SALVATORE LOPRESTI and MARGARET LOPRESTI, Plaintiffs-Appellants,
WELLS FARGO BANK, N.A., successor in interest to Wachovia Bank and First Union, Defendant-Respondent
Argued March 10, 2014.
Approved for Publication April 8, 2014.
On appeal from the Superior Court of New Jersey, Law Division, Gloucester County, Docket No. L-792-11.
Lewis G. Adler argued the cause for appellant.
Jessica A. Goldfinger argued the cause for respondent ( Greenbaum, Rowe, Smith & Davis, LLP, attorneys; John D. North, on the brief; Ms. Goldfinger, on the brief).
Before PARRILLO, KENNEDY
and GUADAGNO, Judges.
[435 N.J.Super. 313] OPINION
The underlying action was instituted by plaintiffs Salvatore and Margaret Lopresti against defendant Wells Fargo Bank, N.A., successor to Wachovia Bank, N.A. and First Union National Bank (Wells Fargo), alleging the Bank wrongly collected a prepayment penalty on a commercial loan to their business, Body Max, Inc. (Body Max), which plaintiffs personally guaranteed and secured by a mortgage on their primary residence. On defendant's motion for summary judgment, the trial judge dismissed plaintiffs' complaint, finding that the proscription against such a charge in the New Jersey Prepayment Law, N.J.S.A. 46:10B-1 to -11.1, does not apply to commercial transactions like the one involved here. [435 N.J.Super. 314] Plaintiffs appeal and argue, alternatively, that if the fee is allowed, it is excessive.
The facts are not in dispute. On March 1, 2002, Body Max executed and delivered a Promissory Note to defendant's predecessor, First Union, as evidence of a $550,000 loan. The terms of this note included an interest rate of 6.75% and required Body Max to make " consecutive monthly payments of principal and interest in the amount of $4,898.00 commencing on April 1, 2002 and continuing on the same day of each month thereafter until fully paid." The total principal and interest accrued on the loan was " due and payable on March 1, 2007." In addition, this original note contained a prepayment provision setting a fee of 1% in the event Body Max paid the loan prior to the termination date:
PREPAYMENT COMPENSATION. Principal may be prepaid in whole or in part at any time; provided, however, if principal is paid before it is due under this Note, whether voluntary, mandatory, upon acceleration or otherwise, such prepayment shall include a fee equal to 1% of the amount prepaid.
Any prepayment in whole or in part shall include accrued interest and all other sums then due under any of the Loan Documents. No partial prepayment shall affect the obligation of Borrower to make any payment of principal or interest due under this Note on the due dates specified.
This note was executed by Salvatore Lopresti (Lopresti) in his capacity as President of Body Max.
In order to secure payment of its obligations under the original note, Body Max executed a Mortgage and Absolute Assignment of Leases dated March 1, 2002 to First Union. This mortgage covered Body Max's principal place of business, a gymnasium located on Delsea Drive in Washington Township. This document was also executed by Lopresti as President of Body Max.
Additionally, on March 1, 2002, Lopresti executed and delivered to First Union an Unconditional Guaranty to provide assurance that Body Max would fulfill its obligations under the original note. To secure payment and performance of the guaranty, plaintiffs executed and delivered a Mortgage and Absolute Assignment Agreement of Leases to First Union, covering the premises where their primary residence was located, also in Washington Township.
[435 N.J.Super. 315] Pursuant to the loan transaction of March 1, 2002, First Union advanced the full $550,000 loan proceeds to Body Max. Body Max then transferred the funds to TD Bank in order to pay off a prior loan borrowed by Body Max. Plaintiffs did not personally receive any of the loan proceeds.
Thereafter, on December 20, 2005, Body Max modified the terms of its original note
with Wachovia Bank, First Union's successor and Wells Fargo's immediate predecessor. Lopresti, as President of Body Max, executed and delivered the modified note of December 20, 2005 in the amount of $460,195.41. The modified note stated that it " renew[ed], extend[ed] and/or modifie[d] that [Original Note of Mach 1, 2002], evidencing an original principal amount of $550,000.00." The terms of the modified note included an interest rate of 7.25% and called for " consecutive monthly payments of principal and interest in the amount of $4,228.19 commencing on January 20, 2006, and continuing on the same day of each month thereafter until fully paid." All of the principal and interest on this modified note were " due and payable on December 20, 2020." Further, the modified note defined " loan documents" as " all documents executed in connection with or related to the loan ...