Opinion
02-26-1940
VESTA UNDERWEAR CO. v. POHATCONG HOSIERY MILLS.
Whiting & Moore, of Newark, for complainant. Collins & Corbin, of Jersey City, for defendant.
Foreclosure proceeding by the Vesta Underwear Company against Pohatcong Hosiery Mills, wherein defendant filed a counterclaim. On motion to strike the answer and counterclaim.
Motion granted in part.
Whiting & Moore, of Newark, for complainant.
Collins & Corbin, of Jersey City, for defendant.
KAYS, Vice Chancellor.
This matter comes before me on a motion by the complainant to strike out the answer and counterclaim of the defendant.
The bill in this case was filed to foreclose two mortgages which were given to secure the principle sum of $100,000. One mortgage covers real estate in Warren County and the other covers machinery and equipment contained in the building erected on said lands. The mortgages are for the same debt.
The bill alleges default by reason of the failure of the defendant to pay an installment of principal in the amount of $25,000 which became due on December 27, 1937. The bill of complaint was filed November 17, 1939.
The answer to both causes of action is in effect a general denial of the material allegations of the bill. The answer further sets up an extension of time for the payment of the installment alleged to be in default. There are eight additional answers to both causes of action which are pleaded separately. These in effect allege a fraudulent scheme by the complainant to ruin defendant's business and acquire its assets and set forth fraud, estoppel, waiver, laches and also invoke the equitable doctrine of "clean hands". The general denial contained in the answer raises a question of fact and entitles the defendant to a final hearing.
The fraudulent scheme, as pleaded, may not constitute a valid defense. A party cannot be deprived of the enforcement of a legal right for the motives alleged. See Weiner v. Cullens, 97 N.J.Eq. 523, 128 A. 176. The scheme alleged, however, is but an incidental part of the proof which may be required to establish an extension of time for payment and does not justify the striking out of the answer at this time. The answer may stand until final hearing.
The counterclaim is one not only against the complainant, but involves other individuals who are not parties to the suit. It alleges a fraudulent scheme and asks for a decree declaring certain sales agreements breached by the complainant and the said other individuals. It asks for an accounting, award of unliquidated damages,discovery and other relief. A defendant in a foreclosure suit cannot set up by way of counterclaim unliquidated damages in the absence of art agreement between the parties that such debt or claim shall be received and credited as payment. Corson v. Bailey, 98 N.J. Eq. 323, 129 A. 145. The counterclaim in question is pleaded as a separate cause of action whereby the defendant seeks relief apart from the case made by the bill of complaint. The counterclaim is not germane to the issue set forth in the bill of complaint and, therefore, should be striken out.