Rova Farms – From Born to Run to Bad Faith

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

SpringsteenI am in the middle of reading “Born to Run,” Bruce Springsteen’s memoir. I am about one-third of the way through and so far, so good. I just finished reading about “the only full-scale truly scary bar brawl [of Bruce and the band’s] club lives.” It happened in Rova Farms, a “Russian social club on the outskirts of town.” (In Springsteen’s life, like in his songs, the important things always seem to happen on the outskirts of town.) The brawl started right before the band broke into “Santa Clause is Coming to Town,” and ended with the police being called and several people being taken out on stretchers.

Like nearly all New Jersey lawyers, I know Rova Farms as a thing – a “Rova Farms letter” or a “Rova Farms claim” – not a place. It was interesting to read a story about the place behind the thing. For the uninitiated, Rova Farms Resort v. Investors Ins. Co. of America, was a case involving a visitor to Rova Farms who was injured, not in a bar brawl, but from diving into a shallow portion of a lake on the resort. He sustained serious spinal cord injuries and was paralyzed. The resort’s insurance carrier refused to tender the full, $50,000 policy limit to settle the claim. The case went to trial and the jury returned a $225,000 verdict. The resort then sued its carrier for the full amount of the judgment, alleging that it acted in bad faith by not settling the claim within the policy limits.

The New Jersey Supreme Court agreed, holding that an insurer’s bad-faith failure to settle within policy limits renders it liable for the full amount of the judgment, including any portion in excess of the policy limits. As a result of this decision, defendants in New Jersey will usually send a “Rova Farms letter” to their carriers when a plaintiff offers to settle a case within policy limits. The letter puts the carrier on notice that, if it does not settle within the policy limits, the insured will look to the carrier to pay the entire judgment. Of course, the obligation to do so only arises when the carrier acts in bad faith, but, needless to say, this letter tends to change the dynamic between insured and insurer.   

Back to Bruce . . . As far as New Jersey courts are concerned, Rova Farms is far more popular than Springsteen. The case has been cited more than 3,800 times in New Jersey alone. A search of all state and federal court opinions for Bruce Springsteen yields 87 hits, and only 5 of those are from New Jersey courts. Local hero indeed.

It is Still Not a Breach Of The Duty Of Good Faith And Fair Dealing For Lenders To Enforce The Terms Of Their Loan Documents

         by:  Peter J. Gallagher (@pjsgallagher)

It seems like I read cases like this every few weeks: A borrower defaults on a loan, tries to work something out with the bank, but the bank for some reason decides not to work out a deal and instead decides to enforce the terms of the underlying loan documents (usually through foreclosure or some other means). The borrower then sues, alleging that the lender acted in bad faith by thinking about working out a deal, and maybe even taking some steps to do so, but eventually deciding not to. Although I have obviously summarized these cases in broad terms and the devil is often in the details, the result is almost always the same – the borrower loses.

The reason for this is simple. The law in New Jersey is well settled that a lender will not generally be deemed to have acted in bad faith when it seeks to enforce the terms of a note or mortgage as written.  Stated differently, lenders cannot be barred from enforcing loan and mortgage documents merely because they seek to enforce their express contractual rights.  Indeed, “a creditor's duty to act in good faith does not extend to foregoing its right to accelerate upon default or otherwise compromising its contractual rights in order to aid its debtor.” Glenfed Financial Corp. v. Penick Corp.   For instance, in Creeger Brick & Building Supply, Inc. v. Mid-State Bank & Trust Co., — a decision cited by the Appellate Division with approval in Glenfed — a Pennsylvania appeals court held:

. . . a lending institution does not violate a separate duty of good faith by adhering to its agreement with the borrower or by enforcing its legal and contractual rights as a creditor. The duty of good faith imposed upon contracting parties does not compel a lender to surrender rights which it has been given by statute or by the terms of its contract. Similarly, it cannot be said that a lender has violated a duty of good faith merely because it has negotiated terms of a loan which are favorable to itself. As such, a lender generally is not liable for harm caused to a borrower by refusing to advance additional funds, release collateral, or assist in obtaining additional loans from third persons. A lending institution also is not required to delay attempts to recover from a guarantor after the principal debtor has defaulted.

Try as borrowers might, New Jersey courts have repeatedly and consistently rejected efforts to hold lenders liable for violating the duty of good faith and fair dealing when those lenders have simply attempted to enforce the terms of their loan agreements.

 

Continue reading “It is Still Not a Breach Of The Duty Of Good Faith And Fair Dealing For Lenders To Enforce The Terms Of Their Loan Documents”

Hell Hath No Fury Like . . . An Angry Litigant And Former Fiance?

by:  Peter J. Gallagher

Courts don't often impose sanctions for frivolous litigation, but when they do, it usually involves something unusual (apologies to John Winger). Unusual — and perhaps even unfortunate — would be the only way to describe the facts of a recent decision from the Appellate Division that revived a party's request for legal fees in a case involving a failed (alleged) engagement and the return of a (purported) engagement ring that the recipient initially claimed to have lost, but later (apparently) found.

 

 

Continue reading “Hell Hath No Fury Like . . . An Angry Litigant And Former Fiance?”

You Think Your Neighbors Are Bad . . .

by:  Peter J. Gallagher

Anyone who thinks they have bad neighbors better pay attention to this story.  A man with the too-good-to-be-true name of Titus Terranova put up a sign warning potential purchasers of his neighbor's house about what they were in for if they moved in next door.  According to the story by the local Colorado TV station, "Neighbor's Warning Sign Scares Off Home Buyers" (h/t: Marketplace),  the sign, which is hand painted on the side of Titus Terranova's RV reads: "Warning: 3 Rottweilers, Loud Parties, Loud Music, Loud Cars, Anti-Horse, Fireworks."  Naturally the current owners of the home objected to their neighbors brutal honesty, but Titus Terranova appears undeterred.  As you can see in the attached clip, he told one reporter: "As far as I know, that thing right up there on that pole," he said pointing to the large American flag fluttering above his home, "gives me right to do whatever I want to do unless I hurt somebody else."

UPDATE:  I just noticed my favorite part of the sign – the line on the bottom inviting people to "call for more info."  Can you imagine the conversation?  "Yes, I have a question about the fireworks…"