Summit Trust Co. v. Willow Business Park, L.P.

• Decision Date: 04 January 1994
• Citation: 635 A.2d 992,269 N.J.Super. 439
• Parties: The SUMMIT TRUST COMPANY, Plaintiff-Respondent, v. WILLOW BUSINESS PARK, L.P., John J. Garibaldi, Jeffrey J. Garibaldi, Joseph J. Garibaldi, James J. Garibaldi and William T. Kitley, Defendants-Appellants.
• Court: New Jersey Superior Court — Appellate Division

Page 439

269 N.J.Super. 439

635 A.2d 992

The SUMMIT TRUST COMPANY, Plaintiff-Respondent, v. WILLOW BUSINESS PARK, L.P., John J. Garibaldi, Jeffrey J Garibaldi, Joseph J. Garibaldi, James J. Garibaldi and William T. Kitley, Defendants-Appellants.

Superior Court of New Jersey Appellate Division.

Argued Nov. 29, 1993.

Decided Jan. 4, 1994.

James A. Scarpone, Newark, for defendants-appellants (Hellring, Lindeman, Goldstein & Siegal, attorneys; Mr. Scarpone and Peter H. Stoma, on the brief).

Robert Novack, Short Hills, for plaintiff-respondent (Budd, Larner, Gross, Rosenbaum, Greenberg & Sade, attorneys; Mr. Novack and Mary L. Moore, on the brief).

Before Judges PETRELLA, BAIME and CONLEY.

The opinion of the court was delivered by

CONLEY, J.A.D.

Defendants appeal summary judgment awarded plaintiff bank on a note and personal guaranties. In addition to the personal guaranties securing the note indebtedness, the bank obtained from defendant William Business Park, the borrower, a mortgage on undeveloped commercial real estate financed by the loan. When the borrower defaulted on the note, the bank elected to file a complaint in the Law Division against the borrower and the guarantors on the note and guaranties. In their answer, defendants asserted the bank should "be compelled to first foreclose its lien on the real estate ... and that the defendant guarantors be given a credit equal to the fair market value of the collateral." Defendants continue to contend on appeal that they are entitled to the "equitable right to foreclose first and a fair value credit." We disagree and affirm summary judgment.

In its November 1988 commitment letter, the bank agreed to loan $5,000,000 to GRC Development Corporation to purchase 109.5 acres of real estate in Freehold Township to be developed as an industrial park. Repayment of the loan would be secured by a first mortgage lien on the property and by joint and several, unconditional guaranties by the individual defendants. The commitment specifically stated that it was issued in reliance upon the "Borrower's financial standing and that of its principals and guarantors, as set forth in the financial statements and other information which the Borrower submitted" as well as in reliance on the value of the real estate. The commitment was accepted on November 15, 1988 by the borrower and by the defendants in their corporate capacities and separately in their personal capacity. The borrower was changed from GRC Development Corp. to Willow Business Park, L.P., the general partners of which are the individual defendants.

On December 16, 1988, defendant Kitley as general partner, executed a one-year note in the amount of $5,000,000, evidencing that indebtedness to plaintiff. At the same time the bank was given a mortgage on the Freehold property as security for the loan. Paragraph 9 of mortgage specifically states:

REMEDIES CUMULATIVE. All of the Bank's remedies hereunder are distinct and cumulative and may be exercised concurrently, independently, or successively. If any indebtedness secured hereby is now or hereafter secured by any other collateral, the Bank may, at its option, exhaust all or any part of such collateral and the security hereunder, either concurrently or independently, and in such order as it may determine.

Paragraph 9 of the mortgage further specified that the bank could, among other things, "without notice or consent, and without affecting any of its rights or the liability of the Borrower or any guarantor ... (b) [e]xercise or refrain from exercising or waive any right the Bank may have ... and (d) [e]xercise or otherwise deal with any property ... securing such indebtedness."

Finally, each individual guarantor signed a guaranty requesting the bank to extend credit to Willow Business Park and "[i]n consideration of any such credit given, each guarantor jointly and severally":

hereby absolutely and unconditionally guarantees [sic] prompt payment when due (and at all times thereafter) of any and all existing and future indebtedness and liability of any kind of the Borrower to the Bank, including, without limitation, interest, charges and other fees, and attorneys' fees and other costs of collection, if applicable, and further including all renewals, extensions and modifications of any such indebtedness or liability, however and whenever created, arising, evidenced, or acquired (all of such indebtedness or liability hereafter referred to as the "Indebtedness"). The Guarantor waives notice of the acceptance of this guaranty, notice of any and all of the Indebtedness, and presentment, protest, notice, demand or action on delinquency with respect to any Indebtedness, including any right to require the Bank to sue or otherwise enforce payment thereof.

This guaranty is made and shall continue as to any and all Indebtedness now existing or hereafter arising, without regard to the existence of other collateral, security, guaranties, or obligors, if any. The Bank may, from time to time, without notice to or consent of the Guarantor, sell, release, surrender, exchange, settle, compromise, waive, subordinate or modify, on any terms, any collateral, security, guarantees or conditions, without in any manner affecting or impairing the liability of the Guarantor. The Guarantor's liability hereunder is several and is independent of any other guaranties at any time in effect with respect to all or any part of the Indebtedness, and the Guarantor's liability hereunder may be enforced regardless of the existence of any such other guaranties.

[Emphasis added].

Consistent with the underlying note and mortgage documents, defendants' guaranties were unequivocal, unconditional and expressly recognized the bank's right to proceed on the guaranties in the event of a default without recourse to any other collateral or security. Defendants, then, proceeded with the deal, received through their partnership entity the loan monies and acquired the property with full understanding that in the event of default, the bank could seek the payment of the debt from the individual guarantors and Willow Business on its note prior to or in lieu of foreclosure on the property.

Thereafter, Summit and Willow Park modified the note and mortgage by extending the maturity date of the debt by modification agreements dated December 15, 1989, February 15, 1990 and November 30, 1990. Repayment was eventually extended to April 15, 1992 under the terms of the November modification agreement. That agreement explicitly recognized the continuing validity of the underlying note, mortgage, and guaranties. Each of these documents was incorporated by reference in paragraph five of the November 1990 modification which states:

Subject only to the provisions of this Agreement, the terms of the Note, Mortgage, Guaranty and Prior Modification Agreements are hereby ratified, confirmed and approved and incorporated herein ....

Further, that modification agreement states that each guarantor "represents and warrants that there are no claims, setoffs, or defenses to the Bank's exercise of any rights or remedies available to the Bank under the terms of the Note, Mortgage, Guaranty and Prior Modification Agreements, or any other document executed in connection with this loan." Although defendant Kitley, who at the time of the November 1990 modification was no longer a general partner in Willow Business, did not sign the agreement, there is no evidence, either oral or in writing, of a release by the bank of Kitley's obligations under his original December 16, 1988 guaranty.

Defendants contend on appeal that the trial judge erred in granting summary judgment against Kitley and erred in rejecting their claim that the bank should first foreclose on the property before suing on the note and guaranties or, alternatively, that they should be permitted to assert a fair market value credit in the note and guaranty proceeding. Defendants' contention as to the summary judgment against Kitley is clearly without merit. R. 2:11-3(e)(1)(A),(E). Whether or not Kitley signed the last or any of the modification agreements, the fact is he remains a guarantor under his December 16, 1988 agreement from which he was never released by the bank. The fact that his signature was not requested for the November 1990 modification shows no more than that he was not then a general partner.

We are equally convinced defendants' foreclosure and fair market value contentions are also without merit. We address them in more detail, however, and begin with the basic premise that, with few exceptions, a continuing, absolute and unconditional guaranty of a note such as the guaranty involved here may be enforced directly against the guarantor without prior recourse to foreclosure on the collateral or even against the principal debtor. Delaware Truck Sales, Inc. v. Wilson, 131 N.J. 20, 32, 618 A.2d 303 (1993); Lenape State Bank v. Winslow Corp., 216 N.J.Super. 115, 126, 130, 523 A.2d 223 (App.Div.1987). This is precisely what the individual guaranties expressly acknowledge, as does the mortgage by expressly...