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Shalit v. Investors Savings and Loan Association

Decided: May 15, 1968.

BENJAMIN SHALIT AND MILDRED SHALIT, PLAINTIFFS,
v.
INVESTORS SAVINGS AND LOAN ASSOCIATION, A NEW JERSEY CORPORATION, DEFENDANT



The opinion of the court was delivered by Antell, J.s.c. (temporarily assigned).

Antell

Plaintiffs sue for $14,635 which they paid for defendant's waiver of its right to accelerate payment of a certain bond and mortgage executed by plaintiffs. Plaintiffs argue that the payment is usurious, was made under duress, and that the receipt thereof exceeded defendant's authority under the laws governing Savings and Loan Associations. On this motion by defendant for summary judgment the following material facts appear:

Plaintiffs, a builder and his wife, executed a bond for $320,000 secured by a mortgage on August 1, 1962 in order to finance the construction of a multi-unit dwelling on Bloomfield Avenue in Verona, New Jersey. The mortgage provided:

"* * * if there shall be any change in the ownership of the mortgaged property, then and in such event, the aforesaid principal sum with accrued interest shall, at the option of the Mortgagee, become due and payable immediately, anything herein contained or contained in the bond to the contrary notwithstanding."

On December 22, 1966 plaintiffs, through their counsel, advised defendant in writing that they had entered into a contract to sell the premises subject to the mortgage. Noting the acceleration clause in the mortgage, the letter asked that defendant:

"* * * advise us under what conditions you will waive your right to accelerate the payment of the principal and interest and permit the assumption of the mortgage by the Purchaser. If an arrangement can be entered into for that purpose, we will appreciate it if you will forward to us several applications to be completed by the prospective Purchaser."

Following short negotiations a payment by plaintiffs in the amount of $14,635 was agreed upon in exchange for the

defendant's consent to transfer of title without calling the mortgage. An assumption agreement was thereafter executed by plaintiffs' successor in title, 70 Park Avenue, Inc., and the agreed upon premium paid by the plaintiffs on February 13, 1967. Demand for the return of the premium monies was made on behalf of plaintiffs under date of March 8, 1967 by the same counsel who represented the plaintiffs throughout the transaction. The letter of demand stated: "It is our opinion that the payment demanded by you was unjust and inequitable and constitutes payment under duress". Defendant has refused to return the monies demanded.

As noted, plaintiffs contend that the premium payment constituted a usurious charge by the defendant, that the defendant was not lawfully empowered to receive such payment and that the payment aforesaid was made under duress.

It has long been settled that if a note or security is valid when made, no subsequent act can make it usurious. Donnington v. Meeker, 11 N.J. Eq. 362, 365 (Ch. 1857). In Bloomfield Sav. Bank v. Howard S. Stainton & Co., 60 N.J. Super. 524, 532 (App. Div. 1960), the court stated that it was "totally without justification" to characterize the payment of money for the privilege of prepaying a mortgage loan as usurious. The principle of that decision appears to govern here inasmuch as in both cases the premium was paid by the mortgagor, not as interest "for loan of any money" (N.J.S.A. 31:1-1), but to induce the surrender of a right enjoyed by the mortgagee. In the Bloomfield Savings case the mortgagee yielded its right to continue the investment of its funds. Here, the mortgagee relinquished its right to call in the full amount of the principal balance for reinvestment at more favorable rates of interest. Hence I conclude that the payment sought to be recovered is not usury.

In his answering affidavit plaintiff builder recites that prior to executing the bond and mortgage he received certain construction mortgage monies from the defendant for which he paid total fees of $6,500. Prior to closing the ...


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