The opinion of the court was delivered by: POLITAN
Belnova is a limited partnership formed originally to purchase and develop certain real property. In June of 1985, Ingersoll-Rand Financial Corporation ("IRFC") loaned Belnova the sum of $ 1,470,000. Belnova signed a promissory note in which, Belnova unconditionally promised to pay to the order of IRFC the above amount plus interest. Belnova has defaulted on its obligation to IRFC. The note contains an acceleration clause which states that IRFC may, upon a demand for acceleration, declare the entire amount due and owing and recover the entire obligation plus interest and late charges. The note further provides that upon default, IRFC is entitled to costs and attorneys' fees incurred in the collection under the note. IRFC has made a demand for acceleration upon Belnova and now seeks summary judgment for breach of contract and for Belnova's liability as maker of the note.
Belnova was funded in part by the sale of 22 investor promissory notes which were sold to various investors. These investor notes were negotiated by Belnova to FED. FED then indorsed 14 of these investor notes as collateral security to First National Bank of Palm Beach in Palm Beach County, Florida, which was the interim lender for the Belnova project. This assignment contained an express provision that the assignment was to be "construed in accordance with the laws of Florida." At the time of the Belnova-IRFC loan closing, these 14 notes were indorsed over to IRFC by First National Bank. The remaining 8 notes were indorsed directly by FED to IRFC. FED has defaulted on its obligations as an indorser and IRFC has accelerated the amount due and owing. IRFC seeks judgment from FED for the principal amount owed, plus interest, late charges and attorneys' fees and costs due under the individual investors notes based upon FED's indorsement.
Basically, neither Belnova nor FED dispute liability under the notes. Both defendants take issue with the timing of IRFC's demand. Defendants argue that IRFC's motion should be denied because IRFC has taken steps to satisfy its debt by attempting to foreclose on its collateral. IRFC has contacted investors with regard to their making payments directly to IRFC and has, when investors have defaulted, initiated suit against them for payment. Defendants contend that the plaintiff cannot seek alternative remedies until this avenue of recovery is pursued to fruition and a deficiency in the amount collected is demonstrated. In this vein, defendants have moved to have the action stayed or abated until the collateral is disposed of and a deficiency is proven.
As an initial matter the Court must determine which law to apply. IRFC asserts that because this action involves payment to a New Jersey institution in New Jersey, New Jersey law should govern. FED, however, states that Florida law should control because their transactions occurred in Florida and the assignment between it and First National Bank contained a Florida choice of law clause.
Federal Courts sitting in diversity actions must look to the forum state's choice of law to determine which state's law applies. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941); Blakesley v. Wolford, 789 F.2d 236, 238 (3d Cir. 1986). Under New Jersey law, the validity of a contract is governed by the law of the place of contracting. See Ingersoll-Rand Financial Corp. v. Anderson, No. 86-4036, Slip Op. at 6 (D.N.J. April 13, 1987); Jaclyn, Inc. v. Edison Brothers Stores, Inc., 170 N.J. Super. 334, 348, 406 A.2d 474 (Law Div. 1979). In New Jersey, if a note is made payable in a certain place, "it is to be treated in all respects as if made there without regard to the place where it is dated or delivered." Commercial Credit Corp. v. Boyko, 103 N.J.L. 620, 626, 137 A. 534 (E. & A. 1927). See also Anderson, slip op. at 7 (analyzing which law to apply to interpret an Acknowledgement and Agreement entered into between IRFC and certain individual investors of another limited partnership and concluding that because payment was to be made in New Jersey, New Jersey law applied).
Defendants assert that because the cause of action concerns FED in its capacity as indorser of promissory notes delivered in Florida to a Florida limited partnership with payments thereunder to be made in Florida, Florida law should govern. Defendants then state that under Florida law, a creditor may not simultaneously pursue satisfaction of a debt by taking action against both the maker and/or guarantor of the underlying obligation and at the same time proceed against any collateral security in its possession.
The Court, however, does not have to utilize Florida law. It is clear that under these circumstances, New Jersey law governs. The instant action concerns IRFC, a New Jersey plaintiff and notes which were assigned over to it with payments to be made in New Jersey. It is irrelevant that prior to IRFC's entry into the picture, all of the principals involved in this arrangement were Florida based. The Court is concerned with the specific transaction which gives rise to this cause of action; that is, the assignment of the notes to IRFC as security for the substantial loan IRFC extended to Belnova. Payments pursuant to this assignment were to be made in New Jersey.
With respect to Belnova, the partnership note executed between IRFC and Belnova contained a provision specifically stating that New Jersey law shall apply. It is well settled that parties may consent to the jurisdiction and laws of a state and that such a selection will be upheld unless it is "unfair, unreasonable or against the public policy of the forum state." Air Economy Corp. v. Aero Flow Dynamics, Inc., 122 N.J. Super. 456, 457, 300 A.2d 856 (App. Div. 1973). Therefore, I will apply New Jersey law.
I am satisfied that under New Jersey's codification of the U.C.C. plaintiff can obtain a judgment against both Belnova and FED at this juncture and need not wait until a deficiency is demonstrated.
IRFC's status with respect to Belnova is that of a secured creditor. As such, it is governed by Article Nine of the Uniform Commercial Code. N. J. Stat. Ann. 12A:9-501 states:
(1) When a debtor is in default under a security agreement, a secured party has the rights and remedies provided in this Subchapter . . . . He may reduce his claim to judgment, foreclosure or otherwise enforce the security interest by any available judicial procedure . . . The rights and remedies referred to in this subsection are cumulative. (emphasis added).
Moreover, the Partnership Note at issue specifically provides that:
The remedies of the Lender under this Note are cumulative, are in addition to any other remedies provided by for [sic] law or in equity, and may, to the extent permitted by law, be exercised concurrently, or separately, and the exercise of any one remedy shall not be deemed an ...