Joan Ryno, Inc. v. First Nat. Bank of South Jersey

• Decision Date: 10 March 1986
• Citation: 506 A.2d 762,208 N.J.Super. 562
• Parties: JOAN RYNO, INC., Plaintiff-Appellant, v. FIRST NATIONAL BANK OF SOUTH JERSEY, Defendant-Respondent, and John Does: jointly, severally, and in the alternative, Defendants.
• Court: New Jersey Superior Court — Appellate Division

Page 562

208 N.J.Super. 562

506 A.2d 762

JOAN RYNO, INC., Plaintiff-Appellant, v. FIRST NATIONAL BANK OF SOUTH JERSEY, Defendant-Respondent and John Does: jointly, severally, and in the alternative, Defendants.

Superior Court of New Jersey,

Appellate Division.

Submitted Feb. 24, 1986.

Decided March 10, 1986.

Mario J. D'Alfonso, Camden, for plaintiff-appellant.

Kirkman, Mulligan, Bell, Armstrong & Serber, Atlantic City, for defendant-respondent (David B. Frisch, Atlantic City, on brief).

Before Judges MORTON I. GREENBERG, LONG and HAVEY.

The opinion of the court was delivered by

MORTON I. GREENBERG, P.J.A.D.

This matter comes on before this court on appeal by plaintiff, Joan Ryno, Inc., from a final judgment in its favor for damages of $1,500 on which prejudgment interest of $985 was allowed. The case involves a breach of a commitment by defendant First National Bank of South Jersey to make a mortgage loan. Even though the case was tried to a jury, the trial judge decided the matter himself as he concluded that on the undisputed evidence plaintiff was entitled to a judgment on liability but its damages were limited to $1,500. Plaintiff, regarding this award as inadequate, brings this appeal. Defendant has not cross-appealed.

The facts developed at the trial are not complicated. In 1977, plaintiff acquired land in Voorhees Township and subdivided it into three lots intending to build two houses, one as a personal residence for its officers, Frank and Joan Ryno, and the other to sell. Frank Ryno (Ryno), who was in charge of plaintiff's construction activities, made inquiry at defendant's Echelon branch concerning the availability of construction financing and was directed to a Mr. Wylerback at defendant's Washington Township branch. Wylerback told him that defendant would issue a commitment for a loan for the personal residence but not for the resale house. This was agreeable to plaintiff and the loan for the personal residence was taken by plaintiff and later closed.

After the initial turn-down of the resale house loan defendant indicated that it would consider a construction loan for that house if plaintiff procured a buyer for it. Consequently plaintiff placed the plans and specifications for this proposed house with a real estate broker to find a purchaser for it. This effort proved fruitful and on March 6, 1978, David Pierson and his wife entered into a contract to buy the house for $69,500. The construction time was important to the Piersons as they wanted to be in the house by July. Plaintiff was attempting to expedite the construction as it did substantial work on the building even before it obtained financing. The Piersons sought financing from defendant which on May 12, 1978 issued a mortgage commitment to them for the purchase. On the same day defendant issued a $50,000 commitment for construction financing at 9 1/2% interest to plaintiff which, however, was not delivered to plaintiff until May 19, 1978. When the commitment was delivered Ryno paid a $50 fee charged for it by defendant and signed an acceptance of it.

Unfortunately a few days after May 19, defendant's employee, David A. Lewis, who had been involved in the matter, called Ryno and told him defendant was cutting back lending and would not be advancing plaintiff the money, a decision made in defendant's Atlantic City office. Lewis, however, referred Ryno to George Emmons, defendant's vice-president in charge of mortgages.

Over the next two days Ryno made several telephone calls to Emmons but was never able to talk to him on the telephone as Emmons did not return his calls. Eventually, between five and ten days after May 19, 1978, Ryno went to Atlantic City and without an appointment walked into Emmons' office. At that time Ryno threatened defendant with litigation if it would not honor the commitment. Nevertheless Emmons confirmed that defendant would not make the loan.

Some days after Ryno's meeting with Emmons, Lewis called Ryno and related that Emmons wanted Lewis to see if something could be worked out. By this time, however, the Piersons had withdrawn from the purchase and had either obtained or asked for a return of their deposit. Subsequently on June 13, 1978 defendant issued to plaintiff a supplementary construction mortgage commitment for $50,000 at the same interest rate as in the earlier commitment. This new commitment was valid for six months but plaintiff refused to accept it as its ability to sell the property was now in question. Plaintiff conceived that it needed a commitment valid for a longer period.

Eventually the situation was largely salvaged. On July 12, 1978, plaintiff obtained a construction mortgage commitment from Atco Bank for $53,000, interest to be 4% above the prime rate, to secure a six-month note renewable for two more six-month periods. Unfortunately, there is no evidence in the record of the prime rate and thus we cannot compare the interest costs of the Atco loan with that under defendant's commitment. The record also is not clear as to the amount of interest plaintiff paid the Atco Bank. However it appears that with this financing, only $40,000 of which was actually drawn, plaintiff was able to complete the property and it did so, eventually reselling it by deed dated June 8, 1979 to Daniel and Lorraine O'Brien for $68,000, $1,500 less than the price under the Pierson contract. This $1,500 differential was the only recovery made by plaintiff in the case.

Notwithstanding the problems between the parties, defendant continued to hold the financing on the Ryno's home. However, on August 1, 1980, more than two years after defendant breached its commitment to plaintiff, the mortgage payment due from plaintiff on the personal residence was not paid, an event which though seemingly unrelated to this case, has generated the principal issue on this appeal. On November 14, 1980, defendant instituted foreclosure proceedings on the residence and on May 27, 1981 secured a final default judgment. This led to a sheriff's sale on July 31, 1981 which was confirmed by the court after plaintiff's objections to it were overruled.

The action now before us was started on April 18, 1983, when plaintiff filed a complaint in the Law Division against defendant seeking compensatory and punitive damages attributable to its refusal to honor the mortgage commitment. Defendant filed an answer disputing liability. ¹

The case came on for jury trial on February 21, 1985. The judge at that time reserved decision on defendant's pretrial motion to dismiss the punitive damage claim. After extensive pretrial argument the judge ruled that the single controversy doctrine barred plaintiff from offering proof of any damages for the loss of the personal residence by foreclosure as that claim should have been presented in the foreclosure action. The case was then tried with the evidence we have already described being developed.

After plaintiff rested, defendant renewed its motion for dismissal of the punitive damage claim and, as the court found the case involved only a breach of contract without egregious conduct or concealment, this motion was granted. Defendant then moved for a partial directed verdict limiting damages to $1,500 and this motion was granted. Defendant then rested without offering evidence. At that point plaintiff moved for a directed verdict which the trial judge granted as he found that defendant unquestionably breached the terms of the mortgage commitment agreement. He thus awarded plaintiff $1,500 in damages, an amount not in dispute. On March 13, 1985 the judge entered an order granting final judgment in favor of plaintiff for $1,500 in damages and prejudgment interest of $985. Plaintiff has appealed from that order.

Plaintiff's first legal contention in its own words is The 'entire controversy' doctrine, Rule 4:7-1, and Rule 4:27-1(b), do not preclude claims for damages arising from an admitted breach of loan commitment, when such claims were not raised in an unrelated foreclosure action between the same parties.

Clearly plaintiff's very framing of the issue shows that it cannot prevail on this point. It will be noted that plaintiff refers to the two actions as "unrelated," a characterization with much to support it. Defendant made separate commitments to plaintiff on two different though neighboring properties. Defendant did finance one property, apparently without incident. The foreclosure of the mortgage on that property was triggered when plaintiff failed to comply with its repayment obligation. Defendant dishonored its commitment on the other property.

But plaintiff contends, factually, as it must if it is to recover losses for the foreclosure in this case, that the transactions are not unrelated. In its brief it recites:

Due to the Bank's failure to honor its first commitment of May 19, 1978, the Piersons backed out of their agreement to purchase, thus leaving the appellant with no buyer and no funds with which to complete the home.

As a result, the appellant was forced to borrow money elsewhere at a significantly higher interest rate. ²

The higher rate of interest, coupled with the increased costs of construction, forced the appellant to draw continually from its assets in order to complete the home which was sold in June of 1979 at a purchase price of $68,000.00 ($1,500.00 less than what the Piersons had contracted to pay). Ultimately, the appellant's assets were depleted and it could no longer make the mortgage payments on the Ryno home. Consequently, in November of 1980, the Bank foreclosed on the Ryno home in an action against Joan Ryno, Inc.

Thus plaintiff's problem is apparent: if the transactions are unrelated, as it sets forth in its legal contentions, then the law of damages could not possibly support a finding that losses it suffered by reason of the foreclosure are recoverable in this breach of contract action. On the other hand if they are related, then plaintiff's claim...