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Herzog v. B & M Oil Gas Co.

July 22, 2008


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

Per curiam.


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 ...

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