CAPITAL BANK OF NEW JERSEY v. ADAM GOLDSTEIN

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3219-10T1

CAPITAL BANK OF NEW JERSEY,

Plaintiff-Respondent,

vs.

ADAM GOLDSTEIN,

Defendant-Appellant,

and

ROBIN RUNKLE,

Defendant.

__________________________________

December 16, 2011

Submitted: October 26, 2011 - Decided:

Before Judges Cuff and St. John.

On appeal from the Superior Court of New Jersey, Law Division, Cumberland County, Docket No. L-81-10.

Kavanagh, Kavanagh & DiLazzero, LLC, attorneys for appellant (Jeffrey A. DiLazzero, on the brief).

Eisenberg, Gold & Cettei, P.C., attorneys for respondent (Donna L. Cettei, on the brief).

PER CURIAM

This appeal presents the narrow issue of whether a mortgagor who tenders deeds in lieu of foreclosure remains liable on the notes following recordation of the deeds by the lender. When, as here, a mortgagor expressly agrees to remain personally liable on the notes, the debt survives tender and recordation of the deed in lieu of foreclosure. We, therefore, affirm the order denying a motion to declare the judgment on the note satisfied.

Defendant Adam Goldstein executed a note in the amount of $159,000 and mortgage on real property located in Pilesgrove Township. Goldstein and defendant Robin Runkle executed a note in the amount of $205,000 and mortgage on real property located in West Deptford. Defendants defaulted on both notes two years later in 2009. Plaintiff Capital Bank of New Jersey (Capital Bank) commenced separate foreclosure actions on both properties in 2009. In 2010, Capital Bank commenced a civil action against Goldstein on the Pilesgrove note and against Goldstein and Runkle on the West Deptford note. On May 11, 2010, Capital Bank obtained a judgment against Goldstein on the Pilesgrove note in the amount of $170,838.27, and a judgment against Goldstein and Runkle on the West Deptford note in the amount of $215,697.99.

On July 2, 2010, Goldstein, Runkle and Capital Bank executed an agreement entitled Agreement in Lieu of Foreclosure (the Agreement). Pursuant to the Agreement, Goldstein would tender the deed to the Pilesgrove property, and Goldstein and Runkle would tender the deed to the West Deptford property and pay $4000 from the proceeds of the sale of a third property. In return, the foreclosure proceedings would be dismissed, and Runkle would be released from liability for any deficiency on the West Deptford mortgage and the May 2010 judgment.

In the preamble to the Agreement, the parties expressed the intention of the document. It provides:

WHEREAS, Lender, GOLDSTEIN and RUNKLE desire to avoid further legal proceedings for their respective benefits based upon mutual consideration and to provide for the conveyance of the Properties to Lender by Deed in Lieu of Foreclosure, and the payment to Lender of a lump sum of $4,000.00 out of the proceeds of the sale of the Hickory Drive Property, in exchange for the release of RUNKLE from liability for any deficiency on the West Deptford Mortgage and on the Judgments, and the release of the Judgments from the Hickory Drive Property . . . .

The Agreement proceeds to detail Capital Bank's rights and the liability of the individual defendants. Specifically, Capital Bank could exercise any rights it may have to the property, Runkle was released from all liability on the West Deptford mortgage and note and the May 2010 judgment, and Goldstein remained liable on the Pilesgrove and West Deptford mortgages, both notes, and the May 2010 judgment, less the $4000 payment and any proceeds obtained from the sale or disposition of both properties. The Agreement provides:

[7]f. Nothing in this Agreement shall be construed to limit the Lender from exercising any other remedy it may be granted by this Agreement, the Judgment, the Mortgages or the Notes, or any other loan documents executed in connection therewith. The exercising of the rights under this Agreement shall not limit the Lender from exercising any other rights it may have. . . .

11. In consideration for the receipt of the payment referred to in paragraph 5, above, and the delivery of the West Deptford Deed and the Pilesgrove Deed, Lender has agreed to release RUNKLE only, from any and all liability under the West Deptford Note, West Deptford Mortgage, and the Judgment. . . .

12. The parties expressly acknowledge and agree that nothing in this Agreement shall be deemed to release Goldstein from any liability under the Mortgages, Notes, or the Judgments. Goldstein shall remain fully liable to lender on the Judgments, which shall continue to accrue interest until the same have been satisfied.

13. Goldstein s liability under the Judgments shall be reduced by the $4,000.00 payment referred in paragraph five above and the Net Proceeds received by Lender . . . from the sale or disposition of the West Deptford Property and the Pilesgrove Property.

In accordance with the Agreement, Goldstein and Runkle tendered the deeds, Capital Bank released Runkle from the May 2010 judgment on the West Deptford note, and dismissed the foreclosure actions against the West Deptford and Pilesgrove properties. In July and August 2010, Capital Bank discharged the Pilesgrove and West Deptford mortgages and recorded each deed in lieu of foreclosure.

Thereafter, Capital Bank applied for a writ of execution against Goldstein's personal and business assets. The writ issued on October 29, 2010. Goldstein filed a motion seeking an order satisfying judgment based on the tender and recordation of the deeds in lieu of foreclosure. Judge Geiger held that the documents executed in conjunction with the tender of the deeds clearly evinced an intention to preserve Goldstein's liability on the notes and the May 2010 judgment. On appeal, Goldstein argues that recordation of the deeds satisfied the indebtedness secured by the mortgage and entitled him to an order satisfying judgment as a matter of law.

Goldstein premises his argument on the proposition that acceptance and recordation of a deed in lieu of foreclosure extinguishes the debt. The case on which he relies, BA Properties, Inc. v. Government of the United States Virgin Islands, 299 F.3d 207 (3d Cir. 2002), provides little support for his position. It concerns the meaning of an exemption provision in the Virgin Islands Stamp Tax Act and applies the law of the Virgin Islands. Id. at 208.

Capital Bank responds that Goldstein has failed to demonstrate that the rule he proffers has been adopted in this State or that the term "deed in lieu of foreclosure" has a uniform and unambiguous meaning "such that its use in any context always requires the underlying mortgage debt be 'satisfied.'"

Our research has yielded no case law directly addressing this issue in this State. We note, however, that Myron Weinstein in his treatise on mortgages observes that most mortgagors expect that the lender is taking the mortgage in satisfaction of the debt, unless the parties agree otherwise. 29 New Jersey Practice, Law of Mortgages 13.14, at 971 (Myron C. Weinstein) (2d ed. 2001). He states:

In any event, the mortgagor's ordinary expectation in giving a deed in lieu of foreclosure (unless otherwise provided for by agreement) is that the mortgagee is taking the deed in satisfaction of the debt and to save the expenses of a judicial foreclosure.

[Ibid. (emphasis added).]

See Restatement (Third) of Property: Mortgages 8.5 comment b (1997) (a deed in lieu of foreclosure may satisfy in whole or in part the mortgage obligation).

Goldstein's argument ignores the Agreement executed by the parties. The Agreement expressly provided that Goldstein remained liable on the underlying debt that had been reduced to judgment, and that Capital Bank could exercise any rights it had to the property. Goldstein's argument also ignores the plain language of the Agreement.

"Interpretation and construction of a contract is a matter of law for the court subject to de novo review." Fastenberg v. Prudential Ins. Co. of Am., 309 N.J. Super. 415, 420 (App. Div. 1998). In construing a contract, the court should "consider what was written in the context of the circumstances under which it was written, and accord to the language a rational meaning in keeping with the expressed general purpose." Atl. N. Airlines, Inc. v. Schwimmer, 12 N.J. 293, 302 (1953). Hence, if a contract contains clear terms, the court must "enforce it as written and not [] make a better contract for either of the parties." Kampf v. Franklin Life Ins. Co., 33 N.J. 36, 43 (1960); see also Pacifico v. Pacifico, 190 N.J. 258, 266 (2007) ("As a general rule, courts should enforce contracts as the parties intended."); Seaview Orthopaedics ex rel. Fleming v. Nat'l Healthcare Res., Inc., 366 N.J. Super. 501, 510 (App. Div. 2004) ("[P]arties [are] free to contract as they deem[] appropriate, and courts will not rewrite contracts to make better deals for parties than they freely and voluntarily chose to make for themselves.").

Additionally, a "court will, if possible, give effect to all parts of the instrument, and an interpretation which gives a reasonable meaning to all its provisions will be preferred to one which leaves a portion of the writing useless or inexplicable." Maryland Cas. Co. v. Hansen-Jensen, Inc., 15 N.J. Super. 20, 27 (App. Div. 1951). It follows, the court may determine that those terms the parties excluded from the contract were intentionally excluded. Gabel v. Manetto, 177 N.J. Super. 460, 464 (App. Div. 1981) ("An affirmative expression ordinarily implies a negation of any other alternative. Expressio unius est exclusio alterius."), certif. dismissed, 91 N.J. 270 (1982). Outside of the contractual language, courts may also consider "the circumstances leading up to the formation of the contract, custom, usage, and the interpretation placed on the disputed provision by the parties' conduct." Kearny PBA Local #21 v. Town of Kearny, 81 N.J. 208, 221 (1979).

Paragraphs 7(f) and 12 of the Agreement clearly express an intention to preserve Goldstein's liability. Paragraph 7(f) states Capital Bank's choice of remedy is not limited by recordation of the deeds. Moreover, paragraph 12 states Goldstein's liability would not be released "under the Mortgages, Notes, or the Judgments." Instead, Goldstein would "remain fully liable to lender on the Judgments, which shall continue to accrue interest until the same have been satisfied." Additionally, paragraph 11 releases "only Runkle" from liability.

The Agreement clearly demonstrates that the parties were aware Capital Bank could release the debtors from some or all liability. Construing the Agreement as argued by Goldstein renders useless or inexplicable paragraph 7(f) preserving plaintiff's remedies beyond the Agreement, paragraph 11 "release[ing] RUNKLE only, from any and all liability," and paragraph 13 detailing a formula for reducing Goldstein's liability. Maryland Cas. Co., supra, 15 N.J. Super. at 27.

Moreover, Goldstein, through his attorney in the June 17, 2010 letter to Capital Bank, evidenced an understanding aligned with the intention to release Runkle and preserve Goldstein's liability:

I write to confirm the agreement we have reached. . . . Runkle will be released from any and all personal liability under the Note that she has signed and will be released from any potential deficiency claim, while Mr. Goldstein will remain personally responsible for the Notes on both of the properties.

See Kearny PBA Local #21, supra, 81 N.J. at 221.

In short, the Agreement is not ambiguous. The plain language of the Agreement evinces a clear intent to release Runkle from all liability for the debt secured by the West Deptford mortgage and reduced to judgment but to preserve Goldstein's liability on the debt. Moreover, paragraph 13 of the Agreement addresses the application of proceeds, including the $4000 initial payment and proceeds from the sale of the properties, to reduce and ultimately satisfy the debt. This provision is clearly at variance with Goldstein's contention that the debt was satisfied upon recordation of the deeds.1

1 Mortgagors have a statutory and equitable right to a fair market value hearing to determine the amount of credit to be allocated to the foreclosed property. N.J.S.A. 2A:50-3; Citibank, N.A. v. Errico, 251 N.J. Super. 236, 248 (App. Div. 1991); see also MMU of N.Y., Inc. v. Grieser, 415 N.J. Super. 37, 45-48 (App. Div. 2010) ("[I]n the absence of express statutory authorization, a court has inherent equitable authority to allow a fair market value credit in order to prevent a double recovery by a creditor against a debtor.").