The Burlington County Country Club ("club") issued a series of 51 (out of an offering of 75) $1000, 6%, 20-year mortgage bonds on July 1, 1930. A mortgage covering the club's golf course secured the bonds. Burlington City Loan and Trust Company, the original trustee named in the mortgage, has been replaced by Midlantic National Bank South,
The bonds, as well as the mortgage called for semi-annual interest payments commencing January 1, 1932, with the entire principal due July 1, 1950. No interest or principal has ever been paid in accordance with these terms but most of the bonds have been retired as the result of negotiated partial payments to bondholders. Earl B. Howe owns seven bonds.*fn1 They are said to be the only ones outstanding. The trustee is authorized to foreclose the mortgage upon the club's failure to pay an installment of interest within six months of its due date and in the event of a failure to pay the principal when due. However, foreclosure is permitted only when requested by 25% of the bondholders. That request has never been made.
The club has issued stock to its members. Its bylaws provide:
No person shall have registered on the books of the corporation more than one share of stock.
In the event of the dissolution of the Club, its property after paying off its debts and obligations, shall belong to and be distributed among its shareholders equally.
All bondholders were also stockholders.
The bylaws also established a class of life members, consisting of all bondholders. "A Life Member, together with all members of his family permanently residing in his household except male members twenty-one years of age and over, shall be exempt from the payment of entrance fees and dues."
The club filed this summary action on February 13, 1987, seeking cancellation of the mortgage which secures Howe's bonds. It relies upon N.J.S.A. 2A:51-1 which authorizes such cancellation on proof that the mortgage has been paid, or upon the making of a deposit with the court of the amount due thereon, or upon proof of "such special circumstances as to satisfy the court that the mortgagee and his successors, if any, in right, title and interest have no further interest in the mortgage or the debt secured thereby." The club relies on the latter provision. It also offers Howe without prejudice $500 a bond and a life membership in the club in exchange for his bonds. He has refused that offer in the past and does so now. He opposes the cancellation of the mortgage and crossclaims for substitution as its trustee on the ground that he holds the club's only outstanding bonds and is the only party in interest. He has not counterclaimed.
The cause has been tried. This opinion disposes of all issues, concluding that the complaint must be dismissed.
The club was unable to produce any comprehensive records relating to its stock transactions or to the bonds and mortgage in question. Available documents were marked into evidence. Some facts were stipulated. The club, apparently having no alternative, called as its only witness the defendant, Earl B. Howe. The facts, based upon these proofs, are found to be as set forth in this opinion.
The club placed 13 bonds, with various attachments, in evidence. These were the only bond records it could find. They show that:
In 1967 the Club paid Bertha M. Herbert and Emma R. Brick each $500 for their bonds and $150 each for their stock.
In 1970 the Club paid Leona F. Conroy an undisclosed price for her bond.
In 1975 the Club paid James F. Marshall $500 for his bond.
In 1976 the Club paid Robert R. Taylor $500 for his bond.
The club's proofs also show that most of the remaining bonds (perhaps all but Howe's) were redeemed through partial payments to bondholders negotiated by counsel.
The Statute of Limitations.
The club's suit is premised upon the claim that the statute of limitations has run against the mortgage, a claim which Howe disputes. The club's burden of proof was satisfied by its showing that the statutory period of limitations has run. It then became Howe's obligation to prove otherwise. The club's records, produced in response to Howe's demand, ...