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Sea v. DFH Environmental Services


June 26, 2008


On appeal from the Superior Court of New Jersey, Law Division, Essex County, L-7034-04.

Per curiam.


Submitted March 31, 2008

Before Judges Lintner and Alvarez.

Plaintiff, Julius Sea, appeals from a jury verdict in favor of defendant, DFH Environmental Services, Inc. Plaintiff's complaint sought reimbursement of $40,000 paid on account of a contract to replace underground gasoline and oil tanks at his service station. For the reasons that follow, we affirm.

The parties signed the agreement, which called for scheduled payments, on September 1, 1998: $20,000 upon execution of the contract, $20,000 after new tanks were ordered, $20,000 when "site mobilization" was completed, and $60,000 at completion. During negotiations, defendant agreed to allow plaintiff to make the final $60,000 payment in installments, secured by a mortgage, a promissory note, and assignment of rents generated by the gas station. To induce plaintiff to make the final payment in a lump sum, the contract provided that plaintiff could make the last installment by paying $55,000 and not the $60,000 originally quoted. The terms of defendant's proposed mortgage called for the $60,000 to be paid at the rate of $2500 monthly payable over two years. It also stated, "[a] service charge of 1.75% per month will be charged to all overdue installment payments." The proposed promissory note contained the following proviso:

In the event any payment due hereunder shall not be paid on the date when due, such payment shall bear interest at the lesser of twenty-one percent per annum or the highest lawful rate permitted under applicable law, from the date when such payment was due until paid. This paragraph shall not be deemed to extend [or] otherwise modify or amend the date when such payments are due hereunder. The obligations of Maker under this Note are subject to the limitation that payments of interest shall not be required to the extent that the charging of or the receipt of any such payment by the holder of this Note would be contrary to the provisions of law applicable to the holder of this Note limiting the maximum rate of interest which may be charged or collected by the holder of this Note.

Although the contract was signed, the financing documents were not. Plaintiff objected to a number of terms contained in the proposed mortgage and promissory note, including his understanding of the documents that interest would accrue on the entire unpaid balance.

It is not clear from our review of either the financing documents, the briefs or the trial transcripts, whether defendant intended to charge interest only if monthly payments were late, or on the entire unpaid balance. The language in the financing documents refers to a "service charge" on late monthly payments, yet plaintiff testified that he did not want to pay interest of more than twenty percent per year on the unpaid balance.

Over the next six years, the parties engaged in fruitless ongoing negotiations, and the financing documents were never signed. Early on, plaintiff paid $40,000 to defendant, and defendant, in turn, obtained new tanks and moved the necessary equipment for installation to the gas station, "site mobilization," on two separate occasions. Each time, plaintiff called off the work, in part because the mortgage, promissory note, and assignment of rents had not been signed.

When negotiations finally stalled completely, and plaintiff demanded a refund, defendant refused to reimburse anything. Plaintiff initially sued defendant pro se. Thereafter he retained counsel, and an amended complaint was filed seeking damages, in addition to the reimbursement, for breach of contract, tortious interference with business relations, misrepresentation, fraud, and violations of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -166.*fn1 Presumably, defendant filed a counterclaim seeking payment for work performed, although no copy of an answer and counterclaim was provided. Although no copy of the jury verdict sheet was included either, our review of the transcript reveals that the jury found plaintiff in breach of the contract due to his failure to pay the third $20,000 installment upon site mobilization. The jury further found that plaintiff was not entitled to any refund, and that defendant was not owed payment for work performed over and above $40,000.

During his direct testimony at trial, plaintiff sought to introduce a copy of a letter to defendant dated March 5, 1999, demanding either a refund of the $40,000, or that the funds be placed in an interest-bearing escrow account. The letter had not been provided in discovery, and accordingly, the judge barred its admission. After the ruling, plaintiff attempted to answer a question by reference to the letter, at which point the trial judge instructed the jury as follows:

- - ladies and gentlemen, I'm going to put this to bed finally.

There is an allegation that there was a letter sent in 199[9]. That document was never provided to the defense in discovery. Therefore, . . . there are questions as to whether or not that actually - - that document is legitimate.

For that reason, the [c]court has suppressed that and is not allowing it into evidence. So that as far as you are concerned, that document does not exist.

And I will remind Dr. Sea not to mention that again. Otherwise I will have to give further corrective instructions.

At the beginning of the judge's charge conference, the following colloquy occurred:

[Defendant's counsel]: Your Honor, we had the motions yesterday at sidebar. Other than that I don't believe there are any on our side.

[The court]: Let me ask this then. With regard to plaintiff's case, plaintiff alleges in their complaint a breach of contract. Since we've already disposed of the Consumer Fraud Act, what was the misrepresentation and fraud?

[Plaintiff's counsel]: Judge, the fact that the defendant represented to my client that they would finish the gas station.

Neither brief indicates when the consumer fraud count was dismissed; in fact, plaintiff contends the trial judge impermissibly usurped the jury's function as a trier of fact by a dismissal "without any reason on the record." A thorough review of the transcripts does not reveal any prior or subsequent mention of the Consumer Fraud Act claims. The sidebar motion, assuming that is how the matter came to be dismissed, was not recorded.

Plaintiff's points on appeal are as follows:







It is undisputed that the March 5, 1999 letter was not supplied in discovery. "The discovery rules 'were designed to eliminate, as far as possible, concealment and surprise in the trial of law suits to the end that judgments therein be rested upon the real merits of the causes and not upon the skill and maneuvering of counsel.'" Wymbs v. Twp. of Wayne, 163 N.J. 523, 543 (2000) (quoting Evtush v. Hudson Bus Transp. Co., 7 N.J. 167, 173 (1951)). While these rules should be "construed liberally and broadly, '[c]oncealment and surprise are not to be tolerated.'" Ibid. (quoting Lang v. Morgan's Home Equip. Corp., 6 N.J. 333, 338 (1951)) (alteration in original). Moreover, "'[l]awyers have an obligation of candor to each other and to the judicial system, which includes a duty of disclosure to the court and opposing counsel.'" Liguori v. Elmann, 191 N.J. 527, 551 (2007) (alteration in original) (quoting McKenney v. Jersey City Med. Ctr., 167 N.J. 359, 371 (2001)).

"[T]rial courts have 'wide discretion in deciding the appropriate sanction for a breach of discovery rules,' as long as the sanction is 'just and reasonable.'" Wymbs, supra, 163 N.J. at 543 (quoting Mauro v. Owens-Corning Fiberglas Corp., 225 N.J. Super. 196, 206 (App. Div. 1988), aff'd sub nom. Mauro v. Raymark Indus., Inc., 116 N.J. 126 (1989)). A judge may exclude testimony as the result of a discovery violation, if to do so would be "just and reasonable." Ibid. In this case, had the judge admitted the letter or allowed testimony about it, defendant would have been substantially surprised and substantially prejudiced.

In his opening statement, defense counsel stressed that despite having spent years forwarding letters "attempting to obtain changes to the contract . . . [,] [plaintiff] never said I don't want this contract and I want my money back, never, ever. . . . [H]e does not send one letter, not one." Production of the document after plaintiff called defendant's owner as his own witness, prior to testifying himself, would certainly have been prejudicial to defendant, who premised his defense, at least in part, on plaintiff's silence.

Furthermore, even if the letter had been admitted, the impact on any jury verdict would have been minimal, as plaintiff continued to negotiate with defendant for years thereafter. The two efforts at site mobilization of equipment and startup of the project, occurred long after the letter was written.

Plaintiff now contends that the court's corrective instruction was prejudicial, and that it undermined his credibility to the detriment of his entire case. It would have been preferable for the judge to employ more neutral language when instructing the jury. The judge's language was ultimately harmless, however, because although he stated that there were questions about the document's legitimacy, he did not say that in his opinion it was false. His phrasing makes clear that the legitimacy of the document was in dispute as between the parties. The document was not subsequently mentioned during the course of the trial, and plaintiff does not give any reason for his contention that his case was prejudiced by the instruction. Plaintiff's claim that the comment undermined the credibility of his entire case generally is simply not substantiated.

Since neither party explained how or why the trial judge reached his decision to dismiss the CFA claim, it is impossible to assess the decision. We note, however, that there was no renewed objection made on the record when the trial judge made the reference during the charge conference, in fact, no objection was made at all to the dismissal that we can discern. For all we know, plaintiff's counsel acquiesced to the dismissal.

Furthermore, the gist of plaintiff's complaint about the dismissal is that the CFA protected him from the mortgage and promissory notes' proposed usurious interest rate. Plaintiff does not even indicate which rate he believed to be the maximum permitted by law. In addition, plaintiff could have readily avoided any interest by financing the final payment through a lending institution, and thereby saving himself $5,000. In addition, it is not certain from this record that any interest at all would have been charged if plaintiff had made timely payments. As defendant's principals made clear, their preference was to be paid in full when the job was finished. There is therefore no basis for a CFA claim.

Lastly, plaintiff contends that the trial judge erred by not invalidating the contract because of its unconscionability, or in the alternative, that he erred because he did not provide the jury with instructions regarding unconscionable contracts or contingency contracts. "[U]nconscionability is 'an amorphous concept obviously designed to establish a broad business ethic.'" Cox v. Sears Roebuck & Co., 138 N.J. 2, 18 (1994) (quoting Kugler v. Romain, 58 N.J. 522, 543 (1971)). The word "unconscionable" implies a standard of conduct demonstrating a "lack of 'good faith, honesty in fact and observance of fair dealing.'" Ibid. (quoting Kugler, supra, 58 N.J. at 544). There was no evidence that DFH's actions showed a lack of good faith. Instead, the evidence showed that DFH tried repeatedly to come to an agreement with plaintiff regarding payment terms. Accordingly, it was not error for the trial judge to fail to sua sponte charge the jury as to unconscionability at trial or to invalidate the contract outright. Defendant clearly did not want to be in the business of financing $60,000. Otherwise, it would not have offered the $5,000 discount to plaintiff as inducement for him to make a lump sum final payment. No instruction about unconscionability was requested by counsel, nor should one have been given.

We agree with the trial judge that this was not a contingency contract. It was a construction contract with a side agreement to fund payment for the work. The focus of the agreement was not plaintiff's execution of the mortgage and promissory note, the focus of the agreement was completion of renovations to plaintiff's gas station. As the trial court said, "[plaintiff] recognized that it wasn't contingent because at some point he . . . communicated to the defendants that he was no longer interested in a mortgage. That he would just pay it off at the completion of the project." That was obviously defendant's preference. As the trial judge also said, "clearly [plaintiff] saw and understood that it was not contingent."

"No party is entitled to have the jury charged in his or her own words; all that is necessary is that the charge as a whole be accurate." State v. Jordan, 147 N.J. 409, 422 (1997). It is true that the contract states that the payment terms are "contingent" upon defendant acquiring a first mortgage, but the reference is to plaintiff's option. The "contingency" did not require an instruction, as plaintiff was the one in control. He could pay in full or finance through defendant or through a lending institution. We agree with the trial court that this was not a contingency contract. Therefore, no instruction on the point was necessary.


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