THE BANCORP BANK v. CONDOR DEVELOPERS, LLC et al

Filing 92

OPINION. Signed by Judge Noel L. Hillman on 8/4/2017. (tf, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

THE BANCORP BANK,
Plaintiff,

CIVIL NO. 15-4451(NLH)(AMD)

v.
OPINION
CONDOR DEVELOPERS, LLC,
DANIEL BROWN, NJG
ACQUISITIONS, LLC, ENPHRONT
INC., and STATE OF NEW
JERSEY,
Defendants.

APPEARANCES:
PHILIP S. ROSENZWEIG
SILVERANG & DONOHOE LLC
595 E. LANCASTER AVENUE
SUITE 203
ST. DAVIDS, PA 19087
On behalf of Plaintiff
DAVID JOHN AZOTEA
LEVINE STALLER SKLAR CHAN & BROWN PA
3030 ATLANTIC AVENUE
ATLANTIC CITY, NJ 08401
On behalf of Defendants
HILLMAN, District Judge
This matter concerns claims by Plaintiff, The Bancorp Bank,
regarding the default on the financing of a property in Atlantic
City, New Jersey that provides housing to veterans.

Presently

before the Court is Plaintiff’s motion for summary judgment
against Defendants Condor Developers, LLC (“Condor”), NJG
Acquisitions, LLC (“NJG”) and Daniel Brown (“Brown”).

For the

reasons expressed below, Plaintiff’s motion will be granted in
part and continued in part.
BACKGROUND
In 2008, Defendants took over a 14-unit townhome project in
Atlantic City, New Jersey as housing for U.S. military veterans.
Due to various problems with construction and damage from Super
Storm Sandy in October 2012, Defendants were unable to complete
the project, even with increased financing, and eventually
defaulted on loans and lines of credit extended by Plaintiff for
principal in the amounts of $5,100,000 and $950,000, respectively. 1
The defaulted obligations were backed by personal guarantees
executed by NJG and Brown. 2
In June 2015, Plaintiff instituted the instant foreclosure
and breach of contract action against Condor, NJG, and Brown.

In

1

Plaintiff claims that the unpaid principal balance under the loan
is $4,916,309.50, and that the unpaid principal balance under the
line of credit is $947,978.36.
2

Brown is the sole member of NJG. As is discussed more fully
below, NJG and Brown provided personal guarantees to Plaintiff in
order to secure additional financing for the project. During the
course of discovery, Plaintiff learned that in addition to NJG and
Brown, two former members of Condor also provided personal
guarantees: Jack A. Gartner, Jr. and Joseph D. Jenci. In October
2016, Plaintiff filed a third amended complaint to assert breach
of contract claims against Gartner and Jenci. (Docket No. 75.)
NJG and Brown filed an answer to the third amended complaint, and
asserted counterclaims against Plaintiff and cross-claims against
Gartner and Jenci. (Docket No. 76.) It is unclear from the
docket whether these new defendants were served with the third
amended complaint or the cross-claims, and they have not appeared
in the action.
2

February 2016, the Court held a hearing on Plaintiff’s motion to
appoint a receiver, and the Court granted that motion.

The

receiver has been managing the property ever since.
Plaintiff has filed a motion for summary judgment in its
favor on all of its claims against Condor, NJG, and Brown, and on
Defendants’ counterclaims against it, which include claims for
fraud in the inducement, breach of covenant of good faith and fair
dealing, intentional misrepresentation, malicious prosecution, and
unlawful permanent contract rescission.
Condor and NJG do not contest that judgment be entered on
Plaintiff’s claims against them.

Brown, however, argues that

disputed issues of material fact remain over his obligation under
his personal guarantee.

Brown admits that he signed a guarantee

on the line of credit, but denies that he is individually liable.
Brown claims that Plaintiff’s former vice president, Michael
Schreiber, stated to Brown on various occasions that the loans
would be extended, and Brown would not be held personally liable
for the line of credit upon any potential default because the bank
would simply repossess the property.

Brown argues that this

dispute also compels the Court to deny Plaintiff’s motion for
summary judgment on his counterclaims.
In its moving brief, Plaintiff argues that it is entitled to
summary judgment on Brown’s counterclaims because he has not
provided any evidence to support his claims, including failing to
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depose Michael Schreiber or any other bank representative.
Plaintiff argues that Brown’s self-serving testimony regarding
Schreiber’s alleged fraud to induce Brown to sign a personal
guarantee is insufficient to maintain his counterclaims.
Plaintiff, however, did not file a reply brief in further support
of its motion to specifically counter Brown’s argument that his
testimony presents a material disputed fact that precludes
Plaintiff’s motion for summary judgment on its breach of contract
claims against Brown.
DISCUSSION
A.

Jurisdiction

This Court has jurisdiction over this matter pursuant to 28
U.S.C. § 1332 because there is complete diversity of citizenship
between the parties and the amount in controversy exceeds $75,000.
The citizenship of the parties is as follows: Plaintiff is a
citizen of the State of Delaware, and Defendants are citizens of
the States of New York and New Jersey. 3
B.

Standard for Summary Judgment

Summary judgment is appropriate where the Court is satisfied
that the materials in the record, including depositions,
documents, electronically stored information, affidavits or
declarations, stipulations, admissions, or interrogatory answers,

3

The two defendants added to the action through Plaintiff’s third
amended complaint are citizens of New Jersey. (TAC ¶¶ 6, 7.)
4

demonstrate that there is no genuine issue as to any material fact
and that the moving party is entitled to a judgment as a matter of
law.

Celotex Corp. v. Catrett, 477 U.S. 317, 330 (1986); Fed. R.

Civ. P. 56(a).
An issue is “genuine” if it is supported by evidence such
that a reasonable jury could return a verdict in the nonmoving
party’s favor.
(1986).

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

A fact is “material” if, under the governing substantive

law, a dispute about the fact might affect the outcome of the
suit.

Id.

In considering a motion for summary judgment, a

district court may not make credibility determinations or engage
in any weighing of the evidence; instead, the non-moving party's
evidence “is to be believed and all justifiable inferences are to
be drawn in his favor.”

Marino v. Industrial Crating Co., 358

F.3d 241, 247 (3d Cir. 2004)(quoting Anderson, 477 U.S. at 255).
Initially, the moving party has the burden of demonstrating
the absence of a genuine issue of material fact.
Catrett, 477 U.S. 317, 323 (1986).

Celotex Corp. v.

Once the moving party has met

this burden, the nonmoving party must identify, by affidavits or
otherwise, specific facts showing that there is a genuine issue
for trial.

Id.

Thus, to withstand a properly supported motion

for summary judgment, the nonmoving party must identify specific
facts and affirmative evidence that contradict those offered by
the moving party.

Anderson, 477 U.S. at 256-57.
5

A party opposing

summary judgment must do more than just rest upon mere
allegations, general denials, or vague statements.

Saldana v.

Kmart Corp., 260 F.3d 228, 232 (3d Cir. 2001).
C.

Analysis

Defendant Condor does not contest summary judgment with
respect to Count I (breach of contract against Condor), Count II
(mortgage foreclosure against Condor), or Count III (demand for
possession), since that claim is now moot through the February
2016 appointment of the receiver.

Defendant NJG also does not

contest summary judgment on Count V (breach of contract against
Brown and NJG). 4
As stated above, Brown contests summary judgment on
Plaintiff’s breach of contract claim arising out his personal
guarantee for the line of credit.

Brown also contests summary

judgment with respect to all of Defendants’ counterclaims against
Plaintiff, arguing that his testimony about Schreiber’s alleged
statements presents material disputed facts that preclude the
entry of summary judgment.
Specifically, Brown states in his certification attached to

4

All Defendants argue that an order of judgment should not be
entered in Plaintiff’s favor on the claims for which Defendants
have conceded liability, arguing that Plaintiff should provide an
accounting to justify the amounts demanded. Because Plaintiff has
only cited to its complaint to support the unpaid principal
balances due, and does not cite any document to support the per
diem interest amount, Plaintiff is directed to file a proposed
form of judgment with documentation to support its damages for its
claims against Condor and NJG.
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his opposition brief that he undertook the project to provide
housing to veterans because it was an issue very dear to him and
he wanted to make a difference in their lives.

Brown states that

he had a good working relationship with Schreiber, and that
Schreiber told him on various occasions that the bank would not
enforce the personal guarantees, and it only needed them to secure
the financing.

Brown states that Schreiber’s statements were

material to his signing the guarantees and that he would not have
signed them but for those representations.

Brown also asserts

that he was under the impression that Bancorp would work with him
to avoid defaulting Brown and his entities, including through such
means as providing additional extensions to the mortgage and loan
agreement or by seeking to repossess the project and relieve Brown
of his personal guarantees on the notes.
Brown states that in addition to construction delays, Super
Storm Sandy severely damaged several of the units, and then fire
damaged another unit, and the insurance proceeds did not nearly
cover the cost of repairs.

When the notes became due and payable,

Condor and NJG could not repay the loans, and Brown offered to
return the property to Plaintiff.

Instead, Plaintiff filed the

instant lawsuit, and Brown relates that he is dire financial
circumstances and does not have the financial wherewithal to pay
back those funds.

He also states that he is considering filing

for personal bankruptcy.
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To state a claim for fraudulent inducement, a plaintiff must
demonstrate: (1) a material misrepresentation of a presently
existing or past fact; (2) knowledge or belief by the defendant of
its falsity; (3) an intention that the other person rely on it;
(4) reasonable reliance thereon by the other person; and (5)
resulting damages.

Gennari v. Weichert Co. Realtors, 691 A.2d

350, 367, 148 N.J. 582, 610 (N.J. 1997). 5
The introduction of extrinsic evidence to prove fraud in the
inducement is a well-recognized exception to the parol evidence

5

A party who proves the he was fraudulently induced to enter a
contract has two choices – either rescind or affirm the contract.
See Tonglu Rising Sun Shoes Co., Ltd. v. Natural Nine (USA) Co.,
Ltd., 2016 WL 7374543, at *3 (D.N.J. 2016) (citing Daibo v.
Kirsch, 720 A.2d 994, 998 (N.J. Super. Ct. App. Div. 1998)) (other
citation omitted). When a plaintiff seeks only equitable remedies
such as rescission, however, the plaintiff needs to prove
equitable fraud, which is a lesser burden than proving legal
fraud. Tonglu, 2016 WL 7374543, at *3 (D.N.J. 2016) (citing
Jewish Ctr. of Sussex Cty. v. Whale, 86 N.J. 619, 625 (1981)
(“[W]hatever would be fraudulent at law will be so in equity; but
the equitable doctrine goes farther and includes instances of
fraudulent misrepresentations which do not exist in the law.”).
Unlike a plaintiff claiming legal fraud, a plaintiff claiming
equitable fraud does not need to prove the defendant's scienter in
making the misrepresentation; rather, a plaintiff seeking
rescission of a contract based on fraud in the inducement, must
show by clear and convincing evidence: (1) a material
misrepresentation of a presently existing or past fact; (2) the
maker's intent that the other party rely on it; and (3)
detrimental and reasonable reliance by the other party. Id. We
have substantial doubts that Brown can sustain his fraud in the
inducement claim in that it requires a misrepresentation regarding
a “presently existing or past fact” and Brown only appears to
claim misrepresentation as to a future intention, i.e., that the
bank would not act in the future on the personal guarantees. That
deficiency alone may defeat his claim. In the additional briefing
ordered below, the parties should expressly address this issue.
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rule.

Everest Nat. Ins. Co. v. Sutton, 2008 WL 3833586, at *7

(D.N.J. 2008) (quoting Alexander v. CIGNA Corp., 991 F. Supp. 427,
436–37 (D.N.J. 1998)) (other citation omitted).

The parol

evidence rule “‘operates to prohibit the introduction of oral
promises to alter or vary an integrated written agreement.’”
(citation omitted).

Id.

“‘Extrinsic evidence to prove fraud is

admitted because it is not offered to alter or vary express terms
of a contract, but rather, to avoid the contract or to prosecute a
separate action predicated upon the fraud.’”

Alexander, 991 F.

Supp. at 436 (quoting Filmlife, Inc. v. Mal "Z'' Ena, Inc., 598
A.2d 1234, 1235 (N.J. Super. App. Div. 1991)), cited in Everest,
2008 WL 3833586, at *7.

A party may not, however, seek to

contradict the express terms of a writing to avoid obligations he
knowingly assumes.

Everest, 2008 WL 3833586, at *7.

For example, in Everest, the defendant signed a personal
guarantee, and after the plaintiff filed suit to recover under the
guarantee, the court granted the plaintiff’s motion for summary
judgment on the defendant’s fraudulent inducement counterclaim,
rejecting the defendant’s declaration, in which he stated that
“the guaranty instrument was a mere ‘formality,’ that it ‘would be
torn up in a matter of months,’ that it would never be enforced,'
and that it was only ‘window dressing’ to appease Everest's Board
of Directors.”

Everest, 2008 WL 3833586 at *6-7.

The court found

that because the personal guarantee embodied the final written
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expression of the parties’ agreement – “This Agreement is intended
by the parties as a final expression of their agreement, is
intended as a complete statement of such agreement, and is in lieu
of any oral understanding.” – and because the alleged false
promise by the plaintiff directly contradicted the terms of the
written agreement, the defendant’s allegations, even if true, were
prohibited by the parol evidence rule.

Id.

In making its decision, the court looked to Fr. Winkler KG v.
Stoller, 839 F.2d 1002 (3d Cir. 1988), which presented an
analogous situation:
The plaintiff, Winkler, sought to recover on defendant
Stoller's guarantee of certain promissory notes. Like
Defendants here, Stoller alleged that “he was told that
his guarantee was ‘a mere formality’ and that he would
never be held personally liable on it,” and Stoller argued
that such representations constituted fraud. However, the
Third Circuit found that the guarantee “embod[ied] the
final written expression of the parties' agreement” and
held that “proof in support of a guarantor's allegation
that his indorsement was required only as a matter of
form, and that it would never be enforced, is prohibited
by the parol evidence rule.” “To hold that parties made
two contracts at the same time, one of which is in
positive contradiction of the other is somewhat
fantastic.” The court noted that the evidence “would do
more than simply modify the notes' terms; it would utterly
extinguish them.” Consequently, the Third Circuit
affirmed the trial court's entry of summary judgment
against Stoller.
Everest, 2008 WL 3833586 at * 7 (internal citations omitted).
In this case, neither party has squarely addressed the
application of the parol evidence rule in the context of Brown’s
claims of fraudulent inducement.

Plaintiff has supported its
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breach of contract claim against Brown by showing he signed a
personal guarantee and he has breached the personal guarantee,
both of which Brown admits to.

To support his defense to

Plaintiff’s breach of contract claim, Brown essentially contends
that he cannot be held to have breached the contract because no
contract existed due to Schreiber’s fraudulent statements that
induced Brown to sign the guarantee.
Brown has the burden of proof to support his fraudulent
inducement counterclaim, and he also has the burden of proof to
support his fraudulent inducement defense to Plaintiff’s breach of
contract claim.

Ordinarily, in cases where the issue of fraud had

been raised by the defendant in the context of a plaintiff’s
breach of contract claim, it is necessary to decide the same
factual issue for the fraud claim in order to determine the
enforceability of the contract involved in the case.

See

Goen

Technologies Corp. v. NBTY, Inc., 2007 WL 2595753, at *5 (D.N.J.
2007) (citing T.P.O. v. Federal Deposit Insurance Corp., 487 F.2d
131 (3d Cir. 1973); Associated Hardware Supply Co. v. Big Wheel
Distributing Co., 355 F.2d 114 (3d Cir. 1964)).

Accordingly, if

“the claims in a complaint and compulsory counterclaim are so
closely related that an issue of fact in one may prove important
to both, then summary judgment on the complaint is inadvisable
when material issues of fact remain as to the counterclaim.”
(citations omitted).
11

Id.

The same situation is presented here.

Plaintiff seeks

judgment in its favor on its breach of contract claim against
Brown, who counterclaims that the contract was induced by fraud.
As mentioned above, Plaintiff does not directly address Brown’s
fraud claims, other than to argue in its moving brief that his
conclusory allegations are insufficient to maintain his
counterclaims.

Additionally, neither Plaintiff nor Brown

addresses whether the personal guarantee embodied the final
written expression of the parties’ agreement, which, if it did,
would preclude Brown’s allegations of false promises under the
parol evidence rule.
Therefore, because it is necessary to decide the same factual
issue for the fraud claim in order to determine the enforceability
of the personal guarantee, the Court will direct each party to
file a supplemental letter brief to address the issues identified
above.

Based on the submissions, the Court will determine whether

Plaintiff is entitled to summary judgment on Plaintiff’s breach of
contract claim against Brown, and Brown’s fraudulent inducement
counterclaim against Plaintiff. 6

6

Several claims asserted in Plaintiff’s third amended complaint
are not the subject of its motion for summary judgment: Count VII
Fraud/Fraudulent Inducement against Defendants Brown and/or
Condor; Count IX Conversion/Misappropriation against Defendants
Brown and/or Condor; and Count X Conspiracy against all
Defendants. Plaintiff’s claims against the two recently added
defendants are also outstanding. In its supplemental letter
brief, Plaintiff shall address how it intends to proceed on those
claims.
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CONCLUSION
As observed by the New Jersey courts more than 100 years ago,
a person is “usually bound by the import of documents signed by
them and which they had the ability and opportunity to read.”
Filmlife, Inc., 598 A.2d 1234 at 1236 (citing Alexander v.
Brogley, 63 N.J.L. 307 [43 A. 888] (E. & A. 1899) (other citations
omitted).

Having charged fraud, Brown has assumed the burden of

proving its existence as an inducement to the making of the
contract.

See Invengineering, Inc. v. Foregger Co., 184 F. Supp.

366, 373 (D.N.J. 1960) (citing City of Clifton v. Cresthaven
Cemetery Ass'n, 71 A.2d 655, 657 (N.J. Super. Ct. App. Div. 1950)
(“The burden of establishing fraud rests upon the party who
asserts it.”).

The parties are directed to file supplemental

letter briefs to address whether Brown can meet that burden to
defeat summary judgment.
An appropriate Order will be entered.

Date:
August 4, 2017
At Camden, New Jersey

s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.

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