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Carvajal v. Business Lenders

August 5, 2009

MARTHA CARVAJAL AND AMERICAN PODIATRIC MEDICAL CENTER, PLAINTIFFS-APPELLANTS,
v.
BUSINESS LENDERS, L.L.C., DEFENDANT-RESPONDENT.



On appeal from Superior Court of New Jersey, Law Division, Special Civil Part, Morris County, Docket No. DC-8663-06.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued February 10, 2009

Before Judges Fuentes, Gilroy and Chambers.

Plaintiff Martha Carvajal, d/b/a American Podiatric Medical Center, filed suit against defendant Business Lenders, L.L.C., (Business Lenders) in the Law Division, Special Civil Part, to recover counsel fees she paid defendant as part of its claim associated with an outstanding debt. Business Lenders' demand for counsel fees was derived from a promissory note and personal guarantee executed by Carvajal to induce Business Lenders to extend a commercial loan. In addition to the note, Carvajal also gave Business Landers a third mortgage on property she owned.

The trial court dismissed Carvajal's action, finding that Business Lenders was entitled to recover attorney fees and costs under the terms of the promissory note. In so doing, the court rejected Carvajal's arguments that the fees were not permitted under Rule 4:42-9(a)(4), as made applicable under the New Jersey Fair Foreclosure Act, N.J.S.A. 2A:50-53 to -68.

We agree with the trial court and affirm. These are the facts.

On August 17, 2000, Carvajal borrowed $115,000 from Business Lenders, to provide an infusion of cash in support of Carvajal's podiatric practice. Carvajal executed a promissory note, and a personal guarantee, and gave Business Lenders a third mortgage on her residential property. Carvajal's property was already encumbered by a first mortgage held by Greenpoint Mortgage to secure its $115,000 loan, and a second mortgage held by B&B Funding to secure a $70,000 loan.

The mortgage agreement securing Business Lenders' loan provided in part:

Without notice and without Borrower's consent, Lender may:

Incur expenses to collect amounts due under this Note, enforce the terms of this Note or any other Loan Document, and preserve or dispose of the Collateral. Among other things, the expenses may include payments for property taxes, prior liens, insurance, appraisals, environmental remediation costs, and reasonable attorney's fees and costs. If Lender incurs such expenses, it may demand immediate repayment from Borrower or add the expenses to the principal balance.

Carvajal also signed a personal guarantee providing that: "Guarantor (YOU) promises to pay all expenses Lender (BUSINESS LENDERS) incurs to enforce this Guarantee, including, but not limited to, attorney's fees and costs." (Emphasis added.)

Carvajal eventually defaulted on her obligation to make regular payments on all three loans. By letters dated April 23, and October 22, 2001, Business Lenders notified Carvajal of her default status. These letters also emphasized that, in addition to her obligation to pay the outstanding principal and interest, Carvajal was also liable to pay Business Lenders' attorney's fees incurred in connection with any collection effort. Carvajal did not make any further payments on this loan.

In December 2001, Carvajal filed a Chapter 13 bankruptcy petition in the United States Bankruptcy Court seeking "to reorganize [her] debts." She proposed a bankruptcy plan that did not provide any cure of the default on Business Lenders' loan. This plan was never confirmed by the ...


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