Introduction

This case explores the impact of New Jersey’s entire controversy doctrine in a foreclosure action involving counterclaims between multiple parties. 279 Veterans LLC v. Vill. Green Assocs., LLC, No. A-0606-22, 2024 N.J. Super. Unpub. LEXIS 511 (App. Div. Mar. 27, 2024).

Background

The 1999 Purchase and 2008 Mortgage

In May 2008, Defendant Village Green Associates LLC (“Village Green”) borrowed $700,000 from Plaintiffs (“279 Veterans”) and Seabridge. 279 Veterans took out a mortgage with Village Green and signed a note in favor of Seabridge related to a shopping center Village Green purchased nine years prior. The mortgage was recorded three years later, in 2011. Harold Trieger owned both 279 Veterans and Seabridge, while Joseph Grunwald owned Village Green.

The 2013 Ceasing of Payments

Interest-only payments continued on the note until Village Green stopped making payments in June 2013. Soon after, 279 Veterans assigned the note to Fidelity Mortgage, LLC (“Fidelity”), which Trieger also owned. Fidelity sent a demand letter to Village Green seeking repayment of $787,996.00 due on the loan. A foreclosure action followed, which was dismissed without prejudice after Fidelity learned of potential environmental issues at the shopping center.

The 2015 & 2016 Lawsuits

What followed was a suit by Village Green in 2015, alleging that the mortgage had not actually been signed by its principal, Grunwald, and that, as a result, it was null and void. 279 Veterans and Fidelity hired handwriting experts, who showed that Grunwald actually signed the mortgage. This suit was subsequently dismissed with prejudice via a stipulation of the parties.

Further, in 2016, a third party sued Village Green “seeking a declaration that he was a fifty-percent owner in properties acquired by the defendant and a share of the profits for properties sold by defendant” due to an oral partnership agreement. As part of the Action, the third party contested the validity of the mortgage.  This case was dismissed with prejudice after an eight-day trial.

The 2020 Action

Then, in March 2020, Village Green recorded satisfaction of the mortgage, which was dated February 8, 2014, allegedly signed by Grunwald, the father-in-law of Paul Zicherman, on behalf of 279 Veterans, which stated that the mortgage was paid and consented to a mortgage discharge. 279 Veterans and Fidelity discovered the recorded satisfaction and filed suit in June 2020, seeking a declaration that the satisfaction was fraudulent and seeking to remove it. Village Green answered, counterclaimed, and filed a third-party complaint “seeking a declaration that the satisfaction was valid and that the mortgage was no longer a valid, binding debt.”

279 Veterans and Fidelity moved for summary judgment, arguing that they were entitled to a declaratory judgment because the satisfaction was invalid and that the entire controversy doctrine barred Village Green’s counterclaims and third-party claims.  Village Green cross-moved based on the Cancellation.

The Trial Court granted 279 Veterans and Fidelity’s motion for summary judgment and denied Village Green's other claims.  Among other rulings,  while facts were introduced to show the mortgage may have been assigned to Zicherman in 2009, Plaintiffs submitted “true copies of the [n]ote and [m]ortgage assignments from [279] Veterans to Fidelity dated August 7, 2013.”  The judge, therefore, found that Zicherman did not have the authority to discharge the mortgage on behalf of 279 Veterans in February 2014 at the time of the Cancellation. Fidelity held the mortgage at that time. Finally, the trial court held that the entire controversy doctrine barred Village Green from asserting the Satisfaction as a defense as it failed to raise it in the 2015 Action.  In contrast, 279 Veterans and Fidelity were within their rights to raise the entire controversy as they did not discover the Satisfaction until 2020.

Appeal

On appeal, Village Green argued that there were material issues of fact that precluded the trial court from granting summary judgment in favor of 279 Veterans and Fidelity and that the entire controversy doctrine did not bar Village Green from arguing that the Satisfaction discharged the mortgage. The Court rejected these arguments.

The Court said that the burden “of disputing the validity of the mortgage was on defendant but defendant failed to produce credible evidence to refute the validity of the mortgage. Moreover, there is no evidence that Zicherman had authority to execute the Satisfaction in 2014. Furthermore, the Satisfaction was not produced in the 2015 Action nor was it timely recorded.”

In that vein, the Court began by noting the entire controversy doctrine  is “an equitable doctrine whose application is left to judicial discretion based on the factual circumstances of individual cases.” Bank Leumi USA v. Kloss, 243 N.J. 218, 227 (2020) (quoting Dimitrakopoulos v. Borrus, Goldin, Foley, Vignuolo, Hyman & Stahl, PC, 237 N.J. 91, 114 (2019)). The doctrine obligates a party to “assert all claims known to them that stem from the same transactional facts, even those against different parties.” See Joel v. Morrocco, 147 N.J. 546, 548 (1997). “In determining whether successive claims constitute one controversy for purposes of the entire controversy doctrine, ‘the central consideration is whether the claims . . . arise from related facts or the same transaction or series of transactions.’ Ibid. It is the factual context ‘giving rise to the controversy itself, rather than a commonality of claims, issues or parties, that triggers the requirement of joinder to create a cohesive and complete litigation.’” Mystic Isle Dev. Corp. v. Perskie & Nehmad, 142 N.J. 310, 323 (1995).

Here, the Court found that Village Green should have known about the Satisfaction by the time of the 2015 and 2016 Actions and raised it in those actions, but it did not. Indeed, the Appellate Division noted Grunwald had the opportunity to testify at trial in the 2016 Action about the Satisfaction and never did.  As such, Village Green was barred from raising the Satisfaction as a defense to the foreclosure.

After the entire controversy doctrine barred Village Green’s satisfaction defense, the request for declaratory relief was essentially unopposed as Village Green produced no evidence or documentary evidence challenging Fidelity’s right to foreclose on its mortgage.

Takeaways

This case highlights that the entire controversy doctrine is an equitable principle that requires parties to assert all claims known to them arising from the same transactional facts, even against different parties involved.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Thomas Persico at tpersico@riker.com, Kevin Hakansson at khakansson@riker.com, or Kori Pruett at kpruett@riker.com.