CUSTOMERS BANK VS. JOSEPH PACITTIÂ (L-3985-10, CAMDEN COUNTY AND STATEWIDE)(CONSOLIDATED), A-0891-15T1/A-2989-15T3

Background

In 2010 Interstate (later Customers Bank) obtained a New Jersey default money judgment against Pacitti and associated entities for $1,540,867.53; that judgment was docketed and subject to two levies.
The loan had been secured by, among other collateral, a Connecticut commercial property owned by PRA Wallingford; Pacitti signed the note/mortgage as PRA's authorized member.
In Connecticut (2011–2013) Customers Bank foreclosed the Connecticut property, obtained an appraisal valuing it at $1,175,000, and the Connecticut court entered a strict foreclosure and a deficiency judgment crediting that fair market value, resulting in a deficiency judgment for $1,086,645.36.
The Connecticut appraisal expressly assumed environmental compliance; the property later sold in 2015 for $470,000.
In New Jersey proceedings to enforce the 2010 judgment, defendants sought a fair-market-value credit (as determined in Connecticut) against the NJ judgment; the Law Division declined to permit relitigation of value but used the actual sale price ($470,000) as the credit, and included post-judgment interest and certain foreclosure costs.
The Appellate Division dismissed the interlocutory appeal from a 2015 order, and on the merits affirmed in part and reversed in part: it held both parties are collaterally estopped from relitigating the Connecticut court’s fair-market-value determination and directed application of the $1,175,000 appraisal credit to the NJ judgment, remanding for recalculation (including permitted foreclosure costs and post-judgment interest).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the New Jersey court should relitigate fair market value after Connecticut foreclosure and deficiency judgment	Plaintiff argued the NJ inquiry should start from the 2010 NJ docketed judgment and that the Connecticut appraisal/sale were not binding; bank urged use of sale price ($470,000)	Defendants argued the Connecticut fair-market appraisal ($1,175,000) — and the Connecticut deficiency decision — precluded relitigation and must credit the NJ judgment	Court held collateral estoppel bars relitigation of the fair-market-value issue; both parties are precluded from challenging the Connecticut court’s valuation and the $1,175,000 appraisal credit must be applied to the NJ judgment
Whether plaintiff is bound by its Connecticut appraisal/deficiency proceeding	Plaintiff contended it was not bound and could rely on actual sale proceeds for credit	Defendants argued plaintiff voluntarily put valuation before the Connecticut court and thus is bound	Court held plaintiff is bound by the Connecticut valuation because it actively litigated and relied on the appraisal in seeking the deficiency; therefore plaintiff is precluded from claiming a different credit
Whether additional foreclosure costs incurred post-foreclosure may increase the amount owed under the NJ judgment	Plaintiff sought inclusion of certain foreclosure fees and costs incurred in Connecticut	Defendants argued the NJ judgment amount could not be increased beyond the original judgment amounts determined earlier	Court held equitable and legal principles permit inclusion of amounts that are different categories or that accrued after the first judgment; the Law Division correctly included $119,234.03 in foreclosure-related fees (excluding contractual interest/late fees) but remand is needed to apply the $1,175,000 credit and recompute interest
Whether sale of a debtor-owned Wildwood property to satisfy judgment was improper	Plaintiff represented there was insufficient personal property to levy and sought sale	Defendants argued sale was improper because other collection means were not exhausted	Court held sale authorization was proper: creditor made reasonable efforts to locate personalty and sale under R. 4:59-1(d)(1) was permissible

Key Cases Cited

Citibank, N.A. v. Errico, 251 N.J. Super. 236 (App. Div. 1991) (New Jersey courts may apply equitable principles to allow a fair-market-value credit in commercial deficiency contexts to avoid a windfall)
First Union Nat’l Bank v. Penn Salem Marina, Inc., 190 N.J. 342 (2007) (amounts determined in a first action bind subsequent actions as to same categories/periods; exceptions for amounts accruing after the first judgment or different damage categories)
Hennessey v. Winslow Twp., 183 N.J. 593 (2005) (purposes and benefits of collateral estoppel: finality, avoidance of needless relitigation)
In re Estate of Dawson, 136 N.J. 1 (1994) (elements required for collateral estoppel)