## Facts

- Anthony and Theresa Stefanelli were New Jersey residents who borrowed money from Oxford Consumer Discount Company, a Pennsylvania consumer finance corporation.
- The transaction was initiated by the Stefanellis, who went to Pennsylvania to obtain the loan; Oxford did not solicit or market loans in New Jersey.
- The loan was negotiated and executed in Pennsylvania and was repayable in Pennsylvania.
- The obligation was secured by a second mortgage on the Stefanellis’ home in New Jersey.
- The loan complied with Pennsylvania law, but its terms violated New Jersey’s Secondary Mortgage Loan Act (including an interest rate and charges exceeding what New Jersey permitted for such loans).
- After the Stefanellis defaulted, Oxford filed suit in New Jersey state court to enforce the note and foreclose the New Jersey mortgage.
- The trial court ruled for Oxford, but the Appellate Division reversed, applying New Jersey law and barring Oxford from collecting on the loan; Oxford appealed to the New Jersey Supreme Court.

## Issues

1. Whether New Jersey’s Secondary Mortgage Loan Act governs a loan made and payable in Pennsylvania when it is secured by a second mortgage on New Jersey real estate owned by New Jersey residents.
2. If New Jersey law governs, whether New Jersey courts may deny enforcement of a loan that violates the Secondary Mortgage Loan Act even though the loan is valid where made.
3. To what extent the decision applying the Act and limiting enforceability should apply to loans entered into before the Appellate Division’s 1968 decision (retroactivity versus prospectivity).

## Decision

- The New Jersey Supreme Court affirmed the Appellate Division substantially for the reasons in its two opinions addressing (1) applicability of the Secondary Mortgage Loan Act and (2) the time reach of the remedy.
- The Court agreed that New Jersey’s Secondary Mortgage Loan Act applies to this type of transaction because it involves New Jersey resident-borrowers and a mortgage on New Jersey real property.
- The Court approved New Jersey-court refusal to enforce loan obligations that violate the Act, notwithstanding that the loan was made in Pennsylvania and valid under Pennsylvania law.
- The Court accepted limiting the decision’s retroactive impact based on fairness considerations, and affirmed subject to a limited qualification regarding the retroactivity framework.

## Legal Principles

- A state may apply its lending and consumer-protection statute to a transaction materially connected to the state, including when the collateral is in-state real property and the borrowers are state residents, even if contracting and payment occur elsewhere.
- A forum may refuse to enforce contractual rights that conflict with a strong local public policy expressed in a regulatory statute, despite the contract’s validity under the law of the place of contracting.
- When a court announces or applies a legal rule that changes enforcement consequences for existing transactions, it may limit retroactive effect to reduce unfairness to parties who relied on prior practice and the law of another jurisdiction.

## Conclusion

Oxford Consumer Discount Co. v. Stefanelli holds that New Jersey’s Secondary Mortgage Loan Act governs secondary mortgage loans secured by New Jersey homes owned by New Jersey residents, even when the loan is made and payable in Pennsylvania, and that New Jersey courts may deny enforcement of noncompliant loans while restricting retroactive application to avoid inequitable results for earlier transactions.


Oxford Consumer Discount Co. v. Stefanelli, 262 A.2d 874 (1970)