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Qugen, Inc v. Anupama Chawla A/K/A Anupam Chawla

December 2, 2011

QUGEN, INC., PLAINTIFF-APPELLANT,
v.
ANUPAMA CHAWLA A/K/A ANUPAM CHAWLA, ACE AMERICA PLUS, L.L.C., JUPMINDER SINGH T/A US DOLLAR PLUS, INC. AND ONE DOLLAR DEPOT A/K/A JUPMINDER SINGH CHAWLA AND SUNNY SINGH, DEFENDANTS-RESPONDENTS.



On appeal from Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-603-08.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued September 27, 2011

Before Judges Reisner, Simonelli and Hayden.

Plaintiff Qugen, Inc. appeals from an April 14, 2010 order dismissing its complaint against defendants Anupama Chawla and Jupminder Singh. Briefly, this is a commercial dispute in which plaintiff obtained summary judgment against corporate defendants Ace America, L.L.C. and U.S. Dollar Plus, L.L.C, and then sought to pierce the corporate veil and impose personal liability on defendants Chawla and Singh. After a bench trial on the veil-piercing issue, Judge Martin E. Kravarik found no basis to hold Chawla and Singh personally liable. Based on our review of the record, we conclude that Judge Kravarik's decision is supported by substantial credible evidence and is consistent with applicable law.*fn1 Accordingly, we affirm.

I

This was the most pertinent evidence. The lawsuit arose from a November 1, 2006 contract between Qugen, an importer of generic over-the-counter medications manufactured in India, and Ace America Plus, L.L.C. (Ace), a corporation formed for the sole purpose of distributing those goods to dollar stores, gas stations and convenience stores (collectively, bargain stores) in the United States. Chawla was the president of Ace. Singh, who lived with Chawla and is the father of her two children, was the president of U.S. Dollar Plus, Inc. (U.S. Dollar), the corporation that signed the Qugen-Ace contract as guarantor.

Ace ordered, received, and paid for the first shipment of merchandise. A dispute arose when Ace failed to pay for the second shipment of merchandise. Ace eventually paid Qugen $70,000 for a portion of a third shipment. After obtaining a judgment for over $300,000 from Ace, Qugen sought to collect the judgment from the individual defendants, claiming that they made material misrepresentations to induce Ace to sign the contract; undercapitalized Ace; commingled their personal funds with those of Ace and used Ace's funds for personal purposes; and fraudulently induced Ace to ship merchandise with false promises of payment.

To be charitable, plaintiff's trial proofs were less than overwhelming. Through no fault of its current counsel, plaintiff's prior attorney had failed to complete discovery. Instead of beginning with testimony from plaintiff's employees, plaintiff first presented defendants as its witnesses and, in essence, conducted discovery during their direct examinations. This time-consuming process elicited considerable information about the fast-food meals and other relatively small expenses defendants charged to Ace's credit card, and extensive testimony about Chawla's unreported income from sources other than Ace. It produced little evidence to support plaintiff's claims.

In their direct testimony, and the cross-examination conducted by their own counsel, defendants gave the following version of events. A representative of Qugen approached Singh with an offer to distribute Indian-made generic products in the United States. Singh, who was then operating a dollar store, was unwilling to enter into an agreement himself or through his corporation, U.S. Dollar. However, he told the Qugen representative that his "wife" Chawla could set up a separate corporation to engage in the distribution. At the time, Chawla was working at a Dunkin Donuts restaurant. Neither Singh nor Chawla made any representations about her assets or business acumen or about the assets that the new corporation, Ace, would have. Qugen insisted that U.S. Dollar guarantee the contract, but did not ask for any financial information about U.S. Dollar, Ace, or either of the defendants. Nor did Qugen seek a personal guarantee from either defendant.

The contract required Ace to provide a $25,000 deposit in escrow against payment for the first shipment of merchandise, plus a post-dated check for the balance owed on the first shipment, and required Qugen to escrow $5000 as a guarantee of prompt delivery of that shipment. The contract did not provide for any other financial security, beyond the guarantee from U.S. Dollar. The contract also contained an integration clause limiting the agreement to the four corners of the written contract. Significantly, the clause provided: "This Agreement contains the entire agreement between the parties . . . and prior or collateral representations, promises or conditions in connection with or in respect to the subject matter hereof that are not incorporated herein are not binding upon either of the parties."

According to defendants, Qugen understood that Ace would take delivery of the goods, sell them to wholesalers or to individual bargain stores in the United States, and pay Qugen out of the proceeds of those sales. Defendants testified that Ace took delivery of the first shipment, sold it with relative ease, and paid Qugen with the proceeds. They testified that Qugen then sent them a second shipment prematurely; this shipment contained defective goods; and they were unable to sell it because their customers had not yet sold the first shipment and did not need to restock. According to Singh, Qugen pleaded with Ace to take the goods anyway, try to sell them, and pay when they sold them.

Both defendants testified that after Qugen's representatives repeatedly pressed them for payment, Chawla agreed to provide Qugen with four checks, three of which were undated, with the agreement that Qugen was not authorized to cash the checks until Ace was able to sell the merchandise and she gave authorization for payment. Defendants insisted that Qugen was well aware that Ace did not have the funds to cover the checks at the time they were written; that is why three of the checks were undated.

Eventually, Ace sold some of the merchandise, and Chawla issued a dated check for about $70,000 to pay for that merchandise.*fn2 After Qugen insisted that it was going to deposit the three undated checks, Chawla arranged to stop payment on them. She insisted that Ace was never able to sell the merchandise for which it had not paid Qugen; that the merchandise was still sitting in a ...

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