Allstate Lending Grp., Inc. v. Gran Centurions, Inc.

ALLSTATE LENDING GROUP, INC., Plaintiff-Respondent, v. THE GRAN CENTURIONS, INC., and UNION COUNTY CAPITAL, LLC, Defendants-Appellants,andGARRY'S CATERING, LLC and GARRY RUANE, Defendants-Respondents.

THOMAS BOROWSKI, MELISSA EISEN, SAMUEL BOROWSKI, ITALSKI, LLC,UNION COUNTY CAPITAL, LLC and THE GRAN CENTURIONS, INC., Plaintiffs-Appellants, v. MICHAEL SCANNELL, individually,and ALLSTATE LENDING GROUP, INC., Defendants-Respondents.

DOCKET NO. A-3018-18T1

DOCKET NO. A-3827-18T1

DOCKET NO. A-4524-18T1

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION

Argued telephonically May 4, 2020

June 23, 2020

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION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.

Before Judges Messano, Vernoia and Susswein.

On appeal from the Superior Court of New Jersey, Chancery Division and Law Division, Union County, Docket Nos. C-000145-18 and L-3596-18.

Richard A. Grodeck argued the cause for appellants in A-3018-18 and A-4524-18 and respondents in A-3827-18 (Piro, Zinna, Cifelli, Paris & Genitempo, LLC, attorneys; Richard A. Grodeck, on the briefs).

Sean Mack argued the cause for respondents Allstate Lending Group, Inc. and Michael Scannell (Pashman Stein Walder Hayden, PC, attorneys; Sean Mack and Howard Pashman, on the briefs).

Barbara Schwartz argued the cause for respondents Garry's Catering, LLC and Garry Ruane in A-3018-18 and appellants in A-3827-18 (Law Office of Paul Swanicke, attorneys; Barbara Schwartz and Paul Swanicke, on the brief).

PER CURIAM

These three appeals arise from orders entered in two actions, one in the Law Division and the other in the Chancery Division, involving common parties and claims over the funding and payment of three loans totaling $2.65 million. We scheduled the appeals back-to-back-to-back and now consolidate them for purpose of issuing a single opinion. Resolution of the three appeals is centered on a common issue: did the Law Division and Chancery Division correctly determine claims asserted in the respective complaints are subject to binding arbitration pursuant to arbitration agreements executed in connection with the three loans? Based on our review of the records presented in light of the applicable law, we conclude the courts correctly found the pertinent claims are subject to the parties' arbitration agreements, and we affirm the challenged orders.

I.

Prior to addressing the orders from which the appeals are taken, we identify the parties and summarize the proceedings between them to provide context for our discussion of the legal issues presented. The Gran Centurions, Inc. (TGC) is a non-profit corporation, the ownership of which is represented by sixty-eight bonds. TGC owns a restaurant, a banquet facility, and real property in Clark.

Garry's Catering, LLC (Garry's) is party to a lease with TGC pursuant to which it operates a banquet facility at TGC's Clark property. Garry Ruane (Ruane) is Garry's sole member, and he is also a TGC bondholder. Under its lease with TGC, Garry's had a right of first refusal to purchase TGC and its Clark property if they were offered for sale.

In October 2016, Garry's filed a Chancery Division action (the 2016 action) against TGC challenging a proposed sale of TGC bonds to Union County Capital, LLC (UCC). Garry's asserted the proposed sale of the bonds violated its right of first refusal under its lease with TGC.

In 2017, Ruane filed a Chancery Division action (the 2017 action) against Thomas Borowski (Borowski) and UCC, asserting Borowski was a principal in UCC, and the "self-appointed [p]resident and/or [c]hairperson of [the] Board of Trustees of TGC." The complaint alleged Borowski and UCC purchased the bonds of certain TGC bondholders in violation of TGC's by-laws and had taken various actions on TGC's behalf without proper legal authority. In particular, the complaint alleged Borowski and UCC acted without proper legal authority on TGC's behalf to borrow $1.65 million from Allstate Lending Group, Inc. (Allstate) and mortgage TGC's Clark property to Allstate to secure payment of the loan.

On November 16, 2017, the 2016 and 2017 actions were settled. Garry's and Ruane entered into a "MUTUAL RELEASE AND SETTLEMENT AGREEMENT" with TGC, UCC, and Borowski, in which the parties released each other from any and all claims that were made, or could have been made, in the 2016 and 2017 actions and through the date of the agreement.

The $1.65 million loan Allstate made to TGC, which Ruane challenged in the 2017 litigation, was one of three loans Allstate made related to TGC and its property. The proceeds from the three loans were intended to finance the purchase of TGC bonds and TGC's real property in Clark by Borowski and UCC. Disputes concerning the three loans, and the ensuing litigation, give rise to the three pending appeals.

On December 6, 2016, Allstate loaned $500,000 to Borowski and $500,000 to Italski, LLC (Italski). Borowski executed separate $500,000 promissory notes on his own behalf and on behalf of Italski. To secure payment of the $500,000 loan to Borowski, he executed a mortgage in Allstate's favor on property located in Linden. The $500,000 loan to Italski was secured by a mortgage on property in Howell that Borowski executed on Italski's behalf.

Five weeks later, Allstate loaned $1.65 million to TGC. Borowski executed a promissory note in that amount on behalf of TGC, as well as amortgage in Allstate's favor on TGC's property in Clark. The mortgage secured the performance of TGC's obligations under the note.

In connection with each of the loans, Borowski executed identical "ARBITRATION AGREEMENTS" on his own behalf and on behalf of Italski and TGC, respectively. Each agreement stated as follows:

Arbitration is a process by which both parties to a dispute agree to submit the matter to an arbitrator who has expertise in the area and to abide by the arbitrator's decision. There is no right to a trial by jury and the arbitrator's legal and factual determinations are generally not subject to appellate review. Arbitration rules of evidence and procedure are often less formal and less rigid than the rules which apply in court. Arbitration usually results in a decision much more quickly than proceedings in court, and the attorneys' fees and other costs incurred by both sides may be substantially less. You are free to discuss the advisability of arbitration with us, or with your own independent counsel or any of your other advisors, and to ask any questions which you may have. Both the United States Supreme Court and the California Supreme Court have endorsed arbitration as an accepted and favored method of resolving disputes, because it is economical and expeditious.

By signing this engagement agreement, we agree that, in the event of any dispute or claim arising out of or relating to this agreement, our relationship, our charges, or our services, SUCH DISPUTE OR CLAIM SHALL BE RESOLVED BY SUBMISSION TO FINAL AND BINDING ARBITRATION IN LOS ANGELES COUNTY, CALIFORNIA BEFORE A RETIRED JUDGE OR JUSTICE. BY AGREEING TOARBITRATE, YOU WAIVE ANY RIGHT YOU HAVE TO A COURT OR JURY TRIAL. If we are unable to mutually agree on a retired judge or justice, then each side will name one retired judge or justice and the two named persons will select a neutral judge or justice who will act as the sole arbitrator. The fees of the arbitrator will be paid equally by both the Firm and you.

Following execution of the notes, mortgages, and arbitration agreements for the three loans, disputes arose between Allstate, as the lender and mortgagee, and Borowski, Italski, and TGC, as the respective borrowers and mortgagors. It appears the disputes concerned Allstate's funding of the loans, with Borowski, Italski, and TGC claiming Allstate deducted improperly calculated prepaid interest from the respective loan proceeds and otherwise improperly delayed making the loan payouts to the respective borrowers.

As a result of the disputes, separate actions in the Law Division and Chancery Division were commenced. Those actions resulted in the entry of the orders from which the pending appeals were taken. We briefly describe in turn each action and the orders at issue in the pending appeals.

The Chancery Division Action (A-3018-18 and A-3827-18)

In October 2018, Allstate filed a verified complaint in the Chancery Division against TGC; UCC, "which owns [TGC]"; and Garry's, which Allstate alleged "is the primary tenant at [TGC's] [p]roperty." The complaint allegedTGC defaulted on the $1.65 million note to Allstate, and Allstate had served TGC with a demand for arbitration over the matters in dispute. Allstate requested the court appoint a receiver to collect rents and to maintain TGC's property pending resolution of the underlying disputes between Allstate and TGC in arbitration.¹ No claims were asserted against Garry's; it was named as a defendant because it was obligated to pay rent pursuant to its lease with TGC.

In November 2018, Allstate moved for an order compelling TGC to proceed to arbitration. TGC opposed the motion, arguing the arbitration agreement was unenforceable because it was not the product of mutual assent as to the arbitral forum and the rules to be applied during the arbitration. Garry's did not oppose Allstate's motion to compel TGC to proceed to arbitration, and Garry's counsel did not participate in the two hearings the court held on the motion. In late November, Garry's filed an order to show cause, an answer to the complaint, and cross-claims and a third-party complaint against Borowski, UCC, TGC, and Borowski's wife and father.

At a December 21, 2018 hearing, the court denied Allstate's motion to compel arbitration, finding the parties to the arbitration agreements did not have "a meeting of the minds," but it also stated it would issue a written...