KAYS, Vice Chancellor
Syllabus by the Court.
1. When a complainant in a foreclosure sale has obtained a final decree against the defendant mortgagor and has allowed the sale thereunder to stand over for several years for the purpose of allowing payments to be made by the mortgagor, he will not be permitted to apply the payments made by the mortgagor on the mortgage contract as though no decree had been entered and afterward proceed with the sale and credit the amounts paid upon account of interest, premiums, and fines due under the mortgage contract over the objection of a second mortgagee who is a party to the suit. Such payments must be applied on the decree and not on the mortgage.
2. When a mortgage is foreclosed and final decree entered, the debt becomes a debt of record, which is evidenced by the record of the court, and the decree draws legal interest from the date of its entry.
3. Complainant in such a case cannot lay aside a decree for the purpose of applying payments on the mortgage which has been merged in the decree and then proceed with a sale thereunder.
Suit by the Colonial Building-Loan Association against Mongiello Brothers, Incorporated, and others.
Decree in accordance with opinion.
George G. Tennant, of Jersey City, for complainant.
Bart R. Boyle, of Bayonne, for defendant, Mongiello Bros, Inc.
George B. Astley, of Newark, for defendant, Delaware, Lackawanna & Western Coal Co.
KAYS, Vice Chancellor.
This matter comes before me on exceptions to a master's report.
The facts in the case are that complainant, the holder of a first mortgage known as an installment building and loan mortgage, for the principal sum of $45,000 covering property in Bayonne, N. J, owned by the defendant, Mongiello Brothers, Inc., began4, 1933, the date of the master's report in the foreclosure, and that the amount due the Delaware, Lackawanna & Western Coal Company was the sum of $50,525, together with interest from November 4, 1933, together with taxed costs, etc.
Complainant's counsel contends that the master erred in finding this amount due to the complainant. He says that the payments made by Mongiello Brothers, Inc., were on account of the premiums, dues, interest, and fines the same as if no decree had been entered, and that complainant was entitled, in accordance with an understanding with Mongiello Brothers, Inc., to make such credits and ignore any interest or rights which the Delaware, Lackawanna & Western Coal Company might have as second mortgagee. He contends that the second mortgagee could not complain as to any agreement made between complainant as first mortgagee and the defendant, Mongiello Brothers, Inc., mortgagor.
The master found that complainant, instead of proceeding to a sale pursuant to the decree, elected to postpone the same after final decree and accept payments from defendant, Mongiello Brothers, Inc. He found there was no satisfactory proof of an express agreement, either oral or written, whereby the parties agreed to disregard the decree and adopt the foreclosed mortgage in its place, and that no such agreement could be implied from the conduct of the parties. It is true that complainant apparently never abandoned its right to continue the foreclosure. It held such right as a threat over the defendant, Mongiello Brothers, Inc., in order to induce Mongiello Brothers, Inc., to continue payments. It never applied to the court to cancel the decree or to restrain the proceedings. All of the correspondence between complainant and Mongiello Brothers, Inc., indicate such a course. Mongiello Brothers, Inc., paid to complainant's solicitor $500 during the months of August and September, 1935, as counsel fees which were demanded before the foreclosure would be discontinued. The foreclosure, however, was never discontinued. Mr. Cook, the secretary of the defendant, the Delaware, Lackawanna & Western Coal Company, testified that he was informed by complainant's solicitor that the moneys paid by Mongiello Brothers, Inc., to complainant were being paid in reduction of the decree and were not being applied on the mortgage because as a matter of fact the mortgage no longer existed. Solicitor of complainant refused to state whether or not he so informed Mr. Cook.
Irrespective as to whether or not there was an agreement between the complainant and Mongiello Brothers, Inc., as to how payments by Mongiello Brothers, Inc., to complainant should be applied, the question arises whether or not such an agreement would bind the defendant, the Delaware, Lackawanna & Western Coal Company, and also whether such an agreement was valid as effecting a final decree. There is no evidence of a written agreement between the parties, and, as above stated, the decree still remains and no new mortgage was ever executed.
Chancellor Walker, in the case of Hudson Trust Company v. Boyd, 80 N. J. Eq. 267, 269, 84 A. 715, said:
"Now, the mortgage is very effectually continued when merged into a decree of foreclosure, which can be enforced by execution at any time within 20 years (on notice to defendant after the lapse of 6 years), and under the terms of the decree the defendants are not foreclosed of the equity of redemption until the premises are actually sold by virtue thereof.
"In fact, when merged into a decree, the debt which before was one by 'specialty' becomes one of 'record.' A 'debt of record,' says Blackstone, is a contract of the highest nature being established by the sentence of a court of judicature. 2 Bl. Com. 465. A 'debt of record' is a sum of money which appears to be due by the evidence of a court of record. 2 Words and Phrases [First Series] 1891. See, also, New Jersey Insurance Co. v. Meeker, 37 N. J.Law [8 Vroom] 282, 301. A 'judgment debt' is one which is evidenced by matter of record. Bouv.Law Diet. (Rawle's Rev.) 513. A 'debt by specialty' is a sum of money due or acknowledged to be due by deed or instrument under seal. 2 Bl.Com. 465. * * *
"After decree the proceedings are under the control of the court, and will only be opened in order to prevent fraud or mistake. Consolidated Electric Storage Co. v. Atlantic Trust Co, 50 N.J.Eq.[5 Dick.] 93, 24 A. 229."
It is quite obvious that such must be the law, and that every party to the suit is bound thereby and has the right to assumethat such decree represents the final determination of the debt and amount due thereunder as therein stated, and that such debt draws legal interest from the date of its record and no more, and that such decree cannot be considered as nonexistent for the purpose of allowing a complainant and defendant to continue a contract which was settled by the entry of such decree which would affect the interest of another defendant who is not a party to such agreement. If this were not so, other creditors of a defendant could never be sure that the defendant's rights and liabilities under a decree had been finally established. Complainant contends that while the mortgage merged in the final decree, yet the merger is not such as will foreclose the defendants of the equity of redemption until the premises are actually sold, citing the case of Heritage v. Bethel, 96 NJ.Eq. 515, 125 A. 917. Such is no doubt the law, but this does not give complainant the right to apply payments made by the mortgagor on account of the mortgage instead of on the decree when the rights of another defendant, a second mortgagee whose interest has been determined by the court, are effected thereby. Complainant cites a number of cases wherein it is suggested that a new agreement may be entered into between the complainant mortgagee and the defendant mortagor relative to settlements of the decree. None of these cases cited, however, involved the question of the rights of a second mortgagee.
The only question involved in this case is whether, after the decree was entered, the payments made by the mortgagor to to first mortgagee should have been credited on the decree or whether by an alleged agreement made between the complainant and first mortgagee the payments could have been credited, as complainant alleges they were, for the interest, fines, dues, etc, under the terms of the mortgage to the detriment of the second mortgagee who has made application to have this matter determined. Complainant cannot, on the one hand, lay aside the decree for the purpose of applying payments on the interest, premiums, and fines, and then, on the other hand, bring the decree again into effect for the purpose of proceeding with the sale thereunder.
I have concluded that the master reached the proper result in this matter, and I will therefore advise a decree to that effect.