This matter presents for determination the question of the extent to which a mortgagee must search the record to avail itself of the protection afforded by the recording statute.
Plaintiff Security Pacific Finance Corporation (Security) brought suit to foreclose a mortgage it holds on residential property located in Hamilton Township, Atlantic County. Defendant
Insilco is the assignee of an interest in the form of a mortgage which it claims as a priority over the mortgage held by Security. The parties have entered into and filed a stipulation of facts and have brought crossmotions for summary judgment. There being no disputed issue of material fact, the matter is ripe for resolution on the crossmotions. R. 4:46-2.
The stipulation of facts establishes that Robert and Marie Taylor, husband and wife, (Taylor) entered into an agreement on February 14, 1976 to purchase the subject property from Lee A. Garell. The agreement was recorded July 27, 1976 in the office of the Atlantic County Clerk and called for a consideration of $5,000 for the purchase of the property, a vacant lot.
In December 1976 Taylor obtained a building permit from the municipality for the construction of a single family home on the subject premises. On June 8, 1978 they borrowed $22,400.50 from Insilco to finance the construction of the house. Taylor gave Insilco a note and mortgage, and the mortgage was recorded on July 27, 1978 in the office of the Atlantic County Clerk. As of the recordation of this "mortgage," Taylor had no record interest in the subject property other than as buyer under the February 14, 1976 agreement.
On October 15, 1979 Garell transferred title to the property to Berlee, Inc., a New Jersey corporation, with the deed being recorded November 27, 1979.
Taylor completed the construction of the home and received a temporary certificate of occupancy from the municipality in January 1980. Later that year Berlee, Inc. transferred the property to Taylor for $5,500, by deed dated September 2, 1980 and recorded October 7, 1980 with the Atlantic County Clerk.
In November 1980, Taylor borrowed $11,432.68 from plaintiff's assignor, and executed a note and mortgage in favor of plaintiff's assignor in that amount. In loaning the money to Taylor, plaintiff's assignor relied upon Taylor's representations that there were no mortgages, liens or encumbrances on the subject property, which representation was, of course, false.
The mortgage to plaintiff's assignor was dated November 4, 1980, and was recorded in the Atlantic County Clerk's office on November 6, 1980. Several months later, on March 27, 1981, Taylor applied to plaintiff's assignor for an additional loan, and again falsely represented in the loan application and affidavit that there were no other interests outstanding against the property. On March 27, 1981, Taylor executed a second mortgage in the sum of $19,500 in favor of plaintiff's assignor, which second mortgage was recorded on March 31, 1981.*fn1
Taylor defaulted on the payments due under each of plaintiff's mortgages. Plaintiff's foreclosure action, initially brought without impleading Insilco as a party defendant, resulted in a final judgment in favor of plaintiff in the sum of $25,299.19, together with interest at the contract rate of 18% from December 11, 1982 to May 6, 1983, costs of $675.91, and interest on the judgment from May 6, 1983. A sheriff's sale was scheduled but, prior thereto, Insilco obtained an order reopening the judgment and permitting Insilco to file an answer, counterclaim, and crossclaim.*fn2 By consent the sheriff's sale was held on June 3, 1983, at which time Insilco purchased the land for $29,500. The ...