Opinion
Decided October 9th, 1935.
1. Defendant guaranteed the title of certain property on which complainant took a bond and mortgage which it soon after assigned to the testator, guaranteeing the payment of principal and interest thereof. On a bill to foreclose, testator's executors and the assignor company join as complainants against the present owner of the property and the defendant title guarantor as defendants. On motion to strike the bill as multifarious on the ground that it joins an action of law which the complainant assignor had on the policy contract against the defendant title guarantor, with an equitable action that the executors have against the owner of the mortgaged premises, held, such joinder is proper.
2. The policy contract guaranteeing the title, the mortgage taken as a result thereof and the assignment of the mortgage with the mortgagee's guaranty of payment, were all parts of a single transaction. Under chancery rules 23 and 24 persons interested in separate causes of action may be joined if the causes of action have a common question of law or equity and arose out of the same transaction or series of transactions, which includes any transaction growing out of the subject-matter in regard to which the controversy arises.
3. Since the executors have a right of action to foreclose the mortgage in question (an equitable action) and for any deficiency a right of action against the company that assigned the mortgage on its guaranty of payment (a law action); and in case that company pays the deficiency, it will have an action at law against the title guarantor, equity is the only forum in which all these rights can be adjudicated in a single suit and complete justice done.
4. Equity has jurisdiction to determine and enforce the rights of all parties to the transaction to avoid circuity of action, inasmuch as the complainant executors have the right of substitution, as a creditor of the company that assigned the mortgage, to all the collateral obligations for the payment of their claim which that company holds for its indemnity.
5. The claim of the complainant executors is not for unliquidated damages, for if the property sells for less than the amount of the decree in foreclosure, their claim is for a definite amount — the difference between the sale price and the decree. Even where the claim is for unliquidated damages, under the Chancery act of 1915, the case can be retained and the question of damages sent to a jury for determination. If no jury trial is demanded, equity will determine the damages.
6. Mere lapse of time, if properly explained, will not bar relief, and laches, if a proper defense, should be pleaded.
Appeal of Fidelity Union Trust Company.
On appeal from an order of the court of chancery, advised by Vice-Chancellor Fielder, who filed the following opinion:
"The bill of complaint alleges that on December 1st, 1920, Mountain Lakes, Incorporated, gave its bond and mortgage to North Jersey Title Insurance Company, for $9,000 payable December 1st, 1933, the mortgage covering real property described by a particular description which concludes with the words, "containing house known as house No. 500," which mortgage was recorded December 23d 1920; that to induce the title company to make said mortgage loan, Fidelity Trust Company (afterward known as Fidelity Union Trust Company) issued a policy dated December 23d 1920, guaranteeing the title company against loss not exceeding $9,000 by reason of defect in title of the mortgaged premises and further guaranteeing said mortgage to be a first lien on the premises in the mortgage described; that as part of such guaranty of title, the trust company delivered to the title company a survey of the mortgaged premises which shows a house numbered 500 located on said premises, although the trust company knew it was not in fact so located; that relying on said guaranty of title, survey and description and on the false and fraudulent representation of the trust company that house number 500 was located on the premises, the title company made said mortgage loan; that the house known as number 500 was worth at least $14,000; that by assignment dated December 21st, 1920, recorded December 27th, 1920, the title company assigned said bond and mortgage to George Krouse and guaranteed to him payment of principal and interest thereof; that the title company learned in 1922 that the house number 500 was not located on the described land and that the land was vacant; that Krouse died testate and complainants Commercial Trust Company and Leon A. Carson are his executors; that the principal of said bond and mortgage is past due and unpaid; that the trust company is liable to the title company under said policy of title guaranty, for the difference between what may be realized on foreclosure sale of the mortgaged premises and the amount of the mortgage, because house number 500 is not located on the mortgaged premises and that Krouse's executors are in equity subrogated to the rights of the title company against the trust company. The bill is filed by the Krouse executors and the title company as complainants against the owner of the mortgaged premises and the trust company as defendants, to foreclose the mortgage and to ascertain the loss sustained by complainants by reason of the absence of house number 500 from the mortgaged premises and to obtain a decree that the trust company pay the amount of such loss to complainants in discharge, in whole or part, of the guaranty given by the title company to Krouse.
"The trust company moves to strike the bill of complaint, assigning several grounds therefor, which are summarized under the heads hereinafter stated.
"The objection that the bill is multifarious in that it joins an action at law which complainant title company has on the policy contract against the trust company with an equitable action which Krouse's executors have against the owner of the mortgaged property, cannot prevail. The policy contract, the mortgage given by Mountain Lakes, Incorporated, to the title company and the assignment of mortgage to Krouse with the title company's guaranty of payment, were all part of a single transaction, as will appear by the dates set out in the bill. Under chancery rules 23 and 24 persons interested in separate causes of action may be joined if the causes of action have a common question of law or equity and arose out of the same transaction or series of transactions, which includes any transaction growing out of the subject-matter in regard to which the controversy arises. The complainant executors have a right of action to foreclose the mortgage in question, which is an equitable action, and for any deficiency arising on foreclosure sale they have a right of action against the title company on its guaranty of payment of the mortgage debt, which is a law action. Should the title company satisfy the executors on such guaranty, the title company will claim a right of action against the trust company on the latter's policy of title guaranty, which is also a right to sue at law. The complainant executors claim the right, by way of subrogation, to enforce the claim of the title company against the trust company, which is an equitable right. This is the only forum in which these various rights or claims can be adjudicated upon in a single suit and where complete justice can be done all parties and it is settled that this court has jurisdiction to determine and enforce the rights of all parties to the transaction in order to avoid circuity of action. Holland Reform School Society v. De Lazier, 85 N.J. Eq. 497. I think the right of complainant executors cannot be said strictly to be the right of subrogation, but rather the right of substitution. Their right rests upon the equitable principle that as a creditor of the title company they are entitled to have the benefit of all collateral obligations for the payment of their debt which the title company holds for its indemnity and that to avoid circuity of action and to save the title company, as an intermediate party, from being sued in another action by complainant executors and being then compelled to seek relief against the trust company in a third action, the complainant executors may go directly to the trust company on whom it is alleged the liability will finally rest. Binns v. Baumgartner, 105 N.J. Eq. 58.
"The trust company contends that the claim the complainants assert against it is for unliquidated damages and that such a claim is not cognizable in equity. Norton v. Sinkhorn, 61 N.J. Eq. 508. Since that question was so decided, the Chancery act of 1915 was enacted and under sections 33-121 and 33-122, as found in Cum. Supp. Comp. Stat., where any question ordinarily determinable at law requiring a jury trial shall arise in a cause in which this court has jurisdiction, a jury trial may be ordered and the case retained until the legal question shall be determined and any question ordinarily determinable at law, arising in a suit in which this court has jurisdiction (other than certain excepted cases), shall be determined by this court if no jury trial be demanded. If the trust company desires the question of liability or extent of liability under its title policy contract determined at law and by a jury it may take that question to a law court, but it does not so move, the question of damages may be determined by this court. Moreover under the allegations of the bill, the complainants' claim is not unliquidated. The bill alleges that the house the trust company guaranteed to be on the mortgaged land was worth at least $14,000. If on foreclosure sale the mortgaged property sells for less than $9,000 (or the amount of the decree in foreclosure) the complainants' claim is for a definite sum — the difference between what the property sells for and the foreclosure decree.
"Finally the trust company contends that the bill of complaint discloses on its face that complainants are barred by laches from maintaining suit against it on its policy of title guaranty. The bill shows that complainants learned in 1922 that house number 500 was not located on the premises described in the guaranty; they filed their bill September 24th, 1934. The bill should not be stricken on this ground because it does not appear that complainants' delay in bringing suit has deprived the court of the power of ascertaining with reasonable certainty what the truth is with respect to the issue, or that the trust company has suffered in any way by lapse of time. Mere lapse of time, if properly explained, will not bar relief and laches, if a proper defense to complainants' cause of action, should be pleaded. Sobota v. Shaffer, 105 N.J. Eq. 459.
"The point whether the trust company's liability on its policy was not terminated when the title company assigned the bond and mortgage against which the policy guaranty was issued ( Bradley v. Atlantic Guaranty, c., Co., 98 N.J. Law 34, 741) is not presented by the motion to strike and was not argued.
"The defendants' motion to strike the bill of complaint will be denied."
Messrs. Hood, Lafferty Campbell ( Mr. Richard C. Plumer, of counsel), for the appellant.
Wall, Haight, Carey Hartpence ( Mr. William H. Carey, of counsel), for the respondent.
The order appealed from will be affirmed, for the reasons stated in the opinion delivered by Vice-Chancellor Fielder in the court of chancery.
For affirmance — THE CHIEF-JUSTICE, TRENCHARD, PARKER, LLOYD, CASE, BODINE, DONGES, HEHER, PERSKIE, VAN BUSKIRK, HETFIELD, DEAR, WELLS, WOLFSKEIL, RAFFERTY, JJ. 15.
For reversal — None