Rosenthal & Rosenthal, Inc. v. Vanessa Benun

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2890-13T3
ROSENTHAL & ROSENTHAL, INC.,
APPROVED FOR PUBLICATION
Plaintiff-Respondent,
June 17, 2015
v.
APPELLATE DIVISION
VANESSA BENUN a/k/a VANESSA
BROOCHIAN and ELAN BROOCHIAN,
Defendants,
and
RIKER, DANZIG, SCHERER,
HYLAND & PERRETTI, L.L.P.,
Defendant-Appellant.
____________________________________________
Argued April 15, 2015 – Decided June 17, 2015
Before Judges Fuentes, Ashrafi, and
O'Connor.
On appeal from Superior Court of New Jersey,
Chancery Division, Monmouth County, Docket
No. F-6301-12.
Gerald A. Liloia argued the cause for pro se
appellant (Nicholas Racioppi, Jr., of
counsel; Matthew H. Lewis, on the brief).
Joshua A. Zielinski argued the cause for
respondent (McElroy, Deutsch, Mulvaney &
Carpenter, L.L.P., attorneys; Mr. Zielinski
and Peter Saad, of counsel and on the
brief).
The opinion of the court was delivered by
ASHRAFI, J.A.D.
In this foreclosure action, defendant-mortgagee Riker,
Danzig, Scherer, Hyland & Perretti, L.L.P., (Riker) appeals from
summary judgment granting priority to the two earlier, recorded
mortgages of plaintiff-mortgagee Rosenthal & Rosenthal, Inc.
(Rosenthal). The Rosenthal mortgages secured not only existing
debts guaranteed by defendant-mortgagor Vanessa Benun but also
future advances Rosenthal would make in its discretion to the
debtor. Riker argues that the Chancery Division incorrectly
applied the common law of optional future advances secured by a
mortgage. We agree and reverse.
Both parties filed motions for summary judgment. The
pertinent facts are essentially undisputed. Our standard of
review is plenary on the application of law leading to summary
judgment where no genuine issues of fact are in dispute.
Nicholas v. Mynster, 213 N.J. 463, 477-78 (2013); Zabilowicz v.
Kelsey, 200 N.J. 507, 512-13 (2009).
Riker is a law firm. Rosenthal describes itself as "an
international financial institution engaged in providing
businesses with . . . traditional factoring services, which
involves businesses selling their accounts receivable to
2 A-2890-13T3
Rosenthal, in return for cash to satisfy their immediate cash
flow needs." See also 35 C.J.S. Factors § 1 (2009) ("factoring"
defined as the sale of accounts receivable at a discounted
price). Both Riker and Rosenthal are creditors of Jack Benun or
the camera sales businesses that were owned by the Benun family,
which we refer to in this opinion as "the Jazz entities."
On July 12, 1995, Rosenthal entered into a factoring
agreement with one of the Jazz entities, Jazz Photo Corporation
(Jazz Photo). Paragraph 7(b) of the 1995 factoring agreement
provided that Rosenthal, "will advance to" Jazz Photo "at
[Rosenthal's] discretion, up to seventy percent (70%) of the net
amount of receivables purchased by [Rosenthal] and not as yet
collected."
On August 18, 2000, defendant Vanessa Benun, who is Jack
Benun's daughter, executed an agreement by which she guaranteed
to Rosenthal payment of all obligations, liabilities, and
indebtedness of Jazz Photo. Vanessa Benun also executed a
mortgage and security agreement (the 2000 mortgage), encumbering
real property she owned on Ivy Place in Ocean Township. The
2000 mortgage included a "dragnet clause," which secured Vanessa
3 A-2890-13T3
Benun's obligations under the guarantee up to a maximum
principal amount of $1,000,000.1
The 2000 mortgage also contained an "anti-subordination
clause," which stated that Vanessa Benun "shall not further
mortgage or amend, modify, restate or amend any existing prior
mortgage or otherwise encumber the Premises, or any part
thereof." The 2000 mortgage was recorded in the Monmouth County
Clerk's Office on August 21, 2000.
1
A dragnet clause is used in conjunction with one type of future
advance mortgage. Grant S. Nelson & Dale A. Whitman, Rethinking
Future Advance Mortgages: A Brief for the Restatement Approach,
44 Duke L.J. 657, 671-73 (1995). Dragnet clauses typically
state that if the borrower ever becomes liable to the lender on
any other loan, the mortgage will also secure that loan. Id. at
671. "The purpose of the dragnet clause is to provide a sort of
contingent cross-collateralization; if any other loan is made in
the future, the presently mortgaged real estate will serve as
additional collateral for it." Id. at 671-72.
The dragnet clause in this case provided that the 2000
mortgage would secure, up to its principal limit:
all obligations and indebtedness of every
kind and description of Mortgagor to
Mortgagee or any of its affiliates, whether
primary or secondary, absolute or
contingent, direct or indirect, sole, joint
or several, secure or unsecured, due or to
become due, contractual, tortious, arising
by operation of law or otherwise, or now or
hereafter existing, and whether incurred as
principal, surety, endorser, guarantor,
accommodation party or otherwise, including,
without limitation, principal, interest,
fees, late charges and expenses, including
attorneys fees and/or allocated fees of
Mortgagee's in-house legal counsel . . . .
4 A-2890-13T3
On March 8, 2005, Rosenthal entered into a second factoring
agreement with another of the Jazz entities, Ribi Tech Products,
LLC (Ribi Tech). Paragraph 7.2 of the second factoring
agreement stated that in its "sole discretion," Rosenthal "will,
from time to time . . . advance to [Ribi Tech], sums" up to a
maximum calculated as a fixed percentage of outstanding
"Eligible Receivables" or "Eligible Inventory."
On March 15, 2005, Vanessa Benun executed another agreement
by which she guaranteed to Rosenthal payment of all obligations,
liabilities, and indebtedness of Ribi Tech. Vanessa Benun also
executed another mortgage and security agreement (the 2005
mortgage), further encumbering the Ivy Place property, again in
the principal amount of $1,000,000. The 2005 mortgage contained
the same dragnet and anti-subordination clauses as the ones in
the 2000 mortgage. The 2005 mortgage was recorded in the
Monmouth County Clerk's Office on April 13, 2005. At some
point, Ribi Tech changed its name to Jazz Products, LLC (Jazz
Products).
On March 25, 2007, Vanessa Benun executed a mortgage in
favor of Riker (the Riker mortgage) on the same Ivy Place
property. The purpose of the Riker mortgage was to secure
payment of outstanding legal fees totaling $1,679,701.33 owed to
Riker as of that date by Jack Benun. The Riker mortgage was
5 A-2890-13T3
recorded in the Monmouth County Clerk's Office on April 13,
2007.
On August 3, 2007, Rosenthal's counsel sent an e-mail to
Riker that took notice of the Riker mortgage. Counsel wrote:
"title on the daughters properties show liens in favor of your
firm. Those liens will need to be fully subordinated to any new
[Rosenthal] mortgages on the daughters properties . . . ."2
On September 8, 2009, Jazz Products filed for bankruptcy.
The next day, Vanessa Benun executed a third agreement by which
she guaranteed to Rosenthal payment of all obligations,
liabilities, and indebtedness of Jazz Products as a debtor in
possession.
Pursuant to paragraphs 7(b) and 7.2 of the 1995 and 2005
factoring agreements, Rosenthal continuously disbursed and
collected funds from the sale of accounts receivable of the Jazz
entities, at the same time charging the Jazz entities fees,
commissions, and other charges referenced in the agreements. It
also made advances to the Jazz entities every month between June
2006 and August 2009. Once Jazz Products filed for bankruptcy,
Rosenthal declined to make additional disbursements and advances
except for a few that were intended to complete the bankruptcy
2
Another of Jack Benun's daughters had also provided a mortgage
to secure the debt to Riker.
6 A-2890-13T3
liquidation process. Jazz Products defaulted on the factoring
agreements by failing to make the required payments. As of
March 2012, Jazz Products and Vanessa Benun owed Rosenthal
$3,986,724.19.
After Riker recorded its mortgage in April 2007, it also
continued to perform services for Jack Benun. In April 2013, at
the time of the motions for summary judgment, Jack Benun owed
Riker more than $3,000,000 in legal fees.
To recapitulate, Rosenthal had two mortgages on the Ivy
Place property recorded in 2000 and 2005, and Riker had a
subsequent mortgage on the same property recorded in 2007. The
value of the mortgaged property was not sufficient to secure the
debts owed to both Rosenthal and Riker.
In April 2012, Rosenthal filed a complaint of foreclosure
against Vanessa Benun, her husband Elan Broochian, and Riker.
Vanessa Benun and Elan Broochian did not respond to the
complaint, and Rosenthal filed a request to enter default
judgment against them. Riker answered the complaint and pleaded
affirmative defenses, including that its 2007 mortgage has
priority over Rosenthal's 2000 and 2005 mortgages. In February
2013, both Rosenthal and Riker filed motions for summary
judgment on the priority issue.
7 A-2890-13T3
On April 26, 2013, the Chancery Division granted
Rosenthal's motion, struck Riker's answer with prejudice, and
entered default against Riker as if no answer had been filed in
the foreclosure action. The court then remanded the matter to
the Office of Foreclosure. On February 20, 2014, a final
judgment in foreclosure was issued, which ordered "the mortgage
premises be sold to raise and satisfy the several sums due, in
the first place, to [Rosenthal] in the sum of $2,613,972.60 as
of January 13, 2014 . . . ." Riker filed a timely Notice of
Appeal challenging the priority granted to Rosenthal by the
court's April 26, 2013 order.
Relying on the law of mortgages that secure future
advances, Riker argues its later-recorded mortgage has priority
over the optional advances Rosenthal made to the Jazz entities
after Rosenthal had actual notice of the Riker mortgage. In
response, Rosenthal relies on the sequence of the recordings and
on the concept of "first in time, first in right" to argue for
its priority over the Riker mortgage.
"Future advance mortgages typically provide that 'the
property encumbered by the mortgage stands as security not only
for the funds advanced at the time the mortgage is executed and
delivered, but also for any obligations incurred after the
initial advance.'" Cox v. RKA Corp., 164 N.J. 487, 524 (2000)
8 A-2890-13T3
(Stein, J., concurring in part and dissenting in part) (quoting
James B. Hughes, Future Advance Mortgages: Preserving the
Benefits and Burdens of the Bargain, 29 Wake Forest L. Rev.
1101, 1101 (1994)).
Many years ago in Ward v. Cooke, 17 N.J. Eq. 93, 99 (Ch.
1864), the Chancellor held that future advance mortgages are not
subordinated except as to advances made after the mortgagee
receives actual notice of the subsequent lien or encumbrance.
The Chancellor held that constructive notice is insufficient to
subordinate the priority of a future advance mortgage. Ibid.Ward remained unchallenged as the rule in New Jersey until
1982, when the Chancery Division analyzed the effect of
recording statutes enacted after Ward in the context of a
construction loan. Lincoln Fed. Sav. & Loan Assoc. v. Platt
Homes, Inc., 185 N.J. Super. 457, 464-67 (Ch. Div. 1982). The
court in Lincoln Federal held that constructive notice through
the recording of a subsequent mortgage would also suffice to
give the later mortgage priority where the future advances on
the earlier mortgage were optional, not obligatory. Id. at 461-
65 (citing Mayo v. City Nat'l Bank & Trust Co., 56 N.J. 111, 117
(1970); Micele v. Falduti, 101 N.J. Eq. 103, 104-05 (Ch. 1927)).3
3
Though not pivotal to the issue before us, Lincoln Federal's
holding on constructive notice departs from the majority of
(continued)
9 A-2890-13T3
In Cox, supra, 164 N.J. at 525, Justice Stein's concurring
and dissenting opinion explained the distinction drawn in
Lincoln Federal and other cases with reference to the earlier
mortgagee's contractual obligation:
the determination of the lien priority of
future advance mortgages against a
subsequent lien holder turns on whether the
advances are obligatory or optional and what
constitutes notice to the future advances
mortgagee. . . . [I]f a mortgagee is
contractually obligated to make advance[s],
those advances will be senior to any
intervening lien irrespective of notice.
[Ibid. (citing Nelson & Whitman, supra, 44
Duke L.J. at 669).]
The Chancery Division in Lincoln Federal explained the
priority rule in terms of the lender's commitment to make future
advances:
Thus, where the mortgagee is committed under
a recorded mortgage to lend a specific sum,
and where several advances are required to
consummate the agreement, the court will
give effect to the manifest intention of the
parties and will treat successive advances
as a single transaction, fixed and effective
as of the date the original commitment was
recorded.
(continued)
American jurisdictions, which "require that the first mortgagee
have actual notice of the subsequent lien before [its] claim
will be subordinated." Cox, supra, 164 N.J. at 526 (Stein, J.,
concurring in part and dissenting in part) (citing cases); see
also 29 New Jersey Practice, Law of Mortgages § 10.13 (finding
unpersuasive Lincoln Federal's rationale for departing from the
actual notice requirement of Ward).
10 A-2890-13T3
[Lincoln Fed., supra, 185 N.J. Super. at 462
(citing Micele, supra, 101 N.J. Eq. at 104;
Cent. Trust Co. v. Cont'l Iron Works, 51
N.J. Eq. 605, 608 (E. & A. 1893)).]
Specifically relevant to the issue in this appeal, the
Chancery Division stated: "When the future advance is optional
on the part of the mortgagee, the rule is clear: actual notice
of an intervening encumbrance will work a subordination of any
advances made after such notice is received." Ibid.; see also
Mayo, supra, 56 N.J. at 117 ("Where it is optional with the
mortgagee whether to make future advances, he does not have a
prior lien for those advances made after notice of an existing
encumbrance.") (citing Germania Bldg. & Loan Ass'n v. B.
Fraenkel Realty Co., 82 N.J. Eq. 49 (Ch. 1913), aff'd, 84 N.J.
Eq. 164 (E. & A. 1915)).
These common law rules of priority place Riker ahead of
Rosenthal as to any optional future advances that Rosenthal made
to the Jazz entities after it had actual notice of the Riker
mortgage.
The evidence is undisputed that all the advances Rosenthal
made to the Jazz entities were made at its option; they were not
obligatory. Not only did paragraphs 7(b) and 7.2 of the
factoring agreements reserve to Rosenthal "discretion" to grant
the advances, but also Rosenthal's advances were secured by the
11 A-2890-13T3
dragnet clauses of the Rosenthal mortgages. Because dragnet
clauses are generally included in a loan agreement when a lender
is under no obligation to make any additional loans, subsequent
advances are virtually always optional rather than obligatory.
Nelson & Whitman, supra, 44 Duke L.J. at 671-72.
In addition to Rosenthal's advances being optional, all the
advances upon which it now seeks to collect occurred after
August 2007, that is, after it had actual knowledge of the Riker
mortgage. At oral argument before us, Rosenthal acknowledged
that the entirety of its claim of almost four million dollars
arises from such optional advances made after its counsel's e-
mail of August 2007, in which Rosenthal indicated its actual
knowledge of the Riker mortgage. Because Rosenthal made
optional advances with actual knowledge of Riker's subsequent
mortgage, the common law gives priority to the Riker mortgage
over the earlier Rosenthal mortgages.
This conclusion is consistent with the result reached by
the Chancery Division in Lincoln Federal. There, Platt Homes,
Inc. owned five lots that it planned to develop, and Robert
Hedges was an investor in Platt's development plan. Lincoln
Fed., supra, 185 N.J. Super. at 459. In May 1979, Platt
obtained a construction loan from Lincoln Federal Savings & Loan
Association providing for discretionary advances of up to
12 A-2890-13T3
$94,500 and secured by a recorded mortgage executed by Platt on
the property. Ibid. Also in May 1979, Lincoln Federal made an
initial advance to Platt of $39,500. Ibid. In July 1979,
Hedges lent Platt an additional $10,000 beyond his investment in
exchange for a mortgage to him, which Hedges promptly recorded.
Ibid. In August 1979, Lincoln Federal made a second advance of
$27,200 to Platt. Ibid. Platt defaulted on both mortgages.
Hedges conceded the priority of Lincoln Federal's initial
$39,500 advance, but argued his intervening mortgage was
superior to the $27,200 optional second advance made by Lincoln
Federal. Ibid.The Chancery Division surveyed the law on future advance
mortgages, id. at 459-63, and granted priority to Hedges'
recorded mortgage over the subsequent advances Lincoln Federal
made, id. at 465. The court suggested a construction lender
could conduct a run-down search of the property and obtain the
subordination of any intervening lienholders before releasing
any additional optional funds. Id. at 467.
Rosenthal points out that Lincoln Federal pertained to a
construction loan and its holding was not intended to extend to
security for commercial lending transactions such as in this
case. Rosenthal relies on a footnote in the Lincoln Federal
opinion, which states in part:
13 A-2890-13T3
The court recognizes, however, that this
holding cannot apply in general commercial
loan situations, where commitments to make
future advances may be secured by rapidly
fluctuating collateral, such as inventory,
accounts receivables or the like, with a
mortgage on real property taken as side
collateral only. In such situations the
position of the first secured party to file
is protected as to nonreal property
collateral by the Uniform Commercial Code,
N.J.S.A. 12A:9-312(5) and 12A:9-312(7). He
may then "make subsequent advances without
each time having, as a condition of
protection, to check for filings later than
his." New Jersey Comment 5 to N.J.S.A.
12A:9-312(5). Thus, the lender's priority
as to all advances relates back to the time
of filing. A real estate mortgage given as
additional collateral for such a loan or as
security for a guaranty of such a loan is
generically different from a construction
mortgage, and thus can be governed by
different standards.
[Id. at 467 n.5.]
In this case, the Chancery Division took note of the
disclaimer contained in the Lincoln Federal footnote and
concluded the body of law on future advance mortgages does not
apply because this case does not pertain to a construction loan.
Our review of the case law does not reveal such a limitation on
the common law rule of priorities where the future advance
mortgagee has actual knowledge of the intervening lien.
Construction loans are one type of future advance mortgage.
Lines of credit, open-end lending agreements, and dragnet
clauses are also types of future advance mortgages. Nelson &
14 A-2890-13T3
Whitman, supra, 44 Duke L.J. at 670-73. The first mortgages in
Ward and a number of other cases that granted priority to
subsequent mortgages or liens did not involve construction
loans. See Ward, supra, 17 N.J. Eq. 93; Lanahan v. Lawton, 50
N.J. Eq. 276 (Ch. 1892), aff'd o.b. sub nom. U.S. Trust Co. of
N.Y. v. Lanahan, 50 N.J. Eq. 796 (E. & A. 1893); Heintze v.
Bentley, 34 N.J. Eq. 562 (E. & A. 1881); Jacobus v. Mut. Benefit
Life Ins. Co., 27 N.J. Eq. 604 (E. & A. 1876); Griffin v. N.J.
Oil Co., 11 N.J. Eq. 49 (Ch. 1855). Although these precedents
date from the nineteenth century, they have not been overruled
or superseded by any case or statute that has been brought to
our attention.
The quoted footnote in Lincoln Federal sought to restrict
the holding of that case to construction loan mortgages, but we
must keep in mind that the holding of Lincoln Federal is that
constructive notice suffices to grant priority to the subsequent
mortgagee. That holding should not apply to other types of
commercial lending transactions because of the frequency and
rapidity of future advances given in many such transactions. It
would be impractical to expect a commercial lender such as
Rosenthal to conduct a search of intervening recorded
encumbrances every time another advance is made in a transaction
such as the factoring agreements of this case.
15 A-2890-13T3
Here, Riker does not claim priority because it recorded its
mortgage in April 2007 and thus provided constructive notice to
Rosenthal. It claims priority because Rosenthal had actual
notice of the Riker mortgage, and yet, Rosenthal continued to
make optional advances to one or more of the Jazz entities
without first assuring that the Riker mortgage would be deemed
subordinate to Rosenthal's prior mortgages. It is only the
combination of Rosenthal's actual notice and optional advances
that establishes Riker's priority under the common law.
Also, in the factual circumstances of this case, the common
law priority rule was not abrogated by the Legislature's 1985
enactment of N.J.S.A. 46:9-8.1 to -8.5 and the amendments to
those statutes in 1992, 1997, and 1998. That legislation
preserves the priority of earlier recorded mortgages by relating
back to the original date of recording certain modifications of
mortgage loans and lines of credit. 29 New Jersey Practice, Law
of Mortgages § 10.13.
N.J.S.A. 46:9-8.2 states in pertinent part:
Notwithstanding any other law to the
contrary, the priority of the lien of a
mortgage loan which has undergone a
modification, as defined by this act, shall
relate back to and remain as it was at the
time of recording of the original mortgage
as if the modification was included in the
original mortgage or as if the modification
occurred at the time of recording of the
original mortgage.
16 A-2890-13T3
"Mortgage loan" as used in this statute is defined as "any loan
or line of credit, except a construction loan, which states a
maximum specified principal amount and which is secured by an
interest in real property." N.J.S.A. 46:9-8.1(a) (emphasis
added). That definition applies to Rosenthal's 2000 and 2005
mortgages. However, the type of modification that relates back
to the original execution of the mortgage loan does not include
future advances. That is because "modification" is defined by
the statute as "a change in the interest rate, due date or other
terms and conditions of a mortgage loan except an advance of
principal . . . ." N.J.S.A. 46:9-8.1(d)(1) (emphasis added).
As argued by Riker, the 1997 amendment of the statute
temporarily added such advances of principal to the definition
of "modification" of a mortgage loan that would relate back to
the date of its recording and thus give it priority over
subsequent mortgages. L. 1997, c. 427, § 1(d). However, the
1998 amendment revised the statute again by redefining
"modification" to include an advance of principal only with
respect to a "line of credit." L. 1998, c. 130, § 1(d).4
4
After the 1998 amendment, N.J.S.A. 46:9-8.1(d) states in full:
"Modification" means:
(continued)
17 A-2890-13T3
Therefore, the only lasting change the legislation made as to
the meaning of "modification" was with respect to lines of
credit. 29 New Jersey Practice, Law of Mortgages § 10.13.
Rosenthal's advances in this case were not provided on a line of
credit. They were granted on a "mortgage loan" as defined in
N.J.S.A. 46:9-8.1(a).
Rosenthal argues that Riker was on notice of the earlier-
recorded Rosenthal mortgages and had notice of their anti-
subordination clauses. Riker responds that it was not a party
(continued)
(1) With respect to a mortgage loan other than a
line of credit, a change in the interest rate, due
date or other terms and conditions of a mortgage
loan except an advance of principal; or
(2) With respect to a line of credit, a change in
the interest rate, due date or other terms and
conditions and an advance of principal made pursuant
to the line of credit but only to the extent that
the advance does not cause the principal balance due
to exceed the principal amount stated in the line of
credit plus accrued interest;
(3) Payments for taxes, assessments and insurance
and other payments made by the mortgagee pursuant to
the terms of the mortgage or line of credit are
included with the amounts which have priority
pursuant to section 2 of P.L. 1985, c. 353 (C. 46:9-
8.2) and are not included in the phrase "advance of
principal;"
(4) "Modification" does not include a substitution
in the collateral.
[(Emphasis added.)]
18 A-2890-13T3
to and is not bound by the terms of the Rosenthal mortgages.
Assuming that constructive notice of the anti-subordination
clauses is sufficient, there is no evidence that Riker had
actual or constructive knowledge of the amount of the
indebtedness of the Jazz entities to Rosenthal in April 2007
when Vanessa Benun executed the Riker mortgage.
Rosenthal, on the other hand, had actual knowledge of the
Riker mortgage no later than August 2007 and the varying amounts
of the Jazz entities' indebtedness to Rosenthal. Rosenthal was
in a position to avoid subordination of its future advances
simply by declining to make additional advances until the Riker
mortgage might expressly be made subordinate to the Rosenthal
mortgages. By failing to take such a step, Rosenthal subjected
itself to the application of the common law rules on priorities.
Rosenthal's remedy for violation of the anti-subordination
clauses lies with Vanessa Benun, not with Riker. Rosenthal took
no action to protect its interests until Jazz Products defaulted
under the factoring agreement in December 2009. During those
two years, Rosenthal did not declare the Jazz entities or
Vanessa Benun to be in default of their agreements, or seek
discharge or subordination of the Riker mortgage. In fact, it
continued to make advances to the Jazz entities despite its
actual knowledge of the Riker mortgage.
19 A-2890-13T3
We emphasize that our conclusion that Riker has priority
does not subordinate any existing debts of the Jazz entities or
Vanessa Benun at the time the subsequent Riker mortgage was
executed. As in Lincoln Federal, supra, 185 N.J. Super. at 459,
any advances from Rosenthal that preceded Rosenthal's actual
knowledge of the Riker mortgage had priority over it. Only the
optional advances that Rosenthal made after it knew of the Riker
mortgage are subordinate to the Riker mortgage.
Finally, Rosenthal argues that it seeks priority on the
basis of Vanessa Benun's guarantees and not on the basis of
future advances made pursuant to its factoring agreements.
Vanessa Benun's guarantee agreements, however, also guaranteed
the optional future advances Rosenthal made after it had actual
knowledge of the Riker mortgage. The guarantee agreements do
not change application of the common law priority rules.
Reversed and remanded for entry of an amended final
judgment of foreclosure granting priority to Riker over the
Rosenthal mortgages. We do not retain jurisdiction.
20 A-2890-13T3