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Shah v. Mehta

December 7, 2007


On appeal from the Superior Court of New Jersey, Law Division, Civil Part, Camden County, L-4596-00.

Per curiam.


Argued: September 17, 2007 (telephonically)

Before Judges A.A. Rodríguez and C.L. Miniman.

Defendant Sherry Mehta appeals a judgment in favor of plaintiff Hemant Shah on an April 7, 1999, promissory note. The trial began as a jury trial but was converted into a bench trial after Mehta became ill. We affirm.

Shah is a board-certified family practitioner in Jersey City. In early 1998 Shah met co-defendant Rohit Jaegeser through Laxmi Sharma, a Hindu cleric who was friendly with both men. Jaegeser needed money for his radio station, RBC Broadcast Systems, the sole Indian radio station in the tri-state area. The radio station was a division of Ripe Records, Ltd. Shah began lending money to Jaegeser, some for the radio station and some for a film project. By December 1998 Shah had loaned Jaegeser $400,000 for his radio station and his film project.

In the meantime, Jaegeser also sought financing from Mehta. Jaegeser met Mehta when she placed some advertising on the radio station. They met in July 1998 and discussed whether Mehta would loan money to the radio station on a monthly basis, ostensibly because Shah was late in advancing money to Jaegeser and the radio station was behind in paying its bills. Another meeting occurred in September 1998 at Sharma's home. Jaegeser asked Mehta for additional loans. Shah was unaware of these requests for financing.

On December 10, 1998, Shah and Jaegeser entered into a formal agreement. RBC Broadcast Systems was to be incorporated as RBC, LLC (RBC). Shah was to have a twenty percent interest and Jaegeser was to have an eighty percent interest in the new corporation. On December 16, 1998, Shah and Jaegeser executed a supplemental agreement pertaining to the film project and other business ventures. Shah was to receive a twenty percent interest in all future ventures, all of which were to "be conducted only under the [aegis] of RBC." The agreement also provided for additional funding from Shah for the movie project. Shah's interest in the movie project would increase to thirty-five percent when the funding was advanced. Sharma witnessed the execution of the agreement. On December 21, 1998, Shah and Jaegeser executed an operating agreement for RBC.

In January 1999 Mehta made two loans by wire transfers. One loan for $25,000 was payable to Sharma and was intended to repay Sharma's loan to Jaegeser. Another loan for $62,000 was paid to Ripe Records Ltd., a company in which Shah had no interest. In all, Mehta loaned $133,000 to Jaegeser and Ripe Records. Jaegeser admitted that he alone was responsible for this $133,000 debt. Although Mehta claimed she understood that Shah was also liable to repay these loans, Jaegeser testified that he solicited these loans without Shah's knowledge.

On March 16, 1999, Shah was introduced to Mehta for the first time at a meeting with Jaegeser and Sharma. Mehta requested the meeting to discuss securing a loan from a bank in Texas. Mehta claimed that she needed $100,000 to secure a $1,000,000 loan from the Texas bank to help Jaegeser finance the film project and RBC. Shah agreed to loan Mehta $100,000 but required that she and Jaegeser sign a $100,000 promissory note in favor of Shah. The note was dated March 16, 1999, and required repayment on or before April 16, 1999. The note provided for a late charge of twelve and one-eighth percent plus reasonable attorney's fees in the event of a default. Shah gave Mehta a $100,000 check for the purpose of securing the Texas loan. Mehta and Jaegeser both signed the promissory note agreeing to repay this loan. However, the $100,000 check given to Mehta was never negotiated by her.

Soon thereafter, Jaegeser faxed Mehta two letters stating that he was unable to meet her March 13, 1999, repayment deadline for the $133,000 she loaned to him and Ripe Records. He acknowledged that the debt was personal to him and that he was arranging full repayment.

On April 7, 1999, Mehta, Shah, Jaegeser and Sharma had a second meeting, this time at Shah's medical office. Mehta informed Shah and Jaegeser that she needed a total of $200,000 to secure the Texas loan, although Mehta denied this at trial. As a result, the promissory note dated March 16, 1999, was redated for April 7, 1999, and required repayment by May 7, 1999. The changes to the date of the note and the date for repayment were initialed by the parties. Additionally, Jaegeser alone signed a second $100,000 note in favor of Shah, although Shah gave the entire $200,000 to Mehta. Shah and Mehta then went to Shah's bank where he obtained four $50,000 checks, which he gave to Mehta, and Mehta returned the $100,000 check that was given to her on March 16, 1999. Mehta did not secure a loan from a Texas bank.

Sometime after the April 7, 1999, meeting, Shah met again with Mehta and Jaegeser at an Indian restaurant in Edison. Mehta told Shah that she was unable to secure the Texas loan. Mehta also told Shah that she had used the $200,000 for purposes related to her rental properties. Jaegeser reassured Shah that Mehta would repay the $200,000. However, that did not occur. About a year later Shah met with Mehta at Sharma's home. Mehta assured Shah that she intended to repay the $200,000 and she gave him $1,000 in cash as a "good faith" payment. Mehta never repaid the balance of the $200,000 as promised. On July 13, 2000, Shah sued Mehta and Jaegeser on the promissory note in the amount of $200,000. Mehta counterclaimed against Shah and cross-claimed against Jaegeser to recover the $133,000 in loans she made to Jaegeser.

Mehta claimed at trial that the $200,000 was for repayment of the $133,000 in loans she made to Jaegeser and Ripe Records. Mehta claimed that she had no idea what she was signing and did not review the promissory note. She asserted that she relied on the alleged representations of Shah and Jaegeser that she was only acting as a "witness" for Jaegeser. She also claimed that Jaegeser was signing as a "guarantor" and even though she was given a copy, she "didn't need it for anything." She denied that there was any Texas loan or that she was ever trying arrange any funding in addition to the $133,000 she advanced to Jaegeser. Mehta also claimed that, after receiving the March 1999 faxed communication from Jaegeser, she assumed their business relationship was over and she would be repaid on April 7, 1999. Finally, Mehta claimed ...

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