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Republic Business Credit Corp. v. Camhe-Marcille

December 13, 2005

REPUBLIC BUSINESS CREDIT CORPORATION, PLAINTIFF,
v.
MONA CAMHE-MARCILLE, PAMELA CAMHE, RENEE POPKIN, AND ESTATE OF MORRIS CAMHE, DECEASED, DEFENDANT.
ESTATE OF MORRIS CAMHE, THIRD-PARTY PLAINTIFF,
v.
RICK CUCINOTTA, THIRD-PARTY DEFENDANT.
ESTATE OF MORRIS CAMHE, THIRD-PARTY PLAINTIFFRESPONDENT/CROSS-APPELLANT.
v.
NEAL COHEN, THIRD-PARTY DEFENDANTAPPELLANT/CROSS-RESPONDENT.



On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, C-73-00.

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

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued November 9, 2005

Before Judges Coburn, Collester and Lisa

Morris Camhe, Neil Cohen and Rick Cucinotta were equal principals in two corporations and co-guarantors on $2,233,535.12 in notes the corporations had given to Republic Business Credit Corporation. After the corporations defaulted and Camhe died, Republic sued Camhe's estate on the deceased's guarantee and obtained a $900,000 settlement.*fn2 The estate then brought the present action against Cohen and Cucinotta for contribution, alleging that its payment exceeded Camhe's proportionate share of the debt. On the estate's motion, the trial court entered summary judgment requiring Cohen and Cucinotta to each pay the estate $300,000, or one-third of the settlement. Cohen and Cucinotta appealed, but Cucinotta did not perfect his appeal, and it was dismissed. The estate filed a cross-appeal contending that the co-guarantors were jointly and severally liable for $600,000.

Two basic principles govern this case: (1) when one coobligor pays more than his or her proportionate share of the common liability, he or she is entitled to contribution from the other co-obligors for the excess payment; and (2) each coobligor is responsible to the other co-obligors for his or her proportionate share of the excess payment. Although the trial court correctly refused the estate's request to impose joint and several liability against the co-obligors, it disregarded the first principle by basing the liability of the co-obligors solely on the settlement amount. For that reason and because of factual disputes regarding the amount of interest due on the corporate debt, we reverse and remand for further proceedings consistent with this opinion.

I.

Camhe, Cohen, and Cucinotta were shareholders in XTRMZ, Ltd., a New York corporation that made and sold dresses. Camhe was responsible for financial matters, and Cohen and Cucinotta ran the day-to-day operations. In 1993, they formed another New York corporation, Impulsive, Inc., which also sold dresses. The three men owned equal shares in the two corporations. Two other shareholders in Impulsive ran its day-to-day operations until 1998, when they left and the company ceased business. XTRMZ was liable for a large portion of Impulsive's debt, and its efforts to pay that debt, combined with a general decline in business, forced XTRMZ into involuntary bankruptcy in April 1999.

Republic Business Credit Corporation provided accounts-receivable financing to both corporations, and Camhe, Cucinotta, and Cohen signed substantially identical guarantees of three corporate notes totaling $2,233,535.12 plus interest at a fluctuating rate of two percent per year above Republic's "Reference Rate." The notes also made the endorsers jointly and severally liable for the debt and for all costs of collection incurred by Republic and provided that their enforcement would be governed by the law of New York. The relevant portion of Section 8 of the guarantees contains this provision limiting the rights of guarantors to seek contribution:

If there is more than one Guarantor, each Guarantor agrees not to seek contribution from any other Guarantor until all the Obligations shall have been paid in full. If any amount shall nevertheless be paid to a Guarantor by . . . another Guarantor such amount shall be held in trust for the benefit of [Republic] and shall forthwith be paid to [Republic] to be credited and applied to the Obligations, whether matured or unmatured. The provisions of this Section 8 shall survive the termination of this Guaranty, and any satisfaction and discharge of the Borrower by virtue of any payment, court order or any federal or state law.

As further security, Republic obtained $200,000 in cash from Camhe and assignment of the proceeds of two life insurance policies on Camhe, which were owned by XTRMZ and totaled $673,774.56. Camhe died in September 1999. On February 29, 2000, Republic sued Camhe's estate on the notes, demanding damages of $2,233,535.12 plus interest, costs, and attorneys fees. On December 10, 2001, the case was settled with Republic retaining the $673,774.56 from the insurance policies and the $200,000 security deposit and receiving an additional $700,000 from Camhe's estate. The Order of Settlement also provided that the estate could file supplemental pleadings against the coobligors. Consequently, the estate filed the instant third-party complaint seeking contribution and obtained summary judgment on September 10, 2004.

II.

Without citing any authority, Cohen argues first that Section 8 of the guarantees, as quoted above, precludes this lawsuit. But in making that argument, Cohen cites only the first sentence and leaves out the balance of the provision. Read in its entirety, Section 8 contemplates an action of this kind as between co-obligors and attempts to provide a measure of protection for Republic should one ensue. But since the estate's settlement with Republic provided that the estate could sue the co-obligors for contribution, it was no longer obliged to turn over any recovery to Republic. And since Republic has not sued Cohen, this is ...


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