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New York and Suburban Federal Savings and Loan Association v. Sanderman

Decided: August 15, 1978.

NEW YORK AND SUBURBAN FEDERAL SAVINGS AND LOAN ASSOCIATION, A SAVINGS AND LOAN ASSOCIATION DULY ORGANIZED AND EXISTING UNDER THE LAWS OF THE UNITED STATES OF AMERICA, PLAINTIFF,
v.
RICHARD SANDERMAN AND C. REVA SANDERMAN, HIS WIFE; LOUIS CESARANO AND ANNA CESARANO, HIS WIFE: PHILIP TATZ; BERNARD BERGMAN: CHARLES BICK: FEDERAL DEPOSIT INSURANCE CORPORATION, AS RECEIVER FOR FRANKLIN NATIONAL BANK; STATE OF NEW JERSEY, DIVISION OF TAXATION, DEPARTMENT OF TREASURY; STATE OF NEW JERSEY, DEFENDANTS



Dwyer, J.s.c.

Dwyer

New York and Suburban Federal Savings and Loan Association (Association) commenced an action to foreclose a first mortgage it held against the lands and buildings which were formerly the Convalescent Hospital of the City of Newark.

In 1959 Newark declared the property surplus and sold it to Philip Tatz. Without my detailing the history of the title, Association has had a first mortgage on the subject premises since 1962. In the intervening years title was placed in various corporations and then conveyed to partnerships which included Philip Tatz and Bernard Bergman. By means of various documents the original mortgage was modified, extended and consolidated with other mortgages.

On September 22, 1975 a partnership consisting of Philip Tatz, Bernard Bergman et al. , conveyed the subject premises to Richard Sanderman and Louis Cesarano for $901,479.10. The deed recited that it was subject to a $301,479.10 mortgage in favor of Association and that a $600,000 purchase money second mortgage in favor of the grantors was the balance of the consideration. On that same date the grantors executed the last of the documents with Association which established the amount of its first mortgage as $301,479.10.

Thereafter, Bernard Bergman assigned his interest in the second mortgage to the Franklin National Bank as part of the collateral for a loan. In connection with the liquidation of that bank the Federal Deposit Insurance Corporation (FDIC) succeeded to the bank's interest in the second mortgage. It initially contested the validity of the first mortgage and a number of items for which Association claimed a right to be reimbursed for preserving the property

as a mortgagee in possession. After a hearing all issues but one were resolved -- that is, Association's claim to be reimbursed the sum of $45,360 for the cost of maintaining a guard on the premises 24 hours a day at a cost of $120 a day from February 5, 1977 to February 17, 1978.

This amount crystalized at the hearing. Supplemental affidavits were submitted by Association concerning the circumstances under which the expense was incurred and the need for it. Supplemental briefs were submitted on the question of law. Counsel for both parties waived further testimony and argument and requested that the court decide the matter.

In connection with the foreclosure of mortgages on real property in certain of the central cities, there have been requests for reimbursement of expenses, such as boarding up the windows and doors to protect the property against vandalism between the date of entry of the judgment of foreclosure and the time of sale. See Cunningham and Tischler , 30 N.J. Practice (Law of Mortgages), 30 ยง 195 (particularly at 48 for other problems related to vandalism and a mortgagee in possession).

FDIC urges that the expense was unnecessary because the license to operate the nursing home had been revoked, the structures could not be economically used, and to salvage the land value the structures will have to be torn down; hence there was no need for guard service. Its counsel points out that the officers of the Association who testified at the hearing admitted that when the Association received an appraisal report from an outside appraiser pointing these facts out, the Association immediately suspended the guard service. To allow this sum as part of the amount to be raised will shift the cost to the junior lienholders in this case and in others to a mortgagor seeking to redeem; therefore, the FDIC urges that the sum be disallowed.

Association urges that under the decisions in Zanzonico v. Zanzonico , 2 N.J. 309 (1949), cert. den. 338 U.S. 868, 70 S. Ct. 143, 94 L. Ed. 532 (1949); Newark v. Sue Corp. ,

124 N.J. Super. 5, 7-8 (App. Div. 1973), a mortgagee in possession has a duty to protect against vandalism or be held liable for loss or destruction of the property. It points ...


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