LEONARD BOVE JR DENISE CZYZEWICZ v. GLOUCESTER COUNTY FEDERAL SAVINGS BANK (2011)

Plaintiffs Leonard A. Bove, Jr. and Denise Czyzewicz appeal from two orders:  the first granting summary judgment and dismissing their complaint with prejudice because they lacked standing to assert the claimed causes of action, and the second entering judgment against Czyzewicz on the counterclaim filed by defendant Gloucester County Federal Savings Bank (GCF).  Following our review, we conclude plaintiffs' appeal is not properly before the court and we dismiss.   R. 2:2-3(a)(1).

Plaintiffs are shareholders of Home Network Builders, Inc. (HNB, Inc.) and members of Home Network Builders at Maple Shade, LLC (HNB, LLC) (collectively HNB).  Beginning in 1999, HNB executed a series of loan agreements ¹ with GCF to obtain financing for the acquisition and construction of an eighteen-lot residential development in Maple Shade to be known as “The Community at Farmhouse Lane” (Farmhouse Lane development).   The debts were secured by a blanket mortgage on the property, recorded on October 12, 1999 in Mortgage Book 7646 at page 650 in the Offices of the Clerk of Burlington County.   Plaintiffs executed commercial guaranty agreements for each promissory note issued by HNB. An additional $150,000 was secured by HNB through GCF to fund the construction of a house located at 240 Mt. Laurel Road, Mt. Laurel (the Mt. Laurel property).

Problems developed shortly after the initial transaction to acquire the realty.   GCF determined the eighteen lots were overvalued and its debt was undersecured, causing the bank to revise the terms of the initially proposed infrastructure and construction financing.   HNB accepted the revised proposal terms and contacted another lender to obtain additional monies.   HNB commenced construction of the single-family homes and sold several properties in the Farmhouse Lane development.

Between December 1999 and December 2002, HNB was current on all loan repayments.   In 2002, GCF advised HNB that no additional funds were available.   HNB challenged the loan disbursement records and sought an independent audit.   An impasse developed.

Thereafter, HNB defaulted on its loan repayment obligations, causing GCF to commence foreclosure proceedings.   Plaintiffs counter-claimed, alleging GCF and its former loan officer, Barbara Klitchko, negligently and tortiously failed to timely disburse hundreds of thousands of dollars of construction loan advances, causing construction delays and misappropriated or diverted $800,000 in monies charged to HNB that it never received.²  Based on its records, HNB believed GCF had advanced only $2.1 million, even though almost $3 million had been authorized.   As a result, HNB maintained GCF exercised domination and superiority over the construction activities of HNB, interfering with HNB's contractual relationships with third parties and preventing completion of the Farmhouse Lane development.

On November 17, 2005, HNB filed a voluntary petition seeking protection under Chapter 11 of the Bankruptcy Code. 11 U.S.C.A. § 301.   The foreclosure proceedings were stayed.  11 U.S.C.A. § 362(a).   GCF filed its proof of claim as a secured creditor seeking $1,592,476.02.   Ultimately, the consolidated bankruptcy matters were converted to Chapter 7 liquidations.   11 U.S.C.A. § 1112(b).  A Chapter 7 Trustee was appointed to oversee the liquidation of the businesses.

In the course of the Chapter 7 administration, the trustee abandoned the Mt. Laurel property and the structure formerly serving as HNB's offices (429 East Main Street Property), entered into an agreement of sale for another completed home in the Farmhouse Lane development and negotiated the sale of the remaining unimproved Farmhouse Lane development lots.   The trustee also commenced adversary proceedings against GCF, seeking to void the mortgages executed by HNB as security for GCF's loans and to reclassify GCF's proofs of claim as unsecured debts.

GCF and the Chapter 7 trustee reached a global settlement of all disputes raised in the adversary proceedings.   Specifically, the parties agreed the Trustee was authorized to complete the sale of the Farmhouse Lane development lots and the completed home and disburse the proceeds as stated in the stipulation, subject to Bankruptcy Court approval.   The stipulation agreement also contained a mutual release of all claims along with a carve-out of unaffected claims, as follows:

3.  Release of Claims Against [GCF]. Effective upon the approval of the settlement by the Bankruptcy Court and the expiration of all appeal periods, the Trustee, for himself and on behalf of the Estates of [HNB], will, without further action, forever waive, release and discharge any and all legal and equitable claims and/or causes of action, which the Trustee has or may have, or may otherwise have been able to assert against [GCF], and its representative officers, employees, agents and attorneys, successors or assigns, from any cause whatever, known or unknown, whether or not matured or contingent, including but not limited to claims arising out of or relating to the creation, operation, or termination of loans by [GCF] to [HNB], the development and operation of the Farmhouse Lane Lots, the Mt. Laurel Property, the 429 East Main Street Property, or claims which were made or could have been made in the adversary proceeding set forth above.   The foregoing releases do not include any claims and/or causes of action, which the members ․ or the shareholders of [HNB] may have, if any, have against [GCF] and its respective officers, employees, agents and attorneys, successors or assigns.

4. Release and Expungment of All claims of [GCF] against [HNB]. Effective upon the approval of the settlement by the Bankruptcy Court and the expiration of all appeal periods, [GCF] will, without further action, be deemed to have withdrawn and forever waived, released and expunged all filed secured and unsecured proofs of claim and against [HNB] and is prohibited by the terms of this Agreement to file or assert any additional proofs of claim against [HNB]. This Agreement shall have no effect on any claims of [GCF] against the guarantors or sureties of [HNB] or the rights of [GCF] with respect to the Mt. Laurel Property and the 429 East Main Street Property which were previously abandoned by the Trustee.

After the stipulation of settlement was negotiated but prior to its finalization, plaintiffs initiated this action against GCF, as HNB's members and shareholders.   The complaint alleged GCF negligently and tortiously failed to timely disburse construction funding to HNB and misappropriated loan funds.   These claims matched those asserted in HNB's counter-claims previously filed in the foreclosure action.   GCF counterclaimed, seeking payment from plaintiffs on their guarantees.³

At the close of discovery, GCF moved for summary judgment dismissal of plaintiffs' complaint, relying on the terms of the stipulation of settlement entered in the bankruptcy proceedings.   In a bench opinion supporting the grant of summary judgment, the court found “every count” of plaintiffs' complaint “relate[d] back to” HNB and only asserted harm caused to HNB:

Count One indicates HNB was unjustly forced to terminate their residential construction efforts.   HNB was forced to file bankruptcy.

․

Count Two [alleges] the bank's actions undermined HNB's business relationship and corporate goodwill.

Count [T]hree speaks again of the business interests of HNB.

Count Four talks about tortious interference, again though with HNB's contractual relations.

Count Five [alleges] HNB's perspective economic advantage was interfered with

․

Count Six talks about the bank having breached the implied covenant of good faith and fair dealing towards HNB and that confidentially was owed to HNB.

Count Seven [alleges] HNB has sustained and will continue to sustain significant economic harm.

Count Eight [alleges] HNB has been grievously harmed.

The judge found “repetition in the claims being asserted relate[d] to HNB [and did] not find the personalized harm, the individualized harm that is necessary” to sustain a shareholder suit.   The court granted the motion, concluding plaintiffs' claims “remain[ed] derivative claims” of those alleged in the counterclaim in the HNB action.  “Therefore, they [were] repetitive and [ ] duplicative.” ⁴

Thereafter, GCF moved for summary judgment on its counterclaim.   Bove was dismissed by stipulation because he had received a discharge in bankruptcy.

The motion, heard by a different Law Division judge, was granted and judgment was entered against Czyzewicz, “finding her liable for outstanding amounts due on loans guaranteed by her.”   The court's order also stated:  “[Defendant] shall submit a certification of proof setting forth the amount due on each loan and proof that [ ] Czyzewicz signed the guarantee.” ⁵

On appeal, plaintiffs assert:

I.  THE LOWER COURT ERRED IN GRANTING SUMMARY JUDGMENT IN FAVOR OF [GCF] WHERE THERE WAS NO EVIDENCE SUBMITTED BY [GCF] BY WAY OF AFFIDAVIT OR CERTIFICATION IN SUPPORT OF ITS MOTIONS.

II. THE LAW DIVISION MISAPPLIED AND FAILED TO CONSIDER CONTROLLING LEGAL PRECEDENT IN GRANTING SUMMARY JUDGMENT DISMISSING APPELLANT[S'] CLAIMS.

III. THE LOWER COURT FAILED TO ABIDE BY THE LAW OF THE CASE DOCTRINE THEREBY CREATING INCONSISTENCIES IN THE DECISIONS.

IV. THE LAW DIVISION ERRONEOUSLY DECIDED THAT AN EXPERT WAS NEEDED TO DETERMINE LIABILITY.

V. THE LOWER COURT'S ORDER GRANTING SUMMARY JUDGMENT ON THE COUNTERCLAIM IS DEFICIENT BECAUSE IT FAILS TO CONFORM TO THE COURT RULES AND VIOLATES DUE PROCESS.

We decline to address these issues as the underlying dispute is not final.   See R. 2:2-3(a)(1) (stating an appeal as of right may be taken to the Appellate Division only from a “final judgment”).

“[O]ur judicial system recognizes that, with very few exceptions, only an order that finally adjudicates all issues as to all parties is a final order and that an interlocutory appeal is permitted only by leave of our appellate courts.”  Grow Co., Inc. v. Chokshi, 403 N.J.Super. 443, 457-458 (App.Div.2008).  “ ‘[P]iecemeal [appellate] reviews, ordinarily, are [an] anathema to our practice.’ ”  Vitanza v. James, 397 N.J.Super. 516, 518-519 (App.Div.2008) (quoting Janicky v. Point Bay Fuel, Inc., 396 N.J.Super. 545, 549-50 (App.Div.2007).

The orders under review lack finality, as the April 17, 2009 and the January 11, 2010 rulings have not adjudicated all the claims arising in this matter.   Although summary dismissal of plaintiffs' complaint was entered, GCF's counterclaim remained unaffected.   Following another summary judgment motion, Czyzewicz's liability on her guarantees was determined, but the court reserved entry of final judgment pending a proof hearing on the appropriate award of damages.

As we have noted, “[t]he chief thrust of our judicial system-adopted in order to eliminate the unnecessary complications and convolutions of the system it replaced-was to promote efficiency, fairness and the reduction of needless costs and delays.   R. 1:1-2.”  Grow Co., supra, 403 N.J.Super. at 457.   “[T]hese goals require that the judicial process ․ consist of ‘a single and complete trial with a single and complete review.’ ”  Ibid. (quoting Trecartin v. Mahony-Troast Constr.   Co., 21 N.J. 1, 6 (1956)).

Interlocutory review was not requested in this matter.   The premature filing by plaintiffs, coupled with GCF's failure to move for dismissal, which resulted in the matter being fully briefed, submitted for disposition on its merits and calendared before we appreciated its interlocutory nature, insufficiently justifies granting leave to appeal out of time.  Vitanza, supra, 397 N.J.Super. at 518-19.  “[I]f we treat every interlocutory appeal on the merits just because it is fully briefed, there will be no adherence to the Rules, and parties will not feel there is a need to seek leave to appeal from interlocutory orders.”  Parker v. City of Trenton, 382 N.J.Super. 454, 458 (App.Div.2006).

Dismissed.

FOOTNOTES

FN1. The date each note was executed, and the amount borrowed were as follows:7/23/99 $600,000 (Note No. 86)7/11/00 $140,263 (Note No. 240)12/6/00 $220,000 (Note No. 97)12/6/00 $143,916.50 (Note No. 297)12/6/00 $25,000 (Note No. 298)1/23/01 $129,993 (Note No. 310)2/28/01 $138,151 (Note No. 322)3/19/01 $142,350 (Note No. 330)4/11/01 $136,435 (Note No. 344)5/4/01 $155,935 (Note No. 355)5/4/01 $155,935 (Note No. 356)5/4/01 $155,935 (Note No. 357).  FN1. The date each note was executed, and the amount borrowed were as follows:7/23/99 $600,000 (Note No. 86)7/11/00 $140,263 (Note No. 240)12/6/00 $220,000 (Note No. 97)12/6/00 $143,916.50 (Note No. 297)12/6/00 $25,000 (Note No. 298)1/23/01 $129,993 (Note No. 310)2/28/01 $138,151 (Note No. 322)3/19/01 $142,350 (Note No. 330)4/11/01 $136,435 (Note No. 344)5/4/01 $155,935 (Note No. 355)5/4/01 $155,935 (Note No. 356)5/4/01 $155,935 (Note No. 357)

FN2. Klitchko resigned from GCF on January 9, 2003.   GCF issued a suspicious activity report, which led to an investigation and audit of the loan transactions.   On May 2, 2005, the federal Office of Thrift Supervision (OTS) concluded Klitchko “engaged in lending-related activities in excess of her authority, failed to abide by [GCF]'s lending policies and procedures, withheld material information[ ], and failed to maintain significant records” while she was employed by GCF..  FN2. Klitchko resigned from GCF on January 9, 2003.   GCF issued a suspicious activity report, which led to an investigation and audit of the loan transactions.   On May 2, 2005, the federal Office of Thrift Supervision (OTS) concluded Klitchko “engaged in lending-related activities in excess of her authority, failed to abide by [GCF]'s lending policies and procedures, withheld material information[ ], and failed to maintain significant records” while she was employed by GCF.

FN3. The complaint was initially venued in Burlington County and transferred to Gloucester County..  FN3. The complaint was initially venued in Burlington County and transferred to Gloucester County.

FN4. We note plaintiffs' appeal of the summary judgment dismissal (Docket No. A-004620-08) was dismissed on July 14, 2009, as interlocutory because GCF's counterclaim remained pending..  FN4. We note plaintiffs' appeal of the summary judgment dismissal (Docket No. A-004620-08) was dismissed on July 14, 2009, as interlocutory because GCF's counterclaim remained pending.

FN5. The record contains no transcript and the order was unaccompanied by a memorandum of findings supporting the conclusions.   See R. 1:7-4..  FN5. The record contains no transcript and the order was unaccompanied by a memorandum of findings supporting the conclusions.   See R. 1:7-4.

PER CURIAM