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Delareto v. Totaro


September 29, 2010


On appeal from Superior Court of New Jersey, Law Division, Atlantic County, Docket No. L-835-08.

Per curiam.


Submitted August 31, 2010

Before Judges Simonelli and Waugh.

Plaintiff Anthony Delareto appeals from the July 17, 2009 Law Division order granting summary judgment to defendant John Totaro and from the August 28, 2009 order denying his motion for reconsideration. We affirm.

The following facts are derived from evidence submitted by the parties in support of, and in opposition to, the summary judgment motion, viewed in a light most favorable to the plaintiff. see Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).

Plaintiff owns a business known as "Somers Point Florist." According to plaintiff, in 1999, he began the process of purchasing commercial property located in Somers Point (the property), where he would relocate his florist. Plaintiff formed a business relationship with Donald Kelly to purchase the property, which would also house Kelly's business known as "Kelly's All Pro Landscaping." Plaintiff claimed that they agreed that he would own a two-thirds interest in the business to be formed, and Kelly would own one-third.

In order to obtain a mortgage for the purchase, the bank required a $50,000 capital contribution. Plaintiff claims that he lacked sufficient funds for his two-thirds share of that amount, so defendant agreed to loan him $16,666, but would not assert an ownership interest in the newly-formed business. Plaintiff concedes there are no documents evidencing this alleged loan agreement. However, he claims that he and defendant did not formalize their agreement because they were involved in a romantic relationship.

Contrary to plaintiff's claim that defendant would have no ownership interest in the business, on January 18, 2000, he, defendant, and Kelly executed a Limited Liability Company Operating Agreement (the operating agreement) forming MacArthur Park, LLC (MPLLC) for the purpose of purchasing the property. Upon executing the operating agreement, the parties each made a one-third capital contribution of $16,667 and became one-third owners of MPLLC. Defendant also became MPLLC's managing partner.

As to any prior agreements between the parties, the operating agreement contained the following integration clause:

This Agreement (including all exhibits, schedules and other attachments hereto and all other agreements referred to herein) incorporates and embodies the entire understanding and agreement between the parties hereto with reference to the subject matter hereof and to any of the matters hereinbefore discussed or mentioned in reference to the subject matter hereof; all prior promises, representations, agreements, understandings and arrangements thereto being herein merged.

The operating agreement also prohibited any amendment unless "in writing with the consent of a [m]ajority of the [m]embers."

In addition to the operating agreement, the parties' one-third ownership interests are reflected in a notarized Affidavit of Ownership of MPLLC, and in MPLLC's federal and state income tax returns for the years 2000 through 2007. Also, Kelly confirmed that he, plaintiff, and defendant formed MPLLC; each owned a one-third interest; and plaintiff never told him that he and defendant had some other agreement relating to MPLLC. Kelly also explained that plaintiff did not own two-thirds of MPLLC and that, as he understood it, the two-thirds figure stems from plaintiff's payment of two-thirds of MPLLC's carrying charges because his florist business occupied more square footage than Kelly's landscaping business.

Plaintiff claims that despite defendant's inclusion in the operating agreement, defendant had no ownership interest in MPLLC; rather, defendant agreed to accept repayment of the loan and not assert an ownership interest. Plaintiff explains that defendant was included in the operating agreement because the bank providing the mortgage "required that [defendant] appear as a one-third owner of [MPLLC]."

Plaintiff's and defendant's romantic relationship ended in 2001. MPLLC continued to operate thereafter, with defendant continuing as the managing partner. Plaintiff claims that defendant initially demanded repayment of the loan, but later asserted that he owned one-third of MPLLC. Defendant disputes this claim.

Six years later, in December 2007, Kelly purchased plaintiff's interest in MPLLC for $175,000, and defendant's interest for $281,000. On March 12, 2008, plaintiff filed a complaint against defendant alleging breach of contract and breach of promise, breach of the implied covenant of good faith and fair dealing and equitable and common law fraud.

Defendant filed a summary judgment motion, contending that the integrated clause in the operating agreement precludes consideration of parol evidence relating to the alleged loan agreement. The trial judge agreed and concluded there was no clear and convincing proof that defendant fraudulently induced plaintiff to sign the operating agreement. This appeal followed.

On appeal, plaintiff contends that the trial judge erred in applying the parol evidence rule. Plaintiff argues that: (1) the parties had an enforceable oral loan agreement; (2) defendant anticipated that the parol evidence rule would bar evidence of the prior agreement and used that to perpetrate the fraud that he was a legitimate investor in MPLLC; (3) defendant induced plaintiff into signing the operating agreement; and (4) defendant's reliance on the statute of frauds constitutes unjust enrichment, bad faith, and equitable and/or common law fraud. Plaintiff also contends that the judge improperly relied on certain incorrect assumptions of fact not in the record. We disagree with all of plaintiff's contentions.

Our review of a ruling on summary judgment is de novo, applying the same legal standard as the trial court. Chance v. McCann, 405 N.J. Super. 547, 563 (App. Div. 2009). Thus, we consider, as the trial judge did, "'whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'" Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007) (quoting Brill, supra, 142 N.J. at 536). Summary judgment must be granted "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the 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). If there is no genuine issue of material fact, "[we] must [then] decide whether the trial court correctly interpreted the law." Massachi v. AHL Servs., Inc., 396 N.J. Super. 486, 494 (App. Div. 2007), certif. denied, 195 N.J. 419 (2008). Applying these standards, we are satisfied that the trial judge properly granted summary judgment.

"The interpretation or construction of a [written] contract is usually a legal question for the court, suitable for" disposition on summary judgment, unless there is "ambiguity or the need for parol evidence in aid of interpretation." Driscoll Constr. Co. v. State of N.J., Dep't of Transp., 371 N.J. Super. 304, 313-14 (App. Div. 2004) (quotations and internal quotation marks omitted); see also Great Atl. & Pac. Tea Co. v. Checchio, 335 N.J. Super. 495, 502 (App. Div. 2000) "[I]t is not the function of the court to make a better contract for the parties, or to supply terms that have not been agreed upon." Graziano v. Grant, 326 N.J. Super. 328, 342 (App. Div. 1999) (citing Schenck v. HJI Assocs., 295 N.J. Super. 445, 450 (App. Div. 1996), certif. denied, 149 N.J. 35 (1997)). "If the terms of a contract are clear, we must enforce the contract as written and not make a better contract for either party." Ibid.

"In general, the parol evidence rule prohibits the introduction of evidence that tends to alter an integrated written document." Conway v. 287 Corporate Ctr. Assocs., 187 N.J. 259, 268 (2006); accord Filmlife, Inc. v. Mal "Z" Ena, Inc., 251 N.J. Super. 570, 573 (App. Div. 1991); Ocean Cape Hotel Corp. v. Masefield Corp., 63 N.J. Super. 369, 378 (App. Div. 1960). Where there is a fully integrated writing, the parol evidence rule applies:

The general rule is clear that a parol agreement which is in terms contradictory of the express words of a contemporaneous or subsequent written contract, properly interpreted, necessarily is ineffectual and evidence of it inadmissible, whether the parol agreement be called collateral or not. Men are usually bound by the import of documents signed by them and which they had the ability and opportunity to read.

[Winoka Village, Inc. v. Tate, 16 N.J. Super. 330, 333 (App. Div. 1951) (internal quotation marks, quotation and citation omitted).]

However, the rule does not bar proof of changes made to a contract after execution of the written instrument. See Lewis v. Travelers Ins. Co., 51 N.J. 244, 253 (1968) (holding that "the parol evidence rule did not bar proof of changes subsequent to the execution of the integrated writing."); Van Dusen Aircraft Supplies, Inc. v. Terminal Constr. Corp., 3 N.J. 321, 327 (1949) (holding that "a written contract may be altered or changed by a subsequent agreement if based on a proper consideration."). The rule also does not bar the "[i]ntroduction of extrinsic evidence to prove fraud in the inducement . . . " Filmlife, supra, 251 N.J. Super. at 573. Such evidence "is admitted because it is not offered to alter or vary express terms of a contract, but rather, to avoid the contract or 'to prosecute a separate action predicated upon the fraud.'" Id. at 573-74 (quoting Ocean Cape Hotel Corp., supra, 63 N.J. Super. at 378).

Here, plaintiff does not claim that an ambiguity exists in the operating agreement, or that changes were made after its execution. Rather, relying on Cauco v. Galante, 6 N.J. 128 (1951) and an unpublished opinion, Moscato v. C.B.P.B. Assocs., LLC, No. A-4756-05 (App. Div. August 27, 2007), plaintiff argues that he and defendant had an enforceable loan agreement. However, neither of these cases involve an integrated agreement, and further, Moscato does not constitute precedent and is not binding upon this court. R. 1:36-3.

Because of the integrated agreement in this case, the parol evidence rule bars consideration of the alleged oral loan agreement, and no exception applies. Plaintiff has failed to establish that defendant committed fraud or fraudulently induced him into signing the operating agreement. To the contrary, the evidence establishes that defendant owned a one-third interest in MPLLC, and that the bank, not defendant, induced plaintiff to sign the operating agreement by requiring that defendant be a one-third owner of MPLLC, a requirement to which plaintiff acquiesced. Accordingly, the trial judge properly concluded that the parol evidence rule barred consideration of the alleged loan agreement.

Plaintiff's remaining contentions that defendant improperly relied on the statute of frauds and that the judge improperly relied on certain incorrect assumptions of fact not in the record are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). However, we make the following brief comments.

Defendant never relied on the statute of frauds to defeat plaintiff's claim of an oral agreement. Defendant relied solely on the operating agreement. Further, the record amply supports the judge's finding that the parol evidence rule bars consideration of the alleged oral loan agreement.



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