This is a mortgage foreclosure action in which plaintiff has moved for summary judgment. R. 4:46-2. Both parties agree that the material facts are not in dispute.
The affidavits indicate that plaintiffs Richard and Joan Sanguigni loaned $53,000.00 to Defendant Phyllis Sanguigni and her daughter. As security for that debt, a note was executed by defendants on October 14, 1982 along with a mortgage on the property known as 2 West Drive, Margate City, New Jersey. Included within the terms of the mortgage is a provision which indicates that upon the request of the lender, the borrower is obligated to forward payments of 1/12 of the real estate taxes and 1/12 of the insurance to the lender for a tax and insurance escrow fund.
On July 30, 1983, plaintiffs sent defendants a letter demanding the creation of such an escrow fund. Defendants did not respond and now claim that they did not receive the letter.
Thereafter, on September 12, 1983, plaintiffs instructed their attorney to make another demand for the establishment of the fund. Defendants responded by refusing to comply although they continued to pay the taxes and insurance directly. Although there was also a tender of the mortgage payments, beginning with the September 1983 payment, plaintiffs have refused to cash the checks deeming defendants to be in default.
Based on a provision in the mortgage which permits an acceleration of the full amount of the debt in the event of a default in any of its terms, plaintiffs instituted this foreclosure action. Defendants respond by asserting that plaintiffs have not complied with contractual conditions precedent to acceleration by not requesting the escrow fund personally and by not personally delivering the notice or sending it by certified mail. Defendants also contend that the declaration of default was not made in unequivocal terms. Next, they argue their September 14, 1983 letter of response did not constitute a refusal to pay but simply requested additional information. Finally, although not argued directly, they inferentially suggest that even if there was a breach the relief sought is unwarranted.
Mortgage acceleration provisions are generally enforceable. Eisen v. Kostakos, 116 N.J. Super. 358 (App.Div.1971). Although defendants argue that an actual impairment of security is crucial in determining whether an acceleration is permitted the case law is by no means consistent on that and there are some cases to the contrary. Best v. Katz, 105 N.J. Eq. 655 (Ch.1930); Weiner v. Cullens, 97 N.J. Eq. 523 (E. & A.1925); Century Federal Savings & Loan v. Van Glahn, 144 N.J. Super. 48 (Ch.Div.1976); cf. Fogel v. S.S.R. Realty Associates, 183 N.J. Super. 303 (Ch.Div.1981), aff'd 190 N.J. Super. 47 (App.Div.1983). Security impairment aside, whether a breach of the mortgage warrants the remedy of foreclosure involves the operation of equitable principles and is subject to the exercise of discretion by the court. Totowa Savings & Loan Ass'n v.
In Kaminski v. London Pub. the court ruled that the remedy of foreclosure could not be invoked for a default in the failure to pay taxes and municipal liens where payment was made prior to the filing of the foreclosure complaint. Since the mortgagor promptly cured the failure to pay taxes and keep insurance current prior to institution of foreclosure proceedings the security of the mortgage was held not to be impaired. In the instant case, these obligations are current and the issue is the failure to establish an escrow for these payments. That failure was not cured prior to the institution of this foreclosure action, nor has it been corrected to date.
In Pols v. The Strand of Atlantic City, 136 N.J. Eq. 1 (Ch.1944), it was held that a default in the production of tax receipts within the time provided for by an acceleration clause gave the mortgagee the right to demand full payment of the mortgage and to thereafter foreclose. It was noted there that no attempt had been made to tender tax receipts to either the mortgagee or his assignee. The court stated:
A like conclusion was reached in Best v. Katz, supra, where defendants failed to comply with the terms of the mortgage requiring the production of receipts for the payment of taxes at the time called for in the mortgage. Although the court's reasoning was not elaborated it was held that the complainant ...