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Brae Asset Fund, L.P. v. Newman

December 30, 1999

BRAE ASSET FUND, L.P., PLAINTIFF-RESPONDENT,
v.
PHILIP A. NEWMAN, DEFENDANT-APPELLANT.



Before Judges Landau, Kimmelman and Arnold.

The opinion of the court was delivered by: Kimmelman, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued November 16, 1999

On appeal from the Superior Court of New Jersey, Law Division, Bergen County.

Defendant Philip A. Newman appeals from a summary judgment order entered June 24, 1998, adjudicating his liability on two guaranty agreements, in the amounts of $1,000,000 and $47,238.49 respectively, for a total of $1,047,238.49. On appeal defendant contends that, notwithstanding the unconditional and absolute wording of the guaranties which he executed, his defenses of willful misconduct on the part of the Bank (plaintiff's predecessor by assignment), and the Bank's impairment of collateral, created issues of fact which should have precluded the entry of summary judgment. We disagree and affirm.

On June 29, 1992, Venet Advertising/NJ, Inc. (hereinafter Venet/NJ) borrowed $2,000,000 from Citizens First National Bank of New Jersey (heretofore and hereinafter Bank) and executed a promissory note in that amount. On the same day, in order to induce the Bank to make loans to Venet/NJ, defendant executed a Guaranty Of Payment in which his maximum liability to the Bank under that loan was limited to $1,000,000.

A related company, Venet Advertising, Inc. (hereinafter Venet) concurrently borrowed $475,000 from the Bank and executed a promissory note in that amount. It too was guaranteed by defendant who executed a second Guaranty Of Payment that also limited his maximum liability under that loan to $1,000,000.

After default by Venet/NJ and Venet (referred to jointly hereinafter as the Borrowers) this action was commenced against defendant on February 7, 1997. Defendant filed a pro se answer to plaintiff's complaint on or about March 26, 1997. On April 9, 1997, and again on June 17, 1997, the clerk of the court notified the parties that the case had been assigned to the "Expedited Track." Discovery was limited to 100 days and was scheduled to end on July 19, 1997.

On or about April 16, 1998, nine months after the period ordered for discovery expired, plaintiff filed a motion for summary judgment returnable on May 15, 1998. At defendant's request, the return date of the motion was rescheduled for June 12, 1998. On or about June 4, 1998, a law firm representing defendant entered an appearance on his behalf and shortly thereafter moved on short notice to extend the time for discovery. On June 12, 1998, approximately 300 days after the scheduled completion date for the expedited discovery, the court denied defendant's belated request to extend discovery. See R. 4:24-1 (requiring, even for cases not on the "Expedited Track," that discovery be completed within 150 days of the service of the complaint).

In his certification opposing plaintiff's motion for summary judgment, defendant asserted that in late 1992 the Bank wrongfully declared Borrowers' promissory notes to be in default. Defendant also averred that the Bank advised the Borrowers' customers to pay the receivables due directly to the Bank.

Borrowers instituted an action to restrain the Bank from interfering with the Borrowers' rights to collect receivables from customers. On December 23, 1992, the Chancery Division issued a preliminary injunction restraining the Bank from, among other things, interfering with Borrowers' client relationships. Defendant claims, however, that by the time the injunction was issued, Borrowers' customers had already stopped paying their obligations either to the Bank or to the Borrowers. As a result of the Bank's wrongful actions, it is asserted, the Borrowers became hopelessly behind in their collections and were driven out of business.

The Chancery action was dismissed on June 14, 1993 because the Borrowers had each filed for relief under Chapter 11 of the United States Bankruptcy Code. 11 U.S.C.A. §1101 to -1174. On November 23, 1993, both filings were converted to straight liquidations under Chapter 7 of the Bankruptcy Code. 11 U.S.C.A. §701 to -766. In his certification opposing plaintiff's motion for summary judgment, defendant asserted that "[f]or some inexplicable reason, . . . very little effort was made to collect [the Borrowers'] receivables . . . [which] would have gone a long way towards liquidating the obligation owed [to the Bank] for which Plaintiff now seeks payment."

After hearing arguments on June 12, 1998, the motion judge granted summary judgment to plaintiff. The order was entered on June 24, 1998.

On appeal, defendant contends that he raised genuine issues of material fact sufficient to preclude the entry of summary judgment against him. He asserts that the Bank's wrongful actions forced the Borrowers to default under their promissory notes and that the Bank failed to dispose of the collateral in a commercially reasonable manner. The trial ...


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