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First Fidelity Bank, N.A., N.J. v. Bock

Decided: June 27, 1994.

FIRST FIDELITY BANK, N.A., N.J., PLAINTIFF,
v.
GEORGE A. BOCK, CAROL E. BOCK, HUSBAND AND WIFE, THE UNITED STATES OF AMERICA AND TERRA-VEST, DEFENDANTS.



K. MacKENZIE, P.J.Ch.

Mackenzie

Civil Action

The court reserved decision on June 24, 1994, after hearing oral argument on cross-motions for summary judgment. The court now grants plaintiff's motion and denies defendant Terra Vest's motion, for the reasons set forth below.

The facts are clear and uncontroverted. On November 17, 1987, plaintiff First Fidelity Bank made a loan to defendants George and Carol Bock, in the amount of $55,000. The loan was secured by a second mortgage, dated November 17, 1987, and recorded on December 9, 1987. The date of maturity was June 23, 1991.

Defendant Terra Vest obtained a judgment in the Superior Court of New Jersey against defendant George Bock in the amount of $43,034.99, which judgment was entered on June 3, 1991. The judgment was recorded on June 11, 1991.

When the original loan matured on June 23, 1991, the note was not paid in full. A second promissory note, in the amount of $45,293.86, was executed by the Bocks in favor of plaintiff, on September 27, 1991, which note was secured by the original mortgage. In effect, the bank rolled over the original note as an accommodation to the Bocks. The face amount of the second note represented the principal balance due on the original note, together with accrued interest. The maturity date was January 30, 1992. The loan history as documented in the bank's records reflects the September 27, 1991 note as a new loan and the November 17, 1987 note as satisfied.

On January 30, 1992, the second note matured and again it was not paid in full. On the same date, a third note in the amount of $39,999.16 was executed by the Bocks, in favor of plaintiff, which note was secured by the original mortgage. Again, the third note represented a roll-over of the second note. The bank's loan history reflects the January 30, 1992 note as a new loan and the September 27, 1991 note as satisfied.

The Bocks defaulted under the terms of the note on January 15, 1993, and plaintiff instituted this foreclosure action on July 28, 1993. A default was entered against the Bocks for their failure to answer or otherwise plead. Defendant Terra Vest filed a contesting answer on November 29, 1993, disputing plaintiff's priority.

Both parties have agreed that there are no genuine issues of material fact in dispute and this case is ripe for summary judgment.

N.J.S.A. 46:9-8.2 provides, in pertinent part:

Notwithstanding any other law to the contrary, the priority of the lien of a mortgage loan which has undergone a modification, as defined by this act, shall relate back to and remain as it was at the time of recording of the original mortgage as if the modification was included in the original mortgage or as if the modification occurred at the time of recording of the original mortgage.

See also Goldome Realty Credit Corp. v. Harwick, 236 N.J. Super. 118, 122, 564 A.2d 463 (Ch. Div. 1989). N.J.S.A. 46:9-8.1d(1) defines "modification" as "a change in the interest rate, due date or other terms and conditions of a mortgage loan except an advance of principal or a substitution in the collateral."

The enactment of N.J.S.A. 46:9-8.2 in 1985 served to recognize the emergence of alternative lending instruments used by creditors to provide flexible lending options to the debtor while still maintaining a secured priority interest. Assembly Banking and Insurance Committee Statement, Senate, No. 2308 - L.1985, c. 353; see also 29 New Jersey Practice, Law of Mortgages § 117, at 98 (Roger A. Cunningham & Saul Dischler) (Supp. 1994). The Committee Statement does reference balloon mortgage loans and home equity loans as examples of such mortgage instruments; however, this reference is not all-inclusive.

Plaintiff argues that the subsequent promissory notes merely represent a modification, as contemplated in the original note and mortgage.*fn1 Defendant argues that the subsequent promissory notes must be treated as new loans, rather than modifications of the original loan. Defendant's argument relies upon the fact that the payment history expressly recorded the subsequent promissory notes as "new" loans that retired the original note. ...


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