Court: New Jersey Superior Court Appellate Division; September 29, 1960; New Jersey; State Appellate Court
Poultrymen’s Service Corporation has filed a lawsuit against Arthur and Jean Baer, operators of a poultry farm, comprising six counts. The first three counts seek $15,606.16 for a book account, goods sold and delivered, and an account stated. The fifth count asserts that the Baers owed $16,111.80 for goods on February 26, 1960, and agreed to secure this debt with a mortgage on their 20.4-acre farm. This agreement included terms for weekly payments and was communicated to and accepted by the plaintiff, resulting in a remaining balance of $15,606.76 after credits. The plaintiff claims that the defendants’ sale of the farm to Louis and Mary Gamberdella has affected their position, as $17,500 held in escrow is insufficient to cover their claim of $15,639.21 plus $4,381.11 in interest. Arthur Baer’s affidavit indicates discussions of a mortgage but disputes the credits and adjustments. The plaintiff seeks to establish an equitable mortgage lien for $15,606.76 and claims an additional $382.58 due to the Baers' breach of the mortgage agreement. The defendants filed motions to strike the fifth and sixth counts, arguing the agreement violates the statute of frauds, which requires a written contract for interests in real estate. The plaintiff counters that the case falls under exceptions to the statute due to part performance. Cited cases support that a court may enforce a mortgage agreement when money was advanced based on the promise of such a mortgage, even if the payment was past consideration, raising the question of whether this case meets the criteria for that exception.
The transaction involved a mortgage agreement where both parties provided a present consideration; one offered a mortgage while the other provided credit and deferment. Precedent cases typically feature significant loans with expectations for corresponding mortgages, and the court noted that excluding these cases from the statute could enable substantial fraud. The case most similar to the one at hand is Sleeth v. Sampson, in which a small loan was secured by a mortgage; the court invalidated the agreement based on statutory grounds, emphasizing that the acts of part performance were inadequate. The New Jersey case of Cauco v. Galante also relates closely, where a loan was made with a promise for a mortgage, but without prior debts. The court directed the mortgage to be given, highlighting that a change of position plus payment for the promise of a mortgage could avoid the statute. However, this case differed as it lacked antecedent debts, and the change of position was not clearly tied to a mortgage agreement. In the current case, the plaintiff Poultrymen's Service Corporation claims a change of position through the sale of the defendants' farm.
The change of position in this case is more significant than in the Cauco case due to the defendants' actions leading to the plaintiff's potential loss, highlighted by the inadequacy of the escrowed amount to cover the plaintiff's claim and interest. Unlike the Cauco case, where the plaintiff's actions prompted the change, here, the defendants are responsible. The mere payment of money does not qualify as partial performance that would exempt the case from the statute of frauds concerning real estate, as established in Feldman v. Warshawsky, 125 N. J. Eq. 19 (E. A. 1938). The $382.58 credit provided by the plaintiff is somewhat akin to a monetary payment but lacks full comparability since it was an action taken solely by the plaintiff, unlike cases where both parties are involved in a payment, indicating mutual consent. The credit was also not part of the mortgage agreement, which was discussed only after the antecedent debt was established. After considering all factors, the court finds that the relevant principle aligns with Judge Cardozo’s reasoning, leading to the striking of the fifth count, while the sixth count remains viable under a quasi-contract theory to prevent unjust enrichment.
