12 A.3d 264
N.J. Super. Ct. App. Div.2011Background
- Plaintiff Investors Savings Bank sought foreclosure and damages on a loan to Waldo Jersey City, LLC and Powerhouse Land Development, LLC, plus guarantor Pazden.
- Defendants alleged plaintiff breached the loan by failing to fully fund the loan as agreed, causing losses.
- A counterclaim alleged breach of contract and related damages; plaintiff moved to dismiss under Rule 4:6-2(e).
- A provision in the initial loan commitment stated all loan documents were 'free from any right of setoff, counterclaim or other defense'.
- The trial court dismissed the counterclaim and struck defendants' jury demand, treating the waiver as enforceable and indemnification as a shield.
- On appeal, the Appellate Division held the counterclaim-waiver unenforceable in this damages action, and the indemnity provision ineffective to dismiss the counterclaim; the jury waiver was enforceable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of counterclaim waiver in damages action | Waiver bars counterclaims arising from the loan. | Waiver conflicts with court rules and public policy; it defies the consolidation of related claims. | Counterclaim-waiver provision unenforceable; permits counterclaims in this action. |
| Effect of indemnification on counterclaim | Indemnity bars defendants' claims against plaintiff. | Indemnity applies only when indemnitee is liable to a third party, not to shield against lender's damages action. | Indemnification provision does not bar the counterclaim. |
| Enforceability of jury trial waiver | Waiver is enforceable due to clear, conspicuous language. | Unclear voluntary assent and public policy concerns might render it unenforceable. | Jury trial waiver enforceable. |
Key Cases Cited
- Sage Realty Corp. v. Ins. Co. of N. Am., 34 F.3d 124 (2d Cir.1994) (counterclaim-waiver intended to defer, not extinguish, claims; should not bar a later suit)
- North Fork Bank v. Computerized Quality Separation Corp., 62 A.D.3d 973 (N.Y. App. Div. 2009) (New York rule permitting deferral of counterclaims; not extinguishment)
- Banqué Indosuez v. Trifinery, 817 F.Supp. 386 (S.D.N.Y.1993) (counterclaim-waiver with federal compulsory counterclaims; deferral vs extinction analysis)
- Travelers Indemnity Co. v. Dammann & Co., Inc., 592 F.Supp.2d 752 (D.N.J.2008) (indemnity scope and third-party liability basis)
- Feigenbaum v. Guaracini, 402 N.J. Super. 7 (App.Div.2008) (indemnity provisions and general principles)