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Cooper Health System v. FMCF 3X, L.L.C.

Superior Court of New Jersey, Appellate Division

September 13, 2013

FMCF 3X, L.L.C., Defendant-Respondent.


Argued July 9, 2013

On appeal from Superior Court of New Jersey, Law Division, Camden County, Docket No. L-3372-10.

Joseph H. Neiman argued the cause for appellant Executive Campus, L.L.C..

Joseph Lubertazzi, Jr., argued the cause for respondent (McCarter & English, L.L.P., attorneys; Mr. Lubertazzi, of counsel and on the brief; Danielle Weslock, on the brief).

Before Judges Ashrafi and St. John.


Executive Campus, L.L.C. ("appellant"), which was formerly the defendant and counterclaimant in this action, appeals from the March 30, 2012 order of the Law Division by which FMCF 3X, L.L.C. ("respondent"), was substituted for appellant in the action as defendant-counterclaimant. We affirm.

The substitution resulted from a separate foreclosure action filed in February 2010 by Bank of America on a mortgage encumbering commercial property then owned by appellant. Bank of America claimed it was entitled under the loan documents to all rents and related charges due to appellant from tenants of the commercial building in accordance with an Assignment of Leases and Rents ("ALR"). Appellant had executed the ALR in December 2004 at the same time as the other mortgage and loan documents. In June 2011, the Chancery Division appointed a rent receiver in the foreclosure action to manage the property, to collect rents and similar charges, to pay the expenses of the property, and to pay any remaining balance from month to month to the mortgagee to satisfy the mortgage indebtedness.

In July 2010, while the foreclosure action was pending, a tenant in the commercial building, The Cooper Health System ("Cooper"), filed the complaint in this Law Division action. Cooper sought money damages from appellant, as the landlord, for alleged breach of certain covenants of the lease between appellant and Cooper. Appellant filed an answer and a counterclaim alleging that Cooper owed it several hundred thousand dollars for back charges that were the responsibility of the tenant, including electric bills from 2007 through 2011.

In July 2011, the foreclosure action was settled between appellant and the mortgagee.[1] The settlement provided the following rights, among others: (1) permitted the mortgagee to proceed with a sheriff's sale of the property; (2) gave the mortgagee a credit on a bid to purchase the property in the amount of the mortgage indebtedness and related charges; (3) provided for a contingent "economic participation payment" to appellant if the mortgagee obtained title to the property and certain "performance criteria" were satisfied in the rental of the property to tenants; and (4) released appellant and its principal, Mark Karasick, from any further obligation on the mortgage loans.[2]

The settlement agreement also included an integration clause (paragraph 11), which stated in full: "Entire Agreement. This Agreement embodies the entire understanding of the Parties with respect to the transactions discussed herein and supersede [sic] all prior agreements, understandings, written or oral." The settlement agreement contained no provision addressing the rent and related charges allegedly owed by Cooper, or appellant's counterclaims in the Cooper action.

The settlement agreement resulted in a July 26, 2011 consent order executed by the Chancery Division that declared the mortgagee was entitled to a judgment of foreclosure and authorized a pendente lite sheriff's sale of the property to satisfy the mortgage indebtedness. The sheriff's sale was conducted in September 2011, and the mortgagee was the successful bidder. On October 3, 2011, the sheriff issued a deed conveying the property to respondent, an entity established by the mortgagee to take title to the property. On October 25, 2011, the Chancery Division entered an order discharging the rent receiver.

In March 2012, respondent filed a motion in the Cooper action in the Law Division to be substituted as the defendant-counterclaimant. Respondent claimed it was the true party with interest in the pending counterclaims. Appellant opposed the motion, contending that the parties' settlement agreement in the foreclosure action extinguished its debt to the mortgagee and that its counterclaims for past rent and related ...

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