On appeal from the Superior Court of New Jersey, Law Division, Bergen County.
Before: Judges Keefe, P.g. Levy and Wecker.
The opinion of the court was delivered by: Keefe, J.A.D.
Defendant, the Bank of New York, successor in interest to National Community Bank of New Jersey (hereinafter, the "Bank"), appeals from a judgment entered on a jury verdict against it in favor of plaintiff, Cedar Ridge Trailer Sales, Inc. (hereinafter "plaintiff" or "Cedar Ridge"), in the amount $600,000 for compensatory damages and $100,000 for punitive damages. We reverse for the reasons stated herein.
Cedar Ridge was a dealer/franchisee for Fleetwood Motor Homes of Indiana, Inc. (Fleetwood Indiana) and Fleetwood Motor Homes of Pennsylvania, Inc. (Fleetwood Pennsylvania), defendants, both of which manufactured Fleetwood Motor Homes. Fleetwood Credit Corporation (FCC), also a defendant, provided wholesale financing to dealers selling Fleetwood products, including Cedar Ridge. FCC, Fleetwood Indiana, and Fleetwood Pennsylvania are all subsidiaries of defendant Fleetwood Enterprises, Inc. (Fleetwood Enterprises). *fn1
The litigation leading to this appeal stemmed from a series of events in November 1990, commencing with the Bank's refusal to provide an advance under one of Cedar Ridge's lines of credit because of defaults under certain loan documents, and its refusal to honor overdrawn checks in contravention of an alleged oral agreement to honor such overdrafts. Some of the checks the Bank returned in November of 1990 were payable to FCC. This event eventually prompted Fleetwood to remove approximately twenty FCC-financed Fleetwood motor homes from Cedar Ridge's premises. The Bank also declared that Cedar Ridge was in default on its loans and "out of trust" with respect to its floor plan agreement. The Bank threatened to bring suit against Cedar Ridge, including repossession of floor-planned vehicles.
A "Workout Agreement" was entered into between Cedar Ridge and the Bank on January 4, 1991, which extended the relationship between Cedar Ridge and the Bank until April 1991. Details of the Workout Agreement will be discussed later in this opinion. Fleetwood terminated Cedar Ridge's franchises in January and February of 1991. On or about May 6, 1991, ITT, which had also provided financing for Cedar Ridge, paid Cedar Ridge's outstanding obligations to the Bank in full.
In August 1992, Cedar Ridge, Joseph Barbagallo, and Carmela Barbagallo, the principal officers and stockholders of Cedar Ridge, filed a complaint in the Law Division against the Bank, Fleetwood Indiana, Fleetwood Pennsylvania, FCC, Fleetwood Enterprises and Ganis Corporation (Ganis), another company that had provided financing to Cedar Ridge. The complaint was later amended to add two additional Bank officers as defendants, Richard G. Shanklin and Edwin B. Benson. Joseph and Carmela Barbagallo were eventually dismissed as plaintiffs from the complaint.
As against the Bank, Cedar Ridge sought compensatory and punitive damages for breach of contract and tortious interference with economic advantage. Plaintiff sought damages against the Fleetwood defendants based on their alleged illegal cancellation of the Fleetwood franchises. Cedar Ridge sought damages from Ganis for breach of its agreement with Cedar Ridge to provide retail financing to its customers and intentional interference with Cedar Ridge's contracts with customers.
The Bank raised as an affirmative defense, among other things, that the Workout Agreement constituted a release in settlement and/or a waiver of Cedar Ridge's claims. The Bank's motion for summary judgment to dismiss the suit on that ground was denied. The motion was again renewed prior to trial and denied again. The jury trial against all defendants spanned a period of twenty-two days. At the close of plaintiff's case, the trial court dismissed the claims against Benson and Shanklin as well as the Bank of New York, the Bank's parent company.
Pertaining to this appeal, the jury rendered its verdict in favor of Cedar Ridge, finding as follows: the Bank had a contract with Cedar Ridge regarding the payment of checks presented when there were insufficient funds in Cedar Ridge's account; the Bank breached that contract by refusing to pay three checks presented by FCC on Cedar Ridge's account that contained insufficient funds; the Bank breached its contract with Cedar Ridge regarding the used credit line when it refused to advance $43,000 on three titles delivered to it on November 17, 1990; the Bank intentionally interfered with Cedar Ridge's contract with FCC; and the Bank's intentional interference with Cedar Ridge's contract with FCC was a proximate cause of Cedar Ridge's damages. In total, the jury awarded Cedar Ridge $2,700,000 in compensatory damages: $600,000 against the Bank, $800,000 against FCC, $900,000 against Ganis, and $400,000 against FCC, Fleetwood Indiana, and Fleetwood Pennsylvania, jointly. In addition, Cedar Ridge was awarded $100,000 in punitive damages against the Bank, FCC and Ganis.
The Bank's motion for a judgment notwithstanding the verdict or, in the alternative, for a new trial, was denied. The Bank, Fleetwood Enterprises, Fleetwood Pennsylvania, Fleetwood Indiana, FCC, and Ganis filed notices of appeal. All the appeals, with the exception of the Bank's, were dismissed after those parties settled with Cedar Ridge.
Numerous issues are raised by the Bank on appeal. We are satisfied from our review of the record and the parties' briefs, however, that we need not address all of them, inasmuch as we are satisfied that the trial court erred by denying the Bank's motion for involuntary dismissal based on the Workout Agreement. Accordingly, we focus only on the facts necessary to define that issue.
The Bank had a long standing relationship with Cedar Ridge and the Barbagalloes beginning in the late 1970's. The original credit line included a floor plan and security agreement. In general, the floor plan agreement required the Bank, in its discretion, to lend money to enable Cedar Ridge to purchase inventory. When an advance was made, the Bank completed a pre-signed promissory note including the amount advanced. At the Bank's discretion, Cedar Ridge would repay the note upon the sale of the inventory or in periodic installments. The Bank could deduct amounts due from other credit balances, and the loans were secured by Cedar Ridge's inventory and other collateral. The Bank had the right periodically to inspect the inventory and the other collateral to make sure that Cedar Ridge was not "out of trust." Cedar Ridge would be in default if it failed to repay principal or interest timely, failed to comply with any of the terms of the floor plan agreement or any other agreement, or when a change in Cedar Ridge's condition, financial or otherwise, led the Bank to believe that its security was impaired ...