insurance proceeds because, presumably, the mortgagee has been paid in full. However, traditionally, an assignee is but a substitute for the assignor possessing all of the rights and obligations formerly enjoyed by the assignor. Corbin On Contracts, § 861 (7th Ed. 1989). Therefore, Amboy contends that as the assignee of the first mortgagee, Sun Life, who was legally entitled to the proceeds of the policy, it is now entitled to those proceeds. Indeed, according to Amboy, when it purchased the assignment, the purchase price factored in the eventual policy loss payoff. Under Whitestone, as well as general assignment principles, the assignor, Sun Life, no longer has any interest in the policy; but Amboy, as assignee, does.
This Court presumes that the rationale behind the above dictum in Whitestone is that when a mortgagee assigns his interest in the mortgage, it is similar to foreclosure because the mortgagee has received payment on the mortgage. And an assignor can only assign the rights possessed at the time of assignment. If the right to insurance proceeds are extinguished by assignment, then the assignee has no right to those proceeds. But this argument is nonsensical because the act of assignment itself extinguishes all of the assignor's rights in everything that is being assigned. And no court would hold, it is suggested, that an assignee receives nothing in return for its payment. Furthermore, as the Court of Appeals for the Second Circuit has explained, "the Whitestone rule protects mortgagors from deficiency actions after a foreclosure sale and brings certainty to the foreclosure proceedings." Chrysler Capital Realty v Grella, 942 F.2d 160, 163 (2d Cir. 1991). No similar need arises when a mortgagee simply assigns its rights to a mortgage because the act of assignment itself would not permit an assignee to proceed against the mortgagor for any deficiency arising from the assignment.
Because the assignment discussion in Whitestone is only dictum which, to this Court, appears inconsistent with the holding of that case, this Court predicts that the New Jersey Supreme Court would not adopt that discussion as law, and would instead follow traditional assignment principles. Accordingly, Amboy, as assignee of the first mortgage, takes all to which the first mortgagee was entitled, including - to the extent it can establish its entitlement thereto - the proceeds from the insurance policy. Accordingly, the motion for summary judgment on this ground is denied.
B. Amboy as second mortgagee
The movants also assert that Whitestone bars recovery on the policy by Amboy as the second mortgagee. Amboy argues that the rule is inapplicable because, although it foreclosed on the second mortgage, the consideration it received (and paid), $ 100, fell far short of the value of the mortgage and thus it is entitled to recover any deficiencies from the proceeds of the discussed insurance policy.
Now, this Court finds that the Whitestone doctrine applies to and bars the second mortgagee, Amboy, from receiving the moneys of the insurance policy. Amboy clearly falls within the doctrine because it chose to foreclose on the second mortgage after the fire. Amboy argues, nevertheless, that the foreclosure purchase price was only $ 100, and that because that amount did not satisfy the mortgage, it is entitled to the insurance proceeds to the extent that it, as second mortgagee, has any claim to them. Whitestone makes clear that if Amboy seeks to recover any deficiency, it may proceed against the mortgagor only on an indemnity theory. Whitestone, 28 N.Y.2d at 336-37. It no longer has any claims to the insurance proceeds. Thus, summary judgment against Amboy is granted to the extent that it claims it is entitled to proceeds from the insurance policy as second mortgagee.
2. The Settlement Agreement
The movants contend that the unequivocal language of the global settlement agreement between Amboy and Somers also released Generali and all other parties to this action from liability flowing from the forged check. In support they cite the following provision of the agreement:
Any predecessors, successors, affiliates, any owned, controlled or related entities of the foregoing thirty-nine (39) individuals and entities and any agents, officers, partners, stockholders, directors, or employees of the foregoing, and any other entities in which Somers has an interest and any other persons or entities having any relationship or connection with the foregoing or with the property that Somers has or had any interest in, whether mentioned as a Somers Entity or not.
Amboy counters that neither the agreement in general, nor this provision specifically was intended to, or in fact does waive its claims against Generali or any other entity that is not controlled by or affiliated with Somers. This Court agrees.
The terms of the settlement agreement reveal clearly that Amboy intended to settle all of its claims with and against Somers and all of the many entities he controls. Thus thirty-nine different Somers corporate alter-egos are explicitly listed. However, in the event that other Somers entities existed but had been omitted by oversight from the agreement, the provision quoted above was added to ensure that those entities would also be bound by the agreement. While the language broadly states that it applies to "any other persons or entities having any relationship or connection with the foregoing or with the property," it is clear from the context of the agreement that that clause did not intend to apply to third parties, such as Generali. The movants have essentially argued that Somers bargained for and obtained their release from liability from Amboy. No factfinder, acting reasonably, would conclude that Somers' generosity was so great that he entered into a settlement to protect the interests of other parties - in return for nothing from them.
Accordingly, the motion for summary judgment on this ground is denied.
3. Waiver, Estoppel and Laches
Generali contends that (1) the execution of the settlement agreement between Amboy and Somers constituted a waiver of Amboy's claims against it, or that Amboy should be estopped on this basis from asserting these claims, and (2) that Amboy's claims are barred by laches.
Generali's waiver and estoppel arguments are simply a re-styling of the argument that the settlement agreement covers Generali, which the Court has previously rejected. As to the other assertion by Generali, laches is an equitable defense applicable, of course, only to claims sounding in equity. Lavin v. Hackensack Board of Ed., 90 N.J. 145, 147, 447 A.2d 516 (1980). Here, Amboy's claims are legal in that they derive from an express assignment, two mortgage agreements and an insurance policy. The doctrine of laches is inapplicable. Accordingly, Generali's motion for summary judgment on these grounds is denied.
II. Amboy's Motion for Summary Judgment Against Somers
Amboy seeks dismissal of Somers' counter-claim for lack of subject matter jurisdiction.
Somers' counters that this Court has supplemental jurisdiction over the counter-claim pursuant to 28 U.S.C. § 1367, which provides:
in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.
Thus, this Court may exercise supplemental jurisdiction over Somers' counter-claims (which indisputably confer upon this Court no independent basis of jurisdiction) only if they are so related to the factual and legal allegations contained in Amboy's complaint that they are considered part of the same case or controversy. See also United Mine Workers v. Gibbs, 383 U.S. 715, 16 L. Ed. 2d 218, 86 S. Ct. 1130 (1966).
Somers' counter-claim contains five counts: four directly charge Amboy's alleged breach of the settlement agreement between them by the filing of the underlying lawsuit; the last count sounds in libel and slander arising, for the most part, from statements made by Amboy with regard to this litigation. Amboy seeks to obtain, as both the second mortgagee and the assignee of the first mortgagee, the fire loss proceeds from the insurance policy. Somers contends that the settlement agreement prohibits Amboy from recovering the proceeds, and that the breach of that agreement is involved intimately with the substance of Amboy's claims.
This Court has already concluded that that agreement pertains exclusively to the interests of Amboy and Somers' Entities, and not to those of other parties to this litigation. In addition, the settlement agreement is inapplicable to Amboy as assignee of the first mortgagee because it was executed before the assignment of the first mortgage. Unless the agreement extinguished Sun Life's claims to the insurance proceeds, which it does not, then Amboy, as its assignee, can not be barred by the agreement from seeking those proceeds. It is possible that some argument could be constructed to make the settlement agreement germane to the claim to the insurance proceeds by Amboy as second mortgagee, but the Court has granted the above motion for summary judgment against Amboy in its status as second mortgagee. In regards to Somers' libel and slander count, such is premised on Amboy's pleadings which declare that Somers' forged Sun Life's endorsement to the check issued by Generali. Whether Amboy has libeled Somers by making this statement has no bearing on Amboy's alleged entitlement to the insurance proceeds. The counter-claim of Somers is insufficiently related to Amboy's remaining claims to comprise the same case or controversy under Article III. Consequently, under 28 U.S.C. § 1367(a) this Court has no jurisdiction over it and Amboy's motion to dismiss the counter-claim is granted.
Amboy has also suggested that this Court dismiss Somers' fifth-party complaint which names, among others, certain Amboy directors as defendants, for lack of subject matter jurisdiction. That pleading is based upon the same factual and legal circumstances as the earlier discussed counter-claim. Somers, however, has obtained defaults against the fifth-party defendants. At oral argument, Amboy modified its suggestion and argued that the default judgment be vacated and the complaint dismissed for lack of subject matter jurisdiction. This Court concludes that for the same reason that supplemental jurisdiction may not be exercised over Somers' counter-claim, it may not be done with regard to his fifth party complaint. The defaults obtained by Somers are vacated, and the fifth-party complaint is dismissed.
This matter having come before the Court on the motions for summary judgment against plaintiff Amboy to dismiss its complaint, and on the motion of Amboy to dismiss Somers' and Somers' Associates counter-claim, and the Court having considered the arguments of the parties; and for reasons stated,
It is on June 27, 1996
ORDERED that the motion for summary judgment against Amboy is denied;
ORDERED that the motion for summary judgment of Amboy against Somers and Somers Associates is granted; and
ORDERED that defaults obtained by Somers against the fifth-party defendants is vacated, and that the fifth party complaint is dismissed.
William H. Walls, U.S.D.J.