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Oxford Consumer Discount Co. v. Stefanelli

Decided: February 24, 1969.


Conford, Labrecque and Halpern. The opinion of the court was delivered by Conford, S.j.a.d.


[104 NJSuper Page 515] On September 11, 1968 this court held the Secondary Mortgage Loan Act of 1965 (N.J.S.A. 17:11 A -1 et seq.; L. 1965, c. 91) to be, in the main, a valid enactment, constitutionally applicable in relation to the enforcement of the obligation on a secondary mortgage loan to New Jersey borrowers, secured by real property situated in this State, although the loan agreement was executed in Pennsylvania and the loan repayable in that state to a lender which was a Pennsylvania corporation carrying on a loan business in that state under authority of a licensing statute there in effect. Oxford Consumer Dis. Co. of No. Phila. v. Stefanelli, 102 N.J. Super. 549. We consequently barred recovery by plaintiff lender of any part of the loan or interest due thereon, finding that the loan agreement called for interest in excess of that allowed by the New Jersey act and was violative of the act in one other respect. We acted under the mandate of section 29 of the act, which provides that no obligation arising out of a secondary mortgage loan (as defined by the act) shall be enforceable in the courts

of this State unless negotiated and made in full compliance with the provisions of the act. Certain other allegations by defendants as to violations of the act were not passed upon, as they involved disputes of fact which had not been duly tried.

Thereafter, we denied an application by the plaintiff for rehearing. At the same time, however, we granted a petition of First Mercantile Consumer Discount Company ("First Mercantile"), another Pennsylvania small loan company, for leave to intervene in the cause for the purpose of permitting it to be heard to contend on petition for rehearing that the September 11, 1968 decision of the court should be held not to have retroactive effect as to loan transactions entered into before the effective date of that decision by Pennsylvania corporations licensed in the State of Pennsylvania to make such loans, where the loans were not only made there but were also repayable there and in all other respects in conformity with Pennsylvania law.

We allowed the intervention, although such action on appeal is quite rare and granted only in extraordinary circumstances -- see Hurd v. Illinois Bell Telephone Company, 234 F.2d 942, 944 (7 Cir. 1956); McKenna v. Pan American Petroleum Corporation, 303 F.2d 778, 779 (5 Cir. 1962) -- on the basis of the following showing.

First Mercantile and another Pennsylvania loan company had been sued by certain of their New Jersey borrowers, prosecuting a class action in the Chancery Division, for an injunction to restrain enforcement of all secondary mortgage loans made on the security of New Jersey realty by such corporations, although the loan agreements of plaintiffs in those actions were all executed and provided to be repaid in Pennsylvania. Pending the appeal in the instant case we had granted First Mercantile leave to appeal an order of the Chancery Division permitting the continued prosecution of the suit as a class action.

First Mercantile filed proofs on its petition for intervention in the present case, showing it had made secondary

mortgage loans secured by New Jersey realty amounting to approximately $5.5 million, all of which would be uncollectible if our decision of September 11, 1968 were applied retrospectively; that such a result would be catastrophic, causing insolvency of First Mercantile's parent corporation, throwing 50 of its employees out of work, and jeopardizing loans of about $8 million to these corporations made by various banks, insurance companies and other lenders; that unless an early judicial declaration as to the inapplicability of the decision retrospectively to Pennsylvania lenders in First Mercantile's position were forthcoming, its many New Jersey borrowers would repudiate their obligations and cause ruin to the company; and that it had made loans on secondary mortgages on New Jersey realty, notwithstanding enactment of the New Jersey act in 1965, on the basis of advice of both Pennsylvania and New Jersey counsel that these loans were Pennsylvania transactions subject to Pennsylvania law and not subject to the Secondary Mortgage Loan Act of 1965 or any other New Jersey law.

Upon inquiry by the court, amicus curiae Middle Atlantic Finance Association advises that nine of its Pennsylvania members had made out-of-state secondary mortgage loans secured by New Jersey real estate, prior to September 11, 1968, aggregating $4,460,881.96 (not inclusive of loans by First Mercantile but including loans by plaintiff). An undeterminable additional amount of such loans has been made by other Pennsylvania members of that organization.

In addition to the original parties and amicus, Paul V. Durkin and Ellen Durkin, plaintiffs in the aforementioned pending class action against First Mercantile, have been admitted herein as amici curiae to file a brief and to argue in opposition to the position of that intervenor. Plaintiff supports the position of intervenor, having considerable stake in the issue by virtue of other loans outstanding affected by our September 11, 1968 decision. However, as noted, we have already denied its petition for rehearing of this case in relation to the effect of the decision in relieving the Stefanelli

defendants of liability, taking the view that the latter are entitled to retain the fruits of their victory regardless of our conclusion as to the pending request for restrictive application of the decision to other loans. See Goldberg v. Traver, 52 N.J. 344, 347 (1968). The Stefanellis nevertheless join the ...

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