On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-2859-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Wefing, Payne and Hayden.
Following a bench trial, the trial court entered two judgments: one, for $500,000 plus prejudgment interest, in favor of Douglas Faraldi individually; and one, for $175,000 plus prejudgment interest, in favor of Douglas Faraldi as the personal representative of the estate of Ruth Faraldi, his deceased mother.*fn1 Both judgments were entered against defendants Hubert Pototschnig and Care Products, Inc. Defendants have appealed from those judgments. After reviewing the record in light of the contentions advanced on appeal, we affirm as to Pototschnig and remand as to Care Products.
The Faraldis owned a liquor store in Fort Lee and retained defendant Thomas Lawrence, a certified public accountant, and his firm, defendant Thomas Lawrence & Co., to perform accounting services for the business. Pototschnig was another of Lawrence's clients, and he owned a pawn shop in Connecticut, Ace Cash. Beginning in 1998, Lawrence approached the Faraldis with the proposal that they lend money to Pototschnig to help him expand his business. Lawrence told the Faraldis that Pototschnig would pay interest of 18% per annum, and he vouched for Pototschnig's reliability. Attracted by the interest rate, and Lawrence's assurances, the Faraldis agreed to lend money to Pototschnig. They did so by forwarding the money to Lawrence, who would deposit it into an escrow account and then forward it to Pototschnig. Unbeknownst to the Faraldis, Lawrence was charging Pototschnig a much higher interest rate on the loans. The Faraldis received timely interest payments and did not look for repayment of principal; rather, the notes were simply rolled over when due.
In approximately 2004 Lawrence told the Faraldis that Pototschnig had formed a new business, Care Products, which imported home health care test kits from Austria for re-sale in the United States. According to Lawrence, Pototschnig was seeking to borrow more money for this new business venture. Based upon their satisfactory experience with the earlier loans, the Faraldis agreed to advance more money, following the practice of sending the money to Lawrence, who would remit it to Pototschnig. In all, Douglas Faraldi lent $500,000 to Pototschnig, his mother $175,000. Although they received substantial interest payments over the years, the principal was never repaid.
Eventually, the interest payments became irregular and then ceased entirely. The Faraldis filed suit to collect the money due them. When the Faraldis first filed suit, they named Lawrence and his firm as defendants, as well as Pototschnig and Care Products. Their original complaint included counts for breach of contract, book account and unjust enrichment. By the time the matter proceeded to trial, plaintiffs had dismissed the counts for breach of contract and book account, and the matter was heard solely on the theory of unjust enrichment. The Lawrence defendants eventually consented to the entry of judgments against them in favor of the two Faraldis for the full amounts they had advanced, together with prejudgment interest. At trial, Lawrence testified on behalf of the Faraldis.
At trial, Pototschnig denied receiving any funds from the Faraldis but admitted he borrowed money from Lawrence, who, Pototschnig said, charged him interest of 60% per annum. Pototschnig disavowed the notes that bore his signature, claiming they were forgeries. At trial, the Faraldis relied upon these notes, as well as testimony from Douglas Faraldi and Lawrence that Pototschnig met with the Faraldis on several occasions to reassure them of the safety of their loans. Pototschnig admitted at trial that he had met with the Faraldis but said he had done so in an ultimately unsuccessful effort to convince the Faraldis to become stockholders in Care Products.
At the conclusion of this non-jury trial, the trial court made its findings and conclusions. It accepted as credible the testimony of Douglas Faraldi. That credibility assessment, and the factual findings that flowed from it, are, of course, binding upon us on appeal. State v. Locurto, 157 N.J. 463, 474 (1999); State v. Johnson, 42 N.J. 146 (1964).
On appeal, defendants raise three arguments: that the trial court erred in its application of unjust enrichment, that the trial court erred in enforcing usurious agreements, and that it erred in its calculation of damages. We reject defendants' first two arguments but agree with the third.
We recently summarized the principles applicable to a claim of unjust enrichment.
The doctrine of unjust enrichment rests on the equitable principle that a person shall not be allowed to enrich himself unjustly at the expense of another. A cause of action for unjust enrichment requires proof that defendant[s] received a benefit and that retention of that benefit without payment would be unjust. Unjust enrichment is not an independent theory of liability, but is the basis for a claim of quasi-contractual liability. We have recognized, however, that a claim for unjust enrichment may arise outside the usual quasi-contractual setting. [Goldsmith v. Camden County Surrogate's Office, 408 N.J. Super. 376, 382 (App. Div.), certif. denied, 200 N.J. 502 (2009) (citations omitted).]
We agree with the trial court that the transactions at issue here fit squarely within the concept of unjust enrichment. Defendants contend that unjust enrichment is inapplicable because plaintiffs failed to prove that Pototschnig received a benefit from them. The trial court, however, found that the Faraldis' money, forwarded by Lawrence, was deposited into ...