Court Opinion

ID: 5117979
Source: CourtListenerOpinion
Date Created: 2021-10-13 14:08:20.058795+00
Date Added: 2024-06-11T08:22:05.095461
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
     internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

                                                        SUPERIOR COURT OF NEW JERSEY
                                                        APPELLATE DIVISION
                                                        DOCKET NO. A-0469-19

ERNEST BOCK, LLC,

          Plaintiff-Respondent,

v.

PAUL STEELMAN and
MARYANN STEELMAN,

          Defendants-Appellants/
          Third-Party Plaintiffs,

v.

ANTHONY J. CATANOSO,
CHRISTINE CATANOSO,
CHARLES T. CATANOSO, JR.,
NINA CATANOSO, WILLIAM G.
CATANOSO, TINA CATANOSO,
EDWARD J. OLWELL,
ROBERTA NEVIN,
CAPE ENTERTAINMENT
ASSOCIATES, LLC, THE
ROCKET, LLC, HI TECH
THRILLS, LLC, ATLANTIC PIER
AMUSEMENTS, INC., and STEEL
PIER ASSOCIATES, LLC,

          Third-Party Defendants-
     Respondents.
______________________________

             Argued September 20, 2021 – Decided October 13, 2021

             Before Judges Sabatino, Mayer, and Natali.

             On appeal from the Superior Court of New Jersey, Law
             Division, Atlantic County, Docket No. L-2294-15.

             Thomas S. McNamara argued the cause for appellants
             (Indik, McNamara & Dallarda, PC, and Law Offices of
             Peter J. Scuderi, Esq., attorneys; Thomas S. McNamara
             and Peter J. Scuderi (Law Office of Peter J. Scuderi) of
             the Pennsylvania bar, admitted pro hac vice, on the
             briefs).

             John F. Palladino argued the cause for respondent
             (Hankin Sandman Palladino Weintrob & Bell,
             attorneys; John F. Palladino, Evan M. Labov, and Sean
             P. Higgins, on the brief).

PER CURIAM

      This appeal stems from an order granting summary judgment to a lender

on commercial loan guaranties of approximately $12 million, and various other

associated rulings of the trial court.

      For the reasons that follow, we conclude summary judgment was

prematurely granted before depositions of key witnesses and other pertinent

discovery were completed. In addition, the trial court did not afford defendants

a fair opportunity to litigate their contentions that the plaintiff lender breached

                                                                             A-0469-19
                                         2
the implied covenant of good faith and fair dealing. Specifically, defendants

allege that the plaintiff lender engaged in transactions for its own benefit, which

impeded the flow of revenues that might otherwise have been used to pay down

the loan balances. Consistent with case law, including National Westminster

Bank N.J. v. Lomker, we conclude the parties' guaranty agreements "do not

expressly waive the defenses of bad faith . . . [.]" 277 N.J. Super. 491, 499 (App.

Div. 1994). We likewise revive defendants' claims that the lender tortiously

interfered with their reasonable expectations of economic advantage.

      We consequently vacate the entry of summary judgment and remand for

the completion of discovery, without prejudice to further substantive motion

practice being pursued thereafter.

                                        I.

       The parties are surely familiar with the complicated factual and

procedural background of this case, and there is no need for this opinion to

discuss those details comprehensively.       In addition, we are mindful that

discovery is ongoing and that additional or competing facts may emerge. We

therefore precede our analysis with the following abbreviated synopsis.

                                                                             A-0469-19
                                        3
      Defendant Paul Steelman, a developer from Las Vegas, was a member of

Steel Pier Associates, LLC ("SPA"), an entity that owned real estate known as

the Steel Pier ("the Pier") on the Atlantic City boardwalk.

      Steelman and his wife Maryann (the "Steelmans") guaranteed two loans

on behalf of SPA. The loans were extended to SPA and a related entity, Cape

Entertainment Associates, LLC ("Cape"), by plaintiff Ernest Bock, LLC

("Bock"), a company which did construction work on the Pier. 1 The Steelmans

had non-controlling ownership interests in both SPA and Cape.

      SPA defaulted on the loans. Bock did not pursue foreclosure on the

property or sue SPA. Instead, Bock sought payment from the Steelmans as

guarantors on the loans. After the Steelmans declined to pay the amounts due,

Bock filed a complaint against them in October 2015 for breach of the guaranty

agreements.

      In May 2016, the Steelmans filed an amended answer and affirmative

defenses to Bock's complaint. In that same pleading, the Steelmans asserted a

counterclaim against Bock, contending Bock breached the implied covenant of

good faith and fair dealing and also tortiously interfered with their prospective

1
  We shall refer to the LLC as "Bock", unless we specify that we are referring
to Thomas Bock, the President of the LLC.
                                                                           A-0469-19
                                        4
economic advantage.       The Steelmans simultaneously filed a third-party

complaint against Anthony T. Catanoso, the managing principal of SPA, and

other parties,2 making parallel allegations of engaging in improper conduct with

Bock.     Anthony Catanoso, a number of his relatives (collectively "the

Catanosos"), and several other third-party defendants are also co-guarantors of

the loans.

        The May 2016 version of the counterclaim and third-party complaint

focused upon an amusement ride on the boardwalk known as the Wheel.

Defendants charged that "[t]he Catanosos have denied Steelman the opportunity

to share in the financial upside projected to be derived from the Wheel, opting

instead to take the business opportunity from the Primary Owners of [the] Pier

and enter into a secret agreement with Bock for development of the Wheel on

adjacent land . . . [.]" That conduct, defendants alleged, "depriv[ed] the Primary

Owners and Steelman the opportunity to gain from the potential financial upside

projected to be realized from the Wheel."

2
  The other third-party defendants are Christine Catanoso, Charles T. Catanoso,
Jr., Nina Catanoso, William G. Catanoso, Tina Catanoso, Edward J. Olwell,
Roberta Nevin, Cape, The Rocket, L.L.C., High Tech Thrills, L.L.C., Atlantic
Pier Amusements, Inc., and SPA. None of them are participating in this appeal.
                                                                            A-0469-19
                                        5
      Over a year later, in August 2017, Bock moved for summary judgment

against defendants, seeking a final judgment on the outstanding loans they had

co-guaranteed.   Defendants opposed the motion and also cross-moved for

various forms of relief. In particular, defendants moved for leave to amend their

counterclaim and third-party complaint by amplifying their allegations of bad

faith, unfair dealing, and tortious interference. Those amplified allegations

specified improper conduct in connection with: project funding in August 2011

and September 2011; loans from the Casino Redevelopment Authority

("CRDA") in 2012 and 2014; the Wheel; and alleged mismanagement of SPA

that caused it to become undercapitalized. Again, defendants asserted that Bock,

aided by the third-party defendants, breached the covenant of good faith and fair

dealing. These allegations continued a theme already previewed in defendants'

counterclaim over a year earlier, and surely were no surprise to Bock.

      Defendants further alleged in their proposed amended pleading that Bock

induced or conspired with the Catanosos "to enter into an undisclosed agreement

regarding the purchase and/or development of the Wheel[,] [and] induc[ed] SPA

to make loans in the amount of $3.2 million" to Domeinac, LLC, an entity

controlled by Anthony Catanoso, "when those funds could have and should have

been used to satisfy the Bock Funding" to SPA.

                                                                           A-0469-19
                                       6
      In addition, defendants alleged Bock directed other transactions that were

"designed to impair the Companies' ability to borrow without Tom Bock's

consent and/or involvement[.]" They alleged Bock diverted revenues that could

have been used to repay the SPA loans, and instead were used to fund other

ventures of his or entities under his control "for the benefit of DOMEINAC's

development of the Wheel." According to defendants, these transactions and

activities tortiously interfered with their prospective economic advantage.

      In the third count of the proposed amended counterclaim, defendants

requested that the court "equitably recharacterize" the SPA loans as a capital

contribution to the enterprise. Defendants also sought leave to plead claims (1)

for indemnification and contribution, and (2) alleging the fraudulent transfer of

funds. Defendants further sought the appointment of a receiver or a statutory

custodian for SPA and Cape.

      In opposing summary judgment on the guaranties, defendants expressly

argued under Rule 4:46 that such final relief in Bock's favor was inappropriate

because discovery was incomplete. Defendants maintained in this regard that

Bock had not turned over certain relevant financial records that could aid them

in opposing summary judgment. They further urged they needed the depositions

                                                                              A-0469-19
                                       7
of Thomas Bock and the Catanosos before the summary judgment motion could

be fairly adjudicated.

        After hearing oral argument, the trial court rejected defendants' arguments

and granted summary judgment in favor of Bock on the unpaid notes. The court

issued two companion written opinions conveying its reasons on September 17,

2018.

        The trial court was unpersuaded that the loans should be recharacterized

as capital contributions.     Although not explicitly saying so in its written

opinions, the court appeared to adopt Bock's position that the terms of the

guaranty agreements permitted Bock to pursue defendants as guarantors of the

loans without first seeking payment from the borrowers or the other co -

guarantors. The court also seemingly agreed with Bock that, under the language

of the guaranties, defendants waived the right to object to the lender foregoing

or impairing the collateral on the notes.

        The court did not allow defendants leave to amend their counterclaims. In

this regard, the court stated Bock "has sufficiently established that there is no

genuine issue of material fact for the above stated reasons in [Bock's] Reply [.]"

As the court wrote, the counterclaims for breach of the implied covenant of good

faith and fair dealing and tortious interference must be dismissed "because the

                                                                             A-0469-19
                                         8
[c]ourt finds that the money was a loan rather than equitable funding." The court

added that the breach of implied covenant claims were not tenable because the

loan notes were from SPA and Cape to Bock, and consequently "there are no

legal obligations between the individual members of the two entities to each

other individually."

      Pursuant to Rule 4:42-2 and Rule 4:59, the court certified its summary

judgment order as final for purposes of appeal, even though other issues in the

case (such as the third-party complaint) had yet to be adjudicated. The amount

of the final judgment, inclusive of interest as of the date of its entry, was

$11,831,365.32. 3

      Defendants moved for reconsideration, which the court denied in another

set of written opinions on March 19, 2019. The court found it had already

sufficiently addressed and dispensed with defendants' arguments, and there were

no grounds for revisiting or altering its decisions.

      Defendants now appeal. A central aspect of their arguments is that the

trial court prematurely granted summary judgment before discovery was

completed.    In addition, they argue the trial court's reasoning was flawed,

3
  We presume post-judgment interest since that time has substantially increased
the present amount due.
                                                                           A-0469-19
                                         9
particularly with respect to the dismissal of their claims of breach of the implied

covenant and tortious interference.

      Bock, meanwhile, first argues at length in its brief that defendants' appeal

is procedurally defective for a number of reasons. As to the merits, Bock

maintains there are ample grounds to uphold the entry of summary judgment

against defendants as co-guarantors of the loans.

      Among other things, Bock alleges defendants waived through the guaranty

agreements any right to complain that Bock elected not to sue the primary

obligors and pursue relief from them instead. Bock emphasizes that the guaranty

documents contain a waiver of the right to assert impairment of the collateral

for the loan, i.e., the Pier. Moreover, Bock contends that since SPA received

the promised benefits of the loan agreements in the form of the borrowed funds,

there is no basis for relief under alternative theories of lender liability.

                                         II.

      Before we delve into the substance of the issues, we briefly address Bock's

procedural arguments, none of which are persuasive.

      In particular, Bock argues defendants' appeal was filed too late and should

be dismissed as untimely. Alternatively, Bock asserts that defendants have

improperly challenged interlocutory orders that were not sufficiently identified

                                                                               A-0469-19
                                        10
in their Notice of Appeal and appellate Case Information Statement ("CIS").4

We reject those contentions.

      As we noted earlier, the trial court certified the summary judgment order

on the loans as final under the special jurisdictional provision in Rule 4:42-2.

That Rule provides:

            If an order would be subject to process to enforce a
            judgment pursuant to R. 4:59 if it were final and if the
            trial court certifies that there is no just reason for delay
            of such enforcement, the trial court may direct the entry
            of final judgment upon fewer than all the claims as to
            all parties, but only in the following circumstances: (1)
            upon a complete adjudication of a separate claim; or (2)
            upon complete adjudication of all the rights and
            liabilities asserted in the litigation as to any party; or
            (3) where a partial summary judgment or other order
            for payment of part of a claim is awarded.

            [R. 4:42-2.]

To be certified as final under Rule 4:42-2, an order must fall within one of the

Rule's sub-parts and must also be subject to process to enforce a judgment

pursuant to Rule 4:59. Janicky v. Point Bay Fuel, Inc., 396 N.J. Super. 545, 550

(App. Div. 2007) (citations omitted). Rule 4:59, in turn, requires a money

judgment that is enforceable through ordinary collection procedures.         See

4
  Bock did not file a cross-appeal, but reiterates arguments made in its January
2020 motion to dismiss the appeal and strike the amended CIS. We denied that
motion, and continue to maintain that disposition here.
                                                                           A-0469-19
                                       11
Newstead Blrds., Inc. v. First Merch. Nat'l Bank, 146 N.J. Super. 295, 296 (App.

Div. 1977) (holding that a judgment or order will not "constitute a lien or be

otherwise susceptible to execution unless final and for a sum certain[]")

(emphasis added).

      Here, the court certified as final its grant of summary judgment on the

unpaid loans.    That ruling constituted the adjudication of a separate claim

pursuant to Rule 4:42-2, i.e., defendants' breach of the guaranty agreements. In

addition, the money judgment—for a sum of nearly $12 million—was subject to

enforcement pursuant to Rule 4:59. This is true even though defendants filed a

third-party complaint against their co-guarantors, because according to the

guaranty agreements, each signatory was jointly and severally liable. Thus, any

determination the court eventually makes regarding the third-party complaint

would presumably not affect defendants' own liability pursuant to the guaranty

agreements.

      We are satisfied the court's grant of summary judgment was properly

certified as final and was appealable pursuant to Rule 4:42-2. The orders on

appeal include the court's grant of summary judgment, the determination making

that order final, and the denial of the motions for reconsideration of those orders.

                                                                              A-0469-19
                                        12
      Bock argues defendants are improperly going beyond that and appealing

interlocutory orders, including: (1) the September 17, 2018 order granting

summary judgment; (2) the September 17, 2018 order permitting Bock to amend

its pleading to add a count for fraud, and denying defendants' request to amend

their third-party complaint; (3) the March 19, 2019 order denying

reconsideration of the grant of summary judgment and granting Bock's motion

to enter final judgment; and (4) the March 19, 2019 order denying

reconsideration of the court's denial of defendants' motion to amend their third-

party complaint.

      As we have already noted, the September 2018 order granting summary

judgment and the March 2019 order denying reconsideration of the grant of

summary judgment, making it final, are properly before us on appeal in

compliance with Rule 4:42-2.

      The trial court's decisions dismissing the counterclaim 5 and denying

defendants' requests to amend it, as well as its denial of leave to amend the third-

5
 Part of the confusion here results from the fact that the same order that denied
defendants' request to amend their third-party complaint does not mention the
counterclaim. There is no written order that explicitly dismisses the
counterclaim or denies defendants' request to amend it. However, those rulings
as to the counterclaim are expressly stated in the court's September 17, 2018
written opinion, granting Bock's motion for summary judgment.

                                                                              A-0469-19
                                        13
party complaint are enmeshed with its decision to grant Bock summary judgment

on the loan guaranties. As we will discuss, infra, if defendants prove that Bock

or the third-party defendants improperly impeded the ability of the borrowers to

pay the loan debt, that improper conduct might excuse or justify defendants'

non-payment of the guaranties. The issues are so closely connected that the

present appeal fairly and logically should encompass the rulings about the

counterclaim and third-party complaint. And, as we noted above, we decline to

rescind our previous order denying Bock's motion to strike appellants'

amendment of the CIS form. Indeed, the original CIS form expressly mentions

the counterclaim.

      Bock further argues that defendants' appeal was untimely because it

should have been filed within forty-five days after the entry of the court's final

order of judgment on March 19, 2019. See R. 2:4-1(a). This timing argument

has no merit. Defendants timely filed their motion for reconsideration on April

8, 2019, nineteen days after the entry of the March 19 order. That action began

to toll the period for filing the appeal. See R. 2:4-3(b). The court denied

reconsideration on September 10, 2019, and defendants filed their appeal twenty

days later on October 1, 2019.

                                                                            A-0469-19
                                       14
      When the grounds for a motion judge's ruling on summary judgment and

reconsideration are essentially the same, an appeal solely from the denial of

reconsideration may be sufficient for appellate review of the merits of the case.

Fusco v. Bd. of Educ. of City of Newark, 349 N.J. Super. 455, 461 (App. Div.

2002). This is especially true when the CIS makes clear that the court's order

on reconsideration implicates the substantive issues in the underlying ruling.

Ibid.; accord Tara Enters., Inc. v. Daribar Mgmt. Corp., 369 N.J. Super. 45, 60

(App. Div. 2004). Also, "in the interests of justice," an order not specifically

listed on the CIS may be considered on appeal. Innes v. Marzano-Lesnevich,

435 N.J. Super. 198, 211 n.6 (App. Div. 2014), aff'd as modified, 224 N.J. 584

(2016).

      Taking into account the tolling period, defendants' filing of their appeal

on October 1, 2019 occurred a total of thirty-nine "countable" days after the

initial March 19 orders, and thus within the forty-five-day time frame required

by the Rules. They later amended their CIS to clarify exactly which of the orders

of March 19, 2019 were on appeal. It was clear from the original notice of

appeal and CIS that defendants were appealing the rulings underlying the court's

March 19, 2019 denial of reconsideration of the grant of summary judgment and

the entry of final judgment.    No manifest prejudice resulted to Bock from

                                                                           A-0469-19
                                      15
defendants' amending their CIS, because their notice of appeal was timely and

stated that the March 2019 order denying reconsideration and entering final

judgment was on appeal. 6

      In sum, we reject Bock's procedural arguments and therefore proceed to

the merits of the issues.

                                       III.

      The main issue before us is whether the trial court improvidently granted

summary judgment to Bock and enforced defendants' guaranties, without first

allowing defendants to complete depositions and other discovery. Part and

parcel of that determination is whether defendants' non-payment of the

guaranties could be justified as a matter of law because of alleged wrongful

conduct by Bock or the third-party defendants that impeded the ability of the

primary borrowers to pay the loan amounts.

      Bock relies heavily on the fact that the guaranty agreements contain

language granting it full discretion on whether to foreclose on the collateral,

which the guarantors waived any right to oppose. In this regard, the guaranty

agreements stated, in pertinent part, as follows:

6
  Foreshadowing a main argument in their appellate briefs, defendants' notice of
appeal expressly stated that the court's September 2018 grant of summary
judgment was premature because discovery was not completed.
                                                                          A-0469-19
                                       16
            Guaranty Absolute and Unconditional. The liability of
            the Guarantor under this Guaranty is absolute and
            unconditional irrespective of:

            1. any lack of validity or enforceability of any of the
            Loan Documents;

            2. any change in the time, manner, place or amount of
            payment or in any other term of all or any of the
            Indebtedness, or any other amendment or waiver of or
            any consent to departure from any of the terms of the
            Indebtedness;

            3. any exchange, release or non-perfection of any
            collateral or lien securing all or any part of the
            Indebtedness, which exchange, release or non-
            perfection the Guarantor expressly agrees will not be
            deemed an unjustifiable impairment of the collateral;

            4. any release or amendment or waiver of or consent to
            departure from any other guaranty, for all or any part of
            the Indebtedness;

            5. any settlement or compromise with any Borrower or
            any other person relating to the Indebtedness; or

            6. any other circumstances which might otherwise
            constitute a defense available to, or a discharge of, any
            Borrower, any guarantor or other obligor in respect of
            the Indebtedness or the Guarantor in respect of this
            Guaranty.

      In addition, the guaranty agreements included language that waived the

guarantors' defense of impairment of collateral.         The agreements further

authorized Bock to release its interest in the collateral:

                                                                          A-0469-19
                                        17
            Waiver. . . . . This Guaranty will not be affected by any
            surrender, exchange, acceptance, compromise or
            release by the Lender of any other party, or any other
            guaranty or any security held by it for any of the
            Obligations, by any failure of the Lender to take any
            steps to perfect or maintain its lien or security interest
            in or to preserve its rights to any security or other
            collateral for any of the Obligations or any guaranty, or
            by any irregularity, unenforceability or invalidity of
            any of the Obligations or any part thereof or any
            security or other guaranty thereof. The Guarantor's
            obligations hereunder shall not be affected, modified or
            impaired by any counterclaim, set-off, deduction or
            defense based upon any claim the Guarantor may have
            against the Borrower or the Lender, except payment or
            performance of the Obligations.

The agreement continued:

            The Guarantor hereby waives . . . . (f) any requirement
            that the Lender protect, secure, perfect or insure any
            security interest or lien or any property subject thereto
            or exhaust any right or take any action against the
            Borrower, the Guarantor, any other person or any
            collateral; . . .

            (emphasis added).

      Finally, the guaranty agreements included an indemnity clause, whereby

the guarantors agreed to indemnify the lender (Bock) from any claims and

damages asserted against the lender, so long as those claims were not "solely

attributable" to the lender's "gross negligence or willful misconduct."

                                                                          A-0469-19
                                       18
      Nevertheless, the guaranty agreements contained no express language

waiving the guarantors' ability to argue that their payment obligations are

excused or diminished by proof of a breach of the implied covenant of good

faith and fair dealing. This is a critically important omission.

      As this court held in Lomker, 277 N.J. at 496–97:

            Every contract contains an implied covenant of good
            faith and fair dealing. Onderdonk v. Presbyterian
            Homes of N.J., 85 N.J. 171, 182 (1981); Palisades
            Properties Inc. v. Brunetti, 44 N.J. 117, 130 (1965);
            N.J.S.A. 12A:1–203. Good faith is defined by the
            Uniform Commercial Code as "honesty in fact in the
            conduct or transaction concerned." N.J.S.A. 12A:1–
            201(19). In the context of commercial loans, we have
            recently recognized that this good faith requirement
            does not impose upon a lender obligations that alter the
            terms of its deal or preclude it from exercising its
            bargained-for rights. Glenfed Financial Corp., etc. v.
            Penick Corp., et al., 276 N.J. Super. 163, 175 (App.
            Div. 1994) (lender's bad faith or lack of "honesty in
            fact" which would constitute a viable debtor's defense
            does not arise from lender's refusal to exercise greater
            forbearance).    But a debtor may defend against
            enforcement of lender's rights where the lender has
            engaged in bad faith, misconduct or the like . See
            Ramapo Bank v. Bechtel, 224 N.J. Super. 191, 198
            (App.Div.1988) (possibility of a concealed pre-
            transaction agreement not to pursue a co-guarantor in
            the event of default sufficient to overcome lender's
            motion for summary judgment).

                   ....

                                                                       A-0469-19
                                       19
            Related to this obligation is the requirement that a
            lender not "unjustifiably impair" any collateral.
            N.J.S.A. 12A:3–606. See Langeveld v. L.R.Z.H.
            Corporation, 74 N.J. 45, 50 (1977); Lenape State Bank
            v. Winslow Corp., [216 N.J. Super. 115, 124–25 (App.
            Div. 1987)]. Equitable in nature and characterized as
            "probably the most important provision in the Code to
            the surety [or guarantor]," the defense of impairment of
            collateral is available to a guarantor just as much as to
            the debtor. Langeveld, [] 74 N.J. at 51-52. No less can
            be said for the defenses of lender bad faith and
            misconduct.

            [Id. at 496–97 (emphasis added).]

      In Lomker, the lender sued the guarantor of a real estate loan because the

debtor defaulted. 277 N.J. Super. at 493-95. The guarantor argued the lender

engaged in bad faith with respect to the collateral. Ibid. The alleged bad faith

consisted of the lender leaking information to a potential buyer that the bank

would soon be foreclosing on the collateral property. Ibid. That leak resulted

in the sale not going through, but the buyer ultimately purchased the collateral

property from the lender for a price below market value. Ibid.

      In Lomker, we reversed the trial court's grant of summary judgment on

the guarantor's claim that the lender had violated the implied covenant of good

faith and fair dealing. We found no waiver of that claim had occurred. We

instructed there must be "unequivocal language" in the contract to effectuate a

valid waiver of the defense of impairment of collateral, even when the language

                                                                          A-0469-19
                                      20
of the guaranties gave "virtually unlimited power to [the lender] to dispose of

and deal with the collateral." Id. at 497-98. In this regard, we cited Langeveld

v. L.R.Z.H. Corp., 74 N.J. 45, 53-54 (1977), for the proposition that the "right

[to the defense of impairment of collateral] does not originate in contract, and []

cannot lightly be destroyed by contract." Id. at 498.

      Most importantly for purposes of the present case, we extended our

holding in Lomker regarding the impairment-of-collateral defense to any

defense of "bad faith and other misconduct," stating that "[i]n order to waive

those lender liability defenses, a guaranty must do so expressly."            Ibid.

(emphasis added).     We noted "this result logically flows from the maxim

strictissimi juris (according to strict law) that applies to guaranties. Max v.

Schlenger, 109 N.J.L. 298, 301 (E. & A. 1932)." We added that "a guarantor

cannot be held liable beyond the strict terms of the guaranty." Ibid. (citations

omitted).

      Consistent with these principles, we held in Lomker that the "conspiring"

conduct and "'inside' dealing" that culminated in the lender making "a better deal

for the same property" amounted to "wrongful and intentional conduct not

waived by the language in the guaranties." Id. at 499. (emphasis added).

                                                                             A-0469-19
                                       21
      Hence, Lomker is clear precedent that, absent express language, a

guarantor does not waive the implied covenant of good faith and fair dealing,

even in a case where a contract otherwise gives the lender broad powers over

the collateral. It also signifies the provision of a loan in and of itself does not

insulate a lender from a claim of engaging in bad faith conduct during the loan

repayment period.

      Here, the guaranty agreements we have quoted above did grant Bock

extensive power over the collateral, and also expressly waived the defense of

impairment of collateral. Nevertheless, the agreements did not contain language

that expressly waived the implied covenant of good faith and fair dealing. Also,

the guaranty agreements were not enforceable to the extent the lender engaged

in gross negligence or willful misconduct.

      Because the guaranties do not contain an express waiver of the implied

covenant, and because there are material factual disputes as to whether Bock

violated the covenant, the trial court should not have granted summary judgment

on the guaranties.    Nor should the trial court have rejected, out of hand,

                                                                             A-0469-19
                                       22
defendants' associated counterclaims, and denied the motion to amplify them

along with the related third-party complaint. 7

        Bock cites Glenfed Financial Corp., Commercial Finance Division v.

Penick Corp. for the notion that a lender has not violated the implied covenant

when it enforces its rights under a guaranty contract. 276 N.J. Super. 163, 178-

79 (App. Div. 1994). Bock's argument overreads Glenfed, and elides our later

holding in Lomker.

        In Glenfed, the defendant corporation experienced severe financial

distress and attempted to raise funds, but the lender withheld its consent when

asked to forego protections contained in the guaranty contract. Id. at 169-72.

Ultimately, the corporation diverted funds it was supposed to be holding to repay

the loan; the lender discovered this and accelerated the due date of the loan.

Ibid.

        We held in Glenfed that the implied covenant of good faith and fair

dealing "may not be invoked by a commercial debtor to preclude a creditor from

exercising its bargained-for rights under a loan agreement." Id. at 175. There

7
  In this regard, we also permit defendants to pursue their allied claims of
tortious interference with prospective economic advantage, which are based
upon similar allegations of unfair dealing.
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is no breach of the covenant "when a party simply stands on its rights to require

performance of a contract according to its terms." Id. at 176 (citations omitted).

      However, Glenfed may be readily distinguished because we found no

evidence in that case of the lender's bad faith, lack of honesty, or personal

malice, "or that [the lender] was pursuing its own economic interests unrelated

to obtaining the repayment of the loan[.]" Id. at 178. But here, significantly,

defendants have presented some evidence—which they anticipate developing

through the completion of discovery—that Bock pursued its own selfish

economic interests unrelated to repayment of the loan by acquiring the Wheel,

releasing security interests in obtaining the collateral, and assuming obligations

relating to significant funding from the CRDA for the benefit of Domeinac.

      The record reflects, at least in its present incomplete state, material factual

disputes regarding whether Bock violated the implied covenant. Viewing the

present record, as we must, in a light most favorable to defendants, summary

judgment should not have been granted. Brill v. Guardian Life Ins. Co. of Am.,

142 N.J. 520, 523 (1995).

      At the very least, defendants should have been afforded the opportunity to

complete discovery that could shed light on these transactions and activities,

including the depositions of Thomas Bock and other material witnesses. R.

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4:46-5. We are acutely mindful that discovery has carried on for a long period

of time. Even so, we discern no imperative to deprive the defense of the time to

finish discovery that bears upon its asserted justifications for non-payment,

particularly given the impact the COVID-19 pandemic has had on the civil trial

calendar overall.

      For these reasons we vacate the trial court's grant of summary judgment

and remand the matter for continued discovery under the trial court's

supervision. We also reverse the dismissal of defendants' counterclaims and the

denial of leave to amend those counterclaims and their third-party complaint.

We do so without prejudice to Bock's ability to renew a motion for summary

judgment after discovery is finally completed. Our restoration of the case should

not be viewed as any advisory opinion on whether defendants' contentions will

ultimately be substantiated.

      All other arguments raised by the parties lack sufficient merit to warrant

discussion in this opinion. R. 2:11-3(e)(1)(E).

      Vacated and remanded.

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