LINELIV, L.P v. KENNETH STELIGA

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2265-10T3

LINELIV, L.P.,

Plaintiff-Respondent,

v.

KENNETH STELIGA and

TIMOTHY STELIGA,

Defendants-Appellants.

________________________________

October 25, 2011

Argued October 3, 2011 - Decided

Before Judges A. A. Rodr guez, Sabatino and Fasciale.

On appeal from the Superior Court of New Jersey, Law Division, Burlington County, Docket No. L-1694-08.

Igor Sturm argued the cause for appellants (Law Offices of Igor Sturm, attorneys; William C. MacMillan, on the brief).

Steven E. Angstreich argued the cause for respondent (Weir & Partners LLP, attorneys; Amy R. Brandt and Mr. Angstreich, on the brief).

PER CURIAM

In this case involving the enforcement of personal guarantees on several promissory notes, defendants Kenneth Steliga and Timothy Steliga (the Steligas) appeal from: that part of a July 10, 2009 order granting plaintiff Lineliv, L.P. (Lineliv) partial summary judgment on liability; and a December 14, 2010 order suppressing the Steligas' affirmative defenses. We reverse the July 10 order, and affirm in part and reverse in part the December 14 order.

On April 10, 2008, in a separate lawsuit against the Steliga Companies,1 (the first lawsuit) Lineliv obtained a judgment after a bench trial concerning various defaults by the Steliga Companies on several notes. The parties in the first lawsuit appealed from that judgment. Lineliv argued that the judge erred by failing to award damages based on a late charge provision. The Steliga Companies contended that the judge erred by concluding that the defaults on the notes invalidated purported lot release provisions included in the mortgages.

We found no merit in the arguments raised by the parties in the first lawsuit and affirmed the judgment. Lineliv, L.P. v. Steliga Homes of Evesham, LLC., No. A-6312-07 (App. Div. June 26, 2009). We concluded that (1) the late charge provisions were unreasonable because the charges were solely punitive, and (2) the language in the notes, as well as case law, did not support the Steliga Companies' contention that their defaults invalidated the lot release provisions in the mortgages. Id. at 6, 8. In dictum, we stated that "[the Steliga Companies] defaulted on the various notes in the Spring of 2002." Id. at 7.

On June 5, 2008 (almost two months after obtaining judgment against the Steliga Companies), Lineliv filed this complaint against the Steligas seeking to enforce their personal guarantees associated with the notes.2 In October 2008, Lineliv moved for summary judgment and argued that the Steliga Companies defaulted on the notes and the Steligas were personally liable. The Steligas cross-moved for summary judgment and contended mainly that the complaint was barred by the six-year statute of limitations, N.J.S.A. 12A:3-118.

The first motion judge conducted oral argument in December 2008. In January 2009, the court granted summary judgment in favor of Lineliv, entered judgment in the amount of $2,133,786.06, and denied the Steligas' cross-motion. On July 10, 2010, the judge reconsidered his decision and entered summary judgment in favor of Lineliv on liability only, but continued to deny the Steligas' cross-motion seeking to dismiss the complaint as time-barred. In determining when default occurred, the judge relied on our comment in the opinion affirming the judgment in the first lawsuit that the Steliga Companies defaulted on the notes "in the Spring of 2002." The judge stated:

This lawsuit was filed within time, by virtue of the fact the [appellate] opinion said, that . . . "the default occurred in the spring of '02."

. . . .

Therefore, I know when the default [occurred]. . . . . I was thinking that . . . I needed a default hearing, but I don't need that now.

. . . .

So six years from there is when [Lineliv] filed [the complaint], still in the spring, June 5th, 2008. Spring is to end on June 21st. It's within spring, which further buttressed my belief . . . that there's no statute of limitations [defense] and no issue with respect thereto.

After he entered judgment on liability in favor of Lineliv, the judge ordered the Steligas to provide "any new defenses to personal liability in this matter."

The Steligas asserted the affirmative defenses that Lineliv (1) failed to comply with N.J.S.A. 14A:13-20(b);3 (2) was equitably estopped from proceeding because the Steliga Companies offered to satisfy the debts by obtaining a loan (the tender defense); and (3) impaired the collateral under N.J.S.A. 12A:3-605 (the impairment of collateral defense).

In October 2010, Lineliv filed a motion to strike the affirmative defenses asserted by the Steligas. On December 14, 2010, a different motion judge (the second motion judge) granted Lineliv's motion and suppressed the Steligas' affirmative defenses.4 In her written opinion, the judge found that (1) N.J.S.A. 14A:13-20(b) was inapplicable because Lineliv is a limited partnership, not a corporation;5 (2) the tender defense was unavailable because the judge in the first lawsuit found that Lineliv was not responsible for the Steligas failing to obtain a loan from the bank; and (3) N.J.S.A. 12A:9-626 and -627 applied, lot releases were court-ordered, and the collateral was not impaired. The judge then re-entered judgment in favor of Lineliv in the amount of $2,133,786.06.

On appeal, the Steligas argue that (1) the first judge erred by relying on the dictum in our prior opinion to establish the dates of default; (2) Lineliv's claims are barred by the statute of limitations, res judicata, and waiver; and (3) the second motion judge misapplied the law of the case doctrine to suppress the tender defense, and incorrectly applied N.J.S.A. 12A:9-626 and -627 to suppress the impairment of collateral defense.

When reviewing a grant of summary judgment, we employ the

same legal standards used by the motion judge. Spring Creek

Holding Co. v. Shinnihon U.S.A. Co., 399 N.J. Super. 158, 180

(App. Div.), certif. denied, 196 N.J. 85 (2008); Prudential

Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App.

Div.), certif. denied, 154 N.J. 608 (1998). First, we determine

whether the moving party has demonstrated that there were no

genuine disputes as to material facts, and then we decide

whether the motion judge's application of the law was correct. Atl. Mut. Ins. Co. v. Hillside Bottling Co., 387 N.J.

Super. 224, 230-31 (App. Div.), certif. denied, 189 N.J. 104

(2006). We do not decide the disputed fact but ask only whether the allegedly disputed fact is material, warranting resolution by the factfinder. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 536 (1995). Not every disputed fact is sufficient to defeat a summary judgment motion. Rather, the disputed fact must be material and warrant resolution by the trier of fact. Id. at 530.

Further, we view the evidence in the light most

favorable to the non-moving party and analyze whether the moving

party was entitled to judgment as a matter of law. Id. at 523, 540. We accord no deference to the motion judge's conclusions on issues of law, Manalapan Realty, L.P., v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995), which we review de novo. Spring Creek, supra, 399 N.J. Super. at 180; Dep't of Envtl. Prot. v. Kafil, 395 N.J. Super 597, 601 (App. Div. 2007).

We begin by addressing the argument that Lineliv's complaint is time-barred. The applicable statute of limitations for enforcement of a guarantee of payment on a promissory note is controlled by N.J.S.A. 12A:3-118(a), which states that "an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six years after the due date or dates stated in the note or, if a due date is accelerated, within six years after the accelerated due date." In applying the statute to the facts of this case, the Steligas contend that the first motion judge erred by relying on the statement in the first lawsuit that the defaults occurred "in the spring of 2002." We agree.

The narrow issues on appeal in the first lawsuit did not relate to the exact dates on which the Companies defaulted on the notes. Rather, the issues concerned whether the trial judge erred by (1) refusing to award damages based on "late charge provisions; and (2) holding that defaults on the notes invalidated the "lot release provisions" in the mortgages.

By relying on the 2002 date, the first motion judge applied the law of the case doctrine, "a non-binding rule intended to 'prevent relitigation of a previously resolved issue.'" Lombardi v. Masso, 207 N.J. 517, ___ (2011) (citations omitted). Our affirmance in the first lawsuit, however, did not resolve the exact dates on which the Companies defaulted on each respective note. Each note provided when the principal was due and when the note shall be considered to be in default. Our statement concerning the "lot release provisions," that the Steliga Companies defaulted "in the spring of 2002," was dictum. Thus, we remand for the motion judge to conduct a note-by-note review to determine whether any aspect of Lineliv's claim is time-barred under N.J.S.A. 12A:3-118(a).

Next, the Steligas contend that the judge erred by failing to dismiss the complaint based on the doctrine of res judicata, which "'contemplates that when a controversy between parties is once fairly litigated and determined it is no longer open to relitigation.'" Culver v. Ins. Co. of N. Am., 115 N.J. 451, 460 (1989) (quoting Lubliner v. Bd. of Alcoholic Beverage Control, 33 N.J. 428, 435 (1960)). We disagree.

Where the second action is simply a repetition of the first, the first lawsuit acts as a barrier to the second. Ibid. "'The rule precludes parties from relitigating substantially the same cause of action.'" Ibid. (quoting Kram v. Kram, 94 N.J. Super. 539, 551 (Ch. Div.), rev'd on other grounds, 98 N.J. Super. 274 (App. Div. 1967), aff'd, 52 N.J. 545 (1968)). Application of the res judicata doctrine "requires substantially similar or identical causes of action and issues, parties, and relief sought." Ibid. In addition, there must be a "'final judgment by a court or tribunal of competent jurisdiction.'" Ibid. (quoting Charlie Brown of Chatham, Inc. v. Bd. of Adjustment for Twp. of Chatham, 202 N.J. Super. 312, 327 (App. Div. 1985)).

Res judicata is not applicable here because the first lawsuit involved Lineliv and the Steliga Companies, not the Steligas in their individual capacities. The liability of the Steligas, as individuals, has not been addressed at any time prior to this action.

We also reject the Steligas contention that Lineliv waived its claims against them personally. In the first lawsuit, the judge stated that "[Lineliv] has already identified what they're suing on. And anything that they do not present evidence on is basically, as far as I'm concerned, waived by that." Although the Steligas base their waiver argument on this statement, we conclude that they have misconstrued the statement.

"Waiver is the voluntary and intentional relinquishment of a known right." Knorr v. Smeal, 178 N.J. 169, 177 (2003) (citing W. Jersey Title & Guar. Co. v. Indus. Trust Co., 27 N.J. 144, 152 (1958)). For waiver to be valid, a party must have full knowledge of his or her legal rights and intend to surrender those rights. W. Jersey Title & Guar. Co., supra, 27 N.J. at 153. "The intent to waive need not be stated expressly, provided the circumstances clearly show that the party knew of the right and then abandoned it, either by design or indifference." Knorr, supra, 178 N.J. at 177. "The party waiving a known right must do so clearly, unequivocally, and decisively." Ibid. (citing Country Chevrolet, Inc. v. Twp. of N. Brunswick Planning Bd., 190 N.J. Super. 376, 380 (App. Div. 1983)).

The motion judge recognized that a separate action against the Steligas was contemplated and that Lineliv did not waive its claims. In entering the judgment in the first lawsuit, the judge awarded legal fees and considered that some fees would be reserved for a separate action against the individuals. Thus, the circumstances clearly do not show that Lineliv abandoned the right to pursue a separate lawsuit against the Steligas.

Next, the Steligas contend that the second motion judge improperly struck their tender defense by relying on the law of the case doctrine. In the first lawsuit, the Steliga Companies advanced their tender defense that Lineliv was estopped from enforcing the personal guarantees because Lineliv prevented the Steliga Companies from obtaining a loan to satisfy the mortgages. The trial judge in the first suit rejected this tender defense and found that Lineliv was not responsible for the Steliga Companies obtaining the loan. In relying on this trial ruling, the second motion judge invoked the law of the case doctrine and barred the tender defense.

"The law of the case doctrine teaches us that a legal decision made in a particular matter 'should be respected by all other lower or equal courts during the pendency of that case.'" Lombardi v. Masso, 207 N.J. 517, ___ (2011) (quoting Lanzet v. Greenberg, 126 N.J. 168, 192 (1991)) (emphasis added). The doctrine applies to "the binding nature of appellate decisions upon a trial court if the matter is remanded for further proceedings," Slowinski v. Valley Nat'l Bank, 264 N.J. Super. 172, 179 (App. Div. 1993) (quoting State v. Hale, 127 N.J. Super. 407, 410 (App. Div. 1974)), and to whether "a decision made by a trial court during one stage of the litigation is binding throughout the course of the action." Id. at 180 (quoting Hale, supra, 127 N.J. at 410-11). However, the doctrine is "wholly inappropriate" when there are different suits; it "is restricted to preventing relitigation of the same issue in the same suit." Id. at 181 (emphasis original).

Here, the second motion judge's reliance on the law of the case doctrine was misplaced. In rejecting the tender defense, the judge stated that

the [trial judge] found that [Lineliv] was not responsible for [the Steligas] not getting a commitment from Equity Bank[.] As such, this [c]ourt finds that this determination was the law of the case and applies with respect to the individuals, too. There is no need to relitigate the same issues here and the interests of justice require a similar finding here, because [the Steligas] have not demonstrated any ability to introduce new or different evidence from what was considered by [the underlying judge.] . . . . Thus, the request by the Steliga entities for a payoff amount from [Lineliv] was not the basis for [the Steligas] not obtaining the loan commitment and so there was not a "tender" within the meaning of N.J.S.A. 12A:3-603(a) or (b).

The lawsuit against the Companies, however, is not "the same suit" as the current action against the Steligas; furthermore, the first lawsuit was resolved by the entry of a final judgment. The law of the case doctrine "applies only to proceedings prior to the entry of a final judgment." It does not apply to this lawsuit. Lusardi v. Curtis Point Prop. Owners Assoc., 86 N.J. 217, 226 n.2 (1981) (citing Hale, supra, 127 N.J. Super. at 410-11).

Finally, we agree that the second motion judge properly applied N.J.S.A. 12A:9-626 and -627. We have previously stated that

[i]t is a well-recognized principle of the law of suretyship that a release of collateral held by a creditor, or its impairment by improper action or inaction on his part, will extinguish the obligation of the surety, at least to the extent of the value of the security released or impaired. This rule has come to be accepted as the law of our State.

[Langeveld v. L.R.Z.H. Corp., 74 N.J. 45, 50-51 (1977).]

N.J.S.A. 12A:3-605(e) states in pertinent part:

If the obligation of a party to pay an instrument is secured by an interest in collateral and a person entitled to enforce the instrument impairs the value of the interest in collateral, the obligation of an indorser or accommodation party having a right of recourse against the obligor is discharged to the extent of the impairment.

The Steligas' impairment of collateral defense, that Lineliv voluntarily relinquished its security interests and the Steligas are therefore discharged from their obligations, is inapplicable. Pursuant to N.J.S.A. 12A:9-626 and -627, no discharge occurs when a security interest is relinquished by a court order because the relinquishment is not considered "voluntary." Here, the court ordered the lot releases and thus the Steligas are not discharged from their debt.6

Furthermore, we reject the Steligas' argument that N.J.S.A. 12A:9-627 does not apply because the definition of "security interest" only includes personal property. As the motion judge noted, a mortgage is included within the definition of a "security interest." Langeveld, supra, 74 N.J. at 52.

Affirmed in part; reversed in part.

1 Steliga Homes of Evesham, LLC; Steliga Homes of Medford, LLC; Steliga Homes of Voorhees, LLC; and Steliga Homes Corporation.

2 Lineliv also filed a separate lawsuit against Steliga Homes of Evesham, LLC, Steliga Homes of Medford, LLC, the Steligas, and their attorney (collectively the defendants). Lineliv alleged that the defendants violated the New Jersey Racketeer Influenced and Corrupt Organizations Act, N.J.S.A. 2C:41-1 to -6.2 (RICO action). The trial court dismissed the RICO action and we affirmed the dismissal. Lineliv, L.P. v. Steliga Homes of Evesham, LLC., No. A-1436-09 (App. Div. March 14, 2011).

3 N.J.S.A. 14A:13-20(b) bars a foreign corporation from filing suit in New Jersey's courts for contract actions if it did not file a timely report of business activities for the preceding accounting period.

4 The first motion judge who entered the July 10, 2009 order thereafter recused himself. The Steligas do not contend on appeal that the first motion judge was disqualified from deciding the issues that he adjudicated.

5 The Steligas did not contest this ruling before the motion judge and have not raised it on appeal. Thus, they have abandoned this affirmative defense.

6 Although at oral argument before us the Steligas contended that the nature of the order is distinguishable, we are not so persuaded.