                                NOT FOR PUBLICATION WITHOUT THE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.




                                                         SUPERIOR COURT OF NEW JERSEY
                                                         APPELLATE DIVISION
                                                         DOCKET NO. A-1718-17T3


ERIC INSELBERG and
INSELBERG INTERACTIVE, LLC,

           Plaintiffs-Appellants,

v.

FRANK BISIGNANO and
FIRST DATA CORPORATION,

          Defendants-Respondents.


                    Argued December 12, 2018 – Decided March 12, 2019

                    Before Judges Koblitz, Ostrer and Currier.

                    On appeal from Superior Court of New Jersey, Law
                    Division, Hudson County, Docket No. L-4954-15.

                    Brian C. Brook argued the cause for appellants (Clinton
                    Brook & Peed, attorneys; Brian C. Brook, of counsel
                    and on the briefs).

                    Kevin H. Marino argued the cause for respondents
                    (Marino, Tortorella & Boyle, PC, and Michael B.
                    Carlinsky, R. Corey Worcester and Matthew A.
                    Traupman (Quinn Emanuel Urquhart & Sullivan, LLP)
            of the New York bar, admitted pro hac vice, attorneys;
            Kevin H. Marino, John A. Boyle, Michael B. Carlinsky,
            R. Corey Worcester and Matthew A. Traupman, on the
            brief).

PER CURIAM

      Defendant Frank Bisignano loaned money to plaintiff Inselberg

Interactive, LLC (Interactive) with plaintiff Eric Inselberg (Inselberg) as

guarantor of the loan. The parties memorialized the terms of the loan in an

agreement. As collateral, defendant took a security interest in certain patents

Inselberg owned. After plaintiffs defaulted on the loan, the parties executed an

assignment agreement, in which plaintiffs assigned the patents to defendant "in

partial payment and satisfaction of the indebtedness." In this appeal, we are

asked to determine whether the assignment agreement was a valid strict partial

foreclosure. After our de novo review of the record and applicable principles of

law, we conclude the agreement between the parties effected a strict partial

foreclosure under N.J.S.A. 12A:9-620 and affirm.

      Interactive, owned by Inselberg, was created to provide marketing

services for business technology invented by Inselberg. After patenting the

technology, Inselberg transferred the patents to Interactive.

      In 2010, defendant loaned $500,000 to Interactive. Inselberg, who was

the guarantor on the loan, secured it with certain patents and sports memorabilia

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                                        2
he owned.     Inselberg was indicted for mail fraud in 2011, and Interactive

defaulted on the loan. No payments were ever made on the loan, and despite

defendant extending the time for plaintiffs to cure the default, plaintiffs were

still unable to satisfy the loan.

      As a result, in January 2013, the parties entered into an assignment

agreement. This agreement assigned the patents to defendant in partial payment

and satisfaction of the loan. Specifically, it stated:

             Interactive wishes to transfer, convey and assign all of
             its right, title and interest in and to the [patents] in
             partial payment and satisfaction of the indebtedness and
             other obligations under the Loan Agreement and the
             other Loan Documents and Bisignano is willing to
             accept such [p]atents in partial payment and
             satisfaction of the indebtedness and other obligations
             under the Loan Agreement and other Loan
             Documents. . . .

Interactive also "waived in full" any obligation to transfer the patents back to

Inselberg and any right to a "realization of proceeds" related to the patents. The

parties established April 2, 2012, as the date of plaintiffs' default, and under the

agreement, Interactive transferred and assigned "a complete and unconditional

transfer" of the patents to defendant.

      The indictment against Inselberg was dismissed in April 2013. In the

following months, Inselberg demanded the return of the patents, and claimed the


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                                         3
value of the sports memorabilia held by defendant exceeded the amount due

under the loan.

      After defendant's appointment as CEO of defendant First Data

Corporation (First Data), Inselberg alleged First Data was using his patented

technology without a license, and he demanded First Data purchase either the

patents or an exclusive license to them. Shortly thereafter, defendant granted

First Data a license to use, or sell the patented technology, without requiring

royalties for their use.

      In a ten-count complaint filed in December 2015, plaintiffs asserted the

breach of specific provisions of the Uniform Commercial Code (UCC) and

common law duties, a declaration of the invalidity of the assignment agreement,

and allegations that First Data was liable for defendant's underlying breaches of

the UCC and common law duties. Plaintiffs sought monetary damages for

royalties from the transfer of its patents to First Data and an alleged diminution

of the patents' value. 1




1
    Defendants did not dispute the allegations in the complaint that a specific
email conversation with Inselberg was not an enforceable settlement agreement.
Plaintiffs also alleged a conversion claim regarding the sports memorabilia. As
defendants agreed to return all of the sports memorabilia under the final order,
it contends both counts are moot.
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                                        4
      Defendants filed an answer and counterclaim and requested removal to

federal court. Plaintiffs filed two motions in response: 1) to dismiss for lack of

subject matter jurisdiction and 2) to dismiss defendants' counterclaims. These

motions were granted, and the matter was remanded to state court. Thereafter,

defendants moved for dismissal of the complaint under Rule 4:6-2(e), arguing

the assignment agreement was a strict foreclosure under N.J.S.A. 12A:9-

620(c)(1).

      In a written statement of reasons issued January 23, 2016, the trial judge

found a valid loan agreement. The judge reasoned the subsequent assignment

agreement transferring the patents was a valid strict foreclosure under N.J.S.A.

12A:9-620(a) and (c) because it established the necessary record authenticated

after default, and plaintiffs consented to defendant's acceptance of the collateral

as partial satisfaction of plaintiffs' obligation under the loan agreement.

      Despite its conclusion, however, the court declined to dismiss the

complaint, finding the assignment agreement contained "no agreed upon value

for the partial satisfaction" of plaintiffs' debt. The trial court directed the parties

to engage in discovery to determine the value of the patents and how much

should be applied to plaintiffs' outstanding debt.




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                                          5
      The parties disagreed as to the scope of the ordered discovery, prompting

the trial judge to issue a clarification on October 5, 2017. The clarification

stated:

            The court did not "deny in entirety" [d]efendants'
            motion. Clearly, the statement of reasons provided, at
            a minimum, the "partial grant" of [d]efendants' motion,
            limiting the [p]laintiffs' recovery to any excess value
            greater than $500,000 that valuation of the collateral
            may produce. Thus, discovery will be limited to
            VALUATION of patents and sports memorabilia and
            nothing more.

      Following a conference with the trial judge later that month, defendants

submitted a proposed final order (final order) dismissing plaintiffs' claims with

prejudice. Plaintiffs consented to the form of the order, but not its entry. The

October 27, 2017 final order stated: 1) the assignment agreement "effectuated a

valid strict partial foreclosure"; 2) the patents value was "at least $557,733.56

(the amount of the [l]oan plus interest)"; 3) defendants had to return the sports

memorabilia; and 4) defendants' counterclaims were dismissed with prejudice.

      On appeal, plaintiffs contend: 1) the value of collateral in the assignment

agreement is an "essential" requirement of a strict foreclosure and, as the

assignment agreement lacked any value, it was invalid; 2) the assignment

agreement was not executed in good faith; and 3) because the trial court found

discovery was needed to determine the patents' value, there was no strict

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                                       6
foreclosure. In response, defendants assert the assignment agreement satisfied

all of the requirements to establish a strict foreclosure under N.J.S.A. 12A:9-

620, and there is no provision under the UCC or other New Jersey law requiring

the assignment agreement to specify the amount of debt subject to discharge.

      We review the final order de novo, applying the same standard under Rule

4:6-2(e) that governed the trial court. See Castello v. Wohler, 446 N.J. Super.

1, 14 (App. Div. 2016); see also Frederick v. Smith, 416 N.J. Super. 594, 597

(App. Div. 2010). Our review "is limited to examining the legal sufficiency of

the facts alleged on the face of the complaint." Printing Mart-Morristown v.

Sharp Elecs. Corp., 116 N.J. 739, 746 (1989). If "the fundament of a cause of

action may be gleaned even from an obscure statement of claim," then the

complaint should survive this preliminary stage. Ibid. (quoting Di Cristofaro

v. Laurel Grove Memorial Park, 43 N.J. Super. 244, 252 (App. Div. 1957)).

      Strict foreclosure is a creditor's remedy for a debtor's default "by which

the secured party acquires the debtor's interest in the collateral without the need

for a sale or other disposition." UCC § 9-620 cmt. 2; see also N.J.S.A. 12A:9-

620 cmt. 2.2 N.J.S.A. 12A:9-620(a) addresses strict foreclosure, allowing a


2
   New Jersey adopted the UCC in part "to make uniform the law among the
various jurisdictions." N.J.S.A. 12A:1-103(a)(3). The New Jersey statute is
identical to the UCC and we therefore only refer to the New Jersey statute.
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                                        7
secured creditor to "accept collateral in full or partial satisfaction of the

obligation it secures" if the debtor consents to the acceptance or does not object

within a time certain. Section 620 "does not impose any formalities or identify

any steps that a secured party must take in order to accept collateral" if the debtor

consents to the acceptance or does not object within a time certain. See N.J.S.A.

12A:9-620 cmt. 6.

      "[A] debtor consents to an acceptance of collateral in partial satisfaction

of the obligation it secures only if the debtor agrees to the terms of acceptance

in a record authenticated after default."      See N.J.S.A. 12A:9-620(c)(1). A

"record" is information inscribed on any tangible medium or stored in any other

medium and retrievable in tangible form.         See N.J.S.A. 12A:9-102(a)(69).

"Authenticate" is to sign, or otherwise adopt a record with the present intent of

adopting or accepting the record. See N.J.S.A. 12A:9-102(a)(7).

      Once the debtor consents to the acceptance of collateral in partial

satisfaction of the obligation it secures, the acceptance: 1) "discharges the

obligation to the extent consented to by the debtor"; 2) "transfers to the secured

party all of a debtor's rights in the collateral"; and 3) "terminates any other

subordinate interest."    See N.J.S.A. 12A:9-622(a)(1), (2), (4).         Once the

collateral has been accepted, it is transferred to the creditor.


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                                         8
      We are satisfied the trial judge correctly determined the assignment

agreement constituted a strict partial foreclosure. First, the parties executed the

assignment agreement after plaintiffs defaulted on the loan. See N.J.S.A. 12A:9-

620(c)(1). Second, the agreement is written, meeting the "record" requirement.

See N.J.S.A. 12A:9-102(a)(69).        Third, the agreement is authenticated as

defendant and plaintiffs signed the document. See N.J.S.A. 12A:9-620(c)(1);

see also N.J.S.A. 12A:9-102(a)(7). Finally, the agreement stated that Interactive

intended to convey and assign all of its interests in the patents in partial payment

and satisfaction of the debt.      The language in the assignment agreement

expressly stated that defendant, as the secured party, accepted the collateral in

partial satisfaction of plaintiffs' obligation, and that plaintiffs consented to the

acceptance in partial satisfaction. For those reasons, the assignment agreement

fulfills New Jersey's requirements for a strict foreclosure.

      Plaintiffs' assertion that the assignment agreement is invalid because there

was no determination of the value of the collateral is without support in New

Jersey law. As stated, under N.J.S.A. 12A:9-622(a)(1), when a debtor consents

to a secured party's acceptance of collateral in partial satisfaction of the

obligation, it "discharges the obligation to the extent consented to by the debtor."




                                                                            A-1718-17T3
                                         9
Here, plaintiffs, as debtors, consented to defendant creditor accepting the

collateral in partial satisfaction of the obligation in the assignment agreement.

      We further note that the secured creditor's acceptance of the collateral is

automatic, requiring no further action. The secured party's agreement to accept

collateral is self-executing and the secured party is bound by its agreement to

accept the collateral. N.J.S.A. 12A:9-620, cmt. 6.

      In defendant's agreement to accept the collateral, and plaintiffs' consent

to the acceptance, defendant became the owner of the patents upon the execution

of the assignment agreement. No further action was needed. As established

under the final order, the debt has been satisfied as defendant agreed to assign

the value of the loan and accrued interest as the value of the patents. Therefore,

it was not necessary to address the valuation of the patents.

      Because the assignment agreement effected a strict foreclosure, plaintiffs'

rights and interests in the patents were extinguished. As a result, the complaint

cannot sustain a cause of action, and the final order dismissing plaintiffs' claims

was appropriate under Rule 4:6-2(e).

      Affirmed.




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