TROPICANA ATLANTIC CITY CORP v. M&J AT MELROSE L.L.C.

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

TROPICANA ATLANTIC CITY CORP.,

Plaintiff-Respondent,

v.

M&J AT MELROSE, L.L.C.,

Defendant-Appellant.

________________________________________________________________

February 6, 2014

Argued December 17, 2013 Decided

Before Judges Fisher and Koblitz.

On appeal from Superior Court of New Jersey, Chancery Division, Atlantic County, Docket No. F-007-11.

Andrew Ullrich argued the cause for appellant (The Weingarten Law Firm, L.L.C., attorneys; Mr. Ullrich, on the brief).

Gerard W. Quinn argued the cause for respondent (Cooper Levenson April Niedelman & Wagenheim, P.A., attorneys; Mr. Quinn, on the brief).

PER CURIAM

Defendant M&J At Melrose, L.L.C. appeals from the December 4, 2012 final judgment of foreclosure, arguing that summary judgment should not have been granted because plaintiff Tropicana Atlantic City Corp. does not have standing to foreclose upon the mortgage and note because it is not in possession of the original note. We affirm Judge William C. Todd, III's grant of summary judgment to plaintiff in this commercial foreclosure.

On August 23, 2004, M&J entered into an agreement with Adamar of New Jersey, Inc., plaintiff's predecessor, to purchase property at the intersection of New Hampshire and Melrose Avenues in Atlantic City for $2.6 million. The agreement stated that after an initial deposit of $10,000, M&J was to provide Adamar with a first purchase money mortgage note and mortgage in the amount $2.59 million.

The agreement further provided that M&J's obligation to proceed was dependent upon it obtaining the "third construction/permanent mortgage" from the Casino Reinvestment Development Authority (CRDA), which funds in the amount of $21 million would be available from Adamar's Atlantic City Housing Deposits. At the time, Adamar was the owner and casino licensee for the Tropicana Hotel and Casino in Atlantic City.

In 2004, Adamar and M&J entered into a First Commercial Mortgage Note (Note) in the amount of $2.59 million. Based upon a thirty-year amortization schedule and a fixed rate of 4.75%, M&J's monthly payments were set at $13,670, beginning after the initial twenty-four months of the loan. In order to secure payment of the Note, M&J executed and delivered to Adamar a First Mortgage and Security Agreement (Mortgage).

In May 2008, Tropicana Entertainment, LLC, the parent corporation of Adamar and a different entity from plaintiff, filed a voluntary bankruptcy petition. Adamar filed its own voluntary bankruptcy proceedings in April 2009. Pursuant to a bankruptcy order, substantially all of Adamar's assets were transferred to plaintiff. In March 2010, the Note and Mortgage were assigned by Adamar to plaintiff. Two months later retired New Jersey Supreme Court Justice Stein, acting as "trustee/conservator" for Adamar, executed an allonge endorsing the Note from Adamar to plaintiff.

M&J failed to make the payment due on November 1, 2009 and all payments thereafter. In accordance with the loan agreement, plaintiff elected that the unpaid principal due on the Note and Mortgage, including all unpaid interest, late charges and advances made thereon, be immediately due.

Summary judgment must be granted if "the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). Without making credibility determinations, the court considers the evidence "in the light most favorable to the non-moving party" and determines whether it would be "sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v.Guardian Life Ins. Co.of Am., 142 N.J. 520, 540 (1995). The non-moving party's mere identification of a disputed fact of an insubstantial nature will not defeat a motion for summary judgment. Judson v. Peoples Bank & Trust Co. of Westfield, 17 N.J. 67, 75 (1954). We apply the same standard as the trial court when reviewing the disposition of a motion for summary judgment. W.J.A. v. D.A., 210 N.J. 229, 237 (2012).

M&J argues that plaintiff lacks standing to foreclose upon the underlying debt because it presented insufficient evidence of ownership of the Note. "As a general proposition, a party seeking to foreclose a mortgage must own or control the underlying debt." Wells Fargo Bank, N.A. v. Ford, 418 N.J. Super. 592, 597 (App. Div. 2011) (internal quotation marks and citation omitted). In foreclosure actions, standing is conferred upon a plaintiff by either possession of the original note or an assignment of the note that predates the original complaint. Deutsche Bank Nat'l Trust Co. v. Mitchell, 422 N.J. Super. 214, 225 (App. Div. 2011). "[S]tanding is not a jurisdictional issue in our State court system and, therefore, a foreclosure judgment obtained by a party that lacked standing is not 'void' within the meaning of Rule 4:50-1(d)." Deutsche Bank Nat'l Trust Co. v. Russo, 429 N.J. Super. 91, 101 (App. Div. 2012).

Tama Hughes, plaintiff's vice president and corporate counsel, testified at a deposition that, while she was unsure of the exact location of the original Note, plaintiff came to be the owner or holder of the Note "through an assignment and assumption through the sale of bankruptcy."1 At the deposition, Hughes' attorney stated that he would do his best to locate the original Note and provide it to his adversary. Subsequently, Hughes executed a Certification of Lost Note, in which she detailed the history of the Note and accompanying Mortgage and stated that the original Note was "inadvertently and mistakenly either lost or destroyed. Diligent efforts have been made to locate the original [N]ote which to date have been unsuccessful."

M&J argues that Hughes' testimony as to the location of the original Note contradicts the Certification of Lost Note she later filed with the trial court. We do not find her testimony contradictory as Hughes testified she did not know exactly where the Note was located, although she thought it was in a file in the legal department. The record fully supports plaintiff's position that it owns the Note.

Under New Jersey law, Article III of the Uniform Commercial Code (UCC), N.J.S.A. 12A:3-101 to -605, governs the transfer of negotiable instruments, including those secured by mortgages. N.J.S.A. 12A:3-104. Under the UCC, there are three categories of persons entitled to enforce negotiable instruments: (1) "the holder of the instrument," (2) "a nonholder in possession of the instrument who has the rights of the holder," or (3) "a person not in possession of the instrument who is entitled to enforce the instrument pursuant to N.J.S.A. 12A:3-309 or subsection d. of N.J.S.A. 12A:3-418." N.J.S.A. 12A:3-301.

When an instrument is lost, destroyed or stolen, as in category (3) above, enforcement is governed by N.J.S.A. 12A:3-309. "[T]he loss of possession [must] not [be] the result of a transfer by the person or a lawful seizure." N.J.S.A. 12A:3-309(a). An entity seeking enforcement under this subsection must prove (1) the terms of the instrument and (2) the entities' right to enforce the instrument. N.J.S.A. 12A:3-309(b). "The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument." Ibid.

Here, plaintiff established the terms of the instrument by providing a copy of the Note between Adamar and M&J. Plaintiff also established its right to enforce the instrument by providing a copy of the assignment of the Note and Mortgage from Adamar to plaintiff. Because plaintiff established that it is an entity not in possession of the instrument who is entitled to enforce the instrument pursuant to N.J.S.A. 12A:3-309, Judge Todd's grant of summary judgment was well-founded.

M&J argues that the trial judge failed to address its promissory estoppel claim "explicitly pled as both an affirmative defense and as a [c]ount in the [c]ounterclaim." M&J alleges that Adamar's conduct "post-closing" regarding the CRDA induced M&J to rely on financing which plaintiff did not facilitate. M&J contends that Adamar "should have, at some point, alerted [M&J] that it was under no obligation [to] participate in the CRDA financing process despite the communications between the parties to the contrary." M&J does not further explain its promissory estoppel argument.

To establish a promissory estoppel claim, a party must show: "(1) a clear and definite promise; (2) made with the expectation that the promisee will rely on it; (3) reasonable reliance; and (4) definite and substantial detriment." Toll Bros., Inc. v. Burlington Cnty. Bd. of Chosen Freeholders, 194 N.J. 223, 253 (2008).

M&J presents bare allegations that Adamar "should have" alerted M&J that its obligations under the CRDA were not mandatory. Plaintiff stated "[c]ontrary to [d]efendant's assertions, [Adamar] did, in fact, pay its CRDA obligations in the ordinary course of business . . . . [Adamar]'s [financial] obligations . . . were complete in 2005."

Judge Todd addressed M&J's promissory estoppel claim. In evaluating M&J's counterclaims, he reasoned that there was nothing in the record "that would lead one to conclude that [Adamar] had some affirmative obligation to be taking some specific action or that it was not cooperative[.]" We agree. M&J raises no genuine issue as to a material fact.

1 We were not provided with a copy of the deposition transcript. We rely on the excerpts that were included in M&J's trial brief, which was submitted as an exhibit without objection. We note that Rule 2:6-1(a)(2) discourages this practice.