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Customers Bank v. Reitnour Investment Properties, LP

Superior Court of New Jersey, Appellate Division

February 26, 2018

CUSTOMERS BANK, Plaintiff-Appellant,

          Submitted November 15, 2017

         On appeal from Superior Court of New Jersey, Chancery Division, Cape May County, Docket No. F-031832-14.

          Saldutti Law Group, attorneys for appellant (Robert L. Saldutti and Thomas B. O'Connell, of counsel and on the brief).

          Fellheimer & Eichen LLP, attorneys for respondent (John J. Jacko, III, of counsel and on the brief; Alan S. Fellheimer, on the brief).

          Before Judges Alvarez, Currier, and Geiger.


          GEIGER, J.S.C. (temporarily assigned).

          Plaintiff Customers Bank appeals from an October 5, 2016 order: (1) vacating a December 31, 2014 order; (2) reinstating the final judgment of foreclosure in the amount of $612, 912.31, inclusive of interest and counsel fees; (3) declaring the foreclosure judgment satisfied; and (4) ordering plaintiff to refund the sum of $28, 976.13 to defendant Reitnour Investment Properties, LP (RI Properties). For the reasons that follow, we affirm.


         We derive the following facts from the record. Between 1999 and 2012, plaintiff, defendant Phillip A. Reitnour (Reitnour), and other entities in which Reitnour has an ownership interest (the Reitnour entities) entered into a series of four loan agreements.

         Among these transactions was a 2008 loan entered into by ANYTHINGFORSALEBYOWNER.COM, LLC (Anything for Sale) (the 2 008 Loan). Anything for Sale borrowed the principal amount of $600, 000 from New Century Bank, now known as Customers Bank. The 2 008 Loan was memorialized in a Promissory Note (the 2 008 Note) and Business Loan Agreement and secured by a second mortgage on property located in Stone Harbor, New Jersey (the Stone Harbor property) and an assignment of rents. The mortgage contains a maximum lien clause, which states: "The lien of this [m]ortgage shall not exceed at any one time $600, 000.00."

         RI Properties, is the fee simple owner of the Stone Harbor property. The property is a summer home for Reitnour, the principal of RI Properties. Reitnour and RI Properties were listed as guarantors on the loan agreement.

         The 2008 Note contains the following prepayment clause:

PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges are earned fully as of the date of the loan and will not be subject to refund upon early payment (whether voluntary or as a result of default), except as otherwise required by law. Except for the foregoing, Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments under the payment schedule. Rather, early payments will reduce the principal balance due and may result in Borrower's making fewer payments. Borrower agrees not to send Lender payments marked "paid in full", "without recourse", or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender's rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, indicates any check or other payment instrument that includes that the payment constitutes "payment in full" of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: New Century Bank, 99 Bridge Street, Phoenixville, PA, 19460-3411.
[(Emphasis added).]

         The Stone Harbor property was further pledged as collateral to secure a commercial loan to Reitnour in 2012. This security took the form of a third mortgage lien.

         On August 1, 2013, one of the loans became due, triggering a cross-default and acceleration, encompassing all loans entered into by plaintiff, Reitnour, and the Reitnour entities. On September 16, 2013, plaintiff entered into a forbearance agreement with Reitnour and the Reitnour entities. The parties agreed to a six-month extension on all loan agreements. While RI Properties is listed as a party to the forbearance agreement, it did not execute the agreement.

         The Forbearance Agreement reads in relevant part:

Cross-Collateralization. Borrower acknowledges that a condition of this Forbearance Agreement is that all loans and obligations shall service as collateral for each of the related loans and obligations. It is agreed that all loans and their security shall serve as collateral for each and every obligation and loan and are cross-collateralized.

         On April 24, 2014, plaintiff filed three actions for confession of judgment in the Court of Commons Pleas for Chester County, Pennsylvania. This led to the entry of judgments by confession against Phillip A. Reitnour and RI Properties in the amount of $634, 788.59 (the 2008 Loan); against Phillip A. Reitnour and Emergensee, LLC in the amount of $733, 493.88 (the 2011 Loan); and against Phillip A. Reitnour, Emergensee U, Inc., and Emergensee, LLC in the amount of $875, 264.63 (the 2012 Loan).

         After Reitnour defaulted on the forbearance agreement, plaintiff commenced this foreclosure action on August 4, 2014, seeking to foreclose the Stone Harbor property.

         On October 23, 2014, plaintiff voluntarily dismissed the unknown occupants as defendants and filed a motion to enter final judgment in foreclosure against Reitnour and RI Properties in the amount of $585, 764.74.

         After receiving a notice of deficiency from the Office of Foreclosure with regard to service of Reitnour and as to the third mortgage lien, plaintiff dismissed Reitnour as a defendant in the foreclosure action and proceeded with the foreclosure action only in regard to the second mortgage lien arising out of the 2008 Loan (the mortgage).

         On December 11, 2014, in the course of the confessed judgment proceedings, plaintiff, Reitnour, and the confessed judgment defendants (including RI Properties) entered into a settlement agreement in which the borrowers and guarantors were collectively identified as "Reitnour." The Settlement Agreement confirmed the total indebtedness of all outstanding loans was $2, 569, 422.94, confirmed the terms and provisions of the respective loan documents, and established settlement conditions for Reitnour and plaintiff, including a payment plan for plaintiff to "standstill" regarding the foreclosure.

         The settlement agreement reads in relevant part:

2. Confirmation of Loan Documents. Reitnour hereby ratifies and confirms in all respects the terms and provision of the respective loan documents including the September 16, 2013 Forbearance Agreement and the Allonges attached thereto as well as the original loan documents and any modifications thereof.
3. Conditions of Settlement to TRI Properties 1. . .[RI Properties] agrees as follows:
(a) [1RI Properties] shall pay the sum of Five Hundred Thousand ($500, 000.00) Dollars . . . on or before December 31, 2014, with the payment to be credited against the total amount of indebtedness . . .; and
(b) [RI Properties Defendant] shall pay the balance due and owing to [plaintiff] as set forth ... in Paragraph 1 . . . on or before ...

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