On appeal from the Superior Court, Chancery Division, Morris County.
Plaintiffs appeal from that portion of a "Preliminary Judgment for Foreclosure" which excepted from foreclosure sale a particularly described portion of the mortgaged premises. We find that exception to be error and accordingly reverse.
By deed of July 19, 1974 plaintiffs conveyed to WTA Corporation (WTA) an unimproved tract of 87.219 acres. The consideration was $169,204.88, of which $49,204.88 was paid in cash and credits at closing and the balance by the delivery of a $120,000 bond and purchase money mortgage. Shortly thereafter WTA conveyed the entire tract to its principals as partners of Washington Township Associates (Associates); WTA had no other business or assets and was soon formally dissolved.
The contemplation of the parties to the original conveyance, and of Associates, was that the tract would be subdivided and developed for residential use. Associates proceeded in good faith toward that end but was unsuccessful in its efforts to obtain necessary municipal approvals. Through 1978 Associates paid the taxes and interest as required by the mortgage but
thereafter defaulted not only in those payments but in the required payment of the $120,000 principal on July 18, 1979.
On March 4, 1980 plaintiffs filed their complaint in foreclosure. Associates' answer asserted by separate defense that pursuant to the terms of the mortgage it was "entitled to the release of an initial 20.37 acres of mortgagor's selection at any time, without payment of any amount on account of the within mortgage," and that it "has elected" to have the acreage released; it is conceded that the "election" was first made in that pleading. Following a plenary hearing the trial judge sustained the separate defense and included in the foreclosure judgment the exception that is here in issue.
The mortgage covenant which Associates purported to invoke is as follows:
Mortgagee agrees to release acreage from the lien of the within mortgage at the rate of $2,425.00 per acre to be paid on account of the principal balance due hereunder. Such acreage to be released shall be at the selection of mortgagor. Mortgagor shall also be entitled to the release of an initial 20.37 acres of mortgagor's selection at any time without payment of any amount on account of the within mortgage.
Plaintiffs argued in the trial court, as they do here, that in this setting Associates, as a subsequent grantee, should not be permitted to have recourse to this provision inserted for the benefit of the "mortgagor." The trial judge did not address that contention in his ruling; we find it compelling.
The provision is ambiguous on its face: it does not expressly authorize subsequent grantees to demand a partial release nor does it expressly limit that right to the original mortgagor. Accordingly, its application "must be largely dependent upon the special circumstances of the case." Ventnor Inv. & Realty Co. v. Record Develop. Co. , 79 N.J. Eq. 103, 105 (Ch.1911); see also 29 N.J.Practice (Cunningham and Tischler, Law of Mortgages) (1975), § 149 at 688; Annotation, "Construction of provision in real estate mortgage, land contract, ...