Howard Savings Bank v. Cohen

TAMILIA, Judge:

The Howard Savings Bank appeals the trial court’s Order denying its motion for post-trial relief after the court found appellant could not execute upon property held as tenants by the entireties by appellees, Alan and Marilyn Cohen.

Appellant loaned Alan Cohen (Alan) $50,000 as working capital in a corporate venture. The venture later required an additional $100,000, which Alan obtained by signing another promissory note. At appellant’s request, Marilyn Cohen (Marilyn) executed a guaranty for the full amount of the second loan. Alan did not co-sign this guaranty, which was a completely separate contract from Alan’s promissory notes. This guaranty, drafted by the New Jersey bank, expressly provided “[t]he guaranty and all rights and obligations under it shall be interpreted according to the laws of the State of New Jersey.” After the interest payments ceased due to Alan’s illness, appellant sought to have appellees execute two new notes with Marilyn signing as a joint obligor. Appellees refused this request and appellant made demand for repayment on the two notes. On January 29, 1990, after the parties agreed Alan had defaulted on the loan, the trial court entered a verdict, later reduced to judgment, against each appellee in the amount of $202,-871.05 plus interest. Thereafter, a 60-day moratorium against enforcement was agreed to by the parties to allow the court to determine whether the judgment could be satisfied by levying against property located in Pennsylva*558nia and held by appellees as tenants by the entireties. The trial court held the judgments against appellees were not a joint debt and, therefore, appellant could not execute upon property held as tenants by the entireties.

Appellant argues the obligations of appellees under the promissory notes and guarantees should be interpreted under Pennsylvania law, which, according to appellant, treats a guarantor as a surety or co-obligor so that Pennsylvania law allows a judgment against appellees as joint debtors to be satisfied by executing against tenancy by the entirety property. Appellant also contends even assuming New Jersey law applies, the debt still should be treated as a joint obligation.

We agree with the trial court both Alan’s promissory notes and the guaranty signed by Marilyn state unequivocally that they are to be governed by New Jersey law. Therefore, appellant’s reliance on In re Bialon, 67 B.R. 451 (W.D.Pa.1986), in arguing the contract signed by Marilyn was a suretyship, is clearly misplaced. Appellant now argues the guaranty should be treated as a Pennsylvania document which is governed by Pennsylvania law because Marilyn signed the agreement in Pennsylvania. This absurd proposition fails when we note it was appellant who drafted the unambiguous choice of law provision in the guaranty. The separate nature of the contracts involved herein is also demonstrated by the fact that none of the three contracts were co-signed by the appellees and each contract was executed months apart from the others.

Appellant next contends under New Jersey law there is no substantive distinction between a suretyship and a guaranty. Appellant does not directly support this proposition but instead cites various New Jersey cases dealing with general principles regarding co-guarantors. See McCarthy v. Schwalje, 234 N.J.Super. 396, 560 A.2d 1283 (1988); and D’Ippolito v. Castoro, 51 N.J. 584, 242 A.2d 617 (1969). Under New Jersey law, the maker and guarantor of a debt may not be found jointly liable. Saskel v. Rubin, *559125 N.J.L. 68, 13 A.2d 553 (1940); Smith v. Dowden, 92 N.J.L. 317, 105 A. 720 (1919). In contrast, the maker and surety of a debt may be found jointly liable. Black’s Law Dictionary, 5th Ed., 1979, sets forth the relevant distinctions between a guarantor and a surety:

A surety is usually bound with his principal by the same instrument, executed at the same time---- He is an original promisor and debtor from the beginning____ On the other hand, the contract of guarantor is his own separate undertaking, in which the principal does not join. It is usually entered into before or after that of the principal____ The original contract of the principal is not the guarantor’s contract____ The surety joins in the same promise as his principal and is primarily liable; the guarantor makes a separate and individual promise and is only secondarily liable. “Surety” and “guarantor” are both answerable for debt, default, or miscarriage of another, but liability of guarantor is, strictly speaking, secondary and collateral, while that of surety is original, primary, and direct. In case of suretyship there is but one contract, and surety is bound by the same agreement which binds his principal, while in case of guaranty there are two contracts, and guarantor is bound by independent undertaking.

Id. (citation omitted).

The final issue is whether appellant can execute, pursuant to individual judgments against appellees, upon Pennsylvania property held by appellees as tenants by the entireties. Under New Jersey precedent, where a husband and wife hold land by the entireties, judgment creditors of either spouse may levy and execute upon such spouse’s separate right of survivorship. King v. Greene, 30 N.J. 395, 153 A.2d 49 (1959). The New Jersey Supreme Court in King reasoned there is “no compelling policy reason why a judgment creditor should be inordinately delayed, or, in some instances completely deprived of his right to satisfaction out of the debtor-spouse’s assets.” Id. at 413, 153 A.2d at 60. More recently, in Freda v. Commercial Trust Co., *560118 N.J. 36, 570 A.2d 409 (1990), and Bauer v. Miglioccio, 235 N.J.Super. 127, 561 A.2d 674 (1989), the courts have affirmed the rule announced in King. The trial court, however, correctly notes that in the above New Jersey cases where the judgment creditors were allowed to execute upon tenancy by . the entireties property, the property in question was New Jersey property. Here, we are presented with a case involving Pennsylvania real estate owned by Pennsylvania residents. Therefore, even though we concede New Jersey law governs the terms of both promissory notes and the guaranty, we will not apply this New Jersey precedent to the enforcement of these respective debts.1

In Pennsylvania, the only case directly on point is Blusiewicz v. Rosenfield, 33 Pa.D. & C.2d 470, 84 Montg. 40 (1964), which held a judgment entered against a husband and wife individually does not give rise to a valid lien against real estate held by them as tenants by the entire-ties. It is also settled principle a husband and wife do not own separate interests in entireties property which can be reached by their individual creditors. Stop 35, Inc. v. Haines, 374 Pa.Super. 604, 543 A.2d 1133 (1988). Execution upon the property in question would lead to a sheriffs sale, which would divide the entireties property. This division would conflict with the principle that one cannot execute upon a judgment as long as the entireties property is not destroyed.

We affirm the trial court’s Order of August 30, 1990 which denied appellant post-trial relief thereby preventing it from executing on the judgments obtained against appellees as the property against which execution is sought is held by appellees as tenants by the entireties.

Order affirmed.

CIRILLO, J., dissents.

. We do not dispute that if appellant had obtained judgment in a New Jersey court and if appellees’ property was located in New Jersey, appellant could execute against the survivorship interest of either or both of the appellees.