On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-3351-06.
The opinion of the court was delivered by: Kennedy, J.S.C.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Yannotti, Espinosa and Kennedy.
The opinion of the court was delivered by KENNEDY, J.S.C. (temporarily assigned).
Plaintiffs appeal from a judgment entered November 19, 2010, following a bench trial, dismissing their complaint against defendants. They also appeal from a subsequent order of February 4, 2011, denying their motion for reconsideration. On appeal, plaintiffs contend the trial judge erred in determining that plaintiffs failed to prove by clear and convincing evidence that they justifiably relied upon material misrepresentations made by defendants respecting the income of a business plaintiffs purchased, thereby causing them to sustain damages. For reasons set forth hereinafter, we vacate the judgment and remand the matter to the trial court for further proceedings.
The facts that follow are drawn from the record following a bench trial "on the papers." The parties explicitly agreed that the trial judge, having become "familiar with the matter through the summary judgment brief[s] and certifications and the like," would review the parties' pleadings, expert reports, deposition transcripts and "summary judgment papers, which included certifications, statements of material facts [and] many exhibits" and render a decision.
Plaintiffs Anwar and Donna Walid (hereinafter sometimes referred to as the Walids) began looking for a business to purchase in 2005. Donna Walid had worked for a high-end retail clothing store in New York and had studied textile design prior to obtaining a Master's Degree in organization and development. Her husband, Anwar Walid, had a degree in electrical engineering and had worked in research and development of telecommunications systems for Lucent Technologies.
In March 2006, the Walids learned from an internet website that "Irene's Bridal Shop" was being offered for sale and that Jim Hamdan (Hamdan), was the "listing broker." The Walids contacted Hamdan, who provided them with a "fact sheet" he had obtained from the seller and owner of "Irene's Bridal Shop," Yolanda for Irene Couture, Inc. (YIC), the principal of which was Irene Paster. The fact sheet described the business as a general retail store in Chatham, New Jersey, which sold "wedding dresses and related types of clothing." The fact sheet listed "annual sales of $582,500 and 'operating profit' of $289,445. The listing price for the business was $700,000."
Because the Walids intended to finance the purchase, Hamdan referred them to a local bank and forwarded to the bank "information about the business, including tax returns for 2003 and 2004 and financial details for 2005, because the tax return was not yet available for 2005." After some negotiation, the Walids agreed to purchase the business for $700,000 subject to a review by their accountant and attorney and "pro[of] of sales." The Walids retained an attorney but elected not to retain an accountant to review the financial figures because "Mr. Walid would do the review himself." Their counsel explicitly advised them to "retain an accountant, a CPA, or a business evaluator to examine the finances [of] the business" but the Walids, as noted, elected not to do so. Irene Paster subsequently met with Mr. Walid and provided him with bank deposit summaries, tax returns and pending purchase orders. She also provided "profit and loss statements of the business, compilation reports and bank statements for the years 2003 to the first quarter of 2006."*fn1
The financial information provided by Irene Paster showed "gross revenues" as follows:
2003 - $582,913; 2004 - $731,166; 2005 - $588,000; 2006 (first quarter) - $173,607.
After reviewing this financial information, the Walids signed a contract with YIC on April 10, 2006, to purchase the business for $700,000. Paragraph 9A of the contract provided as follows:
Buyer relies upon their [sic] own evaluation, inspection and legal search of the business and does not rely upon any representations that are not ...