Conford, Kilkenny and Leonard. The opinion of the court was delivered by Leonard, J.A.D.
After a trial without jury defendant appeals from a judgment entered against it in the sum of $2,820.30 plus interest and costs.
The stipulated facts follow: On March 6, 1964 plaintiff corporation purchased a certain tract of land located in Newark, upon which there was erected a four-story apartment house. In order to finance this purchase plaintiffs gave defendant a mortgage and promissory note in the amount of $100,000, to run for a 20-year term at 6% interest.
During December 1966 the State of New Jersey, by the Commissioner of Transportation (State), filed a verified complaint in the Superior Court, Law Division, Essex County, whereby it sought to condemn the mortgaged property for state highway purposes. Plaintiffs and defendant herein, among others, were made parties defendant to that action. On or about December 22, 1966 the State filed a declaration of taking of the property, wherein it stated that "just compensation for the taking is $152,500." On December 28, 1966 the State deposited said sum with the Clerk of the Superior Court.
By letter dated December 29, 1966 the State advised plaintiffs and defendant of the aforesaid deposit and their right to make application for the withdrawal thereof. Thereafter, during February 1967 plaintiffs made application to the court for distribution of the funds deposited. Their attorney prepared and sent to all interested parties, including defendant, a form of consent order for signature. At that time, plaintiffs' and defendant's attorneys had a telephone conversation in which the latter stated that his client would not sign the order unless plaintiffs guaranteed full payment of its lien out of the disbursed funds. This was agreed to and the attorneys further agreed that the distribution check would be endorsed by plaintiffs and forwarded to defendant's attorneys so that all liens would be paid therefrom prior to disbursement to plaintiffs. This understanding was confirmed by a letter dated February 10, 1967. Pursuant to this arrangement, all
parties, including defendant, signed a consent order giving the State the right to enter and take possession of the property and authorizing the Clerk to pay $152,500 to plaintiffs. Thereafter a check was issued by the Superior Court to plaintiffs, which they endorsed and forwarded to defendant's attorneys on March 3, 1967.
On or about March 10, 1967 defendant made distribution of the fund. Defendant retained $95,634.37. (Plaintiffs had made the required monthly payments of principal and interest from the original date of the mortgage until the taking by the State.) It paid the second mortgagee the full amount due him, retained $2,000 in escrow for taxes (subsequently paid to plaintiffs) and sent to plaintiffs the sum of $40,445.60. Included in the sum retained by defendant was $470.05 for one month's interest until the date of payment.
Also included in the funds so retained was the sum of $2,820.30 as a prepayment charge levied against plaintiffs, which defendant asserted it was entitled to collect by reason of the following clause contained in the mortgage:
"It is further understood and agreed that the mortgagors shall have the further right and privilege to make payment of the unpaid balance hereof at any time during the first 5 years of the term hereof, provided there is paid in addition to the amount due hereunder for principal and interest a sum equal to six months' interest computed on the unpaid balance of said mortgage as a prepayment privilege fee."
Plaintiffs do not dispute any portion of the distribution made by defendant except its retention of the prepayment charge. When defendant refused to remit this sum they instituted the present action to recover $2,820.30. Following a nonjury trial, upon agreed facts, the trial court entered judgment in favor of plaintiffs and against defendant.
Defendant first contends that it is entitled to the benefit of its executed contract, absolute in its terms, and that the trial court erred in ...