On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-8540-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Nugent and Carchman.
In this consolidated appeal*fn1 from a judgment entered as a result of a default in a commercial loan transaction, we consider the propriety of a contract provision that by its terms limits the interest rate to the "legal" rate and eliminates collection of additional interest that would render the transaction usurious. We conclude that, under the narrow facts here, the clause is enforceable and the transaction was not usurious. As to the liability of the guarantors, we affirm.
These are the relevant facts adduced at both a proof hearing and plenary hearing. In early 2006, defendant Alexander Goldstein met with Robert DeMane, the managing member of plaintiff Herkimer Investment, LLC (Herkimer), a commercial lending company, to secure commercial financing to perfect oil leases in the Ukraine. From March 2006 until March 2007, defendants Marina and Alexander Goldstein (the Goldstein defendants or the Goldsteins)*fn2 executed a series of seven notes, drafted by Herkimer's corporate attorney, Gene Boffa, to fund a Ukrainian oil venture known as "Energyia."
The first commercial mortgage loan was for the amount of $640,000; the note was dated March 31, 2006, and had a maturity date of April 1, 2007 (the First Note). The First Note had an interest rate of twenty percent; a default interest rate of twenty-six percent; and a late charge of five percent of the amount of principal and interest past due. As collateral for the First Note, the Goldsteins executed a mortgage on their property at 9 Fieldstone Court, Upper Saddle River, New Jersey (the Mortgage).
The second commercial mortgage loan was for the principal amount of $177,000; the note was dated August 2, 2006, and matured on April 1, 2007 (the Second Note). The Second Note reflected the same interest rates as the First Note, and was also secured by the Mortgage.
The third commercial mortgage loan was for the amount of $150,000; the note was dated September 26, 2006, and matured on April 1, 2007 (the Third Note). The Third Note reflected the same interest rates as the First Note, and was also secured by the Mortgage.
As of December 2006, the Goldsteins had borrowed $967,000, but the overseas oil projects had been delayed. As a result, Goldstein required additional capital to pursue the investment. DeMane was hesitant to make further loans, stating that as to the first three loans, "[t]he only hard collateral I received was a third mortgage on Mr. Goldstein's house, which is not a great position."
In order to acquire the additional financing from Herkimer, Goldstein reached out to his sister, defendant Zhanna Alergant, and his cousin, defendant Elena Riadtchikova (collectively "the guarantors"), to guarantee the loans received from Herkimer. Zhanna and Elena co-owned defendant New Life Adult Day Care Center, Inc. (New Life), an adult day care center. Elena was a "silent" partner in New Life, while Zhanna served as the president and administrator of the facility.
On December 26, 2006, Goldstein and defendant Ronald H. Shaljian, Esq., visited Zhanna at her office at the New Life facility to request Zhanna guarantee the loans from Herkimer. Although Zhanna was aware that Goldstein was involved in oil and gas "projects," she testified that she was not aware of Energyia prior to trial on June 7, 2011. Zhanna was not shown or made aware of the Goldstein defendants' prior loans with Herkimer. Rather, she explained that while in a meeting with her staff at New Life on December 26, 2006, Goldstein and Shaljian, who had previously served as her attorney and who she believed represented her, asked her to speak with them in the hallway of the facility. Goldstein told Zhanna that he needed her to sign papers, and Shaljian handed her a conflict letter stating that he was not representing her, as well as a guaranty and a stock pledge agreement.
Zhanna did not review the documents in full at New Life, but nonetheless signed them in the hallway because she trusted her brother and Shaljian. Later that day, Zhanna asked Goldstein what papers were for, and "[h]e said, Zhan[n]a don't worry you signing that you are guarantee on $600 after my mortgage, my home and you know that my home costs much more than (sic) so you should not be worried. [Zhanna] said, okay." Zhanna then gave Alex the shares of New Life stock; no copies of the paperwork were left with Zhanna. Zhanna was never provided any documents or notice of the subsequent or prior loans made from Herkimer to the Goldsteins.
The guaranty signed by Zhanna and Elena provided in relevant part:
To induce Bank to make loans, advances or other financial accommodations to Alexander Goldstein and Marina Goldstein . . . now or in the future, and with full knowledge that said loans, advances or other financial accommodations would not be made without this Agreement of Guaranty, the undersigned Guarantors agree as follows:
The undersigned . . . guarantee full, prompt and unconditional payment when due of each and every Liability of the Borrower to Bank, now existing or hereafter incurred, whether direct or indirect, contingent or absolute, joint or several, matured or unmatured and the full, prompt, and unconditional performance of every term and condition of any transaction to be kept and performed by the [b]orrower. . . .
The term "Liability of the Borrower" shall include all liabilities . . . now or hereafter existing, due or to become due [(Emphasis added).]
In addition to the guaranty, Elena and Zhanna also signed a "Stock Pledge Agreement" (the Stock Pledge), by which they pledged the entirety of their stock of New Life "as collateral to secure the [notes] and guaranty of [the Goldstein defendants.]" Pursuant to the Stock Pledge, Elena and Zhanna transferred their shares to Shaljian to be held in escrow in the event of default on repayment of the loans. The details of how Elena's signature was acquired are unclear from the record.
The subject line of the conflict letter, dated December 26, 2006, provided: "Re: Herkimer Investment, LLC to Goldstein $600,000 loan secured by a mortgage on 9 Fieldstone Court and guaranteed by Zhanna Alergant and Elena Riadtchikova." The letter confirmed that Shaljian's firm, although it had represented Zhanna and Elena in the past, "are not and cannot represent [them] in this transaction." It further advised Zhanna and Elena to seek their own counsel and to "take as much time as you need to seek out and obtain legal counsel in order to represent your interest." Zhanna, Elena, and Shaljian signed the letter.
On the same day that Zhanna signed the guaranty, Stock Pledge, and conflict letter, December 26, 2006, Herkimer made a fourth loan to the Goldstein's for $600,000 (the Fourth Note). The Fourth Note had a maturity date of April 1, 2007, an interest rate of twenty percent, a default interest rate of thirty percent, and a late charge ...