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Schecter v. Schecter

November 26, 2008

ROBERT SCHECTER, PLAINTIFF,
v.
EUGENE SCHECTER, DEFENDANT.



The opinion of the court was delivered by: Katharine S. Hayden, United States District Judges

OPINION

I. INTRODUCTION

This breach of contract action arose from an intra-family loan that has not yet been completely repaid. From 2002 to 2006, Robert Schecter (the plaintiff, hereinafter "Robert" for clarity) loaned his father Eugene Schecter (the defendant, hereinafter "Eugene") approximately $1 million for the purpose of purchasing certain real property for development. Robert alleges that Eugene owes him more than $220,000 under the oral contract, and that Eugene now refuses to pay. Eugene disputes neither the existence of the loan nor his ultimate obligation to repay Robert; rather, he disputes the amount owed and the timing of repayment. Robert has moved for summary judgment, which the Court now denies.

II. JURISDICTION & VENUE

Diversity jurisdiction exists pursuant to 28 U.S.C. § 1332(a) because both parties are residents of different states and the amount in controversy exceeds $75,000. Venue is proper in this district pursuant to 28 U.S.C. § 1391(a). See also D.E. # 13.

III. STANDARD OF REVIEW

Summary judgment is appropriate under Rule 56(c) of the Federal Rules of Civil Procedure "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The Court must, of course, view the facts in the light most favorable to the non-moving party and draw all inferences in that party‟s favor. Gray v. York Newspapers, 957 F.2d 1070, 1078 (3d Cir. 1992). Summary judgment is improper if there is evidence sufficient to allow a reasonable jury to return a verdict for the non-moving party, see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986), or if the factual dispute is one "that might affect the outcome of the suit under the governing law . . . ." Id. The movant‟s burden, however, "may be discharged by "showing‟ . . . that there is an absence of evidence to support the non-moving party‟s case." Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Additionally, the non-movant "may not rest upon mere allegations or denials of the . . . pleading"; instead, the non-movant, "by affidavits or as otherwise provided in [Rule 56], must set forth specific facts showing that there is a genuine issue for trial." Matushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).

IV. FACTUAL BACKGROUND & PROCEDURAL HISTORY

Between July 2002 and October 2006, Robert loaned Eugene-through a number of direct payments and wire transfers-approximately $1 million so that Eugene could purchase and develop two properties in Santa Barbara California, known as the "Oceano Property" and the "Canon View Property."*fn1 See Certification of Robert Schecter ("Robert‟s Cert.") ¶¶ 2-4.*fn2

Robert provided the funds using his personal assets, credit cards, and a home equity credit line through Chase Manhattan Bank. See Robert‟s Cert. ¶ 5. Robert and Eugene did not execute a written contract evidencing the loan or its terms. Robert claims, over Eugene‟s denial, that the obligation to repay would be triggered upon any of the following: (1) demand by Robert; (2) Eugene‟s refinancing of the debt secured by either property; or (3) upon the sale of either property.*fn3 See Robert‟s Cert. ¶ 7. He also argues that his father agreed to make the monthly debt service payments (about $1,500 per month) on Robert‟s credit line from Chase Manhattan. See Robert‟s Cert. ¶ 6. After receiving the loan from his son, Eugene did in fact purchase the Canon View and Oceano Properties, see Schecter Cert. ¶¶ 8-9, and subsequently sold them in April 2005 and January 2008, respectively. See Robert‟s Cert. ¶ 25; Defendant‟s Brief in Opposition to Motion for Summary Judgment ("Def. Br.") at 5, ¶ 18.

In December 2005, Eugene refinanced the loan secured by the Oceano Property with a $500,000 loan from Washington Mutual, the net proceeds of which totaled about $246,000. See Robert‟s Cert. ¶ 10. Contrary to what Robert asserts was the intent of their arrangement, instead of using the loan proceeds for repayment, Robert says that Eugene purchased another property for development, the "Cliff Drive" Property.*fn4 See Robert‟s Cert. ¶ 23; Def. Br. at 3, ¶ 9.

Eugene has not repaid his son in full; he has, however, made substantial repayments on the loan-Robert alleges that of the more than $1 million original principal, approximately $210,000 remains due. With the addition of the alleged debt service payments, Robert claims that his father now owes him roughly $223,000. See Robert‟s Cert. ¶ 21. He asserts that the debt has come into immediate repayment since each event that Robert claims would trigger repayment has occurred-he has demanded his father repay the loan, his father has refinanced the underlying debt, and his father has sold each of the properties purchased with the loaned funds. See Robert‟s Cert. ¶¶ 8; 10; 12. Because, he says, Eugene has breached the oral contract by steadfastly refusing to make good on the outstanding debt, resort to litigation has become necessary.

Robert filed this action in January 2007 alleging breach of contract and breach of the covenant of good faith and fair dealing implied in all contracts in New Jersey. See Compl. ¶¶ 15-27. In addition to demanding immediate repayment, the complaint requests the Court to impose an equitable lien on the Cliff Drive Property. Id. After filing the lawsuit, Robert also filed two notices of lis pendens with the Clerk of Santa Barbara County for the Cliff Drive Property and Oceano Property. See Plaintiff‟s Brief in Support of Motion for Summary Judgment ("Pl. Br") at 9. In December 2007, the parties entered into an escrow agreement under which certain proceeds from the sale of the Oceano Property would be held to ensure fulfillment of any judgment rendered by this Court. Approximately $138,000 is currently held in the escrow account. See Robert‟s Cert. ¶ 13. In exchange, Robert agreed to remove the lis pendens notices on the properties. See Certification of Salvatore Giampiccolo ("Giampiccolo Cert") Ex. J. After denial of Eugene‟s motion to dismiss for improper venue [D.E. # 13] and upon conclusion of discovery, this motion followed.

In support of his motion, Robert relies on purported admissions made by Eugene during email correspondence with his son prior to the institution of this lawsuit. See Robert‟s Cert. Exs. B, C, D, E, F, G, H, I, J. These statements include:

"I agree that the $210,069 is the balance remaining. . . . Next week I will send you 3 checks for $1,500 . . . ." See Robert‟s Cert. Ex. D.

"Whatever I borrow would go directly to you with nothing taken out for me. Repayment of this loan would come off the top of the sale of any of the properties right after the mortgage companies. See Robert‟s Cert. Ex. E.

"I will guarantee the loan will be paid back on time." See Robert‟s Cert. Ex. F.

As stated above, Eugene does not deny the fact that he owes his son money. See Def. Br. at 15. His position is simply that the oral contract was informal and dynamic, with no fixed repayment schedule. See Certification of Eugene Schechter ("Eugene‟s Cert.") ¶¶ 3-5. He disputes Robert‟s claim that repayment would be triggered upon demand or refinance of the loan, but agrees that repayment is due upon sale of the properties. See Eugene‟s Cert. ¶ 3; Def. Br. at 3. Having sold both properties, Eugene admits that the loan is presently due. While he has repaid 90% of the loan, he states that his ability to pay off the remainder has been temporarily hindered by the downturn in the California real estate market. See Eugene‟s Cert. ¶¶ 4-5. Because his understanding of the loan does not dictate immediate repayment in full, but permits flexibility in performance, he believes that the temporary delay in completing repayment does not constitute a material breach of the alleged agreement.

Further, notwithstanding his statement in the emailed correspondence that $210,069 is the outstanding amount owed (which he says has been taken out of context), Eugene asserts that $50,000 of this amount was agreed upon as part of a settlement "bonus" in connection with the sale of the Oceano Property. He believes that this settlement bonus has since been rendered void because Robert opted out of the pair‟s joint development venture. See Eugene Cert. ¶ 8. Thus, Eugene acknowledges only $160,000 in accumulated debt. See Eugene Cert. ¶ 12. Finally, Eugene does not dispute that he agreed to make the monthly $1,500 debt service payments on Robert‟s behalf (and indeed did make several of these payments); however, he argues that these payments were also part of the unconsummated settlement agreement and were not part of the original deal. See Eugene‟s Cert. ¶ 13.

V. DISCUSSION

A. Legal Standards

As always, in a diversity case the Court applies the substantive law of the state forum in which it sits. See Siemens Bldg. Techs., Inc. v. PNC Fin. Servs. Group, Inc., 226 Fed. App‟x 192, 195 (3d Cir. 2007). New Jersey courts have long enforced oral contracts upon objective proof of offer, acceptance, and valid consideration. See, e.g., Cal. Natural, Inc. v. Nestle Holding Co., 631 F. Supp. 465, 470 (D.N.J. 1986); Comerata v. Chaumont, Inc., 52 N.J. Super. 299, 305 (App. Div. 1958); Shiddell v. Electro Rust-Proofing Corp., 34 N.J. Super. 278, 290 (App. Div. 1954). When interpreting any contract, the Court‟s "obligation . . . is clear":

First and foremost, "fundamental canons of contract construction require that [the Court] examine the plain language of the contract and the parties‟ intent, as evidenced by the contract‟s purpose and surrounding circumstances." As stated [previously by the Court], "[w]hen reading a contract, our goal is to discover the intention of the parties. Generally, we ...


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