provident savings bank v pinnacle mortgage corp

Loislaw Federal District Court Opinions

Copyright © 2013 CCH Incorporated or its affiliates

IN RE PINNACLE MORTGAGE INVESTMENT CORPORATION, (D.N.J. 1998)

IN RE PINNACLE MORTGAGE INVESTMENT CORPORATION, Debtor

PROVIDENT SAVINGS BANK, a New Jersey Banking Corporation,

Plaintiff/Appellant, v. PINNACLE MORTGAGE INVESTMENT CORPORATION, a

Pennsylvania Corporation, et al., Defendants, SETTLERS ABSTRACT CO., L.P.,

LAWYERS TITLE INSURANCE CORP., LAND TRANSFER CO, INC., FIDELITY NATIONAL

TITLE INSURANCE CO. OF PENNSYLVANIA, GINO L. ANDREUZZI, PIONEER AGENCY II

CORP. t/a PIONEER AGENCY, MUSSER & MUSSER, WILLIAM E. WARD, QUAKER ABSTRACT

CO., and SEARCHTEC ABSTRACT, INC., Appellees.

CIVIL NO. 980489 (JBS), [Bankruptcy Case No. 9510608 (JHW)], [Adv.

Proc. No. 951091]

United States District Court, D. New Jersey.

Filed: December 9, 1998

Walter E. Thomas, Jr., Esq., Timothy J. Matteson, Esq., Mark A. Trudeau,

Esq., Stern, Lavinthal, Norgaard & Kapnick, Esqs., Englewood, New Jersey,

Attorneys for Appellant.

Edward J. Hayes, Esq., Andrea Dobin, Esq., Fox, Rothschild, O'Brien &

Frankel, Princeton Pike Corporate Center, Lawrenceville, New Jersey,

Attorneys for Appellees, Settlers Abstract Co., L.P., Land Transfer Co,

Inc., Fidelity National Title Insurance Co. of Pennsylvania, Gino L.

Andreuzzi, Pioneer Agency II Corp. t/a Pioneer Agency, Musser & Musser,

Quaker Abstract Co, and Searchtec Abstract, Inc.

OPINION

SIMANDLE, District Judge.

I. INTRODUCTION

Provident Savings Bank appeals from a Judgment entered on December 17,

1997, pursuant to a written opinion issued on November 19, 1997, by the

Honorable Judith H. Wizmur, United States Bankruptcy Judge, after trial

in an adversary proceeding. That Opinion ruled in favor of the

Appellees, Settlers Abstract Co., L.P., Land Transfer Co, Inc., Fidelity

National Title Insurance Co. of Pennsylvania, Gino L. Andreuzzi, Pioneer

Agency II Corp. t/a Pioneer Agency, Musser & Musser, Quaker Abstract Co,

and Searchtec Abstract, Inc. ("title agents"). Reviewing a longstanding

complex lending relationship between Provident and the debtor, Pinnacle

Mortgage Corporation, of which the ten real estate mortgage loans at

issue herein were a part, the Bankruptcy Court held that appellee title

agents (who had advanced their own funds to cover disbursements when

Provident dishonored Pinnacle's checks) had a more valid or higher

priority security interest in the promissory notes and mortgages executed

as part of ten separate residential real estate closing than did

appellant. Provident Savings Bank appeals this ruling and seeks this

Court's determination that it was the holder in due course of those

documents.

The principal issue to be decided is whether the Bankruptcy Court

correctly determined under the Uniform Commercial Code that Provident was

not a holder in due course of the promissory notes arising from these

loans, where it found that Provident so closely participated in the

funding and approval of the Pinnaclebrokered loans that the transaction

did not end at the closing with the title agents, such that Provident did

not attain holder in due course status because it did not fit the

requisite role of a "good faith purchaser for value." For the reasons

that will be stated herein, the judgment will be affirmed because the

Bankruptcy Court's finding that Provident never attained HDC status was

neither clearly erroneous nor contrary to law.

II. BACKGROUND

A. Procedural History

This case arises from a dispute over the various security interests in

mortgage documents from ten separate real estate transactions in late

October, 1994, conducted by the debtor, Pinnacle Mortgage Investment

Corporation (who brokered the transactions), the appellant (who financed

the transactions), and the appellees (who were title closing agents in

the transactions). On February 2, 1995, appellant Provident Savings Bank

("Provident") and other creditors filed an involuntary petition under

Chapter 7 of Title 11 of the Bankruptcy Code against Pinnacle Mortgage

Investment Corporation ("Pinnacle"). An order for relief under Chapter 7

was entered by the Bankruptcy Court on March 6, 1995.

On March 24, 1995, Provident commenced this adversary proceeding by

filing a three count complaint to determine the extent, validity, and

priority of the various security interests asserted by Pinnacle, Meridian

Bank, Lawyers Title Insurance Corporation, the appellees, and William E.

Ward with regard to the promissory notes and mortgages from ten real

estate transactions.[fn1] Appellees responded to the complaint by filingan answer, counterclaims, and crossclaims, seeking money judgments in

the amount of the contested notes and mortgages, interest, cost of suit,

and attorneys fees; imposition of a constructive trust in their favor

with regard to the notes, mortgages, and proceeds thereof; and to have

the subject notes and mortgages avoided and stricken in favor of

subsequently executed mortgages between the appellees and the

mortgagors. Provident twice amended its complaint, finally seeking a

declaratory judgment that it is the holder in due course of the subject

notes and mortgages under the Uniform Commercial Code; avoidance of the

preferential transfer by appellee Andreuzzi pursuant to 11 U.S.C. § 547and 550; avoidance of the fraudulent transfer by appellee Andreuzzipursuant to §§ 548 and 550; and avoidance of the preferential and

fraudulent transfers by appellees pursuant to 11 U.S.C. § 547, 548,and 550.

Trial in this matter was held on July 16, 17, and 18, 1996, and October

1, 3, and 4, 1996. At the close of Provident's case in chief, upon motion

by the appellees, all of those portions of the Second Amended Complaint

which did not pertain to Provident's status as a holder in due course

("HDC") were dismissed.

B. The Factual History

In its November 19, 1997 opinion, the Bankruptcy Court determined that

the facts of the case are as follows. Debtor Pinnacle Mortgage Investment

Corporation ("Pinnacle" or "debtor") was a mortgage banker which

primarily dealt in residential mortgage lending and refinance. In December

of 1992, Pinnacle and Provident Savings Bank ("Provident" or "appellant")

entered into a Mortgage Warehouse Loan and Security Agreement

("Agreement"), whereby Provident would fund Pinnacle, who in turn funded

retail customers who sought to purchase or refinance residential real

estate. The borrower in each transaction would give Pinnacle a note and

mortgage, both of which acted as collateral to protect Provident until

Pinnacle sold the mortgage to a third party investor, such as the Federal

Home Loan Mortgage Corporation ("Freddie Mac"), who satisfied Pinnacle's

debt to Provident. Warehouse Agreement § 3.4.

1. The Warehouse Agreement

Under these types of agreements, there would usually not be any contact

between the warehouse lender and the ultimate mortgagor. Typically,

Pinnacle would arrange with a prospective borrower for Pinnacle to

advance funds for the borrower to purchase or refinance a home and for

the borrower to assign a note and mortgage to Pinnacle as collateral. The

mortgage would be endorsed in blank in order to accommodate the final

third party investor (such as Freddie Mac), with whom Pinnacle would

arrange to purchase the mortgage, usually as a part of a pool of

mortgages; this was known as a "takeout" agreement. All of this

completed, Pinnacle would submit a "package" to Provident seeking funding

for the particular transaction under its $10 million line of credit.[fn2]This package included a description of the borrower and the funding, an

assignment of the mortgage endorsed in blank, a takeout commitment, and

an agency agreement that indicated the borrower's attorney's agreement

"to act as the agent of the Bank" to disburse the Advance and to obtain

due execution and delivery to the bank of the original note that

evidences the debt underlying the Mortgage Loan." Warehouse Agreement

§ 5.3(A)(iii). The Agreement required all of this to be submitted

along with the initial funding request. As a matter of course, however,

the agency agreement was usually executed by the title agent handling the

closing instead of by the borrower's attorney, and Provident customarily

accepted the mortgage assignment and agency agreement after the actual

closing.

After Provident received the package and checked to see that Pinnacle's

credit limit had not been exceeded (although, as stated above, often

prior to receipt of the mortgage assignment and agency agreement),

Provident credited Pinnacle's checking account with 98% of the requested

funds. Warehouse Agreement §§ 1.1, 2.1. Pinnacle would write a

regular, uncertified check to the closing agent, who would close the loan

directly with the borrower on Pinnacle's behalf. Pinnacle was supposed to

use specific funds credited to their account to fund specific closings,

but no controls were in place to make sure that Pinnacle actually did

so.

With Pinnacle's check in hand, the closing agent would use money from

its own bank account to disburse funds to the mortgagor, later

replenishing its bank account by depositing Pinnacle's check. Next, the

closing agent would routinely send the original note, a certified copy of

the recorded mortgage, and the other closing documents to Pinnacle, who

would send them on to Provident, who would receive this original note

approximately three to five days after closing. Provident and the

borrowers had no contact; indeed, Provident and the closing agents had no

contact, save the extremely limited contact by the closing agents who did

return the agency agreement included in the borrowing package. Not all

closing agents did return the agreement signed; most of those who did

sent everything through Pinnacle to go to Provident, in accordance with

Pinnacle's written instructions, rather than remitting the note and other

papers directly to Provident, as stated in the agency agreement.

Ultimately, Provident would send the note and accompanying documents to

the third party investor, who would pay Provident the funds which

Provident had originally placed in Pinnacle's checking account by wiring

monies to Provident in Pinnacle's name. Because the third party investor

would send multiple payments in each wire transfer, Pinnacle would tell

Provident to which loans to apply each of the funds.

2. Pinnacle's Declining Financial State

Among the twenty or so warehouse customers that Provident had during

19931994, Pinnacle was the most profitable for Provident, providing

hundreds of millions of dollars in loan transactions. However, when the

mortgage banking industry suffered a decline in business, Pinnacle began

to experience financial difficulties as well.

The Warehouse Agreement, § 6.11, required Pinnacle to submit

unaudited balance sheets and statements of income to Provident on a

quarterly basis, though Pinnacle customarily provided monthly

statements. The statements filed for June, July, and August of 1993

reflected an accrued pretax income for the first three months of the

fiscal year of $281,351. Statements for September, October, and November

of 1993 reflected pretax income of $923,923 for the first six months of

the fiscal year. However, after the November 30 report, Pinnacle began to

send its reports quarterly, which was in accordance with the Warehouse

Agreement but which was nonetheless unusual due to Pinnacle's custom of

submitting reports monthly. The next report, covering the ninemonth

period ending February 28, 1994, was due on April 15 but not received

until some time in May. It showed pretax income of $136,000 for the

first nine months, or an $800,000 loss in the previous three months. The

accompanying unaudited balance sheets showed a reduction of assets from

$40 million to $28 million in those three months. The final financial

statement was due on August 31, 1994, but Provident never received it.

At a holiday party in May 1994, Edmund R. Folsom, head of Provident's

Commercial Lending Department, had learned that Pinnacle had sustained

losses in the winter months. On August 19, 1994, Sharon Kinkead, of

Provident's Warehouse Lending Department, called Pinnacle's headquarters

and learned from Pinnacle's CFO, Joseph Mader, that there would be a

delay in the submission of the audited financial statements for the

fiscal year ending May 31, 1994 because of a change of comptroller, but

that the report would be provided by September 15, 1994. That report

never arrived, and no other financial statements were received up until

Provident's termination of its relationship with Pinnacle in early

November 1994.

3. Provident's Relationship with Pinnacle

Throughout its relationship with Pinnacle, Provident routinely honored

overdrafts on behalf of Pinnacle — about twenty times in 1993 and

fifteen times in 1994. These overdrafts ranged from $7,240.87 to

$5,255,812.

When a check was presented to the bank on Pinnacle's account for which

Pinnacle had insufficient funds, Sharon Kinkead would contact Pinnacle to

ask whether Pinnacle would honor that overdraft. Having been told that

the check would be covered (usually from an anticipated wire transfer),

Kinkead and her supervisor, Mr. Folsom, would honor it and allow the

overdraft. Until November 1994, Provident honored all of Pinnacle's

overdrafts, without reviewing Pinnacle's books and records or monitoring

its checking account.

As mentioned earlier, Pinnacle's CFO, Joseph Mader, had informed

Provident that its final fiscal year report would be forthcoming on

September 15, 1994. When Provident did not receive the audited reports by

that date, Mr. Folsom spoke with Mr. Mader, who reported that though

Pinnacle had sustained losses, it was expecting a substantial infusion of

capital. Pinnacle wanted to hold off publishing the report so that it

could add a footnote explaining that there would be a capital infusion.

Based on this, Folsom decided to extend Pinnacle's credit line through

the end of November.

Folsom called Mader some time in October to check on the status of the

report. When Mader returned the call on November 1, he informed Folsom

that the capital infusion had failed. Folsom demanded a meeting with

Pinnacle's officers.

On November 2, Folsom and Kinkead met with Mader and Al Miller,

President of Pinnacle. Mader and Miller presented internally generated

financial statements indicating a pretax loss of six million dollars for

the previous fiscal year, as well as a pretax loss of almost one million

dollars for the first quarter of the current fiscal year. Miller and

Mader admitted that they had misused their warehouse credit line with

G.E. Capital Mortgage Services, Inc., to whom they were indebted for

about six million dollars. They "admitted fraud" as to G.E., but

indicated that they had not misappropriated the Provident funds and asked

for an extension of funding of their loans while they financially

reorganized. Provident declined to do so.

At that time, Provident finally reviewed Pinnacle's books and

discovered that Pinnacle had been diverting substantial sums of money

from Pinnacle's Provident account to its operating account at Meridian

Bank. Kinkead and Folsom also learned that Pinnacle had been requesting

advances on loans earlier than was routinely requested, possibly using

the money that was supposed to be for specific loans for other purposes

instead. Indeed, Pinnacle was engaging in a "kiting" scheme,

misappropriating monies from third party investors that should have been

applied to previously funded loans. A Pinnacle employee told Kinkead that

the Provident line was not "whole," that as much as $500,000 may have

been taken from it, though no fraudulent loans had been made.

As of November 2, 1994, all checks presented to Provident on Pinnacle's

account had been processed, and the customer balance summary showed an

overdraft of $206,653.67. On November 3, $830,127.48 was deposited in

Pinnacle's account. Sixteen checks totaling $1,584,041.63 were presented

to Provident against Pinnacle's account on November 3. There were

insufficient funds to cover all sixteen, so Folsom sent a letter to

Miller, Pinnacle's president, to ask which checks should be paid. At the

time, Provident knew that all sixteen of those checks represented monies

that Pinnacle had delivered to borrowers and closing agents for

particular loans, as well as that each transaction was accompanied by a

takeout commitment by a third party investor, who would have paid for

the loan.

Miller indicated that six of the checks could be paid. Provident

debited $863,821 to pay off eight loans on November 4, and other checks

were paid at Mader's instruction. There was an overdraft on that date of

$178,303.73, and Provident honored no more checks. The remaining ten of

the sixteen checks presented on November 3 were dishonored, and those are

the subject of the instant litigation.

4. The Ten Transactions

Prior to the closings in each of the ten transactions in question,

Pinnacle had requested from Provident — and received — monies

to fund the transactions. As usual, Pinnacle presented the closing agent

with an uncertified check drawn on its account at Provident representing

payment for the note and mortgage to be executed by the borrower,

purchaser, or refinancer of the property. With Pinnacle's check in hand,

the closing agents closed each transaction, issuing checks from their own

accounts to the parties entitled to receive funds. The closing agents

then deposited Pinnacle's checks in their own accounts, and their banks

presented those checks to Provident for payment. In each case, Provident

dishonored the checks due to insufficient funds. After each closing, but

before the discovery of any problem, each closing agent returned the

original note to Pinnacle. Several closing agents recorded the mortgage

and sent Pinnacle certified copies. Despite the fact that Pinnacle's

checks were not honored, each closing agent honored their own checks when

they were presented.

At the time, uncertified funds were routinely accepted from mortgage

bankers, with a few exceptions for out of state lenders, ignoring the

Pennsylvania statute which required mortgage bankers and brokers to

certify funds. Most mortgage lenders such as Pinnacle insisted on

acceptance of regular checks; title insurers could not stay in business

if they did not follow the standard in the industry.

As was usual for these transactions, Provident had no contact with any

of the closing agents prior to settlement. Agency agreements were

included in most, but not all, of the instruction packages sent by

Pinnacle to the respective closing agents. The agreement provided that

Provident had a security interest in the note and mortgage; moreover, it

provided that the closing agent would act as Provident's agent in

connection with the loan transaction, agreeing to record the mortgage and

then to send both the original note and the original recorded mortgage to

Provident upon closing. The text of the agreement conflicted with the

closing instructions that Pinnacle gave to the closing agents, which

required the note to be returned to Pinnacle. In six of the ten

transactions, the agreement was executed, but its provisions were

basically ignored, as the closing documents were returned directly to

Pinnacle.

The closing agents learned of the dishonor from their own banks.

Provident did not attempt to contact the closing agents until November

10, 1994, when they sent a letter with instructions to deliver to

Provident all notes, mortgages, loan files, and other collateral, and any

monies received in connection with each mortgage loan.

Several of the agents sought judicial relief. Two of the closing agents

who are appellees in this matter, Gino L. Andreuzzi and the Pioneer

Agency L.P., hold state court judgments in their favor, for a total of

three judgments against Pinnacle, striking the mortgages and notes

executed by their respective buyers in favor of Pinnacle. Andreuzzi, the

closing agent in the Hopeck settlement, filed suit against Pinnacle in

the Court of Common Pleas of Luzerne County, Pennsylvania, seeking a TRO

to keep Pinnacle from selling, transferring, or assigning the note and

mortgage in question. Provident was not joined in Andreuzzi's case, but

it did have notice of the litigation. Andreuzzi filed a lis pendens with

the Prothonotary on November 14, 1994. About three hours after the lis

pendens was filed, Provident recorded the assignment from the Hopeck

note. Ultimately, a default judgment was entered against Pinnacle.

Pioneer also filed suits in connection with the Weaver and Fisher

transactions. In both cases, Pioneer sued Pinnacle and Provident in the

Court of Common Pleas of Berks County, Pennsylvania, on November 14,

1994. A preliminary injunction was entered on November 22, and a default

judgment was entered against both defendants on December 21, 1994. Two

days later, Pinnacle moved to open the default judgment. It was still

pending on February 1, 1995 when an involuntary petition was filed against

Pinnacle. Provident removed the action to the Bankruptcy Court on May 8,

1995.

Other closing agents entered into agreements with the borrowers to

execute new notes and mortgages. By the time this came before the

Bankruptcy Court, the mortgages had either been satisfied in full, with

proceeds held in escrow, or payments on the new mortgages and notes were

being made by the borrowers to the closing agents in escrow pending the

resolution of this matter.

C. The Bankruptcy Court's Findings and Judgment

On November 19, 1997, the Bankruptcy Court issued its Opinion in favor

of the appellees, ruling that:

(1) the appellant did not achieve the status of an HDC

with regard to the notes and mortgages in issue;

(2) the appellees would be entitled to indemnification

even if an agency relationship existed between the

appellant and appellees;

(3) the Uniform Fiduciaries Law is inapplicable to

validate the appellant's position with regard to the

subject notes and mortgages; and

(4) the appellant is precluded from relitigating the

transactions with appellees Pioneer Agency II Corp

t/a Pioneer Agency and Andreuzzi.

Judgment against Provident was entered on December 17, 1997. On December

22, 1997, appellant filed a notice of appeal from the Judgment. On

February 13, 1998, the record on appeal was transmitted to this Court. As

"nothing remains for the [lower] court to do," Universal Minerals, Inc.

v. C.A. Hughes & Co., 669 F.2d 98, 101 (3d Cir. 1981), the BankruptcyCourt's ruling is final, and thus this Court properly has appellate

jurisdiction over the December 17, 1997 Order pursuant to

28 U.S.C. § 158(a).

III. ISSUES PRESENTED

On appeal, Provident makes six arguments. First, Provident argues that

it is the holder in due course ("HDC") of the ten mortgage notes.

Second, Provident argues that the Bankruptcy Court's ruling that the

appellees were entitled to indemnification if they were Provident's agents

is clearly erroneous. Third, appellant contends that the bankruptcy court

erred in ruling that Provident was not protected by the Uniform

Fiduciaries Act ("UFA"), adopted by both New Jersey and Pennsylvania at

N.J.S.A. 3B:1454 and 7 Pa. Cons. Stat. Ann. § 6361, respectively.Fourth, Provident argues, for the first time upon appeal, that the

doctrine of avoidable consequences bars appellees from recovering any

damages from Provident. Fifth, Provident maintains that the doctrines of

lis pendens, res judicata, and collateral estoppel do not bar

relitigation of these issues as to the Andreuzzi transaction. Finally,

Provident argues that the Bankruptcy Court erred by giving preclusionary

effect to the Pioneer action default judgments.

This Opinion will not address Provident's "avoidable consequences"

argument, as it was raised, for the first time, upon appeal.[fn3]Moreover, the doctrine of res judicata precludes review of the two

transactions for which Pioneer was the closing agent, and I thus affirm

the Bankruptcy Court's judgment as to Pioneer on that ground.[fn4] I willaffirm the Bankruptcy Court's holding that Provident is not entitled to

the protections of the Uniform Fiduciaries Act , especially in light of

the fact that Provident has withdrawn its argument that Pinnacle was its

agent.[fn5] For reasons stated herein, I will affirm the BankruptcyCourt's holding that Provident is not the holder in due course of the

eight[fn6] transactions still in question. Accordingly, there is no needfor this Court to address the Bankruptcy Court's alternate finding that

the closing agents would be entitled to indemnification.[fn7]

IV. STANDARD OF REVIEW

On appeal, the weight accorded to the findings of fact by a bankruptcy

court are governed by Fed.R.Bank.P. 8013, which provides as follows:

On appeal the district court or bankruptcy appellate

panel may affirm, modify, or reverse a bankruptcy

judge's judgment, order, or decree or remand with

instructions for further proceedings. Findings of

fact, whether based on oral or documentary evidence,

shall not be set aside unless clearly erroneous, and

due regard shall be given to the opportunity of the

bankruptcy court to judge the credibility of

witnesses.

Fed.R.Bank.P. 8013. Under this Rule, a bankruptcy court's factualfindings may be disturbed only if clearly erroneous. See FGH Realty

Credit v. Newark Airport/Hotel Ltd., 155 B.R. 93 (D.N.J. 1993). Where a

mixed question of law and fact is presented, the appropriate standard

must be applied to each component. In re Sharon Steel Corp., 871 F.2d 1217,

1222 (3d Cir. 1989). Thus, a reviewing court "must accept the [lower]court's findings of historical or narrative facts unless they are clearly

erroneous, but . . . must exercise a plenary review and its application

of those precepts to the historical facts." Universal Minerals, Inc. v.

C.A. Hughes & Co., 669 F.2d at 103.

While standards for establishing that a party is a holder in due course

are wellsettled law, see, e.g., Triffin v. Dillabough, 448 Pa. Super. 72,

87, 670 A.2d 684, 691 (1996), the Court's application of these standardsto the facts does result in a mixed finding of fact and law that is

subject to a mixed standard of review. Mellon Bank, N.A. v. Metro

Communications, Inc., 945 F.2d 635, 64142 (3d Cir. 1991), cert. denied,

503 U.S. 937 (1992). The factual findings can only be reversed for clearerror, In re Graves, 33 F.3d 242, 251 (3d Cir. 1994), even if thereviewing court would have decided the matter differently. In re

PrincetonNew York Investors, Inc., 1998 WL 111674 (D.N.J. 1998). This

Court, thus, may not overturn a bankruptcy judge's factual findings if

the factual determinations bear any "rational relationship to the

supporting evidentiary data. . . ." Fellheimer, Eichen & Braverman, P.C.

v. Charter Technologies, Inc., 57 F.3d 1215, 1223 (3d Cir. 1995) (citingHoots v. Comm. of Pa., 703 F.2d 722, 725 (3d Cir. 1983). However, thisCourt reviews any legal conclusions de novo.

V. DISCUSSION

Appellant argues that the Bankruptcy Court's finding that appellant is

not an HDC of the promissory notes and mortgages from the eight remaining

real estate transactions closed by appellees is clearly erroneous. The

dispute here is not a dispute of law, as the parties agree on what the

law concerning HDCs is. As the Bankruptcy Court correctly found,[fn8]every holder of a negotiable instrument is presumed to be an HDC, Morgan

Guaranty Trust Company of New York v. Staats, 631 A.2d 631, 636(Pa.Super.Ct. 1993), but when a defense of fraud is meritorious as to the

payee, the holder has the burden of showing that it is an HDC in order to

be immune from that defense. Norman v. World Wide Distributors, Inc.,

195 A.2d 115, 117 (Pa.Super.Ct. 1963). A holder of a negotiableinstrument (such as the promissory notes in this case) is either the

person with possession of bearer paper or the person identified on the

instrument if that person is in possession. 13 Pa. Cons. Stat. Ann.

§ 1201; N.J.S.A. 12A:3201 (West Supp. 1998). The holder of adocument of title (such as the mortgages in this case) is the person in

possession if the document is made out to bearer or to the order of the

person in possession. Id. The holder becomes an HDC if:

(1) the instrument when issued or negotiated to the

holder does not bear such apparent evidence of forgery

or alteration or is not otherwise so irregular or

incomplete as to call into question its authenticity;

and

(2) the holder took the instrument:

(i) for value;

(ii) in good faith;

(iii) without notice that the instrument is

overdue or has been dishonored or that there is an

uncured default with respect to payment of another

instrument issued as part of the same series;

(iv) without notice that the instrument contains

an unauthorized signature or has been altered;

(v) without notice of any claim to the instrument

described in section 3306 (relating to claims to an

instrument); and

(vi) without notice that any party has a defense

or claim in recoupment described in section 3305(a)

(relating to defenses and claims in recoupment).

13 Pa. Cons. Stat. Ann. § 3302. See also N.J.S.A. 12A:3302. Inshort, an HDC is the holder of the instrument or document who took for

value and in good faith without notice of any claims or defects on the

instrument or document. If classified as an HDC, the holder holds without

regard to defenses, with certain statutory exemptions which do not apply

here. 13 Pa. Cons. Stat. Ann. § 3305; N.J.S.A. 12A:3305.

It was clear to the parties and to the Bankruptcy Court below that

Provident did not have actual possession of the notes and mortgages

before November 2, 1998, when it learned that there were insufficient

funds in Pinnacle's account at Provident to cover Pinnacle's checks to

the closing agents here. Provident nonetheless argued that it was the

holder of the notes and mortgages because, before gaining actual

knowledge of Pinnacle's fraud, Provident "constructively possessed" the

notes and mortgages from the moment that the closing agents, who were

allegedly Provident's agents, took possession of the notes at the

closings before November 2.

The Bankruptcy Court rejected Provident's argument, finding that none

of the appellees acted as Provident's agents, and thus Provident never

constructively or actually possessed the notes and mortgages. Thus, the

Bankruptcy Court found that Provident never became the holder of these

notes and mortgages in the first place. (Opinion at 53.) Alternatively,

the Bankruptcy Court found that while Provident did give value for the

notes and mortgages (Opinion at 54), it did not take those notes and

mortgages in good faith and without knowledge of defenses, and thus

Provident is not an HDC. (Opinion at 63.) The question before this Court

is whether the Bankruptcy Court's rulings in this regard were clearly

erroneous. I hold that it was neither clearly erroneous nor contrary to

established law for the Bankruptcy Court to find that Provident did not

fit the role of "good faith purchaser for value" necessary to claim HDC

status even though Provident's lack of good faith arose after the title

agents closed the real estate transactions. As the following discussion

will explain, in the context of a course of dealing between Provident and

Pinnacle extending over thousands of such transactions, Provident was

essentially a party to the mortgage lending transactions and thus, by

definition, cannot claim HDC status in the negotiable papers which

resulted from those transactions, especially because Provident gained

knowledge of defenses before its own role in the original mortgage

lending transaction was complete.

I affirm the Bankruptcy Court's ruling that Provident is not the HDC of

these notes and mortgages. In so holding, I need not, and thus do not,

reach the issue of whether Provident constructively possessed the notes

and mortgages,[fn9] for holder status is irrelevant if Provident did nottake in good faith and without knowledge of defenses. Because I find that

the Bankruptcy Court's ruling that Provident did not take in good faith

was not clearly erroneous, I affirm the ruling that Provident is not

entitled to the protections afforded to a holder in due course.

The Bankruptcy Court correctly stated the law on good faith in this

context: the test for good faith is "not one of negligence of duty to

inquire, but rather it is one of willful dishonesty or actual knowledge."

Valley Bank & Trust Co. v. American Utilities, Inc., 415 F. Supp. 298,

301 (E.D.Pa. 1976). See also Mellon Bank v. PasqualisPoliti,

800 F. Supp. 1297, 1302 (W.D.Pa. 1992), aff'd, 990 F.2d 780 (3d Cir.1993); Carnegie Bank v. Shalleck, 606 A.2d 389, 394 (N.J.Super.Ct.A.D. 1992); General Inv. Corp. v. Angelini, 278 A.2d 193 (N.J. 1971).Good faith may be defeated only by actual knowledge or a deliberate

attempt to evade knowledge. Rice v. Barrington, 70 A. 169, 170 (N.J. E. &

A 1908). "There is no affirmative duty of inquiry on the part of one

taking a negotiable instrument, and there is no constructive notice from

the circumstances of the transaction, unless the circumstances are so

strong that if ignored they will be deemed to establish bad faith on the

part of the transferee." Bankers Trust Co. v. Crawford, 781 F.2d 39, 45(3d Cir. 1986). Moreover, an HDC must take not only in good faith, but

also without notice of defenses to the instrument or document. One has

"notice" when

(1) he has actual knowledge of it;

(2) he has received a notice or notification of it; or

(3) from all the facts and circumstances known to him

at the time in question he has reason to know that it

exists.

Pa. Cons. Stat. Ann. § 1201.

The Bankruptcy Court here found that Provident did not in fact have

actual knowledge of the fraud or potential defense of failure of

consideration at the time of each separate closing. (Opinion at 58.) The

Bankruptcy Court also found that despite the fact that Provident failed

to review Pinnacle's books, records, and checking account ledger, failed

to notice the overdraft problem, failed to properly monitor withdrawals,

and failed to act after knowledge of financial deterioration in default

in providing timely audited financial statements, the appellees had not

proved that Provident acted with willful dishonesty (id.); Provident did

act with negligence or gross negligence, but gross negligence alone is

not enough to defeat an HDC's title. See Washington & Canonsburg Ry. Co.

v. Murray, 211 F. 440, 445 (3d Cir. 1914); General Inv. Corp.,

278 A.2d 193. Moreover, the Bankruptcy Court correctly noted that holderin due course status is generally created at the time that the claimant

becomes a holder — meaning at the time of negotiation. N.J.S.A.

12A:3302; Sisemore v. Kierlow Co., Inc. v. Nicholas, 27 A.2d 473, 478(Pa.Super.Ct. 1942). In transactions such as the ones at issue here which

involve blank endorsements, the instruments and documents are bearer

paper and are thus negotiated upon delivery alone. 13 Pa. Cons. Stat.

Ann. § 3201; N.J.S.A. 12A:3201.

Nonetheless, the Bankruptcy Court found that Provident failed to attain

the status of a holder in due course. It acknowledged that once a party

establishes its position as a holder in due course, no future action can

undermine that status; so in the usual transaction with negotiable bearer

paper, actual knowledge of defenses gained after possession do not defeat

HDC status. (Opinion at 63.) See Bricks Unlimited, Inc. v. Agee,

672 F.2d 1255, 1259 (5th Cir. 1982); Park Gasoline Co. v. Crusius,158 A. 334 (N.J. 1932). However, the Bankruptcy Court said, it was not

finding lack of good faith after gaining HDC status, but rather that

Provident did not gain HDC status in the first place, for these were not

the "usual" transactions. Taken in a "global sense," the Bankruptcy Court

said, these transactions did not end until after the settlements.

(Opinion at 58.)

Usually, one who takes a negotiable instrument for value has only the

underlying circumstances of that transaction by which to determine if

there is reason to give pause as to the veracity of that instrument. A

lender provides funds to a borrower who executes a promissory note. Once

that transaction is complete, the lender transfers the note to a second

lender in exchange for which the first lender receives funds replenishing

his account and enabling him to lend the same funds to another borrower.

HDC status is given to that second lender if it acts in good faith and

without knowledge of defenses, and there is no general duty for that

second lender to inquire unless the circumstances are so suspicious that

they cannot be ignored. See, e.g. Triffin, 670 A.2d at 692. In the usualHDC transaction, there are two discernible transactions, two exchanges of

funds and notes. As the Bankruptcy Court pointed out, the purpose of

giving that second lender HDC status is "to meet the contemporary needs

of fast moving commercial society . . . (citation omitted) and to enhance

the marketability of negotiable instruments [allowing] bankers, brokers

and the general public to trade in confidence." Triffin,

670 A.2d at 693. However, "the more the holder knows about the underlyingtransaction, and particularly the more he controls or participates or

becomes involved in it, the less he fits the role of a good faith

purchaser for value; the closer his relationship to the underlying

agreement which is the source of the note, the less need there is for

giving him the tensionfree rights necessary in a fastmoving,

creditextending commercial world." Unico v. Owen, 50 N.J. 101, 109110 (1967). See also Jones v. Approved Bancredit Corp., 256 A.2d 739, 742(Del. 1969) (in such a situation, "[the financer] should not be able to

hide behind `the fictional fence' of the . . . UCC and thereby achieve an

unfair advantage over the purchaser.").

Here, there were not two separate, discernible transactions.

Provident's funding of Pinnacle who funded the borrowers was one complex

transaction. The acts of a third party investor who would buy the notes

and mortgages from Provident would have been the second separate,

discernible transaction here. Provident did not replenish Pinnacle's

account in exchange for receiving the notes and mortgages, such that

Pinnacle would have more money to make more loans, as in the "usual"

transaction. Rather, in a complex and longstanding scheme encompassing

thousands of transactions over several years, Provident gave Pinnacle a

line of credit, and then, after Pinnacle gave Provident information about

individual proposed loans to borrowers, Provident transferred money to

Pinnacle's account, in order to later receive the note and mortgage from

each transaction and pass them on to a third party investor. The

Bankruptcy Court, as a factual matter, found that under this complex

scheme, no transactions between any of the parties were complete until

both of the transactions were concluded, particularly because the "second

lender" (Provident) had the ultimate control over the first transaction

(by ordering the dishonor of Pinnacle's checks).[fn10]

I cannot say that the Bankruptcy Court's factual finding was clearly

erroneous. The Bankruptcy Court's ruling accords with the evidence as

well as with the policy underlying the holder in due course doctrine. I

hold that where a warehouse lender so closely participates in the funding

and approval of mortgages which will ultimately lead to the warehouse

lender's rights in mortgages and promissory notes that the transactions

between mortgage banker and mortgagor and between warehouse lender and

mortgage banker are in fact one continuous transaction, rather than two

discernible transactions, a showing of the warehouse lender's lack of

good faith after the closing between title agent and mortgagor but before

the mortgage banker's check is presented to the warehouse lender may

destroy HDC status. Indeed, where the party who claims HDC status was in

essence a party to the original transaction, it cannot, by definition, be

a holder in due course.

Provident had a great deal of involvement in the ongoing series of

transactions and ample knowledge of Pinnacle's overall financial

wellbeing, developed through years of funding Pinnacle's credit line for

thousands of such transactions and receipt of Pinnacle's periodic

financial reports. It had particular information about the borrowers

before it funded these loans. It was, in fact, part of the loan

transactions, and not a separate party who became an HDC through the

giving of value at a second separate, discernible transaction. Provident

had too much control of, participation in, and knowledge of the

underlying transaction to claim that it was a good faith purchaser for

value. See, e.g., Fidelity Bank Nat'l Assoc., 740 F. Supp. at 239.

Because, under this complex transactional scheme, Provident functioned

essentially as a party which approved and funded the loans and gained

actual knowledge of a defense to the notes and mortgages (lack of

consideration) before the transactions were complete, it was not clearly

erroneous for the Bankruptcy Court to find that Provident lacked the good

faith necessary to claim HDC status. Accordingly, the Bankruptcy Court's

ruling is affirmed.

VI. CONCLUSION

For the foregoing reasons, I will affirm the Bankruptcy Court's ruling

that appellant Provident Savings Bank was not the holder in due course of

the notes and mortgages from the ten transactions closed by appellees.

The defense of failure of consideration thus is available against

Provident. I therefore affirm the Bankruptcy Court's judgment that

appellees, and not appellant, are entitled to the notes and mortgages. The

accompanying Order is entered.

ORDER

This matter having come upon the court upon the appeal of appellant,

Provident Savings Bank, from a Judgment entered on December 17, 1997, by

the Honorable Judith H. Wizmur, United States Bankruptcy Judge for the

District of New Jersey,; and the Court having considered the parties'

submissions; and for the reasons set forth in the Opinion of today's

date;

IT IS this day of December, 1998, hereby

ORDERED that the Judgment entered by the Honorable Judith H. Wizmur,

United States Bankruptcy Judge for the District of New Jersey, on

December 17, 1997, which granted the notes and mortgages from

transactions closed by the appellees in this matter to the appellees,

be, and hereby is, AFFIRMED.

[fn1] The appellant's cause of action against defendant William E. Ward

was removed to state court in Delaware upon motion on the basis of

abstention pursuant to 28 U.S.C. § 1334(c) where it is now pending.The appellant's cause of action against Meridian Bank was resolved prior

to trial pursuant to the Stipulation of Settlement with respect to Count

II of the Complaint, filed on July 16, 1996. All claims between the

appellant and Lawyers Title Insurance Corporation were mutually dismissed

at trial.

[fn2] The Agreement said $10 million, but at times up to $12.5 million

was advanced.

[fn3] It is a wellestablished law that appellate courts may not pass

upon an issue not presented in a lower court. Singleton v. Wulff,

428 U.S. 106, 120 (1976). The same holds true for a U.S. District Courtsitting in its appellate capacity over matters appealed from the

bankruptcy court. See Barrett v. Commonwealth Fed. Sav. and Loan Ass'n,

939 F.2d 20 (3d Cir. 1991); In re Middle Atlantic Stud Welding Co.,

503 F.2d 1133, 1134 n. 1 (3d Cir. 1974). Because Provident never raisedthis issue before the Bankruptcy Court, I will not consider it now.

[fn4] The res judicata doctrine prevents relitigation of claims that grow

out of a transaction or occurrence from which other claims have earlier

been raised and decided validly, finally, and on the merits. Federated

Department Stores v. Moitie, 452 U.S. 394, 298 (1981). Under Pennsylvanialaw, default judgments, absent fraud, are afforded res judicata effect.

In re Graves, 156 B.R. 949, 954 (E.D.Pa. 1993), aff'd, 33 F.3d 242 (3dCir. 1994). On December 21, 1994, the Court of Common Pleas of Berks

County, Pennsylvania, entered default judgments against Provident on both

the Weaver and Fisher transactions, those transactions for which Pioneer

was the closing agent. Due to these default judgments, the doctrine of

res judicata bars relitigation of the Pioneer causes of action. The

Bankruptcy Court also held that the Andreuzzi transaction was barred by

res judicata or collateral estoppel because of the lis pendens. That,

however, is a more difficult issue and one that I need not reach now, as

my affirmance of the Bankruptcy Court's judgment applies equally to the

Andreuzzi transaction on the merits.

[fn5] At trial and in its briefs to this Court, as an alternative to its

holder in due course argument, Provident argued that it was protected by

the Pennsylvania Uniform Fiduciaries Act, 7 Pa. Cons. Stat. § 6361,

and the New Jersey Uniform Fiduciaries Law, N.J.S.A. 3B:1454, theprovisions of which are substantially similar. The two laws protect a

person who transfers money to a fiduciary in good faith, by noting that

"any right or title acquired from the fiduciary in consideration of such

payment or transfer is not invalid in consequences of a misapplication by

the fiduciary." 7 Pa. Cons. Stat. § 6361; N.J.S.A. 3B:1454. TheBankruptcy Court held that Pinnacle was not Provident's agent or

fiduciary, and thus the UFA did not apply. (Opinion at 66.) In light of

the fact that Provident's counsel, at oral argument before this Court on

November 13, 1998, themselves argued that Pinnacle was not Provident's

fiduciary, I will affirm this aspect of the Bankruptcy Court's ruling

without need to examine the factual bases on which it relied.

[fn6] The rest of this Opinion is limited to the eight transactions not

handled by Pioneer, since only the Pioneer transactions are bound by res

judicata.

[fn7] As Part V of this Opinion explains, one of the several bases for

the Bankruptcy Court's decision that Provident is not the HDC of the

mortgages and notes is that the settlement agents were not Provident's

agents, and thus Provident did not constructively possess the mortgages

and notes prior to gaining knowledge of claims or defenses on those

notes. (Opinion at 3453.) In the alternative, in case appellate courts

determined that Provident was the HDC of those notes because an agency

relationship did exist, the Bankruptcy Court held that the closing

agents, and not Provident, would still be the ones entitled to the notes

and mortgages, for the agents would have had a right to indemnification

from Provident. (Id. at 6364.) Though, as I explain in Part V, I do not

reach the agency issue, I do affirm the Bankruptcy Court's HDC ruling on

other grounds. In doing so, I am affirming the decision that the

appellees, and not Provident, are entitled to the notes and mortgages. The

Bankruptcy Court's indemnification ruling is just an alternative reason

for finding that the appellees are entitled to the notes and mortgages.

Having already agreed that the closing agents are so entitled because

Provident is not an HDC, there is no need to address that alternative

ruling upon appeal.

[fn8] Seven of the eight remaining transactions here are governed by

Pennsylvania law. The eighth is under New Jersey law, but the two states'

laws on HDC status are largely consistent on the issues raised in these

proceedings.

[fn9] The Bankruptcy Court agreed that authority from other jurisdictions

suggest that a party may become a constructive holder when its agent

takes possession of a negotiable instrument on its behalf. (Opinion at

3637.) However, the Bankruptcy Court made the factual finding that

appellees were not Provident's agents. It determined that though six of

the ten transactions involved written agency agreements, those agreements

were not controlling in light of the course of dealing between the

parties (Opinion at 46), and that Provident did not otherwise meet its

burden of establishing that an agency relationship existed. Because I

find that the Bankruptcy Court's determination that Provident did not act

in good faith is not clearly erroneous, and because the lack of good

faith alone is enough of a basis to sustain a judgment that Provident is

not an HDC of these eight notes and mortgages, I need not address whether

the agency determination was clearly erroneous.

[fn10] Under the Bankruptcy Court's findings of fact, Provident was, in

reality, a party to the original transaction. The situation is somewhat

analogous to a consumer goods financer who has a substantial voice in the

underlying transaction; that financer is not entitled to HDC status.

Westfield Investment Co. v. Fellers, 181 A.2d 809 (N.J.Super.Ct. LawDiv.). Provident had a substantial voice in providing and carrying out

funding of the underlying borrowing transactions, and it thus cannot

claim that it was a good faith HDC when it learned of the defense of

failure of consideration prior to dishonoring the Pinnacle checks.













Proc. No. 951091]












OPINION


I. INTRODUCTION


















documents.












II. BACKGROUND





































































closing.










so.






















































November 1994.





$5,255,812.























































the loan.











































Pinnacle.



























1995.



























28 U.S.C. § 158(a).




































witnesses.




















V. DISCUSSION



















and


(i) for value;

(ii) in good faith;









instrument); and





























































"notice" when





exists.



















Ann. § 3201; N.J.S.A. 12A:3201.












(Opinion at 58.)










































































ruling is affirmed.

VI. CONCLUSION








ORDER






date;













at trial.


was advanced.




































judicata.



















ruling upon appeal.




proceedings.























http://www.loislaw.com/pns/doclink.htp?dockey=7622673@USCODE&alias=USCODE&cite=11+U.S.C.+%A7+547

















Proc. No. 951091]












OPINION


I. INTRODUCTION


















documents.












II. BACKGROUND





































































closing.










so.






















































November 1994.





$5,255,812.























































the loan.











































Pinnacle.



























1995.



























28 U.S.C. § 158(a).




































witnesses.




















V. DISCUSSION



















and


(i) for value;

(ii) in good faith;









instrument); and





























































"notice" when





exists.



















Ann. § 3201; N.J.S.A. 12A:3201.












(Opinion at 58.)










































































ruling is affirmed.

VI. CONCLUSION








ORDER






date;













at trial.


was advanced.




































judicata.



















ruling upon appeal.




proceedings.



































Proc. No. 951091]












OPINION


I. INTRODUCTION


















documents.












II. BACKGROUND





































































closing.










so.






















































November 1994.





$5,255,812.























































the loan.











































Pinnacle.



























1995.



























28 U.S.C. § 158(a).




































witnesses.




















V. DISCUSSION



















and


(i) for value;

(ii) in good faith;









instrument); and





























































"notice" when





exists.



















Ann. § 3201; N.J.S.A. 12A:3201.












(Opinion at 58.)










































































ruling is affirmed.

VI. CONCLUSION








ORDER






date;













at trial.


was advanced.




































judicata.



















ruling upon appeal.




proceedings.























http://www.loislaw.com/pns/doclink.htp?alias=F3CASE&cite=669+F.2d+98

http://www.loislaw.com/pns/doclink.htp?alias=F3CASE&cite=669+F.2d+98#PG101














Proc. No. 951091]












OPINION


I. INTRODUCTION


















documents.












II. BACKGROUND





































































closing.










so.






















































November 1994.





$5,255,812.























































the loan.











































Pinnacle.



























1995.



























28 U.S.C. § 158(a).




































witnesses.




















V. DISCUSSION



















and


(i) for value;

(ii) in good faith;









instrument); and





























































"notice" when





exists.



















Ann. § 3201; N.J.S.A. 12A:3201.












(Opinion at 58.)










































































ruling is affirmed.

VI. CONCLUSION








ORDER






date;













at trial.


was advanced.




































judicata.



















ruling upon appeal.




proceedings.























http://www.loislaw.com/pns/doclink.htp?dockey=6667188@NJCODE&alias=NJCODE&cite=3B%3A14-54

http://www.loislaw.com/pns/doclink.htp?dockey=18442055@FRBANKPR&alias=FRBANKPR&cite=8013

http://www.loislaw.com/pns/doclink.htp?dockey=18442055@FRBANKPR&alias=FRBANKPR&cite=8013




http://www.loislaw.com/pns/doclink.htp?alias=PASUPER&cite=448+Pa.+Super.+72

http://www.loislaw.com/pns/doclink.htp?alias=PASUPER&cite=448+Pa.+Super.+72#PG87

http://www.loislaw.com/pns/doclink.htp?alias=PASUPER&cite=670+A.2d+684

http://www.loislaw.com/pns/doclink.htp?alias=PASUPER&cite=670+A.2d+684#PG691



http://www.loislaw.com/pns/doclink.htp?alias=USCASE&cite=503+U.S.+937



















Proc. No. 951091]












OPINION


I. INTRODUCTION


















documents.












II. BACKGROUND





































































closing.










so.






















































November 1994.





$5,255,812.























































the loan.











































Pinnacle.



























1995.



























28 U.S.C. § 158(a).




































witnesses.




















V. DISCUSSION



















and


(i) for value;

(ii) in good faith;









instrument); and





























































"notice" when





exists.



















Ann. § 3201; N.J.S.A. 12A:3201.












(Opinion at 58.)










































































ruling is affirmed.

VI. CONCLUSION








ORDER






date;













at trial.


was advanced.




































judicata.



















ruling upon appeal.




proceedings.



























http://www.loislaw.com/pns/doclink.htp?dockey=6671154@NJCODE&alias=NJCODE&cite=12A%3A3-201















Proc. No. 951091]












OPINION


I. INTRODUCTION


















documents.












II. BACKGROUND





































































closing.










so.






















































November 1994.





$5,255,812.























































the loan.











































Pinnacle.



























1995.



























28 U.S.C. § 158(a).




































witnesses.




















V. DISCUSSION



















and


(i) for value;

(ii) in good faith;









instrument); and





























































"notice" when





exists.



















Ann. § 3201; N.J.S.A. 12A:3201.












(Opinion at 58.)










































































ruling is affirmed.

VI. CONCLUSION








ORDER






date;













at trial.


was advanced.




































judicata.



















ruling upon appeal.




proceedings.























http://www.loislaw.com/pns/doclink.htp?alias=FDCR&cite=415+F.+Supp.+298

http://www.loislaw.com/pns/doclink.htp?alias=FDCR&cite=415+F.+Supp.+298#PG301

http://www.loislaw.com/pns/doclink.htp?alias=FDCR&cite=800+F.+Supp.+1297

http://www.loislaw.com/pns/doclink.htp?alias=FDCR&cite=800+F.+Supp.+1297#PG1302


http://www.loislaw.com/pns/doclink.htp?alias=NJSUPER&cite=606+A.2d+389

http://www.loislaw.com/pns/doclink.htp?alias=NJSUPER&cite=606+A.2d+389#PG394

http://www.loislaw.com/pns/doclink.htp?alias=NJCASE&cite=278+A.2d+193















Proc. No. 951091]












OPINION


I. INTRODUCTION


















documents.












II. BACKGROUND





































































closing.










so.






















































November 1994.





$5,255,812.























































the loan.











































Pinnacle.



























1995.



























28 U.S.C. § 158(a).




































witnesses.




















V. DISCUSSION



















and


(i) for value;

(ii) in good faith;









instrument); and





























































"notice" when





exists.



















Ann. § 3201; N.J.S.A. 12A:3201.












(Opinion at 58.)










































































ruling is affirmed.

VI. CONCLUSION








ORDER






date;













at trial.


was advanced.




































judicata.



















ruling upon appeal.




proceedings.























http://www.loislaw.com/pns/doclink.htp?alias=NJCASE&cite=278+A.2d+193









http://www.loislaw.com/pns/doclink.htp?alias=NJCASE&cite=50+N.J.+101

http://www.loislaw.com/pns/doclink.htp?alias=NJCASE&cite=50+N.J.+101#PG109

http://www.loislaw.com/pns/doclink.htp?alias=DECASE&cite=256+A.2d+739

http://www.loislaw.com/pns/doclink.htp?alias=DECASE&cite=256+A.2d+739#PG742













Proc. No. 951091]












OPINION


I. INTRODUCTION


















documents.












II. BACKGROUND





































































closing.










so.






















































November 1994.





$5,255,812.























































the loan.











































Pinnacle.



























1995.



























28 U.S.C. § 158(a).




































witnesses.




















V. DISCUSSION



















and


(i) for value;

(ii) in good faith;









instrument); and





























































"notice" when





exists.



















Ann. § 3201; N.J.S.A. 12A:3201.












(Opinion at 58.)










































































ruling is affirmed.

VI. CONCLUSION








ORDER






date;













at trial.


was advanced.




































judicata.



















ruling upon appeal.




proceedings.




































Proc. No. 951091]












OPINION


I. INTRODUCTION


















documents.












II. BACKGROUND





































































closing.










so.






















































November 1994.





$5,255,812.























































the loan.











































Pinnacle.



























1995.



























28 U.S.C. § 158(a).




































witnesses.




















V. DISCUSSION



















and


(i) for value;

(ii) in good faith;









instrument); and





























































"notice" when





exists.



















Ann. § 3201; N.J.S.A. 12A:3201.












(Opinion at 58.)










































































ruling is affirmed.

VI. CONCLUSION








ORDER






date;













at trial.


was advanced.




































judicata.



















ruling upon appeal.




proceedings.
























http://www.loislaw.com/pns/doclink.htp?alias=USCASE&cite=428+U.S.+106#PG120




















Proc. No. 951091]












OPINION


I. INTRODUCTION


















documents.












II. BACKGROUND





































































closing.










so.






















































November 1994.





$5,255,812.























































the loan.











































Pinnacle.



























1995.



























28 U.S.C. § 158(a).




































witnesses.




















V. DISCUSSION



















and


(i) for value;

(ii) in good faith;









instrument); and





























































"notice" when





exists.



















Ann. § 3201; N.J.S.A. 12A:3201.












(Opinion at 58.)










































































ruling is affirmed.

VI. CONCLUSION








ORDER






date;













at trial.


was advanced.




































judicata.



















ruling upon appeal.




proceedings.























http://www.loislaw.com/pns/doclink.htp?alias=NJSUPER&cite=181+A.2d+809

provident savings bank v pinnacle mortgage corp

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