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Herzog v. B & M Oil Gas Co.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


July 22, 2008

SUMNER A. HERZOG D/B/A HERZOG ASSOCIATES, PLAINTIFF-APPELLANT,
v.
B & M OIL GAS CO., INC., A NEW JERSEY CORPORATION AND BRENT MATHIESON, AN INDIVIDUAL, DEFENDANTS-RESPONDENTS.

On appeal from the Superior Court of New Jersey, Law Division, Union County, Docket No. L-4009-04.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued July 8, 2008

Before Judges Parker and Gilroy.

Plaintiff Sumner A. Herzog, d/b/a Herzog Associates, appeals from an order entered on June 14, 2007 directing plaintiff to "pay to the defendant the sum of $10,780.50 representing attorney's fees and cost reimbursement of $370, for a total of $11,150.50," pursuant to N.J.S.A. 2A:15-59.1, the frivolous litigation statute. We affirm.

In the underlying action, plaintiff alleged that it was the holder and owner of a promissory note dated April 16, 1994 made by defendant B&M Oil & Gas Co., Inc. (B&M) in the amount of $16,500. The terms of the note required B&M to pay the total amount plus interest within one year. Defendant Brent Mathieson personally guaranteed the note.

Plaintiff contended that B&M breached the terms of the note and defaulted by failing to make the required payments. Plaintiff declared due and owing the entire unpaid balance, plus accrued and unpaid interest and late charges -- totaling $28,151.67. In addition to the amount due and owing, plaintiff sought pre- and post-judgment interest, costs of suit and attorneys fees.

The complaint was filed on November 10, 2004. On January 4, 2005, defendants' counsel sent a letter to plaintiff's counsel indicating that the note allegedly due and owing was dated April 16, 1994, more than ten years before the complaint was filed. Defendants' counsel indicated that he was sure that there is some sort of mistake or error that we can all agree upon at this time without the inconvenience and expense of unnecessary, frivolous litigation. Even assuming arguendo that my client did not repay the loan, (something he strenuously denies) he would nevertheless be able to avail himself on a statute of limitation defense (seven years under a breach of contract theory), in addition to laches, equitable estoppel, etc.

When plaintiff declined to dismiss the complaint after receiving defense counsel's letter, defendants moved to dismiss on the ground that, pursuant to N.J.S.A. 2A:14-1, the claim was barred by the statute of limitations for a contract action. The motion was argued before Judge Kathryn A. Brock on March 2, 2007.

Plaintiff contended that the loan was re-acknowledged when defendant made a $500 payment in February 2004, thereby extending the statute of limitations. Judge Brock noted that the parties did not dispute the material facts. "[B]ecause the original Promissory Note is from April 16, 1994 . . . . [I]n February of 2004, the question is what happened and . . . what should the [c]court conclude from what happened." Judge Brock held that any re-acknowledgement of a debt must be in writing and the absence of a writing in this case bound plaintiff to the original date of the note -- April 16, 1994. Accordingly, Judge Brock entered an order on March 2, 2007 granting summary judgment dismissing the complaint on the ground that it was barred by the statute of limitations. The order further directed that defendants' counterclaim be set down for trial.

On April 24, 2007, the counterclaim was tried before Judge Katherine R. Dupuis. Defendants sought only "reimbursement for the reasonable attorney fees and costs . . . expended in this matter." At trial, Brent Mathieson testified that he did, in fact, guarantee the loan in question and that he paid the note in 1995 in accordance with its terms.

Suzanne Salazar, an employee of plaintiff with responsibility for processing loan documents and sending notices when borrowers are late with their payments, testified that her notes reflected that the debt had not been paid by its due date in April 1995. Salazar testified further that in July 2004, Mathieson came to plaintiff's office, gave Salazar $500 and told her to apply it to his loan. Salazar conceded that there were no letters or any other writings made by Mathieson in 2004 to re-acknowledge the loan.

In her decision on the record of May 9, 2007, Judge Dupuis found the following:

The matter before me arises out of a loan agreement in 1994. Pursuant to a [d]ecision of Judge Brock, the [d]efendant was granted [s]ummary [j]udgment based upon the fact [that the] statute of limitations had run on the debt.

Plaintiff alleged [d]efendant reaffirmed the debt in 2004 when he came to the office and made a payment. Judge Brock ruled that any such affirmation must be in writing and so the [s]tatute of [l]imitations bar[s] recovery.

Now [d]efendant brought an action for counsel fees under N.J.S.A. 2A:15-59.1, the [f]rivolous [l]aw [s]uit [s]tatute. . . . .

[T]he [f]rivolous [a]ction [s]tatute provides that . . . a prevailing party may obtain all reasonable litigation costs and reasonable attorneys fees if the [j]udge finds the [c]omplaint was [f]rivolous.

To make that determination, this [c]court must look to the pleadings, evidence and discovery and determine [whether] the non-prevailing party knew or should have known the [c]omplaint was without any reasonable basis . . . and could not be supported by a good faith application to extend or modify the law.

A [c]ertification filed by Mr. Herzog [on behalf of plaintiff] alleges [d]efendant advised he would make good on the note in February of 2004. This [c]ertification is undated but filed 4/25/05.

Now the [p]laintiff was advised . . . that the [s]tatute of [l]imitations barred the recovery in an earlier letter from [defendants' counsel] and also in the March 25, 2005 [m]otion to [d]ismiss for [f]ailure to [s]tate a [c]laim.

Plaintiff alleges it had a good faith but erroneous reason for bringing this suit since the debt was affirmed by the [d]efendant. . . . .

[I]t is one of these rare cases where the law is almost trumping the facts and . . . I found the [d]efendant in this matter to be almost 100 percent incredible . . . I think he lied about the payments. I think he lied about not going to the office. I find that Ms. [Salazar] was very credible . . . . But that doesn't really make a difference to my finding because based upon the law, I think there was no good faith argument that . . . could have [been] made to bring this claim, to bootstrap it from 1994 to 2004.

Judge Dupuis concluded that defendant was entitled to counsel fees for the underlying action pursuant to the frivolous claims statute.

Plaintiff appealed Judge Dupuis' June 14, 2007 order and argues:

POINT ONE

THE STANDARD OF REVIEW OF THE TRIAL COURT DECISION BY THE APPELLATE DIVISION IS A MIXED STANDARD WITH RESPECT TO CONCLUSIONS OF LAW AND THE FINDINGS OF FACT

POINT TWO

THE TRIAL [COURT] ERRED IN DISMISSING PLAINTIFF'S CLAIMS AS VIOLATING THE STATUTE OF LIMITATIONS AND THE STANDARD OF REVIEW BY THIS COURT REQUIRES LITTLE DIFFERENCE TO THE LEGAL FINDINGS OF THE TRIAL COURT WHERE PLAINTIFF'S CLAIM DID NOT VIOLATE THE STATUTE OF LIMITATIONS

POINT THREE

THE CONFLICT BETWEEN N.J.S.A. 25:1-5(f) AND N.J.S.A. 2A:14-24 REQUIRES ADJUDICATION BY THE APPELLATE DIVISION

POINT FOUR

THE TRIAL COURT ERRED IN HOLDING PLAINTIFF'S CLAIM FRIVOLOUS AND THE STANDARD OF REVIEW BY THIS COURT REQUIRES CONSIDERABLE DEFERENCE TO THE FACTUAL FINDINGS OF THE TRIAL COURT WHICH FOUND TESTIMONY ON BEHALF OF PLAINTIFF CREDIBLE

POINT FIVE

THE TRIAL COURT ERRED IN FINDING THAT PLAINTIFF/APPELLANT'S CLAIM WAS FRIVOLOUS WHERE THE LAW PERMITS THIS CLAIM AND WHERE THE FACTS AT TRIAL SUPPORT SUCH CLAIM

We have carefully considered plaintiff's arguments in light of the applicable law and we are convinced that the judgment of the trial court is based upon findings of fact and conclusions of law that are adequately supported by the evidence. R. 2:11-3(e)(1)(A). Judge Dupuis was correct in her determination that irrespective of defendant's credibility, plaintiff failed to establish any basis for pursuing the claim. We affirm substantially for the reasons set forth by Judge Dupuis in her decision rendered on the record of May 9, 2007. Nevertheless, we add the following comments.

In Point Two of its brief, plaintiff argues that Judge Brock erred in dismissing plaintiff's claim on the ground that it was barred by the statute of limitations. Plaintiff did not seek leave to appeal from that order, nor did it include that order in the notice of appeal now before us. R. 2:2-3(b). "[A]n interlocutory order is preserved for appeal with the final judgment only if specifically identified as a subject of appeal. Otherwise[,] the right to appeal therefrom is deemed waived." Pressler, Current N.J. Court Rules, comment on R. 2:2-3 [2.3.2] (citing Naporano Assoc. v. B & P Builders, 309 N.J. Super. 166, 178 (App. Div. 1998; 1266 Apt. Corp. v. New Horizon Deli, 368 N.J. Super. 456, 459 (App. Div. 2004)).

In Point Three of its brief, plaintiff argues that there is a conflict between N.J.S.A. 25:1-5(f), the statute of frauds, and N.J.S.A. 2A:14-24, the statute of limitations, requiring adjudication by the Appellate Division.

Paragraph (f) of N.J.S.A. 25:1-5 provides that "[a] contract, promise, undertaking or commitment to loan money or to grant, extend or renew credit, in an amount greater than $100,000, not primarily for personal, family or household purposes, made by a person engaged in the business of lending . . . money or extending credit" shall be in writing, signed by the debtor acknowledging the debt.

N.J.S.A. 2A:14-24 establishes that

In actions at law grounded on any simple contract, no acknowledgment or promise by words only shall be deemed sufficient evidence of a new or continuing contract . . . unless such acknowledgment or promise shall be made or continued by or in some writing to be signed by the party chargeable thereby.

Plaintiff maintains that defendants' payment of $500 in 2004 constitutes a new debt that does not require a writing under the statute of frauds because it does not exceed $100,000. We disagree.

The original debt was not pursued by plaintiff within the statute of limitations, thereby allowing the action to expire. Evers v. Jacobsen, 129 N.J.L. 89 (E&A 1942). Plaintiff's claim that defendants made a new debt in February 2004 then falls within N.J.S.A. 2A:14-24, which requires a writing acknowledging an unconditional promise to pay. In Evers, plaintiff was the holder of notes made by defendant. 129 N.J. Super. at 90. The notes were not paid and no action was taken by the plaintiff during the statute of limitations period. Ibid. Nine years after the notes matured, the defendant sent a payment to the plaintiff with a letter stating, "I am going to send you more when I can." Id. at 91. In her action on the notes, plaintiff claimed that defendant's payment and letter, nine years after the notes matured, "took the debt out of the statute of limitations and gave it new life because of this new contract." Ibid. The Court of Errors and Appeals disagreed, and held:

To constitute a promise to pay sufficient to remove the bar of the statute of limitations the promise must be unconditional and unqualified. Parker v. Butterworth, 46 N.J.L. 244; Bassett v. Christensen, 127 N.J.L. 259. Tested by this well settled rule we find no proofs of any unqualified promise to pay. The only definite proof is found in the defendant's letter of March 7th, 1940, in which he promised "to send you more as and when I can." This clearly is not an unconditional promise to pay.

It follows that the ruling of the trial court in granting a non-suit was right. The judgment is affirmed, with costs. [Ibid.]

Here, we are presented with similar circumstances as in Evers and we are constrained to apply the same law. Consequently, even if we accept plaintiff's assertion that defendants made a payment in 2004, several years after the statute of limitations expired, the cause of action cannot be revived unless there was a written, unconditional promise to pay. We see no conflict here between the statute of frauds and the statute of limitations. Plaintiff correctly points out that the statute of frauds does not apply, but the statute of limitations and N.J.S.A. 2A:14-24 clearly do.

Affirmed.

20080722

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