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Mony Life Insurance Company v. Paramus Parkway Building

November 13, 2003


On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. F-20455-01.

Before Judges Newman, Fall and Parrillo.

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


Argued October 14, 2003

In this commercial mortgage foreclosure action, defendant Paramus Parkway Building, Ltd. appeals from a final judgment of foreclosure on June 4, 2002 in favor of plaintiff, MONY Life Insurance Company, on the basis that there were material issues of fact concerning the amount due, necessitating a plenary hearing prior to entry of judgment. We disagree, and affirm.

The following factual and procedural history is relevant to our consideration of the issues advanced on appeal. On July 29, 1988, defendant borrowed $6.9 million from plaintiff, evidenced by a note and secured by a first mortgage lien on property known as Lot 6, Block 4303 on the Tax Map of the Borough of Paramus, also known as 64 Midland Avenue, Paramus. Plaintiff operated the subject premises as a warehouse and office facility with 66,934 feet of office space and 28,866 square feet of warehouse space. As further security for the payment of that obligation, defendant simultaneously executed and delivered to plaintiff a security agreement covering the buildings, structures, improvements, fixtures, machinery and equipment (collateral) installed, constructed or attached on the subject property. Defendant also executed in favor of plaintiff an assignment of leases and rents, under which defendant assigned to plaintiff all rents and profits from the mortgaged premises as security for the faithful performance of the note obligation.

Additionally, defendant executed a UCC-1 financing statement securing plaintiff's interest in the collateral. The mortgage, security agreement, UCC-1 financing statement, and assignment of leases and rents were recorded on August 2, 1998.

Following various defaults by defendant, a mortgage modification agreement and an allonge to the note were entered into between the parties on December 23, 1991, and recorded on January 10, 1992. Pursuant to the modification, the parties agreed that the maturity date for the payment of all outstanding principal and interest under the note would be October 31, 2001. The modification agreement acknowledged that, as of its date, the outstanding principal balance on the loan was $6,900,000, with unpaid interest due of $31,101.50, and late principal of $7,590.

The note obligation, as modified, required defendant to pay plaintiff monthly installments of principal and interest in the amount of $55,545, commencing November 1, 1991 and ending October 31, 2001, with all principal and interest to be paid on that date.

The note carried an interest rate of nine percent and a default interest rate of an additional six percent per annum. There was also a prepayment clause in the modification, which stated that:

[t]he Note may not be prepaid in whole or in part except as herein expressly provided. However, payment of the loan following a declaration of maturity based upon default in the payment of principal and/or interest, and/or based upon a default in the due observance or performance of any covenant, agreement or condition contained herein or in any document securing the Note, shall be deemed a prepayment, and any such payment to the extent permitted by law will therefore include a fee equal to the amount set forth herein. Borrower may prepay the loan in full but not in part, on any monthly installment date, upon (30) days' prior written notice to the Holder hereof, at a premium equal to the following:....

c. Commencing November 1, 1995, and thereafter, at three percent (3%) of the principal amount, declining one half of one percent per year.

Beginning in February 2001, defendant fell behind in its payments and, according to plaintiff, failed to turn over either pledged collateral or rents and failed to pay real estate taxes on the property. Consequently, on September 19, 2001, plaintiff served defendant with a notice of default and demand that rent monies be collected and turned over to apply to the indebtedness. Because none of the indebtedness was cured, plaintiff filed a foreclosure complaint in the Chancery Division on November 2, 2001, seeking judgment fixing the amounts due and owing to plaintiff, foreclosure of defendant's interest in the subject property, and various other relief.*fn1 On January 4, 2002, defendant filed an answer interposing various defenses including, among other things, that the note and mortgage were void due to illegal and unconscionable penalties contained therein.

On February 5, 2002, plaintiff filed a motion to strike defendant's answer, enter default, and permit the matter to proceed as an uncontested foreclosure action. No opposition was filed and the court, without objection, entered an order on February 22, 2002, striking defendant's answer, entering default and remanding the matter to the foreclosure unit of the Superior Court to proceed as an uncontested foreclosure action.

Thereafter, on May 14, 2002, plaintiff filed a motion, returnable May 31, 2002, seeking entry of final judgment in foreclosure, providing both the court and defendant with documentation and certification of the amount due and owing under the promissory note and modified mortgage agreement. Specifically, plaintiff sought a total amount of $6,549,879.70, which included $5,476,106.84 in principal; $644,813.13 in accrued interest at the contractual per annum rate of 9% accrued from January 1, 2001 through April 16, 2002; $401,579.20 in default interest at the note's additional 6% per annum rate from ...

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