GARCIA et al v. THE BRYN MAWR TRUST COMPANY
Filing
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OPINION FILED. Signed by Judge Robert B. Kugler on 12/8/16. (js)
NOT FOR PUBLICATION
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CAMDEN VICINAGE
___________________________________
:
Kristine M. GARCIA &
:
Civil No. 16-456 (RBK)
Anna S. GARCIA,
:
:
Opinion
Appellants,
:
:
v.
:
:
THE BRYN MAWR TRUST COMPANY, :
:
Appellee.
:
___________________________________ :
KUGLER, United States District Judge:
This matter comes before the Court on the appeal of Kristine M. Garcia and Anna S.
Garcia (“Garcias” or “Appellants”). The Garcias appeal the Bankruptcy Court’s Order granting
summary judgment in favor of the Bryn Mawr Trust Company (“BMTC” or “Appellees”) and
denying additional discovery. For the reasons expressed below, the Order of the Bankruptcy
Court is AFFIRMED.
I.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Kristine M. and Anna S. Garcia jointly purchased a home in Sicklerville, New Jersey in
November 2007. Appellants’ Br. 3. To finance the purchase, the Garcias and their father Rufino
Garcia (“Mr. Garcia”) applied for mortgages from several banks, including First Keystone Bank
(“FKB”). Appellants’ Br. 4. FKB’s headquarters were located in Media, Pennsylvania, and it did
not have any offices, telephone numbers, or employees in New Jersey (“the State”). Id.;
Appellants’ App. A53, ¶ 7. Further, FKB did not directly advertise, solicit, or employ brokers in
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New Jersey to generate business. Appellants’ App. A54, ¶ 6. In 2010, BMTC, another
Pennsylvania Bank, merged with FKB. Appellants’ Br. 4.
Mr. Garcia directly contacted FKB to obtain a loan and requested FKB send him a loan
application to New Jersey. Id. at 4–5. The application was submitted to, analyzed, and
considered in Pennsylvania. Appellants’ App. A55, ¶ 8. FKB hired a New Jersey appraiser and,
after approving the application in Pennsylvania, contacted the Garcias in New Jersey to inform
them of the approval. Appellants’ Br. 5. Mr. Garcia executed a loan for $417,000 on his
daughters’ behalf and executed a mortgage against the Garcias’ home in favor of FKB.
Appellants’ Br. 6. The closing for the loan took place in New Jersey, and the loan documents
designated the state where the property was located, New Jersey, as the governing law. Id.
Beginning mid-2012, the Garcias stopped making timely payments, and FKB initiated
foreclosure proceedings on the house. Id. In May and July of 2015, the Garcias respectively filed
for bankruptcy protection in New Jersey under Chapter 7 of the Bankruptcy Code. Id. BMTC
moved to vacate the automatic stay issued under 11 U.S.C. § 362 and proceed with foreclosure.
Id. The Garcias opposed the motion on the grounds that FKB and BMTC had violated the
Banking Act of 1948 by transacting business in New Jersey without a New Jersey banking
license. Id. The Bankruptcy Court ordered the Garcias to raise this issue by filing an adversary
proceeding against BMTC. Id. at 7.
On July 28, 2015, the Garcias filed a Complaint against BMTC arguing that the loans
issued by FKB were invalid under the Banking Act, N.J. Stat. Ann. § 17:9A-316. Id. On August
24, 2015, BMTC filed an Answer asserting that BMTC qualified for exemptions that permit a
foreign bank to enforce a mortgage for property in New Jersey in the transaction of business
outside of the State, N.J. Stat. Ann. § 17:9A-331(3)–(4). Id. On September 4, 2015, BMTC filed
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a Motion for Judgment on the Pleadings. Id. The Garcias opposed the Motion and requested
discovery. Id. at 8. On November 2, 2015, the Bankruptcy Court permitted the Garcias 45 days
to conduct limited discovery, and the Garcias proceeded to proupound interrogatories and
document requests. Id. On December 22, 2015, the Garcias filed Supplemental Pleadings, in
which they asserted that BMTC improperly refused to provide a list of BMTC employees with
information on the loans at issue and a list of other loans FKB or BMTC have issued in New
Jersey. Id. at 9. On January 12, 2016, the Bankruptcy Court held oral arguments, during which
the court sua sponte converted BMTC’s Motion for Judgment on the Pleadings to a Motion for
Summary Judgment. Id. at 10. The Bankruptcy Court granted summary judgment in favor of
BMTC and denied the Garcias’ request for additional discovery. Id.
On January 27, 2016, the Garcias filed a timely Notice of Appeal to this Court (Doc. No.
1). On February 25, 2016, BMTC filed a Motion to Quash arguing that the Garcias made false
statements in their Statement of Issues and thus failed to preserve any issues for appeal (Doc. No.
4). In March and April 2016, the Garcias and BMTC filed respective briefs arguing the merits of
the Garcias’ appeal (Docs. No. 12–14). In light of the parties’ full briefing of the appeal, the
Court denied the Motion to Quash on August 9, 2016 (Doc. No. 15).
II.
DISCUSSION
A. Standard of Review
The Garcias challenge the Bankruptcy Court’s decision granting summary judgment in
favor of BMTC and dismissing the case. This Court has appellate jurisdiction over a final order
of the Bankruptcy Court pursuant to 28 U.S.C. § 158(a).
A district court’s review of a grant of summary judgment is de novo, “[b]ecause summary
judgment is only appropriate where there is no issue of material fact and judgment is appropriate
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as a matter of law.” Rosen v. Bezner, 996 F.2d 1527, 1530 (3d Cir. 1993). Any factual findings
made in a grant of summary judgment are treated as conclusions as a matter of law that no
dispute of material fact exists, and thus are also subject to plenary review. Id. at 1530 n.2. A
decision regarding the scope or opportunity for discovery is reviewed for an abuse of discretion.
In re Kiwi Int’l Air Lines, Inc., 344 F.3d 311, 323 (3d Cir. 2003).
B. Summary Judgment
The Banking Act of 1948 (“the Act”) prohibits a foreign bank organized under the laws
of another state from transacting any business in New Jersey. N.J. Stat. Ann. § 17:9A-316(B).
There are several exemptions to this general prohibition. A foreign bank is not precluded from:
(3) enforcing in this State obligations heretofore or hereafter
acquired by it in the transaction of business outside of this State, or
in the transaction of any business authorized by paragraph (1) or
(2) of this section;
(4) acquiring, holding, leasing, mortgaging, contracting with
respect to, or otherwise protecting or conveying property in this
State heretofore or hereafter assigned, transferred, mortgaged or
conveyed to it as security for, or in whole or part satisfaction of a
loan or loans made by it or obligations acquired by it in the
transaction of business outside of this State, or in the transaction of
any business authorized by paragraphs (1) or (2) of this section.
Id. § 17:9A-331(3)–(4). A bank cannot bring a claim arising from any transaction of business
that violates the Act. Id. § 17:9A-330.
The Garcias appeal the Bankruptcy Court’s determination that BMTC transacted business
outside of New Jersey as a matter of law and thus falls into the exemptions of § 17:9A-331(3)–
(4). New Jersey courts have not definitively addressed how to determine whether a transaction
occurred outside or inside the State. A recent unpublished, per curiam decision of the Superior
Court of New Jersey, Appellate Division adopted a totality of the circumstances test: “The
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examination must determine whether the conduct in New Jersey was essential to the interstate
transaction” and the location where “the totality of the circumstances show the most pivotal
portions of the loan process occurred.” First Sav. Bank of Perkasie v. Asia Int’l Malls, Inc., No.
A-3881-12T4, 2015 WL 4742873 (N.J. Super. Ct. App. Div. Aug. 12, 2015).
The Garcias challenge the Perkasie test as incorrect in light of Am. Bank & Trust Co. of
Pennsylvania v. Lott, 490 A.2d 308 (N.J. 1985). The Garcias contend that Lott required all of the
activities surrounding a loan to occur outside of the State in order to qualify for the exemptions.
Id. at 310. They rely on the court’s excerpt of an Attorney General Opinion that states: “where
all of the activities surrounding the loan occur exclusively in the foreign jurisdiction, there would
appear to be no legal impediment to a foreign bank making loans to New Jersey residents on the
security of residential property located in the State.” Id. However, the court never wholesale
adopts the Attorney General’s Opinion and merely interprets the Opinion to state that, in the
court’s words, “New Jersey permits a foreign bank to foreclose a mortgage on New Jersey
property.” Id. Regardless, the Opinion nevertheless fails to support the Garcias’ stricter reading
of the exemptions, as it states that a business exclusively transacted outside New Jersey is
sufficient to meet the Act’s exemptions, not required. Lotts at most is neutral to the test
formulated in Perkasie; it certainly does not invalidate it.
Instead of Perkasie, the Garcias argue, Allenberg Cotton Co. v. Pittman, 419 U.S. 20
(1974), supplies the appropriate test. In Allenberg, the Supreme Court determined whether a state
statute unreasonably burdened interstate commerce based on whether the law regulated activities
that were interstate or localized. Id. at 31. A foreign corporation that enters a state to conduct a
unitary transaction is not transacting business of an intrastate character. Id. at 32–33. The
Garcias’ reliance on this holding, however, is misplaced. The Commerce Clause sets the ceiling
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for what activities a state can regulate. Thus, Allenberg merely clarifies what banking activities
New Jersey cannot regulate pursuant to the Commerce Clause, namely, unitary interstate
transactions. See Arab African Int’l Bank v. Epstein, 10 F.3d 168, 173 (3d Cir. 1993) (applying
Allenberg to determine whether the Banking Act burdened interstate commerce, not the scope of
the Act’s exemptions). It does not necessitate that the State permit, bar, or otherwise regulate
banking activities that are actually localized.
With Perkasie as the only guidance on the transactions exempted by N.J. Stat. Ann. §
17:9A-331(3)–(4), the Court will apply the test therein enunciated. See Euster v. Eagle Downs
Racing Ass’n, 677 F.2d 992, 994 (3d Cir. 1982) (“[T]he highest court of a state is the ultimate
interpreter of the state’s statutes and that a federal court is bound by its construction.”). To
determine the state where the most pivotal portions of the loan occurred, the Perkasie court
examined whether the bank advertised, solicited, or employed brokers in New Jersey; had
offices, a telephone number, or employees in New Jersey; where the loan application was
submitted, analyzed, considered, and approved; where the commitment letter was drafted; the
state license of the lendee’s attorney; the state license of the appraiser; and whether the loan was
governed by New Jersey law. 2015 WL 4742873, at *5. Here, it is undisputed that Mr. Garcia
reached out to FKB; FKB did not have any offices, telephone numbers, or employees in New
Jersey; and the loan application was submitted, analyzed, considered, and approved in
Pennsylvania. While the Garcias point out that a New Jersey appraiser evaluated the property
and the loan agreement selected New Jersey law, the majority of the factors suggest the
transaction occurred outside of New Jersey. Moreover, it is of no consequence that the closing
took place in New Jersey. The Perkasie court specifically cautioned that “[t]he location of the
closing in New Jersey does not recast the transaction as one undertaken in New Jersey.” Id. at *6.
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The Garcias also spend much time expounding upon FKB’s and BMTC’s other lending
activities in New Jersey, alleging that they have issued more than one hundred loans in one of the
State’s counties and that BMTC is involved in other foreclosure proceedings in the State.
Appellants’ Br. 22–23; Appellants’ Reply Br. 6–7. While the Garcias correctly note that such
facts are relevant to a Commerce Clause analysis under Allenberg, those facts do not bear on
whether a transaction is considered outside of the State for the purposes of the Banking Act. Lott
interpreted the Banking Act to “not prohibit a foreign bank from enforcing obligations in New
Jersey that are ‘acquired by it in the transaction of business outside of this State.’” Lott, 490 A.2d
at 310 (quoting N.J. Stat. Ann. § 17:9A-331). The exemptions thus turn on the character of the
obligation, not the bank’s activities at large. In conclusion, the Garcias are unable to distinguish
their loans from the one in Perkasie. The Court accordingly holds that summary judgment was
correctly granted in favor of BMTC and affirms the Bankruptcy Court’s order.
C. Discovery
The Garcias also argue that the Bankruptcy Court committed an abuse of discretion in
limiting discovery to 45 days and denying their subsequent requests for additional discovery
regarding the FKB officers involved in issuing their loans and other loans issued in New Jersey
by FKB and BMTC. The Court disagrees. The Garcias argue that they seek the list of FKB
officers to determine whether the officer who attended the closing falls into N.J. Admin. Code §
3:4-4.4 such that FKB and BMTC conducted business under the Banking Act. However, this
issue is irrelevant because the Garcias’ loan qualifies for the exemptions to the general
prohibition on conducting business. The other loans issued by FKB and BMTC in New Jersey
are also irrelevant to establishing whether this loan was transacted inside the State, as discussed
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above. Therefore, the Court finds no abuse of discretion in the Bankruptcy Court’s denial of
further discovery.
III.
CONCLUSION
In light of the foregoing reasons, the Bankruptcy Court’s Order is AFFIRMED.
Dated:
12/8/2016
s/ Robert B. Kugler
ROBERT B. KUGLER
United State District Judge
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