Monthly Archives: November 2014

Prepayment Fees on Commercial Loans

By Louis Pashman, Esq.
lpashman@pashmanstein.com

It is pretty widely known at this point that New Jersey does not permit prepayment penalties on mortgage loans.  N.J.S.A. 46:10B-2.

What if, however, you enter into a commercial loan?  That loan is often guaranteed by a principal of the borrower.  Additionally, the lender frequently requires a mortgage on the guarantor’s personal residence.  Is that sufficient to bring into play the prohibition on prepayment penalties?

That was the question in Lopresti v. Wells Fargo Bank, 435 N.J. Super 311 (App. Div. 2014).

The borrower was a commercial enterprise.  Lender required a personal guaranty from the President of the company.  Borrower also required a mortgage on the guarantor’s personal residence.  Some years later, when interest rates had fallen, borrower asked Wells Fargo to renegotiate the loan.  The bank refused.  Borrower then went to another bank to refinance.  That bank paid off Wells Fargo, including a prepayment fee of $48,306.41.  Borrower challenged that, claiming that because the bank held a mortgage on his personal residence it was a mortgage loan and therefore no prepayment penalty was permitted.

The court first decided that the guarantor had standing to bring the action.  Although his interest was “inchoate and conditional,” he had a “real and genuine financial interest in the transaction….”

The court then noted, however, that all proceeds of the loan and the refinance were deposited directly into the account of the business.  No portion of the money was used for personal or residential purposes.  The mortgage secured the personal guaranty, not the business obligation.  Therefore, the mortgage on the personal residence was not a “mortgage loan” within the statute’s definition and the lender was not “the holder of a mortgage loan.”

The upshot is that prepayment fees, long considered acceptable in commercial transactions, do not lose their character as commercial loans if guaranteed by an individual and that guarantee is secured by a mortgage on the guarantor’s personal residence.

NJ Courts Implement Complex Business Litigation Program

By Sean Mack, Esq.
smack@pashmanstein.com

After many years of discussion and consideration, Chief Justice Rabner announced on November 13, 2014, that effective January 1, 2015, the New Jersey judiciary will accept cases into a new program for the resolution of complex business, commercial and construction cases.  The program is designed to assist New Jersey businesses effectively resolve their disputes through the use of individualized case management by selected judges and by continuing “to develop a body of authoritative case law that will aid all parties in business litigation.”  (New Jersey Courts, Press Release, 11/13/14)

To be eligible for the program, the case must be a business, commercial or construction case involving damages in excess of $200,000.  If the damages are less than $200,000 a party can make a motion to have their case handled under the program.  The motion will need to demonstrate that there is compelling reason for inclusion under the program.  Examples of compelling reasons may be:  the existence of complex legal or factual issues; substantial complex discovery issues involving multiple parties, witnesses or voluminous documents; the case requires  the interpretation of a significant business or commercial statute; or resolution of the case may have a business impact beyond the parties to the dispute.

Under the program, a single judge, with experience in complex civil litigation, will oversee the resolution of each commercial matter from start to finish.  Arbitration or mediation will be encouraged, but not required.  Each of the Assigned Complex Business Litigation judges will receive special training on relevant areas of the law, including the UCC, securities, business valuation, as well as training on case management and e-discovery.

The assigned commercial judges are encouraged to post on the Judiciary’s website written decisions that may help guide other businesses facing similar issues.

Effective January 2015, the assigned Complex Business Litigation judges in each vicinage are:

 

Vicinage Complex Business Litigation Judge(s)
1. Atlantic/Cape May Judge J. Christopher Gibson (primary)

Judge James P. Savio (backup)

2. Bergen Judge Robert C. Wilson
3. Burlington Civil Presiding Judge Marc M. Baldwin
4. Camden Judge Michael J. Kassel
5. Essex Judge James S. Rothschild, Jr.
6. Hudson Judge Barry Sarkisian
7. Mercer General Equity Presiding Judge Paul Innes
8. Middlesex Assignment Judge Travis L. Francis
9. Monmouth Judge Katie A. Gummer
10. Morris/Sussex General Equity Presiding Judge

Stephan C. Hansbury

11. Passaic Judge Thomas J. LaConte
12. Union Judge Thomas J. Walsh
13. Somerset/Hunt./War. Assignment Judge Yolanda Ciccone
14. Ocean Civil Presiding Judge Craig L. Wellerson
15. Cumberland/Glou/Sal Judge Richard J. Geiger

 

The Value of Information in Divorce Litigation

By Robert Kornitzer, Esq.
rkornitzer@pashmanstein.com

Every consultation with a prospective family law client begins with a very similar request from the prospective client “Please tell me what results I can expect, both financial and custodial”.  The financial questions include (but are not limited to) those pertaining to expected results as to payment/receipt of spousal and child support, division of liquid and investment assets, division of retirement assets, division of personal property and the necessity of carrying insurance to secure various obligations.  The custodial questions include (but are not limited to) those pertaining to legal custody, physical custody, relocation of one parent with the children, parenting schedules and parenting dispute resolution.

It is not a difficult task for a family law attorney to spout endlessly as to the statutory and case law pertaining to the above-referenced subjects. In fact, once you get many of us started, like many other professionals, it may be difficult to get us to stop discussing the nuances of our fields of expertise.  But the general knowledge that we can impart upon first meeting a prospective client is relatively meaningless to that client.  Why? Because each client is a unique individual with a unique set of circumstances.  Those unique circumstances create almost a limitless set of possible settlement/trial scenarios that must be explored prior to devising a final strategy.

I am a firm believer that no two sets of litigants (spouses, partners, non-married parents) are alike.  In a divorce, a client and her spouse bring to the litigation an extensive number of variables.  For instance, as to alimony alone, we must explore the ages of each party, the number of years married, the education of each spouse, the earnings of each spouse, the numbers of years in the workforce, the parental responsibilities of each spouse, the health of each spouse, and much more.  As to division of the value of a family business, we must explore the business tax returns, the total benefits derived from the business, the source of funds used to create the business, the involvement of each party in the business, the stability of the business, and on and on.

For each issue to be properly explored it is essential for the attorney to request specific information from the client and it is essential for the client to provide that information to the attorney. The specific information will allow the attorney to tailor advice and create a strategy that is tailored to the client.  Divorce is not “one size fits all”, even though many attorneys do attempt to take a simplistic cookie-cutter approach to divorce litigation.

During the course of litigation, gathering the necessary information takes on an important role towards optimizing the final settlement/trial terms for that client.  But it is also just as important for each attorney and client to understand that not only are each client’s “facts” different, the client’s “wants” are different as well.  It is the combination of maximizing wants based on what the facts have revealed that allows a client to achieve optimal results.