August 13, 2009
HARMONY GLOBAL SOURCING, LLC, AND SALVATORE DISANTO, INDIVIDUALLY, PLAINTIFFS-APPELLANTS,
STEVE STIGLIANO, KIMBERLY KRISSEL, THE ACCOUNTING FIRM OF FINEMAN, WEST AND COMPANY, HAROLD WEST, CPA, DEFENDANTS-RESPONDENTS.
On appeal from Superior Court of New Jersey, Law Division, Ocean County, Docket No. L-003621-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued May 5, 2009
Before Judges Collester and Graves.
Plaintiffs Harmony Global Sourcing, LLC (Harmony Global) and Salvatore DiSanto filed a complaint in December 2005 against defendants Steven Stigliano, Kimberly Krissel, and the accounting firm of Fineman West and Company and Harold West (the West defendants). Plaintiffs appeal from an order dated June 6, 2008, granting summary judgment in favor of the West defendants. We affirm.
After plaintiffs commenced this action, Steven Stigliano and Kimberly Krissel both filed for bankruptcy. In addition, plaintiffs' other claims against the West defendants, including negligence and accountant malpractice, were dismissed on October 25, 2007. Plaintiffs have not appealed from that order. As a result, this appeal involves only the fifth count of plaintiffs' complaint, which asserted a common law fraud claim against the West defendants.
Harmony Global was a business venture formed by defendants Stigliano and Krissel for the purpose of manufacturing fabrics and prom dresses to be sold in retail stores. Plaintiff DiSanto was approached by Stigliano as a potential investor in the company. Stigliano presented DiSanto with financial data prepared by the West defendants which made projections about Harmony Global's expected financial success. DiSanto claimed in his complaint that he was fraudulently induced to invest in Harmony Global on the basis of the projections, which he alleged were falsified by the West defendants.
The West defendants claimed they were hired by another potential investor, Ira Rosenberg, who wanted the financial projections to help him decide whether he should invest in Harmony Global. Harold West met with Stigliano at Rosenberg's request and Stigliano provided the West defendants with financial information about Harmony Global.
After Rosenberg told Stigliano that he was not interested in investing, Stigliano asked Rosenberg if he could show the projections to a potential "back-up investor." Rosenberg said yes ". . . why would I mind? They are your projections." At his deposition, Harold West testified that the West defendants were unaware that the projections would be utilized by anyone besides Rosenberg.
The "preliminary or draft" projections prepared by the West defendants were not final projections. They contained the following general disclaimer: "Preliminary: May be Subject to Change - For Management Review Only." They also indicated that the figures were assumptions based on the best estimate of management. Stigliano presented the projections to DiSanto, who subsequently invested "over one million dollars" in the business. According to DiSanto, Harmony Global was formed on or about March 2004, and it "went out of business on or about the end of 2005."
In their complaint, plaintiffs alleged that the financial projections prepared by the West defendants were "inaccurate, misstated, and fraudulent." When DiSanto was asked about those claims at his deposition, he responded as follows:
Q: You testified earlier Steve Stigliano came to you with a business plan as well as the financial projections; do you know what the actual business plan consisted of besides the financial projections?
A: Well, it was an overall situation of the accounts we were going to have, the fabrics we were going to make, the colors we were going to use, the staff, building, showroom, the accounts that we were going to sell [to], the stores we were going to sell [to] and an overall business plan.
Q: When you ultimately decided to invest in Harmony Global, how did you go about letting Steve Stigliano know?
A: Well, we had meetings for months and months, it had to be at least three, four months before of research of verifying whoever was verifiable and it was numerous meetings, it just didn't happen on one occasion.
Q: what sort of research did you do? . . . .
A: We called accounts, we verified if he in fact knew these people and was able to do business with them, and you know, if he had a real situation.
Q: . . . what is the factual basis for the Statement that the defendant accounting firm did no due diligence?
A: You can't give somebody $12,000,000 worth of projections and then $9,000,000 worth of projections and do $300,000 and put a million dollars into a business, that's how we knew that there was something schemed here between some parties who misled us into putting up this kind of money, we felt there was a conspiracy involved, there was something wrong someplace, that's how we felt.
Q: Do you have any documentation or proof there was a conspiracy?
A: We felt that way because if anybody puts up that kind of money and gets no return, there was something wrong someplace and there was a lot of conversations between the accounting firm and the two guys in California and who was flying back and forth, there was something wrong someplace, something definitely wrong someplace.
Q: What sort of due diligence was the accounting firm Fineman West supposed to do in connection with preparing the financial projections?
A: They were supposed to be accurate, on target, true and responsible. They have an obligation and when they put something on their letterhead and something on their projections to make people put up this kind of money in business, this is an awful lot of money.
Additionally, DiSanto conceded he never spoke "with anyone at Fineman West regarding the projections for Harmony Global" prior to his investment in the company, and he acknowledged he had his own accountant, Arthur Gisser, review the financial projections prepared by the West defendants before he invested in Global Harmony.
A motion for summary judgment must be granted "if the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). "An issue of fact is genuine only if, considering the burden of persuasion at trial, the evidence submitted by the parties on the motion, together with all legitimate inferences therefrom favoring the non-moving party, would require submission of the issue to the trier of fact." Ibid.
Even if the allegations in the pleadings raise an issue of fact, unless the opposing party can demonstrate support for the allegation, summary judgment can be granted. Judson v. Peoples Bank & Trust Co. of Westfield, 17 N.J. 67, 75 (1954). "Bare conclusions in the pleadings, without factual support in tendered affidavits, will not defeat a meritorious application for summary judgment." United States Pipe & Foundry Co. v. Am. Arbitration Ass'n., 67 N.J. Super. 384, 399-400 (App. Div. 1961). An opposing party who offers no substantial or material evidence in opposition to the motion cannot contradict the facts stated in the movant's papers. Judson, supra, 17 N.J. at 75; R. 4:46-5. "[W]hen the evidence is so one-sided that one party must prevail as a matter of law, the trial court should not hesitate to grant summary judgment." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995) (citation and internal quotation marks omitted).
On appeal, we review summary judgment motions under the same standard applied by the trial court. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). We first decide whether there was a genuine issue of fact, and if there was not, we determine whether the trial court's ruling on the law was correct. Ibid. Like the trial court, we view the facts in the light most favorable to the non-moving party. In this case, the plaintiffs.
To establish liability for common law fraud, a plaintiff must prove there was (1) a material misrepresentation by the defendant of a presently existing or past ; (2) knowledge or belief by the defendant of its falsity; (3) an intent that the plaintiff rely upon it; (4) reasonable reliance by the plaintiff; and (5) resulting damages to the plaintiff. Jewish Ctr. of Sussex Cty. v. Whale, 86 N.J. 619, 624-25 (1981); Weil v. Express Container Corp., 360 N.J. Super. 599, 613-14 (App. Div.), certif. denied, 177 N.J. 574 (2003). Where fraud is found, damage may be presumed, however, fraud is never presumed; it must be proven by clear and convincing evidence. Albright v. Burns, 206 N.J. Super. 625, 636 (App. Div. 1986). Therefore, the issue on appeal is whether, viewing the evidence in the light most favorable to the plaintiffs, a rational factfinder could find that the five elements of common law fraud were met.
In an oral decision on June 6, 2008, the trial court carefully reviewed the evidence, and it concluded that plaintiffs had failed to demonstrate a genuine issue of material fact "on any of the elements necessary to establish a prima facie case of legal fraud." We are satisfied that the trial court's factual findings are supported by adequate, substantial, and credible evidence in the record, Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974), and that the matter was correctly decided. See Diabo v. Kirsch, 316 N.J. Super. 580, 589 (App. Div. 1998) (noting that representations as to the value of property "are not usually a basis for a claim of fraud" because such statements are opinions and not facts); see also Manasquan River Reg'l Sewerage Auth. v. Ocean Cty. Util., 234 N.J. Super. 530, 533 (App. Div. 1988) (noting that statements made by utilities authority officials to sewerage authority "as to future rates were approximate projections and not material misrepresentations of actual fact"), aff'd, 117 N.J. 239 (1989). Moreover, the trial court correctly concluded that there was no evidence to support plaintiffs' claim that the West defendants knowingly made false statements to deceive them and there was no showing that it was reasonable for plaintiffs to rely on the preliminary projections prepared by the West defendants. Accordingly, we affirm the summary judgment order substantially for the reasons stated by Judge Jones in his comprehensive oral decision on June 6, 2008.
© 1992-2009 VersusLaw Inc.