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Midlantic National Bank v. Peerless Insurance Co.

Decided: January 15, 1992.

MIDLANTIC NATIONAL BANK, A NATIONAL BANKING CORPORATION, PLAINTIFF-APPELLANT,
v.
THE PEERLESS INSURANCE COMPANY AND COMMISSIONER OF BANKING OF THE STATE OF NEW JERSEY, DEFENDANTS-RESPONDENTS



On appeal from the Superior Court of New Jersey, Law Division, Morris County.

Bilder, Stern and Keefe. The opinion of the court was delivered by Bilder, J.A.D.

Bilder

BILDER, J.A.D.

This appeal involves the Mortgage Bankers and Brokers Act, an act for the regulation and licensing of mortgage bankers and brokers, N.J.S.A. 17:11B-1 et seq., and more particularly the proper construction of that part of the Act which requires that the licensees be bonded, N.J.S.A. 17:11B-8. We are asked to determine whether the protections afforded by the bond provisions of the Act apply only to consumers with whom the licensees do business or reach the claims of the licensees' business creditors. The matter comes to us after cross-motions for summary judgment. There are no disputes as to factual issues. See Judson v. Peoples Bank & Trust Co. of Westfield, 17 N.J. 67, 75, 110 A.2d 24 (1954). The issue is purely one of statutory interpretation.

N.J.S.A. 17:11B-8 provides:

A licensed mortgage banker and mortgage broker, prior to doing business, shall obtain a bond in an amount and form prescribed by regulations of the commissioner but not less than $25,000.00. The bond shall be obtained from a surety company authorized by law to do business in this State. In lieu of individual bonds, a mortgage banker or mortgage broker may procure a blanket bond to cover all employees licensed under the provisions of this act in an amount as prescribed by regulation of the commissioner. The bond shall run to the State for the benefit of any person injured by the wrongful act, default, fraud or misrepresentation of the mortgage banker, broker or solicitors. No

bond shall comply with the requirements of this section unless the bond contains a provision that it shall not be cancelled for any cause unless notice of intention to cancel is filed in the Department of Banking at least 30 days before the day upon which cancellation shall take effect.

The discrete issue before us is whether a business creditor of a mortgage banker, such as plaintiff Midlantic National Bank, is a "person" within the meaning of the sentence: "The bond shall run to the State for the benefit of any person injured by the wrongful act, default, fraud or misrepresentation of the mortgage banker, broker or solicitors."

I.

The case arises from the operations of Dominion Mortgage Company, Inc., a mortgage banker licensed under the Act which ceased its mortgage banking operations in December 1988. On April 15, 1987, as required by N.J.S.A. 17:11B-8, Dominion had filed a surety bond issued by defendant Peerless Insurance Company in the sum of $35,000. Under the bond, Peerless "as surety [was] held and firmly bound unto the State of New Jersey for the use and benefit of any person injured by the wrongful act, default, fraud or misrepresentation of a mortgage banker, broker or solicitor in the principal sum of $35,000."

As a "mortgage banker" Dominion, either directly or indirectly, originated, acquired or negotiated mortgage loans in the primary market, i.e. loans to owners of primarily residential property secured by a first mortgage. See N.J.S.A. 17:11B-1a, b, c.*fn1 Its general business was, as aptly described by Judge Pressler, to grant loans secured by a mortgage and then sell the obligation at a discount. See Mortgage Bankers Ass'n v.

N.J. Real Estate Com'n, 200 N.J. Super. 584, 589, 491 A.2d 1317 (App.Div.1985), rev'd 102 N.J. ...


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