On appeal from Superior Court, Law Division, Bergen County.
Pressler, Baime and Ashbey. The opinion of the court was delivered by Baime, J.A.D.
This is an appeal from a summary judgment in favor of defendants Adamo, Natsikostas and Karavias dismissing the complaint of plaintiff Katsoufris. Plaintiff argues that the affidavits and certifications submitted to the trial court raised genuine issues of material fact and therefore summary judgment was improvidently granted. We agree and are thus constrained to reverse.
We need not recount the facts at length. Plaintiff instituted this action to recover amounts allegedly due on a series of
promissory notes which defendants signed as guarantors for ANK Shipping Company (ANK). The notes evidenced an obligation emanating from a prior transaction whereby ANK had purchased a merchant ship from plaintiff for the sum of $415,000. At the time of the agreement ANK paid plaintiff the amount of $150,000 and executed promissory notes for the balance of the agreed upon purchase price. When title was transferred to ANK, plaintiff obtained a purchase money mortgage to secure the amount owed.
It is undisputed that ANK failed to make timely payments. In order to induce plaintiff to forbear from initiating foreclosure proceedings, ANK agreed to a renegotiation of the underlying obligation. As part of that transaction, ANK executed a new series of 48 promissory notes. Defendants, the principal shareholders of ANK, signed the notes as guarantors of the corporate obligation.
Despite obtaining various charters, ANK's financial condition remained extremely precarious. When ANK defaulted on the payment of wages, the crew mutinied on the high seas and sailed the ship to a port in Puerto Rico where it was seized by creditors, and an in rem foreclosure proceeding was commenced in the United States District Court.
Unfortunately, the paltry record is not wholly informative with respect to exactly what transpired in the federal proceedings. In an affidavit submitted to the trial court, the wife of defendant Natsikostas stated "on information and belief" that plaintiff initially filed a claim as first mortgagee in the federal foreclosure action. According to the affidavit, this claim was subsequently dismissed because of plaintiff's failure to timely prosecute and his delay in complying with the court's orders.*fn1 In response, plaintiff filed a reply certification in which he
stated that he decided not to pursue his claim because of the number and amounts of paramount liens that had been filed against the ship. According to plaintiff, seamen's wage claims alone exceeded $110,000. In addition, suppliers of "bunkers" (oil and provisions) also filed claims having priority over the lien of the first mortgagee. Plaintiff thus contended that it would have been futile had he continued to pursue his claim in the time-consuming and expensive federal proceedings.
Based upon this meager record, the trial judge denied plaintiff's application for summary judgment and granted defendants' cross-motion. In a brief oral opinion, the judge held that plaintiff, by failing to prosecute his claim in the federal proceedings, wrongfully impaired the collateral securing ANK's debt. The judge concluded that plaintiff's failure to protect the security discharged defendants' obligation as guarantors of ANK's debt.
Our thorough review of the record convinces us that the affidavits and certifications submitted to the trial court presented substantial factual issues which should not have been resolved by way of a summary judgment. Initially, we note the deficiencies in the affidavit submitted by defendants in support of their cross-motion for summary judgment. R. 1:6-6 governs the use of such affidavits. It provides that affidavits must be made on "personal knowledge setting forth . . . facts which are admissible in evidence to which the affiant is competent to testify." R. 1:6-6. It is axiomatic that "affidavits may not be based merely upon 'information and belief' or other objectionable hearsay. . . ." Beckwith v. Bethlehem Steel, 185 N.J. Super. 50, 56-57 (Law Div. 1982). See also Patrolman's Benevolent Assn. v. Montclair, 70 N.J. 130, 133-134 (1976); Smithey v. Johnson Motor Lines, 140 ...