TD Bank, N.A. v. Miller

Background

TD Bank moved for summary judgment on Count One of its amended complaint. The claim sought a declaration of the amount owed under a guaranty, the setting aside of property transfers as necessary to satisfy the debt, and permission to attach or levy property. The opinion states that Count Two asserted a fraudulent-conveyance claim against Barbara Miller, but the motion addressed Count One.

In 2014, Michael Miller signed a guaranty making him liable for up to $3.5 million in connection with two mortgage loan notes issued to Woodbridge Center Realty Partners. The guaranty stated that the liability cap would be reduced proportionately by principal payments made by the borrower under the loan amortization schedules and that the guaranty would end when the loans’ outstanding principal balance reached $13.5 million or less. It also stated that the guaranty was unconditional and that foreclosure would not limit or impair the guarantor’s liability. The guaranty selected New Jersey law.

Michael Miller died on December 17, 2016. Barbara Miller was his widow and the executrix of his estate. The estate’s tax return listed assets of $12,209,765 and debts of $15,665,461. Three jointly held UBS accounts transferred to Barbara Miller outside the estate after Michael Miller’s death. The opinion states that the accounts held more than $20 million around the time of his death, but also discusses evidence that a UBS loan of about $17 million may have been secured by or paid from those accounts. The court could not resolve the parties’ dispute about the accounts’ value on the summary-judgment record.

The guaranty and foreclosure proceeds

The court held that the guaranty’s language did not allow foreclosure proceeds to reduce or extinguish Michael Miller’s liability. The guaranty referred to principal payments made by Woodbridge according to the loan amortization schedules, and foreclosure proceeds were not such payments. The guaranty also expressly stated that liability would not be limited or impaired by foreclosure or a sale of the mortgaged property.

The court applied New Jersey law to the guaranty and explained that New Jersey law permits a creditor to pursue a guarantor after foreclosure for a remaining deficiency, subject to limits against recovering more than the amount owed. Barbara Miller did not argue that enforcing the guaranty would give TD Bank an improper windfall, and she acknowledged that the remaining principal debt after the foreclosure proceeds was about $6.8 million, more than TD Bank sought under the guaranty.

Funds in the UBS accounts

The court found an actual conflict between New York and New Jersey law concerning TD Bank’s ability to reach the UBS accounts. Under New York law, a creditor could generally reach the decedent’s half-interest if the transfer made the estate insolvent, while reaching the entire account required direct or substantial circumstantial proof that no joint tenancy was intended or that the account was opened only for convenience. Under New Jersey law, when an estate is insufficient to pay its debts, a creditor may reach the amount the decedent beneficially owned in a joint account, measured generally by the joint owners’ net contributions.

Applying New York choice-of-law principles, the court concluded that the guaranty’s broad provision covering its enforcement extended to TD Bank’s ability to collect from the UBS accounts. New Jersey law therefore governed that issue. Because the estate was insolvent and the opinion states that the UBS funds came from income derived from Michael Miller’s businesses, the court ruled that TD Bank could reach up to the full value of the joint account at the time of his death. The court nevertheless could not conclude that the accounts’ value exceeded $3,478,070.52 on the record before it.

The court also applied New Jersey law to prejudgment interest because the parties agreed that the law governing liability also governed interest. It adopted Barbara Miller’s proposed method for calculating that interest because TD Bank did not argue that the proposed New Jersey-law method was incorrect. The guaranty separately entitled TD Bank to reasonable attorneys’ fees and collection expenses.

Disposition

Judge Victor Marrero ordered that TD Bank’s motion for summary judgment on Count One was granted in part. The court granted TD Bank’s request for a declaration that Barbara Miller received funds from the identified UBS accounts subject to TD Bank’s guaranty claim. It entered final judgment for TD Bank and against Barbara Miller for $1,847,304.63, together with prejudgment interest and reasonable attorneys’ fees and costs to be assessed.

The court ordered Barbara Miller to submit a proposed prejudgment-interest order and TD Bank to submit materials supporting its attorneys’ fee request. It also set aside the transfer of Michael Miller’s interest in $3,478,070.52 in the UBS accounts to the extent necessary to satisfy the guaranty claim and permitted TD Bank to attach or levy on Miller’s UBS accounts or other accounts or property in which she had an interest. The opinion does not state a disposition for Count Two.