October 18, 2010
539 ABSECON BOULEVARD, L.L.C., A NEW JERSEY LIMITED LIABILITY COMPANY, AND BHUDEV SHARMA, PLAINTIFFS-RESPONDENTS/ CROSS-APPELLANTS,
SHAN ENTERPRISES LIMITED PARTNERSHIP, A NEW JERSEY LIMITED PARTNERSHIP, SUNITI CORP., A NEW JERSEY CORPORATION, SHAN REALTY ASSOCIATES, L.P., A NEW JERSEY LIMITED PARTNERSHIP, SHAN REALTY CORP., A NEW JERSEY CORPORATION, SUNIL J. SHAH, NIMESH SHAH, SWATI SHAH, JASHVANT SHAH, AND HJS FUNDING, LLC, A NEW JERSEY LIMITED LIABILITY COMPANY, DEFENDANTS-APPELLANTS/CROSS-RESPONDENTS.
On appeal from the Superior Court of New Jersey, Chancery Division, Atlantic County, Docket No. C-110-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted September 27, 2010
Before Judges Reisner, Sabatino, and Alvarez.
The present appeal and cross-appeal arise from various rulings made by the Chancery Division, following our remand of this case to that court in March 2009. See 539 Absecon Blvd., L.L.C. v. Shan Enter. Ltd., No. A-2250-06 (App. Div. Mar. 26, 2009), 406 N.J. Super. 242 (App. Div.), certif. denied, 199 N.J. 541 (2009).*fn1
We need not repeat here the facts and legal determinations that are comprehensively set forth in our prior opinion. Briefly stated, this litigation arises out of defendants' 2002 sale to plaintiffs of a motel business in Absecon, and the real estate upon which the motel was situated. The purchase was partially financed by a bank mortgage, and the remainder of the purchase price was financed by four promissory notes in the respective amounts of $715,000, $325,000, $250,000, and $200,000.*fn2 After plaintiffs acquired the motel business, the income stream from the motel rooms turned out to be less than what they had anticipated. That perceived shortfall prompted plaintiffs to file the instant action, contending that defendants had violated the Consumer Fraud Act ("the CFA"), N.J.S.A. 56:8-1 to -106, because of various alleged misrepresentations and omissions they made in connection with the sale. Plaintiffs also alleged common-law fraud, fraud in the inducement of the sale, fraudulent concealment, negligent misrepresentation, wrongful concert of action, conspiracy, breach of the implied covenant of good faith and fair dealing, unjust enrichment, unilateral mistake, and a right to pierce the corporate veil. 406 N.J. Super. at 244, (slip op. at 3). Defendants, in turn, filed a counterclaim which, among other things, sought enforcement of the promissory notes. Id. at 265, (slip op. at 36).
Following a lengthy bench trial, the Chancery judge determined that plaintiffs had established violations of the CFA by a preponderance of the evidence, and he awarded plaintiffs treble damages and counsel fees under the statute, as well as prejudgment interest, yielding a judgment of $2,779,742.72. Id. at 265-66, (slip op. at 37). However, the trial judge was unpersuaded that plaintiffs had proven common-law fraud by the higher standard of clear and convincing evidence required to sustain such a claim. Id. at 269, (slip op. at 42-43). The trial judge also rejected plaintiffs' other common-law claims. Id. at 271, (slip op. at 46). As to defendants' counterclaim on the notes, the trial judge's original decision found the respective plaintiffs liable for the sums due under the notes, but not the higher default interest rates contained within them. Ibid. The judge further ruled that the $715,000 note would remain in effect, and that plaintiffs could offset any sums due to defendants under the other three notes against the substantially higher judgment issued in plaintiffs' favor. Id. at 271-72, (slip op. at 46-47).
On appeal, we reversed the trial judge's legal determination that the CFA applied to this kind of transaction. Id. at 273-80, (slip op. at 48-60). We held that, as a matter of law, the CFA did not apply to the sale of the ongoing motel business, particularly given the fact that the real estate was not the primary component of the transaction, and also that defendants' misrepresentations related to the revenue stream of the motel business, not the underlying real property. Id. at 276-80, (slip op. at 54-60). We accordingly reversed plaintiffs' judgment on the CFA claims. Id. at 280, (slip op. at 60). We also affirmed the trial judge's dismissal of plaintiffs' non-CFA claims. Id. at 280, (slip op. at 67-69). Additionally, we sustained the trial judge's rejection of plaintiffs' claims that two of the promissory notes were unenforceable because of alleged oral agreements to cancel them. (Slip op. at 69-74.) We specifically upheld "[t]he portions of the judgment enforcing all four promissory notes," (id. at 74), and remanded the case to the trial court "for the entry of a corrected final judgment consistent with [our] opinion," (id. at 75). Plaintiffs thereafter petitioned the Supreme court for certification, which was denied. 199 N.J. at 541.
Following the denial of certification, the same judge who had presided over the trial considered the parties' various arguments with respect to the remand and the appropriate terms of a corrected final judgment. Among other things, defendants argued that, in light of the appellate reversal of plaintiffs' CFA claims, all three of the outstanding promissory notes*fn3 should be deemed to be in default, and that defendants were entitled to the full measure of default remedies set forth in those three notes, including the higher default interest rates and counsel fees. Plaintiffs opposed defendants' contentions of default. Plaintiffs also sought to have the trial court reinstate their common-law claim of negligent representation.
After considering the parties' lengthy briefs and submissions, and their oral arguments on the remand, as well as the significance of this court's decision on appeal, the trial judge entered a detailed corrected final judgment on July 22, 2009. The corrected judgment provided, in relevant part, as follows, with respect to the promissory notes:
Judgment is hereby entered in favor of defendant Shan Enterprises Limited Partnership and against plaintiff Bhudev Sharma with respect to the notes executed by said plaintiff in favor of said defendant as follows:
(a) Judgment is hereby entered in favor of Shan Enterprises Limited Partnership and against plaintiff Bhudev Sharma in the amount of $301,259.90, representing principal in the amount of $200,000.00 and interest in the amount of $101,259.90 on the $200,000.00 note. Interest has been awarded through August 1, 2009. Effective August 2, 2009 that Judgment shall bear interest in accordance with the Court Rules.
(b) Judgment is hereby entered in favor of Shan Enterprises Limited Partnership and against plaintiff Bhudev Sharma in the amount of $275,726.13, representing principal in the amount of $227,222.77 and interest in the amount of $48,503.36 on the $250,000.00 note. Interest has been awarded through August 1, 2009. Effective August 2, 2009 that Judgment shall bear interest in accordance with the Court Rules.
(c) Plaintiff Bhudev Sharma shall have the right to cure the deficiency and payments required under the terms of the $325,000.00 [note] as follows, and to continue making periodic payments as required by that note. To cure that deficiency, plaintiff Bhudev Sharma is required to pay defendants the amount of $162,127.20, representing the forty-three (43) payments due under the terms of the note for the period commencing in February 2006 and continuing through the payment required in August 2009. That payment is to be made on or before August 26, 2009. Assuming that payment is made, plaintiff shall have the right to continue periodic payments as required by the amortization schedule attached to the note with an initial payment in the amount of $3,770.40 being due on or before September 20, 2009. Additional payments are to be made in the same amount on a monthly basis based upon the amortization schedule attached to the original note. In the event plaintiff should fail to cure the deficiency by making the payment noted by the date indicated above[,] defendant Shan Enterprises Limited Partnership shall have the right to declare the entire amount of the principal and interest due and to request the entry of a Supplemental Judgment in its favor and against plaintiff Bhudev Sharma in that amount.
In his companion oral opinion dated July 22, 2009, the trial judge determined that it would be inequitable, under the distinctive circumstances as they evolved in this litigation, to allow defendant to recover default interest and counsel fees in this case. The judge emphasized that his original decision had authorized plaintiffs to offset the amounts due under the three outstanding notes against the original judgment in their favor exceeding $2 million. The judge did, however, award defendants interest on the unpaid notes of $200,000 and $250,000*fn4 at a rate consistent with the Rules of Court. See R. 4:42-11(a)(iii). The judge further denied plaintiffs' request to reinstate their affirmative claim of negligent misrepresentation, finding that the claim had already been dismissed as part of the original judgment, and that the dismissal had been expressly affirmed on appeal.
Defendants now appeal the trial judge's remand decision and, in particular, the denial of default interest and counsel fees. Among other things, defendants allege that the judge misapplied equitable principles and the parol evidence rule in denying them such enhanced remedies. Plaintiffs, meanwhile, have cross-appealed the trial judge's dismissal of their negligent misrepresentation claim.
Having fully considered the parties' competing arguments on the present appeal, we affirm the terms of the corrected final judgment in all respects, substantially for the reasons expressed in the trial judge's July 22, 2009 oral decision. We only add some brief comments.
With respect to defendants' appeal, we are satisfied that the trial judge's ultimate treatment of the promissory notes and his determination of the appropriate interest rate to be charged were both equitable and sound. Nothing in our prior opinion required the trial judge to activate the default provisions in the notes. We are unpersuaded that the trial judge misapplied principles of parol evidence, or any other law, in declining to award default remedies to defendants. The withholding of such remedies is reasonable and equitable, particularly in light of the trial judge's pointed and unaltered factual findings with regard to the numerous misrepresentations concerning the sale transaction that were made by several of the defendants. Additionally, the unique chronology of the litigation coupled with the first appeal, in which plaintiffs' large judgment was set aside for statutory reasons independent of the equities of the case, also justifies the withholding of default remedies.
We also fully agree with the trial judge's denial of plaintiffs' attempt to reinstate their common-law claims for negligent misrepresentation. The original dismissal of those claims was specifically upheld on appeal and that dismissal is binding as the law of the case. See Slowinski v. Valley Nat'l Bank, 264 N.J. Super. 172, 179-80 (App. Div. 1993); see also Bahrle v. Exxon Corp., 279 N.J. Super. 5, 21 (App. Div. 1995) (applying Slowinski). That being said, we reject defendants' argument that plaintiffs' attempt to revive their negligent misrepresentation claim on their present cross-appeal is so patently frivolous as to warrant sanctions.
The corrected final judgment entered by the trial court is affirmed in all respects.