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Sivaraman Anabarasan v. 53-53 Palisades Hudson Associates


April 4, 2012


On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-63-09.

Per curiam.


Argued February 15, 2012

Before Judges Payne, Simonelli and Accurso.

This is a collection action on a guaranty. On October 20, 2006, defendant 53-54 Palisades Hudson Associates, LLC (Palisades) borrowed $400,000 for twelve months from plaintiff Sivaraman Anabarasan, at an interest rate of two and one-half percent per month. Payment was due on maturity. The debt was evidenced by a Promissory Note executed on behalf of Palisades by its member, defendant Louis Bertinato, and secured by a junior Mortgage on commercial property owned by the borrower on 53rd and 54th Streets in West New York and a joint and several Guaranty. The Guaranty was signed by Bertinato, individually and on behalf of Palisades, defendant Kenneth M. Colao, individually and on behalf of defendant The Colao Group, LLC, and defendant Victor Perez.

Palisades allegedly defaulted on the Note and plaintiff sued on the Guaranty. In his complaint, plaintiff alleged specifically that he had called the Note, that defendants had failed to make payment as required by the Note and Mortgage, that plaintiff had given notice of his intent to enforce the Guaranty and that defendants had failed to respond to that notice. Defendants the Colao Group, Kenneth Colao and Louis Bertinato (the Colao/Bertinato defendants) filed an answer claiming that they were without knowledge as to whether plaintiff had called the Note and denying that defendants had failed to make the payments required by the Note and Mortgage and that plaintiff had given notice to defendants regarding his intent to enforce the Guaranty to which defendants had failed to respond.*fn1 Palisades did not file an answer to the complaint. The parties agree that Palisades filed a voluntary petition in bankruptcy and was subsequently dismissed from the Law Division action without prejudice.

After the close of discovery, the parties cross-moved for summary judgment. On March 18, 2011, the motion judge granted plaintiff's motion and entered judgment for $400,000 on the Guaranty against Perez and each of the Colao/Bertinato defendants, as well as against Palisades and denied the Colao/Bertinato defendants' cross-motion. Pursuant to our grant of limited remand after notices of appeal were filed, the motion judge amended the March 18, 2011 order to include contractual interest of $540,000 for a total judgment of $940,000, from which defendants now appeal.

Defendants contend that plaintiff's failure to provide competent evidence on the motion of Palisades's default or any notice of default to the guarantors, precluded entry of summary judgment to plaintiff and required judgment in their favor dismissing the complaint with prejudice. Defendants also argue that summary judgment as to Palisades was inappropriate as it was a dismissed party at the time of the entry of judgment. Finally, defendants argue that plaintiff was not entitled to interest on the Note after acceleration. Plaintiff argues that entry of summary judgment in his favor was appropriate, that the motion judge properly awarded interest, that Palisades's appeal was untimely, and that the motion judge properly denied defendants' cross-motion for summary judgment. Because of procedural deficiencies in plaintiff's motion for summary judgment, we are constrained to reverse the judgment to plaintiff. We affirm the denial of the Colao/Bertinato defendants' cross-motion.

Summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. R. 4:46-2(c). We review the grant of summary judgment using the same standard as the motion judge.

Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). Thus, we must determine "whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).

Plaintiff supported his motion with a statement of material facts, a letter brief, his own certification and that of his counsel. In the statement of material facts, plaintiff set forth as undisputed the facts alleged in the complaint that he had called the Note, that defendants had failed to make payment as required by the Note and Mortgage, that plaintiff had given notice of his intent to enforce the Guaranty and that defendants had failed to respond to that notice. These are the same facts that the Colao/Bertinato defendants had claimed they lacked knowledge of or denied in their answer. The Colao/Bertinato defendants likewise disputed these facts in their opposing statement of material facts. Plaintiff did not support any of these facts by a citation to the portion of the motion record establishing the fact or demonstrating that it was uncontroverted as required by R. 4:46-2(a).

Further, plaintiff did not attest to these facts in his certification. As to the default, plaintiff said only that "[a]s the court has been made aware in my attorney's submissions, this matter involves the nonpayment by the defendants with respect to a mortgage and promissory note. (See initial motion documents submitted by counsel)." As to the default notice, plaintiff did not claim that he gave such notice as he alleged in the complaint but instead averred that "[u]nder the agreement there was no requirement to provide a default notice and the plaintiff's motion must be granted." Plaintiff's counsel's certification did not address either issue.

Even were we to construe plaintiff's certification as implying that the borrower, Palisades, had failed to make payment on the Note when due, the certification would still be insufficient to establish the fact on a motion for summary judgment. Rule 1:4-4(b) Certification in Lieu of Oath, provides:

In lieu of the affidavit, oath or verification required by these rules, the affiant may submit the following certification which shall be dated and immediately precede the affiant's signature: "I certify that the foregoing statements made by me are true. I am aware that if any of the foregoing statements made by me are willfully false, I am subject to punishment."

Plaintiff's certification does not contain these words.

Instead, plaintiff certifies only that "the foregoing statements made by me are true to the best of my knowledge and ability." A certification that does not contain the language mandated by R. 1:4-4(b) is without evidentiary value. Pascack Cmty. Bank v. Universal Funding, LLP, 419 N.J. Super. 279, 288 (App. Div. 2011).

Accordingly, there was no competent evidence submitted to the trial court to support plaintiff's allegation that the borrower had defaulted on the Note, or that plaintiff had provided notice of default to the guarantors and thus no basis for the entry of summary judgment in his favor on the Guaranty. *fn2

Cf. Sellers v. Schonfeld, 270 N.J. Super. 424, 428-29 (App. Div. 1993) (certifications supplying no competent admissible evidence cannot provide basis for summary judgment).

The summary judgment against Palisades must be reversed for the additional reason that it was not an active party in the Law Division action when summary judgment was entered against it.

The parties agree that Palisades never answered the complaint but instead filed a voluntary petition in bankruptcy. Accordingly, the action as to Palisades was apparently administratively dismissed without prejudice upon notice to the court of the bankruptcy filing. Although we are advised that the Bankruptcy Court had dismissed Palisades's bankruptcy some months before the summary judgment motions were filed, plaintiff never took steps to advise the trial court of the dismissal and to seek reinstatement of the action against Palisades. Accordingly, the entry of summary judgment against Palisades cannot stand and must be reversed.*fn3 Cf. Lopez v. Columbo, 379 N.J. Super. 96, 99 (App. Div. 2005) (dismissal occurring as result of bankruptcy stay is necessarily without prejudice as not dispositional but interlocutory based upon lack of jurisdiction pending further order of the Bankruptcy Court).

The Colao/Bertinato defendants also appeal the denial of their cross-motion for summary judgment discharging them from any liability on their Guaranty. The Guaranty defendants executed provides in pertinent part:

GUARANTY: By signing this Guaranty, the undersigned guarantee to the Lender that the debt owed to the Lender by the Borrower in the amount of $400,000 plus interest as prescribed pursuant to Lender's loan and as set forth in the Promissory Note and Mortgage dated even date herewith will be paid when it is due and in accordance with the Promissory Note. This means that the Lender can demand payment from the Guarantors if the Borrower, having been provided proper notice by the Lender, fails to pay the Lender what the Borrower owes the Lender pursuant to the terms hereunder.

NOTICES: Lender shall notify in writing each Guarantor that the Lender has accepted this Guaranty. Lender shall notify Guarantors and the Borrower in writing that any obligation has not been paid and that the Lender wishes the Guarantors to make a payment under this Guaranty.

OTHER SOURCES OF PAYMENT: Lender can demand payment from Guarantors after Lender has sought payment from the Borrower and that [sic] the Borrower has defaulted under the terms of the obligation.

The Colao/Bertinato defendants contend that plaintiff's failure to notify the Guarantors and Palisades in writing, before instituting suit on the Guaranty, that the $400,000 debt had gone unpaid at maturity and that plaintiff wished the Guarantors to make payment under the Guaranty, relieved them of their obligation to make payment under the Guaranty. We disagree.

When resolving questions regarding the interpretation of a guaranty, we look to the rules governing construction of contracts generally. Ctr. 48 Ltd. P'ship v. May Dep't Stores Co., 355 N.J. Super. 390, 405 (App. Div. 2002). A guaranty, as any contract, is to be interpreted according to its clear terms in order to give effect to the objective expectations of the parties. Housatonic Bank & Trust Co. v. Fleming, 234 N.J. Super. 79, 82 (App. Div. 1989). The liability of a guarantor may not be extended by implication, however. Garfield Trust Co. v. Teichmann, 24 N.J. Super. 519, 527 (App. Div. 1953). Accordingly, contracts of guaranty are strictly construed and any ambiguities in the language are resolved against the drafter of the form. Housatonic Bank & Trust Co., supra, 234 N.J.

Super. at 82.

Here, the language of the Guaranty is clear and unambiguous. The plaintiff must give notice to the guarantors and Palisades, in writing, that Palisades failed to repay the debt at maturity and that plaintiff is seeking payment of the debt from the guarantors. Contrary to defendants' assertions, the terms of the Guaranty do not require that plaintiff give such notice before instituting suit on the Guaranty, or, indeed, at any particular time. Plaintiff's failure to establish that it had provided such notice to defendants, and, perhaps even more crucially, that Palisades had defaulted on the obligation, mandates the reversal of the judgment entered in its favor; it does not, however, provide a basis for entry of judgment in defendants' favor discharging their liability on the Guaranty. Defendants have not asserted any basis for excusing their performance under the Guaranty. They do not contend on this appeal that Palisades has repaid the money it owes to plaintiff. Nor have they asserted any prejudice flowing from plaintiff's failure to give the required notice.*fn4 Accordingly, plaintiff's failure to give the required notice only delays his ability to obtain judgment on the Guaranty, it in no way relieves defendants of their payment obligation. See Duall Bldg. v. 1143 E. Jersey, 279 N.J. Super. 346, 364-65 (App. Div. 1995)(only party's material breach of non-divisible contract excuses other party from performing contractual duty due thereafter).

Finally, defendants contend that plaintiff "should not have been entitled to interest after acceleration." Defendants misconstrue the basis for the motion judge's award of interest. The Note executed by defendant Bertinato on behalf of Palisades provides in pertinent part:

1. Payments under the Promissory Note shall be made by the Borrower as the Borrower determines provided, however, at the end of twelve (12) months from the date of this Note (the "Maturity Date") the Consideration shall be due and payable in full.

Subject to conditions herein, Borrower may pre-pay the Principal Sum and Interest at any time prior to the Maturity Date and Borrower shall not incur a penalty for making such prepayment. If the Principal Sum is pre-paid any time before the Maturity Date, the minimum, Interest Due shall be as if the Principal Sum was paid at the end of seven months bearing a total minimum, Interest payment of Seventy Thousand ($70,000.00) Dollars.

2. Notwithstanding anything herein to the contrary, any payment which is not paid when due, whether at stated Maturity Date, by acceleration or otherwise, shall continue to bear Interest from the date when due until such payment is paid in full, at a rate of two and one-half percent (2 1/2%) simple interest.

3. Interest on the Principal Sum shall be computed on the basis of a 360-day year (and 30-day month). Interest shall be at a simple rate of two and one-half percent (2 1/2%) monthly.

Payment in full was due from Palisades on October 20, 2007. The Note did not require any installment payments. As no installment payments were due, there were no such payments to accelerate. See generally Westmark Commercial Mortg. Fund IV v. Teenform Assocs., 362 N.J. Super. 336, 345 (App. Div. 2003) (acceleration advances the maturity date of the debt). Palisades failed to pay the obligation upon maturity. Accordingly, this is a simple maturity default not involving acceleration. We agree with the motion judge that interest continues to run on the $400,000 loan amount at two and one-half percent per month until paid in accordance with the terms of the Note. As the summary judgment to plaintiff is being reversed, interest continues to accrue on the unpaid principal at the contract rate and not the post judgment rate. See R. Jennings Mfg. v. Northern Elec., 286 N.J. Super. 413, 417 (App. Div. 1995) (distinguishing between contract creditor with a judgment and one without a judgment).

Affirmed in part; reversed in part and remanded.

We do not retain jurisdiction.

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