SALVATORE CALABRESE et al. v. REPUBLIC FIRST BANK, et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-5101-03T15101-03T1

SALVATORE CALABRESE and

TRIDENT MORTGAGE COMPANY, LP,

Plaintiffs-Respondents/

Cross-Appellants,

v.

REPUBLIC FIRST BANK, GREGG

DeSOUZA, LINDA DeSOUZA and

ATLANTIC COUNTY SHERIFF,

Defendants-Appellants/

Cross-Respondents.

_____________________________________

 

Submitted September 14, 2005 - Decided

Before Judges Wecker and Fuentes.

On appeal from Superior Court of

New Jersey, Chancery Division,

General Equity Part, Atlantic

County, Docket No. C-92-03.

Spector Gadon & Rosen, attorneys for

appellant/cross-respondent Republic

First Bank (Ralph R. Smith, 3rd,

on the brief).

Gemmel, Todd & Merenich, attorneys

for respondent/cross-appellant Salvatore

Calabrese (Charles Gemmel, on the brief).

PER CURIAM

Defendant, Republic First Bank (RFB), appeals from the order of the Chancery Division, General Equity Part, reducing the amount of a judgment it obtained against defendants, Gregg DeSouza and Linda DeSouza, in the Court of Common Pleas of the Commonwealth of Pennsylvania. The court also ordered that plaintiff, Salvatore Calabrese, be equitably subrogated to RFB's claims against DeSouza, thereby permitting him "to step in the shoes" of RFB as DeSouza's judgment creditor. RFB argues that the General Equity Part lacked the authority to: (1) modify the amount of a judgment entered in a foreign jurisdiction; and (2) thereafter, assign plaintiff its rights as a judgment creditor. Calabrese and Trident cross-appealed, arguing that the court erred when it permitted RFB to go forward with the Sheriff's sale, thereby compelling them to pay off RFB's judgment in order to preserve their interests in the property. We agree with RFB's position and reverse.

We will examine the issues presented in the following factual context. On September 12, 2002, Calabrese purchased a condominium unit located in the City of Margate from DeSouza, for the purchase price of $419,000. The deed transferring title to the property was recorded in the office of the Atlantic County Clerk on September 26, 2002, two weeks after the closing date. Plaintiff, Trident Mortgage Company, provided the financing for the purchase, and in turn received a purported first-lien mortgage from Calabrese in the amount of $250,000 which was recorded at the county clerk's office on the same date as the deed.

On September 6, 2002, six days before the closing on the Margate property, RFB filed, pursuant to N.J.S.A. 2A:49A-28, the following four judgments it had obtained against DeSouza in Pennsylvania with the Clerk of the Superior Court of New Jersey:

(a) DJ-206564-02 in the amount of $48,572.88;

(b) DJ-206565-02 in the amount of $40,587.83;

(c) DJ-206566-02 in the amount of $41,862.83;

and

(d) DJ-206567-02 in the amount of $76,828.42.

Calabrese did not discover the existence of these docketed judgments until after the closing of title. It is, of course, incumbent upon a real estate purchaser to conduct an updated, "bring-down" search of the property prior to the closing of title, in order to avoid precisely this type of problem. DeSouza, as the seller, also failed to disclose the existence of the debt, and executed an affidavit of title, affirmatively warranting the marketability of the title.

After the closing, RFB requested the Atlantic County Sheriff to levy upon the Calabrese property. This prompted plaintiffs, Calabrese and Trident Mortgage, to file this law suit in an effort to prevent RFB from satisfying the open judgments through the sale of the property. Calabrese refinanced the original purchase-money loan sometime after the commencement of this litigation. He used the proceeds from the refinancing to pay-off Trident's mortgage. The court thereafter dismissed Trident as a plaintiff in the case.

RFB argues here, as it did before the trial court, that in determining the amount needed to discharge the judgments, New Jersey must apply the interest rate and counsel fee award established by the Pennsylvania Court of Common Pleas. Here, these fees were established pursuant to the provisions of the promissory note signed by DeSouza in favor of RFB. The trial court rejected this argument, under its own analysis, holding that enforcement of such fees violated DeSouza's due process rights.

In short, the confession of judgment was entered on the representation that the defendant would be liable for the amounts due under the note. In fact, judgment was confessed for an amount substantially more than that because the judgment which was confessed included a higher post-judgment interest rate than was authorized by any prior agreement. In other words, the judgment debtor had a judgment entered against him for something he did not authorize the bank to do. That is a violation of due process, and because he never had the opportunity to come in and contest that, there being no service upon him, but rather a judgment entered by confession, it is a violation of due process which I am not required to enforce the judgment thus obtained.

The court made similar findings with respect to the amount of counsel fees awarded to RFB. This resulted in a reduction of $44,223.84 from the face amount of the judgments, from $263,883.36 to $219,659.52.

We start our analysis by reaffirming certain basic principles of law. The full faith and credit clause of the United States Constitution provides that "Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State." U.S. Const. art. IV, 1. The exceptions to this obligation are limited. "Under New Jersey law, a judgment properly entered in another jurisdiction is entitled to full faith and credit provided the judgment does not violate the Due Process Clause." In re Triffin, 151 N.J. 510, 524 (1997).

As we have noted regarding an application to enforce in New Jersey a default judgment obtained in Texas:

In the context of an application to domesticate a foreign money judgment, a court of this State is obliged to recognize a foreign money judgment, unless the defendant demonstrates that the foreign jurisdiction lacked personal jurisdiction of defendant, the judgment was obtained by fraud or was entered contrary to due process.

[Arnold, White & Durkee v. Gotcha Covered, 314 N.J. Super. 190, 201 (App. Div.), certif. denied, 157 N.J. 543 (1998).]

As to judgments by confession, although they have long been viewed with "judicial distaste", Ledden v. Ehnes, 22 N.J. 501, 510 (1956), entry of a judgment based upon a warrant to confess judgment does not, necessarily, offend due process as long as reasonable notice and opportunity to be heard are knowingly and voluntarily waived. United Pac. Ins. Co. v. Estate of Lamanna, 181 N.J. Super. 149, 156 (Law Div. 1981).

The due process exception to enforcement of a foreign judgment arises if the original debtor was not accorded due process in the foreign proceeding. As RFB contends, we see no evidence of a denial of DeSouza's due process rights in Pennsylvania.

It is clear that Pennsylvania courts were available to DeSouza to challenge the enforceability of the judgment by confession obtained by RFB. Pa. R.C.P. 2959 (2005); Industrial Valley Bank & Trust Co. v. Glossbrenner, 443 A.2d 1148 (Pa. Super. Ct. 1982); Van Arkel & Moss Props., Inc. v. Kendor, Ltd., 419 A.2d 593 (Pa. Super. Ct. 1980).

In this context, the trial court's decision to reduce the amount of the judgment cannot be sustained, because New Jersey does not have jurisdiction to modify the amount of a foreign judgment. Sonntag Reporting Serv., Ltd. v. Ciccarelli, 374 N.J. Super. 533, 538 (App. Div. 2005). Calabrese must therefore pay the entire claim before the judgments may be discharged of record.

On the question of equitable subrogation, because we have determined that Calabrese must pay the entire amount of the judgments, we do not see any impediment to upholding the trial court's decision in this respect. Permitting Calabrese to assume RFB's rights against DeSouza promotes the bedrock principle underpinning the remedy of equitable subrogation: "'to compel the ultimate discharge of an obligation by the one who in good conscience ought to pay it. . . .'" Culver v. Ins. Co. of North America, 115 N.J. 451, 455-56 (1989) (quoting Standard Accident Ins. Co. v. Pellecchia, 15 N.J. 162, 171 (1954)).

Reversed in part and affirmed in part.

 

As used in this opinion, the name "DeSouza" refers to both Gregg and Linda DeSouza.

Because this property is located in the City of Margate, we recognize that the closing may have been conducted following "South Jersey" procedures, in which the parties proceed without counsel, relying on the title company to perform the final judgment searches. See In re Opinion No. 26 of Comm. on the Unauthorized Practice of Law, 139 N.J. 323 (1995).

(continued)

(continued)

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A-5101-03T1

November 2, 2005