AMBOY BANK v. OLGA HANNOUT

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NOS. A-0

A-4727-12T4

AMBOY BANK, f/k/a AMBOY NATIONAL

BANK,

Plaintiff-Respondent,

v.

OLGA HANNOUT, as Trustee for the

ABBAS OSMAN FAMILY TRUST,

Defendant-Appellant,

and

TOWNSHIP OF NEPTUNE,

Defendant.

_______________________________________

AMBOY BANK, f/k/a AMBOY NATIONAL

BANK,

Plaintiff-Respondent,

v.

ABBAS OSMAN FAMILY TRUST, OLGA

C. HANNOUT, REDA HANNOUT, and

SAMIA SAID,

Defendants-Appellants.
_______________________________________

January 26, 2015

Argued January 7, 2015 - Decided

Before Judges Alvarez, Maven, and Carroll.

On appeal from the Superior Court of New Jersey, Chancery Division, Monmouth County, Docket No. F-58135-10 (A-4311-12); Law Division, Mercer County, Docket No. L-3010-10 (A-4727-12).

David J. Bruno argued thecause forappellants (The Bianchi Law Group, LLC, attorneys; Mr. Bruno, on the briefs).

Thomas W. Halm, Jr., argued the cause for respondents (Hill Wallack LLP, attorneys; Mr. Halm, of counsel and on the brief; Elizabeth K. Holdren, on the brief).

PER CURIAM

These back-to-back matters, which we now consolidate for purposes of this opinion, arise out of a commercial loan agreement (the Agreement) entered into between plaintiff Amboy Bank, as Lender, and defendant Abbas Osman Family Trust (the Trust), as Borrower. The purpose of the loan was to finance the construction of a retail building on property owned by the Trust in Neptune. Defendants Olga C. Hannout (Olga), Reda Hannout (Reda), and Samia Said executed the Agreement as guarantors of the repayment of the loan and completion of the construction project by the Trust.1

After the Trust defaulted, Amboy began a foreclosure action in the Chancery Division, Monmouth County. Amboy simultaneously filed a complaint in the Law Division, Mercer County, for all unpaid principal, interest, and late fees due on the loan. Defendants now appeal from (1) the Chancery Division's November 10, 2011 order granting summary judgment striking the Trust's answer, except for claims and defenses related to the amount due on the loan; (2) the Chancery Division's April 2, 2013 Final Judgment of Foreclosure, entered after a plenary hearing to determine the amount due; and (3) the Law Division's April 25, 2013 judgment that was entered after the parties agreed to be bound by the findings reached at the plenary hearing in the foreclosure action. After reviewing the record in light of the contentions advanced on appeal, we affirm.

I.

On March 13, 2006, Amboy extended a $1.2 million loan to the Trust to finance the construction of a retail store on its Neptune property. The loan was evidenced by a Note executed by the Trust, and was secured by a Mortgage and Security Agreement (the Mortgage), UCC-1 financing statements, an Assignment of Leases, an Assignment of all Governmental Approvals, a Guaranty of Payment, and a Guaranty of Completion.

The project's initial construction budget was $1.2 million. However, the Township of Neptune subsequently requested several changes that increased the construction cost. Consequently, the initial loan amount was no longer sufficient to fully fund the construction.

At the Trust's request, Amboy twice agreed to extend the date that the loan was to convert from a construction loan to a permanent loan (the conversion date). Subsequently, on October 13, 2007, the trust executed an Amendment to Loan Agreement increasing the principal loan amount to $1.3 million. The Note and Mortgage were modified to reflect the higher loan amount.

The Trust failed to pay Amboy the regular monthly payment due on the loan for April 13, 2009, and each month thereafter. On June 24, 2009, Amboy sent defendants a letter declaring them in default, and demanding payment of all arrears by July 5, 2009.

The parties then held a meeting, at which Amboy advised the Trust that it would proceed with foreclosure unless the Trust acquiesced to the use of Amboy's preferred contractor, John Vena, to complete the construction. Amboy relied on a provision in the Agreement that, upon default, granted Amboy the right to

[p]erform any and all work necessary to complete the construction of the Project substantially according to the Drawings and Specifications and employ watchmen to protect the Project site from injury; all sums so expended by the Lender to be deemed paid to Borrower as additional advances and same shall be secured by the Mortgage. For this purpose, the Borrower hereby constitutes and appoints the Lender its true and lawful attorney-in-fact with full power of substitution in the premises, to complete the Project in the name of the Borrower.

The Agreement also allowed Amboy "[t]o employ and/or discharge such contractors, subcontractors, and agents, architects and inspectors" at its discretion.

Olga had been the primary coordinator of the construction project and had arranged for all the subcontractors and materials. Olga did not wish to hire Vena. According to Olga, Amboy assured her that it had been working with Vena for thirty years and "saw him as a person that will expedite a [certificate of occupancy]." On August 2, 2009, the Trust acceded to Amboy's request and authorized Vena to access the property and complete the construction.

On September 22, 2010, Amboy advised the Trust that it approved its request for a modification and extension of the loan, which at that time had a principal balance of $1,536,498.24, and was due to mature on November 13, 2012. Under the proposed modification, the loan amount would increase to $1.7 million, payable at a 5% fixed interest rate for a two-year term based on a twenty-five year amortization. Also, rent from a tenant, Monmouth Interiors, would be directly payable to Amboy, "with excess funds to be applied to principal." However, because Amboy failed to receive the rental payment from the tenant or any payment from the Trust, this modification was never consummated. On October 18, 2010, Amboy again demanded the past-due payments on the loan, which by then had increased to $217,181.19. No monthly payments due on the loan had been made beginning with the April 13, 2009 payment.

Amboy simultaneously filed its complaints in both the foreclosure action and the Law Division action on November 23, 2010. The Trust filed an answer and counterclaim in the foreclosure action, alleging Amboy's breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, interference with prospective economic advantage, and interference with contract. The counterclaim averred that Vena substantially delayed completion of the construction and that the cost of his services was excessive and unreasonable, resulting in additional amounts due Amboy under the loan agreement and the loss of rental income by the Trust.

On May 14, 2011, the Trust served requests for production of documents and interrogatories on Amboy. Amboy subsequently produced a breakdown of construction costs related to the project, which showed that Vena was regularly paid large amounts for his services, suppliers, and subcontractors.

In a July 11, 2011 case management order, the judge in the foreclosure action set a schedule for discovery. On August 31, Amboy protested to the Trust's failure to provide discovery responses. Amboy received answers to interrogatories from the Trust on September 27, which were largely unresponsive.

Amboy then moved for summary judgment, seeking to strike the Trust's answer and counterclaim in the foreclosure action. On November 4, 2011, Judge Thomas W. Cavanagh, Jr., granted the motion, but specifically preserved the Trust's "right to contest the amount due claimed by [Amboy] at the time of [Amboy's] application to the Foreclosure Unit to fix the amount due." On February 1, 2012, the Trust moved for reconsideration of the order striking its answer and counterclaim. Alternatively, it sought an order setting a discovery schedule and a date for a hearing on the amount due Amboy. Following oral argument, the judge entered an order on March 2, 2012, granting the Trust's motion for reconsideration to the extent that it clarified the November 4, 2011 order as preserving the Trust's claims and defenses other than those related to Amboy's right to foreclose. The order further directed that discovery commence immediately, and scheduled a hearing on the amount due Amboy.

The plenary hearing in the foreclosure action on the amount due Amboy took place on February 21 and 26, 2013. Amboy's vice president, Despina Small, testified that there were no irregularities in the manner in which Amboy paid Vena for the invoices he submitted for work done on the project. The principal balance due on the loan was $1,536,498.24, which included the amounts advanced by Amboy to Vena to complete the project. However, Amboy only sought $1,518,708.74, which was the amount listed in the certification submitted in support of its application for final judgment. Additionally, Amboy claimed interest arrearages of $368,109.51, late fees of $14,255.19, and advances for real estate taxes and sewer charges of $7067.12, thus bringing the total amount due on the loan to $1,908,140.56.

Olga claimed at the hearing, disputing Amboy's construction advances. She stated that the interior of the building was ninety-nine percent complete prior to Vena's appointment. She observed that the contractors were not working whenever she went to the property. When she attempted to inform Vena, he was working at a different job site and was difficult to contact. Olga also attempted to offer opinions that Vena's work was unsatisfactory and his charges excessive; however the judge limited her testimony on those matters since she had not qualified as an expert on construction or banking issues. While the foreclosure action was pending decision, on March 26, 2013, defendants requested an adjournment of the trial scheduled in the Law Division action, stating

Both [c]ounsel for Amboy Bank, Mr. Halm, and [the Trust] agree that [the Chancery Division's] decision on the amount due Amboy Bank would be binding on the parties in the Mercer County litigation currently scheduled for April 1, 2013. [The] decision in the Monmouth County matter will effectively constitute a decision in the Mercer County action. Therefore, neither [party] believe[s] that the [c]ourt should invest the time required by a trial to duplicate proofs already submitted to [the Chancery Division] and which await only [the] decision.

On April 2, 2013, Judge Cavanagh rendered a detailed oral opinion in the foreclosure action. The judge noted that he had explained to the Trust that it needed to provide a construction and banking expert to support its allegations that there were excesses in Vena's construction invoices in the absence of any direct evidence of impropriety. The judge ultimately concluded

I am unable to make a finding that any of [the disputed charges are] inappropriate, as a result of [the Trust] failing to utilize the discovery period I gave [it] . . . There is no testimony that his work, Mr. Vena's work, was unnecessary or the value was outside the ordinary course for completing the project.
 

The Chancery Division then entered a final judgment in the amount of $1,908,140.56.2 A writ of execution also issued, directing a sheriff's sale of the property, which subsequently took place on August 2, 2013.

On April 17, 2013, Amboy notified the Mercer County Law Division that the Chancery Division had entered judgment in the amount of $1,908,140.56. Amboy requested that the Law Division judge likewise enter judgment in that amount pursuant to the parties' agreement to be bound by the result in the foreclosure action. The Trust objected, stating that it believed "it would be more appropriate . . . to proceed by way of formal Notice of Motion, rather than just a submission of a proposed form of Judgment." Rejecting this objection, on April 25, 2013, the Law Division judge entered judgment in an amount consistent with the foreclosure judgment. These appeals followed.

II.

A.

The Trust first argues that the Chancery judge erred in granting summary judgment striking its answer and defenses in the foreclosure action, and in denying reconsideration. We disagree.

We review summary judgment decisions de novo and apply the same standard utilized by the trial court, namely, whether the evidence, when viewed in a light most favorable to the non-moving party, raises genuinely disputed issues of fact sufficient to warrant resolution by the trier of fact or whether the evidence is so one-sided that one party must prevail as a matter of law. Brill v. Guardian Life Ins. Co. of Am., 142 N.J.520, 540 (1995); Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998).

Generally, the defenses to foreclosure actions are narrow and limited. The material issues to be established in a foreclosure proceeding are the validity of the mortgage, the amount of indebtedness, and the right of the mortgagee to foreclose on the mortgaged property. SeeGreat Falls Bank v. Pardo, 263 N.J. Super.388, 394 (Ch. Div. 1993); Thorpe v. Floremoore Corp., 20 N.J. Super. 34, 37 (App. Div. 1952) (holdingthat when "the execution, recording, and non-payment of the mortgage [is] conceded, a prima facieright to foreclose [is] made out"). If the defendant's answer fails to challenge these essential elements, the mortgagee is entitled to strike it as a noncontesting answer. SeeOld Republic Ins. Co. v. Currie, 284 N.J. Super.571, 574 (Ch. Div. 1995); Somerset Trust Co. v. Sternberg, 238 N.J. Super. 279, 283 (Ch. Div. 1989).

Here, defendants concede that they executed the loan documents, and that they failed to make payments due on the loan commencing with the April 2009 payment. Thus, Judge Cavanagh correctly concluded that Amboy established a prima facie right to foreclose, while preserving the "arguments raised by defendants outside of Thorpe issues."

The Trust essentially argues that as a result of the actions or inactions of Amboy and its agent, Vena, the completion of the project was unreasonably delayed, and its cost was substantially higher than was necessary or appropriate. However, these claims arose after the Trust had defaulted on the loan, and after Amboy had exercised its right under the loan documents to complete the construction. Accordingly, the Trust's claims and defenses properly pertained to the amount due Amboy, rather than the bank's right to foreclose.

In any event, at the subsequent evidentiary hearing, the Trust was unable to prove its claims. As we note below, defendants produced no banking expert to establish that Amboy's appointment of Vena pursuant to the terms of the loan documents violated standard bank or lending procedures. Likewise, defendants produced no qualified construction expert who could opine that the project was unreasonably delayed, or the amounts expended to complete the construction were excessive. Moreover, Olga could neither specify nor quantify any other irregularity in Amboy's calculation of the amount due. Thus, even if we were to accept the Trust's argument that Amboy's and Vena's mismanagement served as a defense to the foreclosure itself rather than the amount due, the Trust's argument still fails as a result of its inability to prove those claims.

B.

The Trust next argues that the foreclosure judge erred in granting Amboy summary judgment prior to the completion of discovery. For the reasons that follow, we reject this contention.

"There is no question that summary judgment pursuant to Rule 4:46 normally is not appropriate before the party resisting such a motion has had an opportunity to complete the discovery relevant and material to defense of the motion." In re Ocean Cnty. Comm'r of Registration, 379 N.J. Super. 461, 478 (App. Div. 2005) (citing Velantzas v. Colgate-Palmolive Co., 109 N.J. 189, 193 (1988)). Nonetheless, "[a] party challenging a motion for summary judgment on grounds that discovery is as yet incomplete must show that 'there is a likelihood that further discovery would supply . . . necessary information' to establish a missing element in the case." Mohamed v. Iglesia Evangelica Oasis De Salvacion, 424 N.J. Super. 489, 498 (App. Div. 2012) (quoting J. Josephson, Inc. v. Crum & Forster Ins. Co., 293 N.J. Super. 170, 204 (App. Div. 1996)).

Here, the Trust has not shown that further discovery would have changed the relevant facts pertaining to the execution, recording, or non-payment of the mortgage. Indeed, these facts are uncontested and, as noted, establish Amboy's prima facie right to foreclose. Thorpe, supra, 20 N.J. Super. at 37.

Moreover, after entering summary judgment on those issues, the judge granted an additional period of discovery to the parties on the remaining contested issues which centered on Vena's completion of the project. The record establishes that defendants were afforded ample opportunity to conduct discovery and retain appropriate experts prior to the evidentiary hearing to resolve the disputed issues in the case.

C.

The Trust next contends that the judge improperly prohibited Olga from offering opinion evidence with respect to her contentions that Vena improperly delayed completion of the construction, and that the related charges were excessive. We disagree.

Our scope of review of a trial judge's evidential rulings requires that we grant substantial deference to the judge's exercise of discretion. DeVito v. Sheeran, 165 N.J. 167, 198 (2000). Rulings on evidence will not provide a basis for reversal unless they reflect an abuse of that discretion. Benevenga v. Digregorio, 325 N.J. Super. 27, 32 (App. Div. 1999), certif. denied, 163 N.J. 79 (2000). Reversal is not warranted unless the trial judge's ruling was "so wide of the mark that a manifest denial of justice resulted." State v. Carter, 91 N.J. 86, 106 (1982).

Here, the judge allowed Olga to testify as to what she personally observed and her interactions with Vena. Such evidence was properly admitted under N.J.R.E. 701, which permits a lay witness's "testimony in the form of opinions or inferences . . . if it is [] rationally based on the perception of the witness . . . . " See also State v. McLean, 205 N.J. 438, 460 (2011) ("lay opinion testimony is limited to what was directly perceived by the witness").

The judge also properly limited Olga's testimony when she attempted to go beyond her observations. Olga was precluded from offering opinions that Vena's appointment was unnecessary, that he unreasonably delayed completion of the construction, and that his charges were unreasonable. N.J.R.E. 702 requires that an expert be qualified by knowledge, skill, experience, training, or education. For a witness to give expert testimony, it must be shown that she has certain skills, knowledge, or training in a technical area. Scully v. Fitzgerald, 179 N.J. 114, 129 (2004). The Trust had not presented Olga as an expert, or presented any credentials to establish her expertise in banking or construction practices. Hence her opinions as to the bank's practice in appointing Vena, the timeliness of Vena's performance, and the reasonableness of his fees, were all properly excluded.

D.

Finally, defendants challenge the entry of the Law Division judgment. As noted, the Law Division judge entered judgment based on defendants' agreement to be bound by the Chancery Division's decision as to the amount due Amboy.

Initially we note that "[a] judgment or order entered with the consent of the parties is ordinarily not appealable for the purpose of challenging its substantive provisions." Pressler & Verniero, Current N.J. Court Rules, comment 2.2.3 on R. 2:2-3 (2015); see Winberry v. Salisbury, 5 N.J. 240, 255, cert. denied, 340 U.S. 877, 71 S. Ct. 123, 95 L. Ed. 638 (1950); see Infante v. Gottesman, 233 N.J. Super. 310, 318 (App. Div. 1989).

In challenging the Law Division judgment, defendants essentially rely upon their arguments challenging the Chancery Division judgment, all of which we have rejected. Consequently, since defendants agreed to be bound by the amount found due in the foreclosure action, we find no basis to disturb the Law Division judgment.

To the extent that we have not specifically addressed any of defendants' remaining arguments, we find them to be without sufficient merit to warrant discussion. R. 2:11-3(e)(1)(E).

Affirmed.

1 Since Olga and Reda Hannout share a common surname, we refer to them by their first names in this opinion for ease of clarity. In doing so, we intend no disrespect.

2 A final judgment of foreclosure generally establishes the amount due on a mortgage and authorizes a sheriff's sale of the mortgaged property. See First Union Nat'l Bank v. Penn Salem Marina, Inc., 190 N.J. 342, 356-57 (2007); see also Eisen v. Kostakos, 116 N.J. Super. 358, 365 (App. Div. 1971) ("[t]he final judgment in an action to foreclose a real estate mortgage fixes the amount due under the mortgage and directs the sale of the real estate to raise funds to satisfy the amount due").