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Microbilt Corporation v. L2c


August 23, 2011


On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-1118-09.

Per curiam.


Submitted November 15, 2010

Before Judges A. A. Rodriguez and Grall.

Microbilt Corporation (Microbilt) appeals from: (a) the November 19, 2009 order dismissing its complaint against L2C, Inc. (L2C) and its president Michael Mondelli (collectively "L2C") for failure to state a cause of action upon which relief could be granted; and (b) the February 19, 2010 order denying reconsideration of the earlier order. We affirm.

MicroBilt provides small and medium-sized business "end users" with a variety of risk management tools, such as financial background information and credit scores on individual consumers. L2C is a company that analyzes data relating to creditworthiness and provides its conclusions, usually in the form of a credit score, to businesses such as MicroBilt.

On November 14, 2008, MicroBilt entered into a written service agreement with L2C to analyze data bearing on the credit worthiness of MicroBilt's applicants. This required L2C to accept electronic applicant credit queries submitted from End Users points of sale, determine which queries are suitable for L2C credit review, perform credit evaluations on suitable applicants, reach conclusions about the credit-worthiness of those applicants and quickly (as defined herein) return those conclusions to [MicroBilt], and [MicroBilt] to its End Users, through its interface with L2C.

The contract specified that "[i]n each case, the conclusion returned by L2C shall be a score, attributes or a combination of the two."

Upon execution of the contract, MicroBilt paid L2C $60,000 implementation fee. Shortly thereafter, MicroBilt claimed L2C was required to provide to it the underlying data used to calculate the credit scores. L2C disagreed but contacted its data provider, eFunds Corporation (eFunds), to seek release of the data. eFunds notified L2C that MicroBilt sued eFunds for breaching a contract to provide MicroBilt with data and eFunds counterclaimed alleging MicroBilt had improperly distributed the data to unauthorized end users. The suit was pending resolution. Therefore, eFunds prohibited L2C from providing its data to MicroBilt.

L2C advised MicroBilt and did not provide the data. MicroBilt notified L2C that it was in breach of contract and demanded a return of the $60,000 implementation fee. L2C refused.

MicroBilt filed suit seeking in count one to have the contract declared "null and void ab initio" based on a claim of "fraud in the inducement." Counts two, three, and four alleged, respectively, breach of contract, breach of the implied covenant of good faith and fair dealing, and "fraud or, alternatively, a material mistake of fact (albeit unilateral)."

In lieu of filing an answer, defendants moved to dismiss the complaint for failure to state a claim upon which relief can be granted, Rule 4:6-2(e), and for lack of subject matter and personal jurisdiction. Microbilt had sued eFunds for breaching a contract to provide Microbilt with data, that eFunds had counterclaimed alleging Microbilt had improperly distributed the data to unauthorized end users, and that the suit was still pending. MicroBilt opposed the motion.

Judge Thomas W. Sumners, Jr., granted the motion dismissing the complaint with prejudice. The judge rejected L2C's jurisdictional arguments, but found that the complaint failed to state a claim upon which relief can be granted.

MicroBilt moved for reconsideration and for leave to amend the complaint.*fn1 Judge Sumners denied the motion.

On appeal, Microbilt contends that the judge erred in dismissing the complaint because its allegations sufficiently set forth a claim upon which relief may be granted. We disagree.

MicroBilt argues that "the [contract was] breached because L2C knew it needed to supply the supporting data" and thus the judge erred by dismissing its breach of contract claim. We disagree.

A motion seeking dismissal for failure to state a claim upon which relief can be granted must be based on the pleadings alone. Banco Popular N. Am. v. Gandi, 184 N.J. 161, 183 (2004). Here, the motion was based upon evidence outside of the pleadings, including certifications, a red-lined version of the contract, and email correspondence. Therefore, we will review it pursuant to the standard of review for summary judgment motions. See R. 4:6-2 ("If . . . matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided by R. 4:46 . . . .").

We use the same summary judgment standard that is used by trial courts. Jolley v. Marquess, 393 N.J. Super. 255, 267 (App. Div. 2007) (citing Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998)). Summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to judgment "as a matter of law." R. 4:46-2(c); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).

The interpretation of a contract is ordinarily a legal question for the court and may be decided on summary judgment unless "there is uncertainty, ambiguity or the need for parol evidence in aid of interpretation." Great Atl. & Pac. Tea Co. v. Checchio, 335 N.J. Super. 495, 502 (App. Div. 2000); see also CSFB 2001-CP-4 Princeton Park Corporate Center, LLC v. SB Rental I, LLC, 410 N.J. Super. 114, 119-20 (App. Div. 2009) ("Cases involving contract interpretations are particularly suited for disposition by summary judgment.").

When the terms of a contract are clear, "it is the function of a court to enforce it as written and not to make a better contract for either of the parties." Kampf v. Franklin Life Ins. Co., 33 N.J. 36, 43 (1960). "Absent ambiguity, the intention of the parties is to be ascertained by the language of the contract." CFSB, supra, 410 N.J. Super. at 119. "If the language is plain and capable of legal construction, the language alone must determine the agreement's force and effect." Ibid.

Here, the specific contractual provision at issue is: "In each case, the conclusion returned by L2C shall be a score, attributes or a combination of the two." Judge Sumners found that "[g]iven its plain and ordinary meaning, [the provision] specifically describes L2C's deliverables. And it seems to be an ideal place to have included any additional deliverables such as underlying data and analysis." Because contract interpretation is an issue of law, this court's review of the matter is de novo. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995); see also Celanese v. Essex County Imp. Auth., 404 N.J. Super. 514, 528 (App. Div. 2009).

We concur with the judge's analysis, who found that there is no ambiguity in the contract regarding exactly what L2C was to deliver to MicroBilt. Looking at the plain language of the contract, SFB, supra, 410 N.J. Super. at 119, L2C was to analyze a variety of data and then provide its "conclusion" to MicroBilt. The contract then clearly defined the "conclusion" as "a score, attributes or a combination of the two." The language of the contract is unequivocal and lacks any ambiguity. It was entered into by sophisticated parties who agreed to the terms and to the addition of an integration clause.

MicroBilt concedes that contract terms are not ambiguous, but argues that the parties also understood that the underlying data was to be provided as well. The record does not support that conclusion, and the parol evidence rule bars introduction of evidence to modify the unambiguous and clear language of a contract. Filmlife Inc. v. Mal "Z" Ena, Inc., 251 N.J. Super. 570, 573 (App. Div. 1991); 6-26 Corbin on Contracts § 573 (1974).

MicroBilt also argues that the judge erred by dismissing its claim of fraud in the inducement. We disagree. The five elements of common-law fraud are: "(1) a material misrepresentation of a presently existing or past fact; (2) knowledge or belief by the defendant of its falsity; (3) an intention that the other person rely on it; (4) reasonable reliance thereon by the other person; and (5) resulting damages." Gennari v. Weichert Co. Realtors, 148 N.J. 582, 610 (1997). Even viewed in the light most favorable to MicroBilt, we find no support for the existence of any of these elements.

MicroBilt next argues that the judge erred by dismissing the breach of contract and implied covenant of good faith and fair dealing claims because L2C breached a "subsequent oral agreement." This argument was not made in the trial court. Thus, we will not address it. Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973)("It is a well-settled principle that our appellate courts will decline to consider questions or issues not properly presented to the trial court when an opportunity for such a presentation is available[.]").

MicroBilt also argues that the judge erred in granting L2C's motion to dismiss with prejudice. We reject this argument.

Although it is true that a motion to dismiss made pursuant to Rule 4:6-2(e) should normally be granted without prejudice, Quarry Hills Dev. Corp. v. N.J. Dep't of Transp., 267 N.J. Super. 1, 8 (App. Div. 1993), as discussed above, this motion was converted to a motion for summary judgment. Therefore, the judge did not err by dismissing the complaint with prejudice.

MicroBilt next argues that the judge erred by denying its motion for leave to amend the complaint. The judge denied the motion to amend the complaint because:

The Court still feels that, if it examines the pleadings that have been amended, or that are sought to be amended, by adding the reformation of contract claim, the quantum meruit claim, the claim for unjust enrichment, the Court feels that it would not be in the interest of justice to allow the amendment, because the Court feels as though the same arguments or decision that the Court applied in reaching its decision on November 19, 2009, would apply in its evaluation of those claims.

"Amendment [of a complaint] remains a matter addressed to the court's sound discretion." Johnson v. Glassman, 401 N.J. Super. 222, 247 (App. Div. 2008). Ordinarily, a motion to amend a complaint should be liberally granted. City Check Cashing v. Nat. State Bank, 244 N.J. Super. 304, 308-09 (App. Div.), certif. den., 122 N.J. 389 (1990).

However, "[w]hile motions for leave to amend pleadings are to be liberally granted, they nonetheless are best left to the sound discretion of the trial court in light of the factual situation existing at the time each motion is made." Fisher v. Yates, 270 N.J. Super. 458, 467 (App. Div. 1994). Significantly, "courts are free to refuse leave to amend when the newly asserted claim is not sustainable as a matter of law. In other words, there is no point to permitting the filing of an amended pleading when a subsequent motion to dismiss must be granted." Mustilli v. Mustilli, 287 N.J. Super. 605, 607 (Ch. Div. 1995).

[Interchange State Bank v. Rinaldi, 303 N.J. Super. 239, 256-57 (App. Div. 1997).]

Here, MicroBilt's proposed amended complaint sought for reformation of contract, rescission of contract, and quantum meruit. Although these are new claims, each is premised on the same arguments and allegations of breach of contract and fraud in the inducement discussed above. In short, MicroBilt still seeks to expand the contract to include terms wholly unexpressed in the actual contract. Therefore, the judge did not abuse his discretion by denying the motion to amend, as the proposed amendments are "not sustainable as a matter of law." Id. at 257.


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