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Oxford Consumer Discount Co. v. Stefanelli

Decided: March 17, 1970.

OXFORD CONSUMER DISCOUNT COMPANY OF NORTH PHILADELPHIA, A CORPORATION, PLAINTIFF-APPELLANT,
v.
ANTHONY E. STEFANELLI AND THERESA A. STEFANELLI, DEFENDANTS-RESPONDENTS, AND ARTHUR J. SILLS, ATTORNEY GENERAL OF NEW JERSEY, INTERVENOR-RESPONDENT, AND FIRST MERCANTILE CONSUMER DISCOUNT COMPANY, INTERVENOR-APPELLANT, AND PAUL V. DURKIN AND ELLEN DURKIN, HIS WIFE, INTERVENORS-RESPONDENTS



For affirmance -- Justices Jacobs, Francis, Proctor and Schettino. For reversal -- Chief Justice Weintraub and Justices Hall and Haneman. Weintraub, C.J. (dissenting). Hall and Haneman, J.J., join in this dissenting opinion.

Per Curiam

Subject to a qualification to be stated, the judgment of the Appellate Division is affirmed substantially for the reasons expressed below in the exhaustive opinions of Judge Conford. Oxford Consumer Dis. Co. of No. Phila. v. Stefanelli, 102 N.J. Super. 549 (App. Div. 1968), and 104 N.J. Super. 512 (App. Div. 1969).

The first opinion of the Appellate Division was handed down on September 11, 1968. Prior to that date certain New Jersey borrowers other than the defendants Stefanellis had brought suit against First Mercantile Discount Company and another Pennsylvania loan company in the Superior Court, Chancery Division, seeking an injunction to prevent the enforcement of all secondary mortgage loans made by such corporations on the security of New Jersey realty. Basically the same issues were involved in that action (which the

plaintiffs were allegedly prosecuting as a class action) as in the Oxford case. Subsequent to September 11, 1968 some of these parties applied to the Appellate Division for leave to intervene and for a rehearing in order to be heard on the issues decided in Oxford. The leave was granted and the common problems in the cases were reargued. One of the primary questions presented for further consideration was whether, if the Appellate Division adhered to the view expressed in the September 11, 1968 opinion respecting the applicability of the New Jersey Secondary Mortgage Loan Act, the judgment should be prospective or retrospective in scope. The position of the loan companies was that in no event should loan transactions made by Pennsylvania corporations licensed in Pennsylvania to make such loans and entered into before the effective date of that decision be adversely affected by it, where the loans were not only made in Pennsylvania but were repayable there and in all other respects were in conformity with Pennsylvania law. (See 104 N.J. Super., at 516).

Thereafter the Appellate Division affirmed its original holding and dealt comprehensively with the prospectivity -- retroactivity issue. 104 N.J. Super., at 519-25. It held that sufficient equitable considerations were present to warrant denial of unrestricted retroactive operation of the September 11, 1968 decision. In specifying the restrictions it said:

1. "We have concluded that we should not now go beyond adjudicating relief from retroactivity in respect of transactions where there was no intermediation of any kind by others, operating in this State, between Pennsylvania lender and New Jersey borrower."

2. "We are clear, first, that Pennsylvania lenders obtaining New Jersey loan business on a regular continuing basis by or through agents, brokers, or representatives operating in this State, whether or not technically independent contractors, could not reasonably have been advised in advance that choice of law and interstate commerce factors would immunize the loans from the effect of the New Jersey act. As to such loans, therefore, the decision of September 11, 1968 will remain fully retroactive. As to any other type of case involving some degree of causal intermediation between the lender and the borrower by operatives functioning in this State, the court

should appraise the particular facts of the individual case for determination as to whether considerations of fairness and justice call for relief from retroactivity of the September 11, 1968 decision in such instance, according to the criteria discussed above."

3. "It is next necessary to decide whether there should be any curtailment of the lender's claim to interest and other charges where it ultimately qualifies otherwise for relief from retroactivity. As heretofore noted, plaintiff and intervenors contend that fairness would be served by requiring the borrowers to pay the interest rates and other charges (if specifically agreed to in the loan contract) allowed for such transactions by either the New Jersey or Pennsylvania statute whichever is the lower. We think some further curtailment of recoverable interest is appropriate in order to give a degree of substantial effect to the circumstance that, in finality, the lenders have violated New Jersey law as substantively determined by our prior decision. Therefore recovery will be limited to 6% per annum simple interest computed on principal balances outstanding on funds actually advanced." (Numbering of paragraphs ours.) 104 N.J. Super., at 524-525.

We take paragraph 3 to mean that in all cases of loans made by plaintiffs as well as intervenor and amici loan companies to New Jersey borrowers and secured by secondary mortgages on New Jersey realty as defined in N.J.S.A. 17:11A-1a, which are not within the bar of paragraph 2 above, the lender may recover the sum of the loan as actually advanced but only with 6% simple interest on principal balances outstanding. In our view the equities referred to in the second Appellate Division opinion on the subject of retroactivity of the September 11, 1968 decision require a less drastic limitation.

Assuming the loan transactions by Anthony E. and Theresa A. Stefanelli, defendants in the principal case, and Paul V. Durkin and Ellen Durkin, Lindley Henry, Jr. and Irene Henry, Paul Kuzmick and Jane Kuzmick, plaintiffs in the injunction action referred to above, had been instituted and in existence prior to September 11, 1968 and are not within paragraphs 1 or 2 quoted above, these parties are entitled to retroactive benefit of the decision of that date to this extent: They shall be liable for the agreed installment payments of the principal of the actual loan ...


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