The opinion of the court was delivered by: Simandle, U.S. District Judge
HONORABLE JEROME B. SIMANDLE
This matter is before the Court on cross-motions for partial summary judgment by Plaintiff Senior Settlements, LLC ("Plaintiff" or "Senior Settlements") [Docket Item 31], seeking a declaration that valid and enforceable contracts existed between the parties and that Defendants attempted to rescind them in bad faith (Counts One and Three), and by Defendants Growth Trust, Abraham Weingarten, Michael Steinmetz, Leah Cohen and Bernat Steinmetz, [Docket Item 32] for complete summary judgment, on the grounds that no contract existed and seeking an order that Defendants must repay all money they withdrew from the subject life insurance policies. The Court has reviewed the submissions of the parties, heard oral argument on the motions, and reviewed the supplemental submissions of the parties. The principal issue to be determined is whether Plaintiff can demonstrate that the contracts it seeks to enforce were ever formed in conformity with New Jersey law. For the reasons explained below, the Court shall deny Plaintiff's motion [Docket Item 31] and grant Defendants' motion [Docket Item 32], finding upon the undisputed facts that no contract was formed.
This case arises out of a dispute over whether a contract was properly formed between Plaintiff, Senior Settlements, LLC, and Defendants Growth Trust, Abraham Weingarten, Michael Steinmetz, and Leah Cohen. Bernat Steinmetz is also a Defendant in this matter. Senior Settlements is a New Jersey limited liability corporation, with its principal place of business in Cherry Hill, New Jersey (DUMF*fn1 ¶ 1) and is in the "life settlement business," whereby it purchases the beneficial right to life insurance proceeds in exchange for a lump-sum payment to the owner of the insurance policy. (PUMF ¶ 2.) No Defendants are citizens of New Jersey. (Compl. ¶¶ 1-8.) This Court has diversity jurisdiction under 28 U.S.C. § 1332 and New Jersey law governs this contract dispute.
In this case, Defendant Bernat Steinmetz was the original owner of three insurance policies insuring his life, one issued by North American Company and two by American General ("the policies"). (DUMF ¶ 3, PUMF ¶¶ 7-10.) On or about January 4, 1992 Bernat Steinmetz created the Defendant Growth Trust Fund ("the Trust") and placed the policies in the Trust, conveying ownership of the policies to the Trust. (PUMF ¶¶ 8, 9.) The trustees of the Trust were Defendants Abraham Weingarten, Fay Weingarten, Michael Steinmetz, and Leah Cohen ("the Trustees"). (PUMF ¶ 11.)
The North American Company policy has an initial death benefit of $1 million and the American General policies have benefits of $2 million each.*fn2 (DUMF ¶ 3.) On or about June 25, 2004, Senior Settlements presented the Trustees with documents, purporting to be offers to buy the Policies. (PUMF ¶ 12, Ex. D to Wolfe Cert. (the agreements)). The proposed purchase prices for the policies were $318,797 for the North American Company policy and $648,133 for each of the American General policies. (DUMF ¶ 5, ¶ 2 of the agreements.)
Paragraph 19 of each of the purported offers, labeled "Performance," states:
This Agreement has been executed first by the Purchaser [Senior Settlements] as an offer to purchase the Policy hereunder, which offer shall be open for acceptance by Seller until 5:00 p.m. on 7/23/04, at which time the offer shall be deemed to be withdrawn unless Purchaser has received a fully executed counterpart to this Agreement from Seller. Time is of the essence in this Agreement.
(Ex. D to Wolfe Cert.) In fact, however, none of the purported offers had been executed first by Senior Settlements, nor have they ever been signed. (1Fede Dep. 88:21 to 89:4 in Ex. E to Wolfe Cert.) Deposition testimony indicated, quite remarkably, that Senior Settlements intentionally does not sign its purported offers to avoid being bound by them when the policy owners sign. (2Fede Dep. 21:1-7 in Ex. F to Wolfe Cert.)
Defendants argue that these documents cannot be offers because they were not signed, as required by their own terms, and, even if they had been, the offers expired, by their own terms, before any acceptance occurred.
There is no dispute that the Trustees did not agree to the purchase of the policies within the time limit in the purported offer. By e-mail dated July 30, 2004 Senior Settlements indicated that the delay in receiving the signed agreements might cause its offer price to change and stated that if it did not soon receive the signed agreements and other documents required under the agreements it would rescind the offer. (Ex. G to Wolfe Cert.) The e-mail to Defendants' agent stated:
As you know, we have been waiting for the documents on Steinmetz for weeks now. We have also requested the proper releases so we can complete our due diligence and underwriting required to acquire and fund the purchase. To date, we have received neither. When, and if we receive these documents back we must begin our process. It may take weeks to receive the illustrations and VOC. By that time all medical information will be stale dated and we will require new meds and underwriting. [T]here is a possibility LE will change and cause our pricing to differ. Additionally, interest rates from the insurer may change causing additional premiums required to carry the policy. This will also change our pricing. The end result here is that if we do not receive the documents in the next few days I am going to rescind the offer. We may open it again and reprice based on updated information if your client wants to proceed.
Defendants did not attempt to accept until after the time to do so had expired, on or about August 10, 2004.*fn3 (DUMF ¶ 22.) Although that was only a week and a half after the e-mail was sent, the e-mail indicated that the price term had become uncertain and that a delay of "weeks" was significant to Senior Settlements.
In mid- to late September, the designation of ownership of the policies was changed to Senior Settlements. (PUMF ¶ 23.) Defendants had signed change of beneficiary and ownership forms in early September, and, at least as to the AGI policy, Defendants reiterated that request in late September when they sent additional documentation requested by AGI to effectuate the change. (Exs. GG, HH & II to Pl's Opp. to Defs' Mot for Summ. J.) At oral argument, counsel for Senior Settlements indicated that Senior Settlements sent in the change of ownership forms. (Tr. at 11:24-25.) Thus, it is not clear that Defendants were aware that the change of ownership forms were sent to the insurance companies or that the change actually occurred, as Defendants continued paying the premiums on the policies. (Fede Dep. 96-99, Pl.'s Ex. H.) There is no evidence that Plaintiff communicated anything to Defendants at that time. Further, Plaintiff made no payment to Defendants at that time. Soon a dispute arose regarding whether a contract had been formed and whether, if it had, Defendants could rescind it.
Defendants apparently expected to receive a signed copy of the agreements from Senior Settlements once it agreed to be bound, but none was ever sent. On October 21, 2004 Bernat Steinmetz wrote to Senior Settlements directing it not to proceed with any life settlement until he received a copy of the agreements. (Ex. H to Wolfe Cert.) Bernat Steinmetz was not a party to any of the purported contracts, nor did he have any authority to speak for the Trust. (Ex. JJ to Pl.'s Opp. to Defs' Mot. for Summ. J.) Nevertheless, Senior Settlements immediately responded and requested a notarized copy of Mr. Steinmetz's signature. (Ex. I to Wolfe Cert.) Bernat Steinmetz faxed a notarized signature to Senior Settlements that same day. (Ex. J to Wolfe Cert.) Senior Settlements, apparently realizing that Bernat Steinmetz was not a party to any agreement, responded that it needed original, not faxed, copies of his signature and that it also needed notarized signatures of the owners of the policies and advice from them on how to proceed. (Ex. K to Wolfe Cert.) On October 28, 2004 Steinmetz sent a signed, notarized letter indicating that he and the Trustees wished to rescind any agreement to sell his life insurance policies. The letter was not signed by the Trustees.
There is additional notarized correspondence in the record from trustee Faye Weingarten, dated October 22, 2004, advising Senior Settlements not to proceed with any life settlement until the contracts were received. (Pl.'s Ex. P.) On October 28, 2004 Michael Steinmetz, also a trustee, faxed and mailed a withdrawal to Senior Settlements noting that "the Trustees and the Insured Bernat Steinmetz hereby withdraw all of the Sale Offers for the Steinmetz policies," which were identified by company and policy number, "effective immediately." (Pl.'s Ex. S.) The withdrawal notice also indicated that if Senior Settlements thought the agreements had become legally enforceable, the Trustees were electing to rescind and terminate them. "The Trustees and the Insured Bernat Steinmetz do not wish to cause a sale of the Steinmetz Policies in accordance with the terms and conditions set forth in the withdrawn Sale Offers." (Id.) The letter was signed and notarized by Michael Steinmetz.
By that time, Senior Settlements had withdrawn money from the policies. But Senior Settlements admitted at oral argument that Defendants were completely unaware of that fact. (Tr. at 17:21-25.)
Thereafter, Senior Settlements attempted to tender payment to Defendants, but the Trustees returned the checks and indicated that the funds were "unsolicited" and that any additional funds would not be accepted.
A. Summary Judgment Standard
Summary judgment is appropriate when the materials of record "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). In deciding whether there is a disputed issue of material fact, the court must view the evidence in favor of the non-moving party by extending any reasonable favorable inference to that party; in other words, "the nonmoving party's evidence 'is to be believed, and all justifiable inferences are to be drawn in [that party's] favor.'" Hunt v. Cromartie, 526 U.S. 541, 552, 119 S.Ct. 1545, 143 L.Ed. 2d 731 (1999) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)). The threshold inquiry is whether there are "any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Liberty Lobby, 477 U.S. at 250; Brewer v. Quaker State Oil Refining Corp., 72 F.3d 326, 329-30 (3d Cir. 1995) (citation omitted).
Although entitled to the benefit of all justifiable inferences from the evidence, the nonmoving party may not, in the face of a showing of a lack of a genuine issue, withstand summary judgment by resting on mere allegations or denials in the pleadings; rather, that party must set forth 'specific facts showing that there is a genuine issue for trial,' else summary judgment, 'if appropriate,' will be entered." U.S. v. Premises Known as 717 South ...