[248 NJSuper Page 20] Clinton Capital Corporation, a New York corporation, on April 7, 1989, filed a complaint in foreclosure against Edward Straeb and Edna Straeb, his wife; Anthony Belli and Rosemary Belli, his wife, and the American Insurance Company in the Superior Court of New Jersey, Chancery Division, Passaic County, Docket No. F-2791-89. This action was consolidated with Clinton Capital Corporation v. Edward Straeb, et al., a foreclosure action in Bergen County, Docket No. F-2905-89, by order dated December 6, 1989. The order further provided that
the parties agreed that the law of New York would govern, but jurisdiction to foreclose the mortgage is necessarily in the State of New Jersey.
The order made reference to the fact that Clinton Capital Corporation had instituted a foreclosure action entitled Clinton Capital Corporation v. Straeb and Belli, Inc., et al., in Rockland County, New York in which all the corporate borrowers were defendants.
Defendant, American Insurance Company was dismissed by plaintiff.
By order dated May 9, 1990, the answer set forth on behalf of Edward Straeb, Edna Straeb, Anthony Belli and Rosemary Belli was stricken and permission was granted to plaintiff to make application for the entry of a final judgment. A motion was made on notice to the attorney representing defendants, returnable on Friday, August 31, 1990, for the entry of the final judgment and fixing the amount due. The mortgages given by the named individuals on the properties located in Bergen County and Passaic County were given to secure their individual guarantees of the loan to Straeb, Schroen & Belli, Inc. The note of Straeb, Schroen & Belli, Inc. in the amount of $220,000, dated July 15, 1986, provided for 120 consecutive monthly installments of principal and interest and would become due on August 1, 1996 at which time the entire unpaid principal of the loan, together with accrued interest would be due and payable. The note contained the following provision relating to prepayment:
This Note may be prepaid in whole or in part at any time and from time to time, upon ten (10) days' prior written notice to the payee specifying the day and amount of such prepayment, provided that at the time of such prepayment the undersigned shall pay to the payee a prepayment penalty equal to ten (10%) percent of the principal amount so prepared (the "premium"). Partial prepayments shall be applied first to the payment of accrued interest, then to the payment of the premium and then against the remaining installments of principal in the inverse order of their maturity. The premium shall be paid whether prepayment is voluntary or involuntary, including any prepayment made after exercise of any acceleration provision contained in this Note or any documents or instrument executed in connection therewith.
The mortgages which were executed by the individuals to secure their guarantees contained the following provisions:
7. The Lender may declare the entire unpaid amount of principal and interest under the Note and this Mortgage due immediately for any of the following causes: (a) the failure of the Company to make any payment of principal and interest under the Note after its due date. (b) the failure of the Borrower to keep any other promise under this Mortgage within ten (10) days after written notice from the Lender. (c) the failure of the Borrower to make any payment due or to keep any other promise under the Senior Mortgage. (d) any change in the ownership of all or any part of the Property. A change resulting from the death of the Borrower shall not be considered a change of ownership. The change of ownership of a majority of a corporate borrower's common shares, other than by death, is a change of ownership. (e) the starting of foreclosure proceedings by the holder of any other mortgage or lien on the Property. and (f) the starting of bankruptcy, receivership, or insolvency proceedings by or against the Borrower.
The Lender's failure to accelerate for any cause shall not prevent the Lender from doing so for a later cause.
8. If the Lender declares acceleration, the Lender has all rights given by law, for example: (a) to enter and take possession of the Property. (b) to ask a court to appoint a receiver of rents of the Property. The Borrower consents to the appointment of a receiver. (c) To start a court action for foreclosure. Foreclosure is a court ordered sale of the Property. The proceeds of the sale are used to pay the principal and interest due under the Note and Mortgage, plus costs. The Property may be sold in one or several parcels. The Lender may sue any tenant of the Property in the foreclosure action. The Lender's failure to do so does not reduce the Borrower's obligations under the Guarantees and Mortgage, (d) the sale of the Property on foreclosure may not bring in enough money to pay the entire amount due under the Note and Mortgage. The Lender may then sue the Borrower under the Guarantees for the difference. The Lender retains any rights given by law to sue under the Note and Guarantees before foreclosing under the Mortgage.
In a Rider attached to the mortgage there was the following provision relating to prepayment:
13. The Note may be prepaid in whole or in part at any time and from time to time, upon ten (10) days' prior written notice to the Lender specifying the date and amount of such prepayment, provided that at the time of such prepayment the Borrower shall pay to the Lender a prepayment penalty equal to ten (10%) per cent the principal amount so prepaid (the "Premium"). Partial prepayments shall be applied first to the payment of accrued interest, then to the payment of the Premium and then against the remaining installments of principal in the inverse order of their maturity. The Premium shall be paid whether prepayment is voluntary or involuntary, including any prepayment made after exercise of any acceleration provision contained in the Note or this mortgage or any documents or instruments executed in connection herewith,
and payment, if any is due, of such prepayment Premium shall be secured by this mortgage. Nothing herein contained shall be construed so as to entitle Borrower or Company to reborrow any amount prepaid.
In the complaint for foreclosure there is a provision in paragraph nine alleging that, on January 1, 1989, there was a default in making payment under the note and mortgage and that the same had remained unpaid for more than 30 days. It was further alleged that by reason of said default Clinton Capital Corporation "elected that the whole principal sum due on the aforesaid obligation with all unpaid interest, late charges, prepayment penalties and advances shall now be due and payable."
In the affidavit of the amount due filed by Mitchell Rothken, on behalf of Clinton Capital Corporation, in paragraph seven, he details the amounts claimed:
Interest to 8/17/90 52,786.40
Insurance premiums advanced 7,669.63
Default interest 55,388.52
Pre-Payment Penalty 19,482.88