November 5, 2012
NVE BANK, PLAINTIFF-RESPONDENT,
BER-LOEW PARTNERSHIP AND CHRISTOPHER DURSO, DEFENDANTS-RESPONDENTS.
RICHARD BERLOWE, APPELLANT.
On appeal from the Superior Court of New Jersey, Chancery Division, Hudson County, Docket No. F-18303-10.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted September 24, 2012
Before Judges Espinosa and Guadagno.
Appellant Richard Berlowe appeals from the denial of his motion to intervene in a foreclosure action brought by plaintiff NVE Bank against defendants Ber-Loew Partnership and Christopher Durso. On appeal, Richard Berlowe also raises issues regarding the merits of the underlying foreclosure action. We affirm.
On June 10, 1985, Richard Berlowe, Harold Berlowe, Barbara Berko, and Warren Loewenstein*fn1 formed Ber-Loew Partnership (the Partnership) to invest in real estate. Pursuant to the partnership agreement, capital was "contributed in equal amounts by each partner," the "capital gains and losses of the
[P]artnership" were "shared equally among the partners," and each partner had an "equal voice in the conduct of the affairs of the business."
An amendment to the partnership agreement, dated June 13, 2000, named Harold Berlowe "the General Partner with the authority to bind the Partnership." Warren Loewenstein died in 1998 and Barbara Berko inherited his Partnership interest. The amendment was signed by the three remaining partners.
A partnership resolution dated March 8, 2006, and signed by all three partners, granted Harold Berlowe and Barbara Berko the power to:
[e]ndorse, assign, transfer, mortgage or pledge bills receivable, warehouse receipts, bills of lading, stocks, bonds, real estate or other property now owned or hereafter owned or acquired by the Partnership as security for sums borrowed, and to discount the same, unconditionally guarantee payment of all bills received, negotiated or discounted and to waive demand, presentment, protest, notice of protest and notice of non-payment.
The resolution indicated that the signatures of both Harold Berlowe and Barbara Berko were required to exercise these powers. Also on March 8, 2006, a commercial loan agreement for an $830,000 loan was signed between plaintiff, as lender, and 700 Bangs Avenue, LLC (700 Bangs), as borrower. Harold Berlowe, Barbara Berko, Christopher Durso, and Raul Menares signed the loan agreement on behalf of 700 Bangs. 700 Bangs also executed a promissory note in conjunction with the loan agreement.
To secure the 700 Bangs loan, the Partnership executed a guaranty signed by Harold Berlowe and Barbara Berko. On March 8, 2006, the Partnership also executed a mortgage in favor of plaintiff on property located at 255-257 Fourth Street in Hoboken. That mortgage was signed by Harold Berlowe and Barbara Berko on behalf of the Partnership. The mortgage was registered in the Hudson County Register of Deeds on March 27, 2006. A commercial debt modification agreement dated March 20, 2007, extended the maturity date of the $830,000 loan to March 10, 2008.
A partnership resolution of authority, dated December 12, 2007, authorized Harold Berlowe to "[b]orrow money on behalf and in the name of the Partnership, sign, execute and deliver promissory notes or other evidence of indebtedness." This resolution was signed by Harold Berlowe, Richard Berlowe, and Barbara Berko.
On December 12, 2007, plaintiff made a commercial loan of $1.2 million to 707 Bangs Avenue, LLC (707 Bangs). The loan agreement was executed by Harold Berlowe as the "Managing Member" of 707 Bangs Devco LLC, which, in turn, was the managing member of 707 Bangs. On that same date, 707 Bangs also signed a commercial promissory note.
To secure the repayment of this loan from plaintiff to 707 Bangs, Harold Berlowe, as the "Managing Partner" of the Partnership, executed a guaranty dated December 12, 2007. To secure this obligation, Harold Berlowe, on behalf of the Partnership, executed a mortgage in favor of plaintiff on property located at 907 Park Avenue in Hoboken. A second commercial debt modification agreement, dated April 17, 2008, extended the maturity date of the $830,000 loan to October 13, 2008.
In April 2009, plaintiff stopped receiving payments on both the $1.2 million loan and the $830,000 loan. On March 23, 2010, plaintiff filed a complaint in foreclosure against the Partnership and Christopher Durso, seeking to foreclose on both of the Partnership's properties pursuant to the mortgages. The Partnership filed an answer on July 25, 2010. The Partnership's counsel was forced to withdraw on February 18, 2011, because of a conflict of interest.
Richard Berlowe filed a notice of motion to intervene individually as a partner in the Partnership on April 27, 2011. Plaintiff filed a certification in opposition to Richard Berlowe's motion to intervene on May 3, 2011. Plaintiff filed a supplemental certification on May 11, 2011.
On May 13, 2011, the court heard oral argument on Richard Berlowe's motion to intervene. At the hearing, each individual partner was represented by counsel, however, no one appeared on behalf of the Partnership. The court stated that if no one appeared on behalf of the Partnership at the proof hearing, scheduled for May 18, 2011, a default would be entered against the Partnership and the matter would be sent to the foreclosure unit for an entry of judgment.
In denying Richard Berlowe's motion to intervene, the court recognized that because "the individual partners [were] not named defendants," it did not have jurisdiction over them:
I don't have jurisdiction over any one entity or one person as a defendant, other than Ber-Loew Partnership and Christopher Durso, they are the named defendants in this matter.
As I mentioned before, no defendant, no party has chosen to bring in, amend, to name the individual partners in this case, so I can't start having jurisdiction, if you will, over your client, let's say, if I did not permit him to intervene or any other partner, unless they're a party to this case.
. . . I think the concerns your client has vis-a-vis his other partners are really separate claims in a Law Division action.
The court emphasized that because the Partnership was "the entity that guaranteed these loans" and "a defendant in this action," it, therefore, "must raise the defenses, such as they are, to this foreclosure action." The court further stated that Richard Berlowe's complaint "should be against his other partners," and that his remedy was to bring an action in the Law Division to address issues regarding the "rights and responsibilities" of the partners and "breach of fiduciary responsibilities among the partners."
On May 18, 2011, the court held a proof hearing on plaintiff's foreclosure action. The court introduced and explained the nature and scope of the proof hearing by stating:
I now have three attorneys representing three partners of Ber-Loew Partnership. And notwithstanding the fact that the
[P]artnership is not represented here, and I have denied [Richard Berlowe]'s motion to intervene, I will permit each one of the attorneys representing each one of the partners to cross-examine whatever witness the plaintiff is going to put on the stand in this proof hearing.
And the proof hearing today is not going to be in the nature of how much is owed; it's going to be in the nature of whether or not [plaintiff has] the right to foreclose. . . . [I]f I accept the proofs, and I, in fact, strike and suppress the
[P]artnership's responsive pleading after hearing the proofs, I will then send this back to the foreclosure unit and it will proceed as an uncontested matter as to the [P]artnership.
As its first and only witness, plaintiff called Alice Vetrone-Layne, Executive Vice President and Chief Lending Officer for NVE Bank. Vetrone-Layne testified that she was "familiar with the loans" at issue in plaintiff's foreclosure action and that her "dealings were directly with Harold Berlowe." Harold represented to her "[t]hat he was authorized . . . to sign and bind and borrow for Ber-Loew Partnership," and plaintiff "rel[ied] on the oral statements made by [Harold] Berlowe."
On August 24, 2011, the court issued its oral decision on plaintiff's foreclosure action. As to the $1.2 million debt the court found it was "uncontradicted" that the Partnership "executed and delivered" to plaintiff the guaranty and mortgage; plaintiff "relied on" the guaranty and the mortgage; the mortgage "was supported by adequate consideration;" before signing the guaranty and the mortgage on behalf of the Partnership when securing the $1.2 million loan, Harold Berlowe "represented to [plaintiff] that he was authorized to sign that mortgage on behalf of the [P]artnership;" plaintiff received and relied on the June 13, 2000 amendment to the partnership agreement, which had "provided that [Harold Berlowe,] as the general partner[,] had the authority to bind the [P]artnership;" plaintiff was also provided with the December 12, 2007 resolution of authority, "which authorized the [P]artnership to execute documents with the signature of [Harold] Berlowe only;" and Harold Berlowe's oral representations to plaintiff, the amendment, and the resolution "certainly reflected that [Harold] Berlowe not only had apparent authority, but actual authority to act on behalf of the [P]artnership."
The court also determined that the $830,000 mortgage was valid. With regard to that loan, the court made the following findings:
The documents were executed and delivered, a mortgage was executed that secured the obligation and [plaintiff] relied on those documents and made the loan. That mortgage was signed . . . on behalf of the
[P]artnership by [Harold] Berlowe and [Barbara] Berko[. Harold] Berlowe represented to [plaintiff] that he was authorized to sign that mortgage on behalf of the [P]artnership and there was reliance on those representations.
[Plaintiff] was also provided with a copy of the first amendment to the partnership agreement, signed by all the partners of the [P]artnership, which provided that [Harold] Berlowe[,] as general partner[,] had the authority to bind the partnership. There is no obligation for [plaintiff] to examine the relationship among the partners, and that is somewhat axiomatic and is reflected in the case that is oftentimes cited, Great Falls Bank v. Pardo, 273 N.J. Super. [542 (App. Div. 1994)].
The court concluded that plaintiff demonstrated a "prima facie right to foreclose" on the two properties, and that the defenses asserted did not "rise to the level of a valid defense to this foreclosure action."
On August 30, 2011, the court issued a formal order striking the Partnership's answer to plaintiff's complaint and referring the matter to the foreclosure unit as an uncontested matter. On December 7, 2011, the court entered a final judgment of foreclosure. Richard Berlowe filed a notice of appeal on January 19, 2012.
On appeal, Richard Berlowe makes two arguments: (1) the Chancery Division erred when it found that the Partnership's guaranties and mortgages were enforceable, and (2) the Chancery Division erred when it denied his motion to intervene.
Because we find that the Chancery Division properly denied Richard Berlowe's motion to intervene, we will not consider the issues regarding the merits of plaintiff's foreclosure action.
Richard Berlowe claims that, as a member of the Partnership, he has "a direct interest in the assets and profitability of the Partnership" because the value of his interest in the Partnership is reduced if assets of the Partnership are lost. Richard also argues that because Harold Berlowe and Barbara Berko executed personal guaranties of the loans, it was in their interests for plaintiff to foreclose on the Partnership's property. Thus, his interests "were not being adequately protected by any other party to this action." Richard also claims that "no prejudice would have befallen the original parties were [he] allowed to intervene."
Plaintiff maintains that the Chancery Division correctly denied Richard Berlowe's motion to intervene and that he is a "non-party to this case" and, therefore, "cannot pursue an appeal of [the orders] entered in this case." We agree.
Rule 4:33-1 establishes the four criteria for determining intervention as of right:
The applicant must (1) claim "an interest relating to the property or transaction which is the subject of the action," (2) show he is "so situated that the disposition of the action may as a practical matter impair or impede his ability to protect that interest," (3) demonstrate that the "applicant's interest" is not "adequately represented by existing parties," and (4) make a "timely" application to intervene. [Chesterbrooke Ltd. P'ship v. Planning Bd., 237 N.J. Super. 118, 124 (App.Div.), certif. denied, 118 N.J. 234 (1989).]
We have construed this rule liberally and stated that "[t]he test is whether the granting of the motion will unduly delay or prejudice the rights of the original parties." Atl. Emp'rs Ins. Co. v. Tots & Toddlers Pre-School Day Care Ctr., 239 N.J. Super. 276, 280 (App.Div.), certif. denied, 122 N.J. 147 (1990). As the rule is not discretionary, a court must approve an application for intervention as of right if the four criteria are satisfied. Chesterbrooke, supra, 237 N.J. Super. at 124.
Applying the principles that we enunciated in Chesterbrooke, Richard Berlowe failed to satisfy the first required element--that he had an interest relating to the property that was the subject of plaintiff's action. As both properties were owned solely by the Partnership, the Partnership has the sole interest in defending any actions relating to those properties.
Even under permissive intervention, governed by Rule 4:33-2, the move to intervene was not timely. Rule 4:33-2 provides in pertinent part:
Upon timely application anyone may be permitted to intervene in an action if the claim or defense and the main action have a question of law or fact in common . . . .
In exercising its discretion the court shall consider whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties.
Here, the trial court noted that Richard Berlowe was moving to intervene five days before trial "at the 11th hour . . . ." The judge also found, "as a matter of fact," that Richard's intervention would delay the foreclosure and the judge was not inclined to "take this foreclosure action and turn it into, if you will, a free-for-all among the partners, who don't even have enough ability to get together to preserve the partnership and to defend it against this foreclosure action." The Chancery Division judge did permit counsel for each of the individual partners to participate in the proof hearing with the opportunity to cross-examine plaintiff's witness and submit proposed findings of fact. We are satisfied that the Chancery Division judge correctly denied the intervention motion and we affirm this decision substantially for the reasons stated by the judge on the record of May 13, 2011.
Because the court properly denied Richard Berlowe's motion to intervene, he is not a party to the underlying foreclosure action and, therefore, he may not raise issues on appeal relating to the merits of that action.