Great Falls Bank v. Pardo

• Decision Date: 10 May 1994
• Citation: 273 N.J.Super. 542,642 A.2d 1037
• Parties: GREAT FALLS BANK, Plaintiff-Respondent, v. Joseph PARDO, Defendant-Appellant, and Frank Paparatto, Maria Paparatto and Samuel Petracca a/k/a/ Sam Petracca & Samuel S. Petracca, and Maria Petracca, a/k/a/ Maria D. Petracca, John F. Kennedy Medical Center and the State of New Jersey, Defendants. . Argued (telephonically) 1
• Court: New Jersey Superior Court — Appellate Division

Page 542

273 N.J.Super. 542

642 A.2d 1037

GREAT FALLS BANK, Plaintiff-Respondent, v. Joseph PARDO, Defendant-Appellant and Frank Paparatto, Maria Paparatto and Samuel Petracca a/k/a/ Sam Petracca & Samuel S. Petracca, and Maria Petracca a/k/a/ Maria D. Petracca, John F. Kennedy Medical Center and the State of New Jersey, Defendants.

Superior Court of New Jersey Appellate Division.

Argued (telephonically) ¹ May 10, 1994.

Decided May 26, 1994.

Aldan O. Markson, Kenilworth, for appellant Joseph Pardo (Mr. Markson, on the brief).

Cheryl H. Burstein, Wayne, for respondent Great Falls Bank (Williams, Caliri, Miller & Otley, attorneys; Ms. Burstein, of counsel, and on the brief).

Before Judges STERN and KEEFE.

PER CURIAM.

In 1987, Frank Paparatto, Ciro Spinella and Samuel Petracca entered a joint venture to build two-family houses on a parcel of land in North Arlington. To finance the venture, they personally executed a promissory note for a $350,000 loan Great Falls Bank ("plaintiff") made to their corporation. When they could not make payments, Paparatto and Petracca induced Pardo ("defendant") to acquire a 14% interest in the venture in exchange for $176,000 and execution on January 6, 1989 of a guaranty of the debt. On June 16, 1989 defendant also executed a mortgage to secure the guaranty in exchange for release by plaintiff of Paparatto's certificate of deposit previously given as security. Defendant contends that the mortgage was prepared by the bank's vice president, Glen Durr, but that he (defendant) had no direct communication with the bank or Durr. The mortgage was witnessed and notarized by Petracca. According to defendant's certification in opposition to plaintiff's motion for summary judgment, "[a]lthough my signature appears on the mortgage, I have no recollection of ever signing the mortgage ... I was not aware that I had signed a mortgage until many months after June 16, 1989." Defendant, a janitor who cannot read or write English, claims he never understood that he executed a mortgage to secure his guaranty and that he was fraudulently induced to do so by his "partners." ²

On January 21, 1990 the four partners executed a renewal promissory note which facially changed defendant's obligation from that of guarantor to principal. When the obligors did not make timely interest payments, plaintiff commenced a suit in August 1990 against Paparatto, Spinella, Petracca and defendant. Incident to a settlement and dismissal of that litigation, the four "partners" executed another extension of the $350,000 loan. Defendant simultaneously executed a Mortgage Modification and Extension Agreement to secure the debt. Both the note and agreement provided that plaintiff could release any party or collateral without affecting the liability of any other debtor or mortgagor. About seven months later, plaintiff released Spinella and discharged his mortgage in exchange for 25% of the amount due under the loan. Because the remaining balance was not paid when due, plaintiff instituted this foreclosure action. Thereafter, plaintiff's motion for summary judgment was granted, and defendant's motion for reconsideration was denied. Great Falls Bank v. Pardo, 263 N.J.Super. 388, 622 A.2d 1353 (Ch.Div.1993).

Defendant appeals and contends that the court erred by granting summary judgment. He argues that there are material facts in dispute which, if resolved favorably to him, support his claim that (1) plaintiff, as a third party beneficiary of his promises to his "partners," stands in the shoes of the promisees and is therefore subject to the defense of fraud that he asserts against his "partners" in a related action; (2) his mortgage is void because it did not secure a valid, subsisting debt; (3) his original guaranty is unenforceable because plaintiff released a principal obligor on the debt; ³ (4) his guaranty and mortgage are unenforceable for lack of consideration, and (5) the trial judge improperly denied him a hearing on his request that the foreclosure sale of his mortgage be stayed until plaintiff could litigate his claims against his partners and require the plaintiff to satisfy his obligation against them before resorting to the foreclosure sale of his mortgage.

The judgment is affirmed substantially for the reasons expressed by Judge Boyle in his written opinion, Great Falls Bank v. Pardo, 263 N.J.Super. 388, 622 A.2d 1353 (Ch.Div.1993), together with the following. It is uncontested before us that defendant was named as a defendant in the action filed in August 1990 based on the January 21, 1990 note executed by Paparatto, Petracca, Spinella and defendant, and that the suit was dismissed incident to execution by the same four individuals on November 14, 1990 of a new $350,000 promissory note, together with guaranties executed by the wives of Paparatto, Petracca and Spinella, and the Mortgage Modification and Extension Agreement signed by defendant (and apparently separate such agreements by Petracca and Spinella as well). These items were submitted to the plaintiff by counsel for defendants in the 1990 action. ⁴ In fact, counsel witnessed and notarized defendant's signature on the modification agreement, and defendant simultaneously executed an affidavit of title to his mortgaged property. If nothing else, dismissal of the 1990 complaint and renewal of the loan in November of that year provided consideration for the new obligation defendant undertook, and plaintiff could fairly rely on these documents sent to the bank by defendant's counsel. ⁵

We do not believe that the...