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Adkins v. Krikor


October 21, 2010


On appeal from Superior Court of New Jersey, Law Division, Passaic County, Docket No. L-2181-08.

Per curiam.


Argued September 13, 2010

Before Judges Rodríguez and Grall.

Defendants Krikor Kalfayan (Kalfayan) and Krikor, Inc., (Krikor) appeal from a $26,550 judgment entered against them jointly, severally and individually, after a bench trial. Plaintiff Jennipher Adkins has not participated in this appeal.

We conclude the judgment must be reduced to $15,000, the limit on damages that may be recovered in an action in the Special Civil Part.

The litigation arose from a dispute between plaintiff, who is a designer of bonnets, headbands, head-wraps and scarves, and defendants, the manufacturer that agreed to produce the accessories according to her design. Plaintiff commenced the litigation in the Special Civil Part of the Law Division. Defendants filed an answer and a counterclaim. In their answer, defendants contended that Kalfayan was not a proper defendant. The counterclaim, which was filed in the name of Krikor, sought damages in excess of the $15,000 available in the Special Civil Part.

The initial pleadings were dismissed for reasons not clear on this record, but plaintiff filed a second complaint reasserting her intention to be bound by the $15,000 limitation on damages in the Special Civil part. Defendants responded, reiterating the objection to an action against Kalfayan and a counterclaim for damages by Krikor in excess of $15,000. The case was transferred to the Civil Part of the Law Division and scheduled for trial.

Plaintiff and defendants' attorney appeared for trial, but Kalfayan did not attend and no other witness for the defense was called. Defense counsel requested an adjournment because he could not reach Kalfayan and there was no one else in business with him. Although his request was denied, defense counsel, noting he was not likely to receive an adjournment from the presiding judge, declined to pursue that option. Thereafter, over defense counsel's objection based on lack of prior notice, the judge amended plaintiff's complaint to allow her to establish damages in the amount of $69,000.

Plaintiff's unrebutted testimony established the following. Plaintiff, owner of Jenny Capp Company (JCC), and Krikor, through Kalfayan, had cooperated in business ventures prior to the transaction at issue. In the earlier transactions, plaintiff dealt only with Kalfayan, purchased material from Krikor and manufactured the products she marketed herself in JCC's California facility.

This transaction was different in that plaintiff had a contract with another company, TWT Distributing. TWT agreed to pay her $95,616 for a product line she designed and that TWT planned to market under its own label. Because plaintiff did not have the wherewithal to fill the order, she and Kalfayan discussed the possibility of Krikor overseeing production and shipping of the completed products.

Plaintiff produced three draft agreements, which were dated May 15, May 23, and November 1, 2006, respectively. The first was prepared by plaintiff, and the second two were prepared by Kalfayan. The agreement plaintiff prepared was for Kalfayan's signature as owner of Krikor. The agreements Kalfayan drafted identified him as the president of Krikor. Although all three agreements set forth the respective obligations of JCC and Krikor, all three identify plaintiff, JCC, Kalfayan and Krikor as the contracting parties.

The agreements have common elements pertinent to plaintiff's claim. Under each version, Krikor was obligated to either produce and ship or supervise the manufacture and shipment of the finished products. Krikor was to pay the suppliers and contractors, and JCC was to provide printed inserts for the packaging. Plaintiff was to produce evidence that she had granted TWT authority to pay Krikor for the merchandise and for Krikor to deduct its costs and retain three percent of the net amount of the invoice.

The differences in the agreements related to the cost of shipping; plaintiff proposed that she pay the costs, but Kalfayan proposed that he deduct that expense along with his other costs and his three percent of the net value of the invoice before remitting the remainder of TWT's payment to JCC.

Although Kalfayan did not sign his May 23 or November 1, 2006 proposals, in June 2006 he had notified plaintiff that he would have the order completed by the second week in July. The November 1, 2006 agreement varied from Kalfayan's May 23 proposal only in that it provided for the parties to agree on a per-item cost, inclusive of shipping costs. Krikor was to deduct that per-item cost, along with three percent of the net amount of the invoice, before remitting the balance to JCC. Plaintiff signed that agreement when Kalfayan sent it to her on November 1, 2006. She did not have a copy signed by him.

At trial, plaintiff testified that Kalfayan's total per-item cost was $75,181. She subsequently corrected that assertion and said that the $75,181 also included Krikor's three-percent share of the net invoice value.

The merchandise was not shipped to TWT in November. According to plaintiff, in December 2006 Kalfayan told her he could not complete the packaging of the individual items. At the same time, TWT was threatening plaintiff with cancellation of its order because of the delay. Consequently, plaintiff traveled from California to Krikor in New Jersey to complete the work. She hired laborers at a cost of $3200 and spent $2887 on packaging materials and was ready to ship on December 22. Kalfayan, however, demanded payment of $35,000 in advance and directed plaintiff to leave when she could not comply with his demand. Kalfayan contacted plaintiff on December 29, but by that time the owner of TWT had called plaintiff and cancelled the contract.

At the time of trial, plaintiff had no idea what Kalfayan had done with the products he produced and she packaged. She said she lost a $20,435 profit on the transaction, which represented the portion of the $95,616 invoice amount due her after deduction of the $75,181 owed to Krikor, which included its three-percent share of the net invoice value. In addition, she sought payment of her costs in completing the packaging as well as the expense of her travel and stay in New Jersey.

On the foregoing evidence, the trial judge found that the parties had reached an agreement that was evidenced by the written agreements, Kalfayan's acceptance by partial performance and the oral agreement on the amount due Krikor. He further determined that defendants breached the agreement by failing to complete the work and demanding advance payment. The trial judge awarded plaintiff $26,550 to account for her lost profit and her expenditures on labor and packaging.

Relevant to Kalfayan's individual liability, the trial judge found that he was named as a party to the contracts and that by dealing directly with plaintiff he had further indicated his intention to be bound. The trial judge concluded that Kalfayan's conduct indicated that he was "entering into an agreement . . . on an individual basis." He was "satisfied" that this conduct was a sufficient reason to hold Kalfayan personally liable for the damages.

On appeal defendants argue:

I. The transaction was between plaintiff and corporate defendant Krikor, Inc.

II. Plaintiff's damages should be capped at the jurisdictional limit of the Special Civil Part.

III. The court allowed hearsay evidence to be presented in the case and [it] was considered by the court in rendering its decision.

IV. The court err[ed] in making a contract out of the oral positions of the parties where there was clear diversity of position.

We reject defendants' claim that the trial judge erred by concluding that this transaction was between plaintiff, Krikor and Kalfayan and not between plaintiff and Krikor. The question was whether the parties intended to bind themselves as well as their business entities. The trial judge determined that this intention was manifest in the language identifying both plaintiff and Kalfayan as parties to the agreement, which appears in all three agreements including the two presented to plaintiff by Kalfayan, and by Kalfayan's direct dealings with plaintiff as if he were "running the show."

This evidence is adequate to support the factual findings that underlie the judge's conclusion that plaintiff and Kalfayan intended to bind themselves. Rova Farms Resort v. Investors Ins. Co., 65 N.J. 474, 484 (1974). Moreover, there is no question that it was proper for the judge to consider the several written agreements drafted by the parties in the course of this transaction and to take account of the circumstances, including their relationship at the time and their conduct. See Graziano v. Grant, 326 N.J. Super. 328, 342 (App. Div. 1999); Nester v. O'Donnell, 301 N.J. Super. 198, 210 (App. Div. 1997); The Anthony L. Petters Diner, Inc. v. Stellakis, 202 N.J. Super. 11, 21 (App. Div. 1985); see also N.J.S.A. 12A:2-204 (providing that "[a] contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract"). Given the parties' agreement as the trial judge found it to be, Kalfayan's status as president of Krikor is irrelevant.

In contrast to defendants' claim about Kalfayan's liability, their objection to entry of a judgment in excess of $15,000 has merit. Despite notice of defendants' request for transfer from the Special Civil Part because the damages exceeded $15,000, plaintiff never moved to amend her complaint to seek damages in excess of the limit applicable to a claim filed in the Special Civil Part. See R. 6:1-2(c) (precluding recovery that exceeds the limit). There is no question that a plaintiff may seek to amend a complaint to recover damages in amount of the limit when the matter is transferred to the Law Division. See R. L. Mulliken, Inc. v. City of Englewood, 59 N.J. 1, 4 (1971); Pressler & Verniero, Current N.J. Court Rules, comment 2.l.1 on R. 6:4-1 (2011) (noting that the body of law regarding the county district court's monetary jurisdiction, such as R.L. Mullen, remains fully applicable to the Special Civil Part). Nonetheless, amendment is not appropriate when accomplished without accounting for prejudice to the other party. See R. 4:9-2 (providing that on objection to trial of an issue not within the pleadings a court may permit the amendment when the objecting party fails to show prejudice). Here, there was no witness available to testify on behalf of defendants.

The prejudice to the defense was apparent, and in this circumstance, the trial judge erred by not exercising his discretion to grant a continuance in accordance with Rule 4:9-2. Accordingly, the judgment must be reduced to $15,000.

Our decision to reduce the judgment makes it unnecessary to consider defendants' objection to the adequacy of competent evidence supporting an award of damages for plaintiff's expenditures on packaging and labor. The amounts in issue do not exceed the reduction we direct.

Similarly, defendants' objection to the trial judge's reliance on plaintiff's hearsay testimony about TWT's cancellation of the contract is immaterial. While plaintiff's loss was the benefit of her bargain with TWT, whether or not TWT cancelled its purchase order, plaintiff could not collect that benefit because of defendants' failure to deliver the finished products.

Defendants' claim that the evidence was inadequate to establish an enforceable agreement is without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). The trial judge's findings are adequately supported by the record. R. 2:11-3(e)(1)(A).

Affirmed as modified and remanded for amendment of the judgment in conformity with this opinion.

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