August 15, 2011
DAIMLER TRUCKS NORTH AMERICA, L.L.C. (F/K/A FREIGHTLINER L.L.C.),
CHRIS PREZIOSI AND ALBERT PREZIOSI, JR., DEFENDANTS-RESPONDENTS.
On appeal from the Superior Court of New Jersey, Law Division, Somerset County, Docket No. L-2131-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued April 5, 2011
Before Judges Wefing, Baxter, and Hayden.
Plaintiff Daimler Trucks North America L.L.C., formerly known as Freightliner L.L.C., ("plaintiff") appeals from the dismissal of its complaint against defendants pursuant to Rule 4:6-2(e) for failure to state a claim. Having considered the arguments raised in light of the motion record and applicable legal standard, we reverse and order the reinstatement of plaintiff's complaint.
The record reveals that in 2001 Ford World L.L.C., a truck dealership, through its principals, defendants Albert Preziosi, Jr. and Chris Preziosi, entered into an agreement to sell trucks manufactured by plaintiff. In addition, each defendant signed a separate individual continuing guaranty agreeing that in the event [Ford World] failed at any time or times to promptly pay any and all indebtedness which now exists and/or may hereafter accrue from [Ford World] to [plaintiff] as the same becomes due, guarantor absolutely and unconditionally promises to pay any and all such indebtedness as the same becomes due from [Ford World] to [plaintiff] forthwith, upon demand, with all attorneys fees incurred in enforcing payment under this instrument, all without relief from valuation and appraisement laws.
Each defendant also agreed that his continuing guaranty would not cease until the guarantor "has delivered to [plaintiff] a signed notice of Guarantor's election not to guaranty any new indebtedness from [Ford World] to [plaintiff] .. . ." Defendants further agreed that a written notice of termination of the guaranty would not release the guarantors from any indebtedness existing at the time of the termination. Additionally, defendants waived any requirement that plaintiff exhaust its remedies against Ford World before demanding payment of the indebtedness under the guaranties. Specifically, each defendant agreed to be bound to the payment of all indebtedness of [Ford World] to [plaintiff] whether now existing or hereinafter accruing as fully as if each indebtedness was directly owing to [plaintiff] by [each defendant] and as fully as if [each defendant] was a joint maker with [Ford World] upon any note made by [Ford World] to [plaintiff].
Subsequently, on March 12, 2007, plaintiff and Ford World agreed that Ford World would cease doing business and resign as a company dealer, effective that day. Accordingly, they executed a Resignation Agreement and Release ("Agreement") signed March 13 by Ford World and March 14, 2007 by plaintiff. The Agreement contains the following provision:
Except as provided herein, the undersigned parties, in executing this Resignation Agreement and Release, do hereby forever release, acquit and discharge each of the other parties to this Resignation Agreement, their respective officers agents, employees, assigns, and successors, from any and all causes of action, demands or liabilities, both in law and in equity, past, present or future, with respect to any and all matters, transactions, acts, or events resulting from or in any way connected or related to the Dealer Agreement, the resignation or termination of the Dealer Agreement or Dealer's operation as a dealer. This release includes but is not limited to any claims for breach of contract, breach of fiduciary duty, civil conspiracy, breach of duties of good faith and fair dealing, interference with contractual relationship, anti-trust, RICO, resale price maintenance (vertical price fixing), Robinson-Patman Act violations, breach of any New Jersey statutes or common law, Federal Dealer Day in Court Act violations, defamation, prima facie tort (business disparagement), and any other related actions.
Paragraph 3 of the Agreement relates to the return of inventory upon termination. This provision states:
Company agrees to purchase the Eligible Assets in Dealer's inventory provided that Dealer satisfies and complies with the procedures for returning the assets set forth in Paragraph XV(l) or X(D)(3) of the Dealer Agreements or as stipulated by New Jersey state statutes.
Paragraph 6 preserves the rights of the parties to the Agreement concerning pre-existing debts, stating: "This Agreement shall not operate as a cancellation of any current indebtedness between the parties."
In its complaint plaintiff alleged that Ford World owed it $40,068.37 for various items, including parts. Plaintiff sought payment from both defendants based upon their continuing guaranties. By letter dated October 12, 2009, plaintiff demanded that defendants pay the outstanding amount allegedly due to it from Ford World regarding inventory in its possession. After defendants failed to make any payments, plaintiff filed a complaint against them on November 20, 2009, demanding damages for breach of the continuing guaranties. The complaint included copies of the two individual continuing guaranties and the Agreement as exhibits.
On March 24, 2010, defendants filed an answer, admitting that they each had signed personal guaranties to plaintiff for the indebtedness of Ford World. Defendants further acknowledged that Ford World and plaintiff had executed the Agreement in March 2007. Defendants, however, denied owing any money to plaintiff and raised eleven affirmative defenses. In addition, defendants filed a counterclaim alleging that defendants had signed the Agreement as members of Ford World. They further alleged that plaintiff had failed to fulfill its statutory obligations to Ford World under N.J.S.A. 56:10-13.2, part of the New Jersey Franchise Practices Act,*fn1 thereby causing defendants to suffer compensatory, consequential and statutory damages.
On April 26, 2010, plaintiff filed a motion seeking to dismiss defendants' counterclaim for failure to state a claim and to strike certain of defendants' affirmative defenses. Plaintiff contended that defendants lacked standing to assert a counterclaim on behalf of non-party Ford World.
On May 6, 2010, defendants filed both a cross-motion to dismiss plaintiff's complaint for failure to state a claim and its opposition to plaintiff's motion to dismiss. Defendants argued that the complaint should be dismissed because under the Agreement plaintiff had released all claims against defendants, including the guaranties. Concerning their counterclaim, defendants argued that they could individually assert Ford World's statutory claims against plaintiff because Ford World was insolvent.
In his oral opinion, the motion judge held that the Agreement was binding on the litigants. Further, he held:
Paragraph 4 serves as a complete and total release between the parties' overall claims, past, present, future. It states it applies not only to corporate entities, but also to their respective officers, agents and employees. As officers and employees of Ford World, the Agreement applies to the individual defendants. Effectively, the parties have released their claims against each other.
Paragraph 6 of the Agreement states the release shall not operate as a cancellation of any current indebtedness between the parties. That's inapplicable. The debt alleged in the plaintiff's complaint arises out of Ford World's failure to honor the re-purchase agreement as outlined in paragraph 3 of the Agreement and governed by the Franchise Practices Act . . . . It is not current indebtedness.
Plaintiff's cause of action to recover for a violation of the re-purchase agreement is not to sue the guarantors, but to sue Ford World directly for violation of paragraph 3 of the release agreement.
The trial court entered an amended Order on May 17, 2010, dismissing both plaintiff's complaint and defendants' counterclaim without prejudice. Plaintiff appealed.
On appeal, plaintiff raises the following contentions:
I. THE TRIAL COURT'S RULING MUST BE REVERSED TO CORRECT MANIFEST ERRORS OF LAW AND TO PREVENT INJUSTICE.
A. THE TRIAL COURT'S ORDER SHOULD BE REVERSED BECAUSE THE TRIAL COURT ERRED IN HOLDING THAT THE AGREEMENT COVERED THE INDIVIDUAL GUARANTORS.
B. THE TRIAL COURT ERRED IN HOLDING, AS A MATTER OF LAW AND BASED UPON NO RECORD, THAT THE ALLEGATION IN PLAINTIFF'S COMPLAINT DID NOT INVOLVE CURRENT INDEBTEDNESS.
C. THE TRIAL COURT ERRED IN HOLDING THAT CLAIMS UNDER PARAGRAPH 3 COULD ONLY BE ASSERTED AGAINST FORD WORLD.
We begin by discussing some well-settled legal principles. It is well established that an appellate court will examine questions of law de novo. Gallenthin Realty Dev., Inc. v. Borough of Paulsboro, 191 N.J. 344, 358 (2007) (citing Hodges v. Sasil Corp., 189 N.J. 210, 220-21 (2007)). Decisions made by the trial court on the basis of "the law and the legal consequences that flow from established facts are not entitled to any special deference." Zabilowicz v. Kelsey, 200 N.J. 507, 513 (2009) (quoting Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)). On appeal, this court will review a motion to dismiss for failure to state a cause of action under the same standard as that applied by the trial court. Seidenberg v. Summit Bank, 348 N.J. Super. 243, 250 (App. Div. 2002).
The motion judge dismissed the complaint on the basis of defendants' Rule 4:6-2(e) motion, which should generally be granted "'in only the rarest of instances.'" NCP Litig. Trust v. KPMG LLP, 187 N.J. 353, 365 (2006) (quoting Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 772 (1989)). When a motion challenging the legal sufficiency of a complaint is filed, the plaintiff's complaint is entitled to a liberal interpretation and is given the benefit of all favorable inferences that reasonably may be drawn. Stubaus v. Whitman, 339 N.J. Super. 38, 52 (App. Div. 2001), certif. denied, 171 N.J. 442 (2002) (citing Burg v. State, 147 N.J. Super. 316, 319-20 (App. Div.), certif. denied, 75 N.J. 11 (1977)).
A motion to dismiss must be based upon the content of the pleading itself. Roa v. Roa, 200 N.J. 555, 562 (2010). As part of that pleading, documents specifically referenced in the complaint may be considered. N.J. Citizen Action, Inc. v. Cnty. of Bergen, 391 N.J. Super. 596, 605 (App. Div.), certif. denied, 192 N.J. 597 (2007).
At this preliminary stage of the litigation
[a] [c]court [should not be] concerned with the ability of plaintiffs to prove the allegation contained in the complaint. . . .
[P]laintiffs are entitled to every reasonable inference of fact. The examination of a complaint's allegations of fact required by the aforestated principles should be one that is at once painstaking and undertaken with a generous and hospitable approach.
[Banco Popular N. Am. v. Gandi, 184 N.J. 161, 165 (2005) (citing Printing Mart, supra, 116 N.J. at 746).]
Consequently, a motion to dismiss a complaint for failure to state a cause of action must be denied if the claim has been made out. Printing Mart, supra, 116 N.J. at 746.
On appeal, plaintiff argues that, as the Agreement specified only "officers, agents, employees, assigns and successors" of the principal, the defendants as individual guarantors remain liable for any indebtedness covered by their individual guaranties. Even if the Agreement released the individual guarantors, plaintiff argues, the debt at issue was "current indebtedness" and thus was not released. Not surprisingly, defendants argue that the intent of the parties to the Agreement was to completely release Ford World's officers, including as individual guarantors, and that the amount sought as damages involved a debt arising after the signing of the Agreement.
"A guaranty is a separate and independent contract. The guarantor is not a party to the contract between the principal obligor and the guarantee, and the principal obligor is not a necessary party to the contract of guaranty." Great Falls Bank v. Pardo, 263 N.J. Super. 388, 398 n. 5 (Ch. Div. 1993) (citing 38 C.J.S. Guaranty §§ 1, 2 (1992)), aff'd, 273 N.J. Super. 542 (App. Div. 1994). "Generally, a guarantor is a different person from the maker or, if the same person, signs in different capacities when signing as maker and guarantor (e.g., an individual may sign as an officer of a corporate maker and also sign individually as a guarantor of the corporate obligation)."
Ligran, Inc. v. Medlawtel, Inc., 86 N.J. 583, 589 (1981). The purpose of requiring an individual guaranty from the owner of a corporation is to obtain greater security than the corporation's assurance of payment. Shelter Systems Group Corp. v. Lanni Builders, Inc., 263 N.J. Super. 373, 376 (App. Div. 1993). Typically, an unconditional guaranty "permits the creditor to move against the guarantor without first acting against either the collateral or the principal debtor." Lenape State Bank v. Winslow Corp., 216 N.J. Super. 115, 126 (App. Div. 1987).
In interpreting contracts of guaranty, we apply the rules governing the construction of contracts. Center 48 Ltd. P'ship v. May Dept. Stores Co., 355 N.J. Super. 390, 405 (App. Div. 2002)(citations omitted). As a contract, a guaranty must be interpreted "according to its clear terms so as to effect the objective expectations of the parties." Housatonic Bank and Trust Co. v. Fleming, 234 N.J. Super. 79, 82 (App. Div. 1989); Mt. Holly State Bank v. Mt. Holly Wash. Hotel, 220 N.J. Super. 506, 511 (App. Div. 1987). "Courts are generally obligated to enforce contracts based on the intent of the parties, the express terms of the contract, surrounding circumstances and the underlying purpose of the contract." Caruso v. Ravenswood Developers, Inc., 337 N.J. Super. 499, 506 (App. Div. 2001) (citations omitted).
In view of the aforesaid principles we review plaintiff's straightforward one-count complaint. Plaintiff averred that defendants had signed continuing guaranties obliging them each to pay the indebtedness of Ford World to plaintiff. The complaint alleged that Ford World had ceased being a dealer the day before the Agreement was signed. The complaint further alleged that the Agreement did not cancel current indebtedness between the parties. The amount allegedly owed to plaintiff by Ford World was $40,068.37. Plaintiff had made a written demand that defendants pay that amount pursuant to their continuing guaranties but they failed to do so.
We find that on its face the complaint states a viable claim against a guarantor on a guaranty. It is fundamental that where a guaranty exists, demand is made on a debt covered by the guaranty, and it is not paid, the party to whom the guaranty was made may sue to collect on it. United States Rubber Co. v. Champs Tires, Inc., 73 N.J. Super. 364, 373 (App. Div. 1962).
While defendants argue that the intent of the Agreement was to release the defendants in their capacity as individual guarantors, the Agreement does not clearly manifest this intent on its face. The continuing guaranties at issue here require the termination of the guaranty by a written notification of the intent to no longer be liable on any future indebtedness.
Plainly, a factual dispute exists as to the intent of the Agreement to terminate the guaranties. Resolving a contested issue of fact cannot be done on a Rule 4:6-2(e) motion, as was done here. See Leon v. Rite Aid Corp., 340 N.J. Super. 462, 471 (App. Div. 2001).
More importantly, even if the Agreement had covered the guaranties, defendants as guarantors were liable to pay the accumulated debt of Ford World up to the time of the termination of the guaranties. Similarly, the Agreement did not release existing debt between Ford World and plaintiff. A generous reading of the complaint demonstrates that plaintiff is suing on the current indebtedness that existed at the time of the signing of the Agreement. Indeed, at the time of the signing of the Agreement Ford World had ceased to do business with plaintiff, which would normally have the effect of limiting future debt. Consequently, regardless of the effect the Agreement had on the guaranties after its signing, the preservation of current indebtedness in the Agreement means that the guarantors may still be held to their guaranties on the debt accumulated before the release.
Moreover, we can locate no support in the complaint itself for the motion judge's finding that the debt at issue was incurred after Ford World ceased doing business with plaintiff.
By so finding, the motion judge failed to confine himself to an evaluation of the complaint. Resolution of the disputed facts and the ultimate merits of plaintiff's complaint must await the development of a plenary factual record. Consequently, we conclude that the complaint was sufficient to withstand a motion to dismiss for failure to state a claim on which relief can be granted.
Additionally, plaintiff contended that the motion judge erred in stating in his opinion that claims under paragraph three of the Agreement could only be asserted against Ford World, not the individual defendants. We are satisfied that this claim is without sufficient legal merit to warrant an extensive legal discussion in this opinion. R. 2:11-3(e)(1)(E). We add that we are unable to discern such a cause of action in the complaint. The complaint seeks only to enforce the individual continuing guaranties. It neither refers to paragraph three of the Agreement or seeks to enforce it. To the extent the motion judge's ruling was a reference to a position taken by plaintiff or defendant in the dismissed counterclaim, the dismissal has not been appealed and is therefore not before this court. Moreover, appeals are taken from orders, not opinions. Do-Wop Corp. v. City of Rahway, 168 N.J. 191, 199 (2001)(citations omitted).
Reversed and remanded for further proceedings.