Opinion
Argued February 9th, 1938.
Decided May 11th, 1938.
Complainant is an obligor on the bond accompanying the mortgage on which defendant instituted foreclosure proceedings, and was made a party defendant to the foreclosure. A final decree was entered in the cause and execution issued to the sheriff who sold the premises for a nominal sum. The defendants in foreclosure objected to the confirmation of the sale and upon their application for a hearing on the question of fair value, the matter was referred to a master to report thereon. Subsequently the order referring the matter to the master was amended to include the question of the financial ability of the defendants in foreclosure to refinance the property in question. Shortly thereafter the complainant was permitted to withdraw his objection to the confirmation of the sale without prejudice to his rights and with permission to institute an independent bill of complaint to determine his rights. He then filed the bill herein in which he prays, among other things, that it be decreed that his obligation on the bond is that of a surety and not that of a principal. Held, on motion to strike the bill, that the procedure to establish the fact that complainant was a surety on the bond should have been by a petition presented in the original foreclosure proceedings and not through the medium of a bill filed in an independent suit. Fruzynski v. Jablonski, 117 N.J. Eq. 117, and Boardman v. Colonial Building-Loan Association, 118 N.J. Eq. 275, followed.
On appeal from a decree of the court of chancery advised by Vice-Chancellor Egan, who delivered the following opinion:
"The defendant Bertha Weiss in February, 1934, instituted foreclosure proceedings against the Keystone Realty Company, Incorporated, Benjamin Rosenwasser, this complainant, and Fannie Guttenberg, executrix of the last will and testament of Solly Guttenberg, deceased. A final decree was entered upon which an execution was issued to the sheriff of Bergen county who sold the premises under foreclosure on July 24th, 1935, to Louis Jacobson for the sum of $100. Confirmation of the sale was objected to by the defendants in that suit and upon their application for a hearing on the question of fair value, the same was referred to a master to report thereon. Subsequently, the order referring the matter to the master was amended to include the question of the financial ability of the defendants to refinance the property in question. Shortly thereafter, the defendant, Rosenwasser (this complainant), was permitted "to withdraw his objection to confirmation of sale without prejudice to his rights, and reserving all his rights therein, and that he be permitted to institute an independent bill of complaint to determine his said rights." Rosenwasser then filed the bill herein in which he prays, among other things, (1) that it be decreed that his obligation on the bond is that of surety and not that of principal; (2) that it be decreed that the defendant Louis Jacobson, who is the holder of the bid at the sheriff's sale, is in fact holder of the same for the defendant Bertha Weiss; (3) that the defendant Bertha Weiss be enjoined from instituting any action at law on the bond until the complainant is first credited with the sum of $14,000, being the fair and reasonable value of the property as found and reported by the master; (4) that the complainant be exonerated from liability, and that the mortgaged premises pay the debt; (5) that the bond be surrendered for cancellation.
"The complainant is an obligor on the bond accompanying the mortgage, and he claims to be a surety. He is not a party to the mortgage.
"The defendant moved to strike the bill; the motion was held over to the final hearing.
"In the meantime, the proceedings in the foreclosure suit instituted by Bertha Weiss continued. On February 7th, 1936, an order was entered setting aside the sale made on July 24th, 1935. That order provided, among other things, that the defendants guarantee upon the resale, the property bring at least the sum of $12,500 as a `reserved or upset price.' That provision in the order was inserted at the request of counsel for the defendants in that suit (who is the solicitor of the complainant herein). On May 6th, 1936, the property was offered for resale by the sheriff of Bergen county; there were no bidders at the sale; then the sheriff returned the execution `unsatisfied.' Thereupon, an order to show cause why a money decree for the full amount should not be entered against the defendants in the foreclosure suit, was issued. An argument thereon was had by counsel. The court reserved decision.
"This matter came on to final hearing when the motion to strike the bill was renewed.
"Complainant contends that the motion to strike the bill should not prevail, claiming that as a surety on the bond he is entitled to exoneration. Klorman v. Westcliff Co., Inc., 12 N.J. Mis. R. 266; 170 Atl. Rep. 251; Hunt v. Gorenberg, 9 N.J. Mis. R. 463; 155 Atl Rep. 881.
"Counsel for the defendant argues that the complainant is not a surety, but a principal obligor on the bond; that in no part of the instrument does it appear that he is mentioned as a surety. He maintains that even assuming that the complainant is a surety, as he claims to be, the procedure to establish such fact should not have been through the medium of a bill filed in an independent suit, but it should have been by a petition presented in the original foreclosure proceedings. In support of his position, he directs attention to the cases of Fruzynski v. Jablonski, 117 N.J. Eq. 117; Boardman v. Colonial Building-Loan Association, 118 N.J. Eq. 275, and Meranus v. Lawyers' and Homemakers' Building and Loan Association, Ibid. 586, all of which are authority for the proposition that in somewhat similar matters arising from foreclosure suits, application for relief should be by petition in the original foreclosure suit and not by bill in a plenary suit.
"Defendant's counsel further says that the bill should be stricken for the additional reason that complainant's financial inability to protect himself has not in these proceedings been alleged. In support of his point, he submits the following cases: Young v. Weber, 117 N.J. Eq. 242; Maher v. Usbe Building and Loan Association, 116 N.J. Eq. 475; Bluestone Building and Loan Association v. Glasser, 117 N.J. Eq. 392; Better Plan Building and Loan Association v. Holden, 114 N.J. Eq. 537.
"Complainant to sustain his right to proceed by bill herein, presents an unreported decision by Vice-Chancellor Fallon in the case of William F. Moore, complainant, and Lincoln Building and Loan Association of Jersey City, defendant, Docket No. 82/243. In that suit, Moore joined in executing a bond accompanying a mortgage being foreclosed. A decree of foreclosure was entered and the premises were sold by the sheriff. A deficiency suit was instituted at law against Moore. Moore filed a bill in this court in which he alleged that while he contracted as a principal, he, in fact, was not a principal but merely a surety on the bond; that the indebtedness was not his; and that the moneys claimed had been paid to, or for the benefit of, the defendant, the realty corporation, a party defendant in the suit. Vice-Chancellor Fallon held that Moore was a surety and that the indebtedness was the corporation's. However, the Moore Case was not appealed. Since the decision in that case was rendered, the court of errors and appeals of this state has spoken in the cases of Fruzynski v. Jablonski, supra; Boardman v. Colonial Building-Loan Association, supra,c. The determinations in the cases last cited point the way — which is by petition in the original cause. This court must follow those directions. Consequently, the motion to strike the bill is granted."
Mr. Frank H. Eggers, for the appellant.
Mr. Joseph L. Freiman, for the respondents.
We are in accord with the conclusion of the learned vice-chancellor that the bill of complaint should be dismissed. It suffices to say that appellant, even though a mere surety, is not at liberty to compel the mortgagee to take title to the property and give him credit for the fair value thereof.
The decree is accordingly affirmed.
For affirmance — PARKER, CASE, BODINE, DONGES, HEHER, PERSKIE, HETFIELD, DEAR, WELLS, WOLFSKEIL, RAFFERTY, WALKER, JJ. 12.
For reversal — None.