MAPLEWOOD BANK AND TRUST V. SEARS, ROEBUCK AND CO.
Case Date: 03/15/1994
Docket No: none
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SYLLABUS
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court.
Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
MAPLEWOOD BANK AND TRUST V. SEARS, ROEBUCK AND CO., ET AL. (A-91-93)
(Note: The Court wrote no full opinion in this case. Rather, the Court's affirmance of the
judgment of the Appellate Division is based substantially on the reasons expressed by
Judge Coleman's written opinion below.)
Argued February 15, 1994 -- Decided March 15, 1994
PER CURIAM
Maplewood Bank and Trust is the holder of a first purchase money mortgage dated September
20, 1988 and recorded on October 5, 1988, on premises owned by Edward and Terre Capers. The
original mortgage debt was for $121,000. On May 31, 1989, Sears, Roebuck and Co. (Sears) filed a
Financing Statement covering a new kitchen installed in the mortgaged premises at the request of the
Capers after they executed a Security Agreement. The Financing Statement filed by Sears gave notice
that Sears had a security interest in the new kitchen installed in the mortgaged premises in the amount
of $33,320.40.
On August 18, 1989, the Capers executed a second mortgage on the premises to New Jersey
Savings Bank for the sum of $34,000. That mortgage was recorded on August 23, 1989.
The Capers eventually defaulted in their payments due to Maplewood Bank and Sears.
Maplewood Bank filed a foreclosure complaint on November 5, 1988 and an amended complaint on or
about December 6, 1990. Sears filed an answer and counterclaim. Sears sought a declaration that its
debt was prior to the mortgage of Maplewood Bank and, among other things, sought to compel
Maplewood Bank to pay Sears the amount due on its agreement. In essence, Sears claimed that under
N.J.S.A. 12A:9-313, it was entitled to priority over Maplewood Bank in the funds realized from the
anticipated foreclosure sale. Sears' answer and counterclaim were stricken on July 26, 1991, and the
matter proceeded as an uncontested foreclosure action. A final judgment in foreclosure was entered on
February 28, 1992.
Sears appealed the dismissal of its counterclaim to the Appellate Division, arguing that the
priority given Sears as a purchase money security interest holder under the New Jersey Uniform
Commercial Code (UCC) applies to the proceeds of a judicial sale instituted by a purchase money
mortgagee. The Appellate Division rejected that argument.
The Appellate Division found that it was undisputed that the new kitchen Sears installed and
financed satisfied the conditions of a fixture under the UCC; that Sears obtained a purchase money
security interest in the fixture to secure full payment; and that Sears perfected its security interest by
filing a Financing Statement covering the fixtures in the Hunterdon County Clerk's Office where the first
mortgage held by Maplewood Bank was recorded. However, the court found that Sears' security
interest was limited to the fixtures and did not extend to the realty. On the issue of remedies available, Sears contended that it should be entitled to receive from the proceeds obtained at the foreclosure sale the difference between the value of the realty with the new kitchen and the value of the realty after the new kitchen had been removed. The Appellate Division rejected this approach as an inappropriate remedy absent statutory authorization. Under the plain
language of the UCC, Sears had two options: removal of the fixtures or foregoing removal of the fixtures.
The Appellate Division reasoned that to adopt Sears' argument in the absence of legislation would mean
that a mortgagee's security interest could be impaired substantially without the Legislature pronouncing
an intention to do so. The Appellate Division noted that any modification of fundamental property rights
of purchase money mortgagees must be done through legislation and may not be implied from the
existing statute. Lastly, the court found that Sears was not entitled to any remedy, other than the
removal of fixtures, based on equitable principles. It concluded that Sears knew its remedy was limited
to removal upon default.
The Supreme Court granted certification.
HELD: Judgment of the Appellate Division is AFFIRMED for the reasons expressed in Judge
Coleman's written opinion below. The priority given Sears as a purchase money security
interest holder under the New Jersey Uniform Commercial Code does not apply to the
proceeds of a judicial sale instituted by a purchase money mortgagee.
CHIEF JUSTICE WILENTZ and JUSTICES CLIFFORD, HANDLER, POLLOCK, O'HERN,
GARIBALDI and STEIN join in this opinion.
SUPREME COURT OF NEW JERSEY
THE MAPLEWOOD BANK AND
Plaintiff-Respondent,
v.
SEARS, ROEBUCK AND CO.,
Defendant-Appellant,
and
EDWARD CAPERS, TERRE CAPERS,
Defendants.
Argued February 15, 1994 -- Decided March 15, 1994
On certification to the Superior Court,
Appellate Division, whose opinion is reported
at
265 N.J. Super. 25 (1993).
Sheldon H. Pressler argued the cause for
appellant (Pressler and Pressler, attorneys;
Raymond A. Noble, of counsel; Mr. Noble and
Steven P. McCabe, on the brief).
Alan R. Ostrowitz argued the cause for
respondent (Ostrowitz & Ostrowitz,
attorneys).
PER CURIAM
Chief Justice Wilentz and Justices Clifford, Handler, Pollock, O'Hern, Garibaldi, and Stein join in this opinion.
Converted by Andrew Scriven
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