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March 21, 2003


The opinion of the court was delivered by: William G. Bassler, United States District Judge


This is a contested mortgage foreclosure action. Because the parties could not resolve the issues in dispute, the Court held an evidentiary hearing on June 6, 2002, August 1, 2002 and August 14, 2002. The Court's jurisdiction in this case is pursuant to 28 U.S.C. § 1332 (diversity of citizenship). This is a Revised and Amended Opinion. After delivering its original Opinion dated March 4, 2003, the Court provided Counsel with a Judgment reflecting the Result reached by its Opinion. Counsel were asked to forward any objections to the Court and opposing counsel within five days of receipt of the Opinion. In addition, the Court held a hearing on March 19, 2003 to resolve those objections. This opinion constitutes the Court's findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52.


On April 6, 1999 Lehman Brothers Holdings, Inc. ("Lehman") loaned to the defendant Blair Road Associates, L.P. ("Blair Road") $4,325,000.00 (the "Loan"). Blair Road signed a Promissory Note (the "Note") which was secured by a Mortgage and Security Agreement (the "Mortgage") on Blair Road's property at 600 Blair Road, Carteret, New Jersey (the "Property"). Norwest Bank Minnesota, N.A. ("Norwest" or "Plaintiff") (Wells Fargo Bank Minnesota, National Association is now the successor-in-interest to Lehman with respect to the Loan*fn1). The defendant United States Land Resources, L.P. ("USLR") guaranteed certain liabilities of Blair Road. The Note is a non-recourse obligation of the defendants, except for real estate taxes and rents received by Blair Road and not turned over to Norwest after the declaration of default.

By letter of December 23, 1999 Norwest declared a default and accelerated the Loan.*fn2

By Order of February 29, 2000 the Court appointed Harold H. Goldberg the Rent Receiver.

On December 12, 2001 the Court granted that part of plaintiff's motion for summary judgment striking most of Blair Road's affirmative defenses and directing that Norwest submit an affidavit in support of final judgment.

In addition to submitting affidavits*fn3, Darryl J. Black, a Vice President of GMAC Commercial Mortgage, Special Servicer for Norwest, testified as did Louis Mont,*fn4 an employee of USLR, the general partner of the defendant Blair Road and the Guarantor. The Court also permitted Blair Road to take the depositions of Mr. Black in order to clarify certain calculations contained in his affidavits in support of the foreclosure judgment.

The evidentiary hearing concluded on August 14, 2002.


Before the Court sets forth its findings, it wishes to elaborate on the procedure it utilized to arrive at its factual determinations.

The Court invited the parties to submit proposed findings of fact and conclusions of law, and responses thereto, after the close of testimony and argument in this case. The Court has carefully reviewed the proposed findings, the documentary evidence, the affidavits, and the testimony adduced at trial. The Court, having considered this array of information, sets forth its findings of fact based on its independent review of the evidence, and utilizes the parties' proposed findings of fact merely to assist the Court in organizing this information. See 9A Wright & Miller, Federal Practice and Procedure Civil 2d § 2578 (1995) ("Proposed findings submitted by counsel are no more than informal suggestions for the sole purpose of assisting the court.")

The Court bases its findings of fact on its careful consideration of the testimony adduced at the evidentiary hearing and a review of the affidavits and documentary evidence submitted, as well as the logical inferences to be drawn from them. In evaluating the evidence of record, the Court undertook an individualized assessment of the credibility of each witness, and assigned the appropriate weight to the testimony based on the Court's conclusions with respect to credibility.*fn5

A. The Terms of the Mortgage Note

The terms of the Mortgage Note provide for the following categories of damages in the event of a default:

1. Plaintiff is entitled, in connection with the entry of final judgment, to receive the following:

(a) A sum representing the principal balance of the loan. (Paragraph 3(c) of the Note; p. 2).
(b) Accrued interest on the loan. (Paragraph 3(b) of the Note; p. 2).
(c) Default interest. (Paragraph 4 of the Note; p. 2).
(d) A prepayment premium. (Paragraph 5(c) of the Note; pp. 4-5).
(e) Late charges. (Paragraph 8 of the Note; p. 5).
(f) Advances made during the pendency of the foreclosure action. (Paragraph 3(d) of the Note; p. 2).
(g) Reasonable attorneys' fees. (Paragraph 17 of the Note; p. 7).
B. Calculation of Amounts Due According to the Mortgage Note Prior to Any Credits
The Court calculates that the amount due the plaintiff before consideration of any credits(and the Defendants' objections and legal arguments) is $5,171,057.00:

(1) Principal Amount

The principal balance of the loan as of December 15, 2002 is $4,206,151.10. (Darryl J. Black Aff. 12/30/02 at ¶ 3, Attach. Ex. 1.)

(2) Accrued Interest

The accrued interest from October 1, 2002 to January 1, 2003 is $85,623.22. (Black Aff. 12/30/02 at ¶ 4).

(3) Default Interest*fn6

The Note provides that upon the occurrence of an Event of Default, the Note accrues default interest, until the Event of Default is cured or the Note is paid, at a rate (defined in the Note as the "Default Rate") equal to (i) the greater of (a) the Applicable Interest Rate plus three percent (3%) and (b) the Prime Rate (as defined in the Note) plus four percent (4%) or (ii) the maximum interest rate that the Borrower may by law pay, whichever is lower. (See Curt Spaugh Certification 2/11/00, Attach. Ex. A. Promissory Note ¶ 4.)

Under the Note the Default Rate is 10.88% (the Applicable Interest Rate under the Note, 7.88% plus 3%) or the Citibank, N.A. prime rate plus 4 percent, whichever is greater. (Promissory Note ¶ 4; Black Aff. 1/2/02 at ¶ 2(b), Exhibit C attached.)

The default interest is $528,637.22 pursuant to the formula set forth in Paragraph 4 of the Note. (This is calculated from December 1, 1999 [month of default] through December 15, 2002.) (Black Aff. 12/30/02 at ¶ 6.)

(4) Prepayment Premium

The prepayment premium totals $337,871.37. (Black Aff. 12/30/02 at ¶ 5, Attach. Ex. 2.)

(5) Late Charges

The late charges total $12,774.01 (Black Aff. 12/30/02 at ¶ 7.)

(6) Legal Fees

Utilizing R. 4:42-9(a)(4) of the Rules Governing the Courts of New Jersey, the Court has determined that the Plaintiff is entitled to a fee of $48,867.00 raised and paid out of the mortgaged premises.

C. Calculation of Credits Due the Defendants

The Court calculates that defendants are entitled to the following credits in the total amount of $299,351.00:

(1) A credit of $96,232.72. This figure represents the amount diverted by Plaintiff to pay for legal fees. Had the amount not been diverted, the Rent Receiver would have applied it to the defaulted loan.*fn7 Therefore the amount should be credited to Defendants before the Court calculates attorney's fees under N.J.Ct.R. 4:42-9(a)(9) to avoid allowing the Plaintiffs a windfall.
(2) $170,133.29 in the reserve account. (Black Aff. 12/30/02 at ¶ 11; see also Black Test. 6/6/00 Tr. at pp. 83-85.*fn8)
(3) A credit of $25,631.66 reflecting the current suspense escrow balance. (Black Aff. 12/30/02 at ¶¶ 10-11, Attach. Ex. 1.)
(4) A credit of $3,264.00 for the interest on a missing $60,000 check. The missing check, dated February 22, 2002, was neither presented for payment, nor returned. (Tramontano Aff. 3/17/03 at ¶ 3). On June 20, 2002, a duplicate check was issued for $60,000.00, and was paid on or about June 26, 2002. (Id. at ¶ 4). Because Plaintiffs were in the best position to determine the whereabouts of the missing check, Defendants are entitled to a credit for the interest that accrued as a result of the delay in crediting the $60,000 to Plaintiffs. (Mont Test. 8/1/02 Tr. at 10:4-16, 12:11-13).
(5) Credit for interest on escrow account of $4,088.94.

D. Net Amount Due Plaintiffs

The amount due Plaintiffs according to the loan documents and applying the above credits is $4,871,706.00. By adding counsel fees of $48,867.00 to this number, we get the ...

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