agency conveyed two tracts of said project area to Developers, one tract to be redeveloped as a business area and the other to be redeveloped as a residential area. Developers subsequently conveyed the business area tract to Urban Commercial, Inc. (herein called Commercial),

the stockholders in the two corporations being identical. Commercial then executed and delivered a Note in the face amount of $450,000, "or so much thereof as may be advanced," secured by a mortgage upon the business area to the third-party plaintiff, Isidore Feldman (herein called plaintiff).

Plaintiff advanced $250,000 on the mortgage, which was paid over to Agency as the consideration for the conveyances of the residential and business tracts. Of this sum $148,254.59 was utilized for the purchase of the business area and the remainder was used to purchase the residential area. Plaintiff made additional advances in late 1956 totaling $100,000.

On April 2, 1958 plaintiff's mortgage was past due and in default. Plaintiff agreed to a modification with Commercial, extending the due date to January 11, 1959. The extension agreement provided that the principal amount due on the mortgage should be increased from $350,000 to $392,000.

On February 12, 1959 both Commercial and Developers were in default of their obligations under the redevelopment contract with Agency and in breach of a covenant requiring completion of the buildings and improvements in the project area within 32 months from the date of conveyance. Plaintiff had knowledge that said buildings and improvements had not been completed.

On March 20, 1959 Agency declared Commercial to be in default and so notified it. On July 22, 1959 Agency purchased all of Developer's right and interest in its contract of October 25, 1955 at an execution sale.

On October 23, 1959 plaintiff filed his complaint to foreclose his mortgage, Commercial being in default of its obligations. Plaintiff joined Agency in his foreclosure suit, and Agency counter-claimed for a declaration that the mortgage was null and void because in violation of both deed restrictions and federal and state law. Plaintiff also filed a third-party complaint against The Title Guarantee Company, the insurer of said mortgage and present third-party defendant

(herein called defendant). A more detailed statement of the facts can be found in the opinions of Judge Kilkenny and Judge Collester in Feldman v. Urban Commercial, Inc. , 64 N.J. Super. 364 (Ch. Div. 1960), and Feldman v. Urban Commercial, Inc. , 70 N.J. Super. 463 (Ch. Div. 1961), respectively.

Upon an agreed statement of certain facts and upon motion and cross-motion for partial summary judgment, two questions were presented to Judge Kilkenny for determination prior to a determination on the merits. The first question before Judge Kilkenny was whether the mortgage transaction between Commercial and plaintiff was violative of a provision in both the deeds to the property and the redevelopment contract to the effect that there should be no sale, leasing, transfer or conveyance of the property prior to the actual completion of the redevelopment plan, unless the Agency or its successors or assigns gave prior written consent.

Judge Kilkenny held that the mortgage transaction was not violative of the provision in the deeds and redevelopment contract "as of this time." However, he did hold that if the plaintiff proceeded in his foreclosure action to the point of an execution sale and transfer of title to the property, such transfer would violate the said provision and Agency would be entitled to a reconveyance.

The second question submitted to Judge Kilkenny on the motion and cross-motion 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?" 64 N.J. Super. , at p. 372.

The court answered this question in the affirmative, subject, however, to an equitable lien against the property in favor of plaintiff in the amount of $148,254.59 -- the sum of money which was used for the acquisition of the business area property.

In the trial on the merits before Judge Collester plaintiff contended that Agency was estopped from attacking the validity of and plaintiff's right to foreclose his mortgage on the following grounds: (a) knowledge on the part of Agency of the execution of the mortgage, (b) consent to the making of the mortgage, (c) waiver and (d) laches. Judge Collester held that none of the above contentions had merit. The court also found that plaintiff did not come into equity with clean hands. In holding that plaintiff's action to foreclose his mortgage in the ...

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