New Gold Equities Corp. v. Jaffe Spindler Co.
Citation | 453 N.J.Super. 358,181 A.3d 1050 |
Decision Date | 28 February 2018 |
Docket Number | DOCKET NO. A–0200–15T1 |
Parties | NEW GOLD EQUITIES CORP., a New Jersey Corporation, Plaintiff–Appellant/Cross–Respondent, v. JAFFE SPINDLER COMPANY, a New York limited partnership, Defendant–Respondent, and 111 First Street Associates, a New Jersey Partnership, Defendant, and M & T Bank, a New York business corporation, Defendant–Respondent/Cross–Appellant. |
Court | New Jersey Superior Court – Appellate Division |
Brendan M. Walsh argued the cause for appellant/cross-respondent (Pashman Stein, attorneys; Michael S. Stein and Brendan M. Walsh, of counsel and on the briefs).
S. Robert Schrager (Hodgson Russ LLP) of the New York bar, admitted pro hac vice, argued the cause for respondent/cross-appellant (Erin Nicole Teske (Hodgson Russ LLP), Jacquelyn R. Trussell (Hodgson Russ LLP) and S. Robert Schrager, attorneys; Erin Nicole Teske, Jacquelyn R. Trussell, and S. Robert Schrager, on the briefs).
Bertone Piccini, attorneys for respondent (Joseph A. Pojanowski, III, on the brief).
Before Judges Alvarez, Currier, and Geiger.
The opinion of the court was delivered by
ALVAREZ, P.J.A.D.
Plaintiff New Gold Equities Corporation (New Gold) appeals from a June 5, 2015 judgment entered in favor of defendant/cross-appellant M & T Bank (the Bank), an indenture trustee, in its negligence action concerning a $2,100,000 bond. We affirm the trial judge's decision entering judgment for the Bank, in part, because the duties of the indenture trustee were properly limited to those enumerated in the trust agreement. We also affirm the judge's post-judgment August 25, 2015 order denying the Bank's application for $360,335.85 in attorney fees and $45,707.56 in costs. The indenture agreement did not obligate New Gold to reimburse the bank for the legal expenses it incurred defending against its own negligence.
New Gold acquired the property in 1990 from Old Gold Associates (Old Gold),1 which had purchased it on December 22, 1982, from defendant Jaffe Spindler Company, LLC (Jaffe). The transaction was financed through a thirty-year commercial bond agreement, secured by a mortgage against the property, issued by the New Jersey Economic Development Authority (NJEDA).
The yearly interest rate on the bond was fixed at 13%. New Gold was required to actually pay, however, monthly interest ranging at a reduced 6.29% to 7.62%. The difference between the base rate and the monthly interest, described in the loan documents as "deferred interest," accrued but was not due if the principal balance was paid at any time during the first eleven months of the last year of the loan—between December 23, 2011, and November 22, 2012.
In other words, New Gold would not have to pay $3,714,864 in accrued but deferred interest if the principal was satisfied on or before November 22, 2012.2 New Gold did not exercise this option, thus the bond's principal balance of $2,100,000 together with the deferred interest all became due at the loan maturity date on December 22, 2012.
In 2010, the Bank became the indenture trustee, assuming the role from a series of predecessor entities. Marco Medina, a Bank employee, administered the bond from 2010 to the maturity date.
New Gold employed BLDG Management Company, Inc. (BLDG), as the property manager. Senen Bacalan was the BLDG employee responsible for the administrative tasks relative to the mortgage.
On November 12, 2012, forty days before maturity and ten days before the prepayment option expired, Bacalan sent an email to Medina requesting a payoff figure at the maturity date, December 22, 2012: the "usual status letter indicating the principal balance and per diem interest." Medina, who was entirely unaware of the deferred interest provision, did not respond until November 27, 2012, fifteen days later. He forwarded a payoff statement that read:
After Bacalan pointed out that the payoff figures did not include a smaller subordinate bond, Medina sent Bacalan a corrected payoff reflecting an accurate total principal balance due of $2,330,000. Bacalan identified another error in that second payoff statement, the omission of the interest that had accrued on the subordinate bond. On December 18, 2012, Medina responded with a third corrected payoff, stating that an additional $16,017.34 in interest was due.
While preparing the payoff statements prior to the December 22, 2012 maturity date, Medina did not review the bond documents. Thus none of the payoff statements included any mention of the additional deferred interest.
On December 19, New Gold paid the December 18, 2012 payoff statement amounts. After the payment, Medina learned about the deferred interest clause, reviewed the terms of the bond for the first time, and notified New Gold of the additional interest due.
Bacalan, who was also unaware of the deferred interest clause, had inherited handwritten notes and calculations regarding the bond obligation from his predecessor, Patrick Knowles. Knowles, who began working at BLDG in 1990 and retired in 2011, had written "deferred int. $1,000,827.46" on a page of the mortgage schedule. Bacalan, although he had those materials, had never asked anyone about the notations, nor had he read the actual bond documents.
On February 13, 2013, Jaffe sent NJEDA a letter demanding payment of the $3,714,864 deferred interest and threatening to foreclose on the mortgage if it was not made. A parallel foreclosure proceeding was thereafter filed by Jaffe.
New Gold's complaint sought to cancel the mortgage securing the bond, alleging that the deferred interest was an illegal, unenforceable, and uncollectable disguised penalty. New Gold also sought judgment discharging the mortgages, liens, and encumbrances on the property, as well as damages. Jaffe counterclaimed in foreclosure and for possession.
Summary judgment motions and cross-motions were filed by the parties in both this action and Jaffe's separate foreclosure action. On August 28, 2013, among other relief, Judge Hector Velazquez...
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