Argued April 15, 2015.
Approved for Publication June 17, 2015.
On appeal from Superior Court of New Jersey, Chancery Division, Monmouth County, Docket No. F-6301-12.
Gerald A. Liloia argued the cause for Pro se appellant (Nicholas Racioppi, Jr., of counsel; Matthew H. Lewis, on the brief).
Joshua A. Zielinski argued the cause for respondent ( McElroy, Deutsch, Mulvaney & Carpenter, L.L.P., attorneys; Mr. Zielinski and Peter Saad, of counsel and on the brief).
Before FUENTES, ASHRAFI, and O'CONNOR,
[441 N.J.Super. 185] ASHRAFI, J.A.D.
In this foreclosure action, defendant-mortgagee Riker, Danzig, Scherer, Hyland & Perretti, L.L.P., (Riker) appeals from summary judgment granting priority to the two earlier, recorded [441 N.J.Super. 186] mortgages of plaintiff-mortgagee Rosenthal & Rosenthal, Inc. (Rosenthal). The Rosenthal mortgages secured not only existing debts guaranteed by defendant-mortgagor Vanessa Benun but also future advances Rosenthal would make in its discretion to the debtor. Riker argues that the Chancery Division incorrectly applied the common law of optional future advances secured by a mortgage. We agree and reverse.
Both parties filed motions for summary judgment. The pertinent facts are essentially undisputed. Our standard of review
is plenary on the application of law leading to summary judgment where no genuine issues of fact are in dispute. Nicholas v. Mynster, 213 N.J. 463, 477-78, 64 A.3d 536 (2013); Zabilowicz v. Kelsey, 200 N.J. 507, 512-13, 984 A.2d 872 (2009).
Riker is a law firm. Rosenthal describes itself as " an international financial institution engaged in providing businesses with . . . traditional factoring services, which involves businesses selling their accounts receivable to Rosenthal, in return for cash to satisfy their immediate cash flow needs." See also 35 C.J.S. Factors § 1 (2009) (" factoring" defined as the sale of accounts receivable at a discounted price). Both Riker and Rosenthal are creditors of Jack Benun or the camera sales businesses that were owned by the Benun family, which we refer to in this opinion as " the Jazz entities."
On July 12, 1995, Rosenthal entered into a factoring agreement with one of the Jazz entities, Jazz Photo Corporation (Jazz Photo). Paragraph 7(b) of the 1995 factoring agreement provided that Rosenthal, " will advance to" Jazz Photo " at [Rosenthal's] discretion, up to seventy percent (70%) of the net amount of receivables purchased by [Rosenthal] and not as yet collected."
On August 18, 2000, defendant Vanessa Benun, who is Jack Benun's daughter, executed an agreement by which she guaranteed to Rosenthal payment of all obligations, liabilities, and indebtedness of Jazz Photo. Vanessa Benun also executed a mortgage and security agreement (the 2000 mortgage), encumbering real property she owned on Ivy Place in Ocean Township. The 2000 [441 N.J.Super. 187] mortgage included a " dragnet clause," which secured Vanessa Benun's obligations under the guarantee up to a maximum principal amount of $1,000,000.
The 2000 mortgage also contained an " anti-subordination clause," which stated that Vanessa Benun " shall not further mortgage or amend, modify, restate or amend any existing prior mortgage or otherwise encumber the Premises, or any part thereof." The 2000 mortgage was recorded in the Monmouth County Clerk's Office on August 21, 2000.
On March 8, 2005, Rosenthal entered into a second factoring agreement with another of the Jazz entities, Ribi Tech Products, LLC (Ribi Tech). Paragraph 7.2 of the second factoring agreement stated that in its " sole discretion," Rosenthal " will, from time to time . . . advance to [Ribi Tech], sums" up to a maximum calculated as a fixed percentage of outstanding
" Eligible Receivables" or " Eligible Inventory."
On March 15, 2005, Vanessa Benun executed another agreement by which she guaranteed to Rosenthal payment of all obligations, liabilities, and indebtedness of Ribi Tech. Vanessa Benun also [441 N.J.Super. 188] executed another mortgage and security agreement (the 2005 mortgage), further encumbering the Ivy Place property, again in the principal amount of $1,000,000. The 2005 mortgage contained the same dragnet and anti-subordination clauses as the ones in the 2000 mortgage. The 2005 mortgage was recorded in the Monmouth County Clerk's Office on April 13, 2005. At some point, Ribi Tech changed its name to Jazz Products, LLC (Jazz Products).
On March 25, 2007, Vanessa Benun executed a mortgage in favor of Riker (the Riker mortgage) on the same Ivy Place property. The purpose of the Riker mortgage was to secure payment of outstanding legal fees totaling $1,679,701.33 owed to Riker as of that date by Jack Benun. The Riker mortgage was recorded in the Monmouth County Clerk's Office on April 13, 2007.
On August 3, 2007, Rosenthal's counsel sent an e-mail to Riker that took notice of the Riker mortgage. Counsel wrote: " title on the daughters properties show liens in favor of your firm. Those liens will need to be fully subordinated to any new ...