Court Opinion

ID: 9751731
Source: CourtListenerOpinion
Date Created: 2023-08-28 16:56:04.959045+00
Date Added: 2024-06-11T07:26:58.174776
License: Public Domain

SHEBELL, P.J.A.D.
(Temporarily Assigned), concurring.
I join in the opinion of the court insofar as it would allow recovery on the surety bonds beyond that permitted by the trial judge, who adopted the special master’s recommendation that the lender’s claims for post-termination defaults be barred. I also agree that the return of unearned premiums is not required in these circumstances.2
I, nonetheless, write to express my accord with the determination of the Appellate Division that “[t]he clear language of the Bonds indicates that Integrity was liable at the time of execution and delivery for the full amount under the Bonds.” Integrity, supra, 281 N.J.Super, at 380, 657 A.2d 902. That amount was to be reduced only if the investors made their scheduled payments under the notes. Thus, at the time of Integrity’s liquidation, the outstanding balance due on the notes was an absolute obligation because of the default of the investors.
As Integrity (surety) breached its contract with Credit Lyonnais (lender) by filing for and receiving an Order of Liquidation, I find *142no impediment to Credit Lyonnais pursuing a claim for the entire amount of default under the unambiguous language of the bonds. The attorney for the Liquidator made it a point at oral argument to stress that the terms of the bonds were “negotiated for” and that, therefore, the language contained in the agreements’ notice provisions should be applied according to its literal terms. Because these are negotiated agreements, there is no reason to disregard the prominent language of the bonds which state that Integrity as surety “is held and firmly bound ... in the amount of [full amount of bond] for the payment whereof Surety binds itself by, and in accordance with, the conditions hereof.”
The notice provision upon which the Liquidator relies for support of his contention that the absolute obligation of the surety at any point in time is only the amount of each installment payment as it becomes due and not paid, reads as follows:
1. (a) Should any investor fail to make a required payment under a Note, exclusive of any amount due by virtue of Lender’s right of acceleration, when same shall be due (the Payment Due Date), Lender shall notify Surety of such failure within thirty (30) days of the Payment Due Date.
(b) ...
(c) The Notice, signed by an officer of Lender, shall contain the following
information:____
(iv) Amount of Payment Due and not Paid (exclusive of any accelerated balance) ...
(d) Notice sent by Lender as above set forth shall constitute Lender’s claim and demand for payment, together with interest from date of default, hereunder and Surety shall be obligated to pay such amount to lender; provided, however, Surety shall have the right, at its sole option, to require Lender to accelerate the entire balance due under the Note(s), in which case the amount due from Surety shall be such amount, as accelerated....
2. ...
3. The obligation of Surety hereunder is primary, direct and unconditional, except as set forth herein____
4. The Premium hereunder shall be payable upon the execution and delivery of this Bond and shall be fully earned and non-refundable fi-om that time.
5. ...
6. ...
7. Notice by Lender with respect to any one default by an Investor shall not exhaust Lender’s rights against Surety, and unless Surety shall have required Lender to accelerate a Note and shall have paid to Lender the full amount of the *143unpaid balance thereof (if accelerated) with accrued interest, Lender shall have the right to make successive claims against Surety on each succeeding due date of an installment under a Note____
[Emphasis added.]
It is unnecessary to inquire as to whether either Integrity or Credit Lyonnais actually accelerated the entire unpaid balance due from the debtors. As to both surety and lender, the maxim that “[ejquity regards and treats as done what in good conscience ought to be done” is applicable. See Martindell v. Fiduciary Counsel, Inc., 133 N.J.Eq. 408, 413, 30 A.2d 281 (E. & A.1943). Further, acceleration would as to both Integrity and Credit Lyonnais be to their advantage and not their detriment as suggested by the dissent. Post at 149-150, 685 A.2d at 1294. The benefit to Credit Lyonnais is direct and readily apparent. The benefit of acceleration to Integrity, it being in liquidation, arises by virtue of the Liquidator’s ability to then proceed against the reinsurers for the full balance due on the notes, thereby aiding all of Integrity’s creditors.
Under the terms of the agreements, the surety had “the right, at its sole option, to require Lender to accelerate the entire balance due under the Note(s), in which case the amount due from Surety shall be such amount as accelerated____” As noted by Justice Garibaldi, Integrity’s liquidation constituted a breach of the surety contract. Ante at 135, 685 A.2d at 1290. That breach was not capable of being remedied. In these circumstances, if indeed it is necessary, there is no reason why it should not be presumed that Integrity, as surety, exercised its option to accelerate the entire balance due on the underlying notes, which were clearly in default at that time. See Schorr 5¢ to $1.00 Stores, Inc. v. Jacob Ellis Realties, Inc., 131 N.J.Eq. 499, 26 A.2d 65 (Ch.1942). The agreements are clear that upon acceleration “the amount due from Surety shall be such amount, as accelerated.” I concede that the Appellate Division’s reliance on the principle of judicial estoppel was misplaced; nonetheless, Integrity’s acts of advancing litigation on its own behalf for the entire amounts due from *144debtors reflects that Integrity itself considered the entire balances due pursuant to its right of acceleration.
Further, the fact that Integrity, as surety, had the option to require Credit Lyonnais, the lender, to accelerate the balance due on the notes does not detract from the right of Credit Lyonnais to accelerate the balance due from the debtors upon default. The exercise of reasonable prudence by a lending institution, considering its duty to its own investors, would dictate that Credit Lyonnais accelerate the balances due from the debtors, if not upon their default, then at least upon Integrity’s filing for liquidation. Therefore, this court may consider that which should have been done as done. Martindell, supra, 133 N.J.Eq. at 413, 30 A.2d 281. Further, since Integrity provided in the surety agreements that the up-front premium paid to it by Credit Lyonnais “shall be fully earned and non-refundable from [the time of execution and delivery of the Bond],” Integrity’s others creditors may not be heard to complain that Credit Lyonnais is receiving favored treatment from the court.
The Liquidator’s concession that the risk of default renders the notes uninsurable has been viewed by the Court as a basis to render Integrity liable for an amount equal to the face value of the bonds less payments already made by Integrity and the debtors. However, the court shifts the burden to Credit Lyonnais to prove that it cannot obtain payment under the notes executed by the investors, notwithstanding the fact that the very purpose of obtaining the surety bonds from Integrity was to avoid this burden. In a footnote the Court points out that the Appellate Division observed that because of the availability of reinsurance, a decision in favor of Credit Lyonnais would actually help Integrity’s other policyholders (citing 281 N.J.Super. at 381-82, 657 A.2d 902). Ante at 139, 685 A.2d at 1292. While the Appellate Division’s observation may be perfectly valid with respect to a determination that Integrity is liable for its absolute obligation on the surety bonds, that conclusion is not so clear if, in fact, Integrity’s obligation is held to be based on the theory that the damages *145awarded are consequential because of the lender’s inability to obtain alternate insurance. These two complications are unnecessary and avoidable as Integrity’s obligation clearly flows from its contractual liability under the surety agreements.
Therefore, while I join in the decision to affirm the judgment of the Appellate Division, I do so on a different basis than that set forth in the Court’s opinion.

 The Appellate Division opinion inadvertently states that “the Chancery Division judge's finding that Integrity is entitled to a return of unearned premiums is reversed because allowance of such would lead to double recovery under Credit Lyonnais's Bonds.” Under the Chancery Division's findings it is Credit Lyonnais that would be entitled to the return of the unearned premiums. Liquidation of Integrity, 281 NJ.Super. 364, 382-83, 657 A.2d 902 (App.Div.1995).