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Phil Besler, A/K/A Philip A. Besler v. Richard Coluccio


September 5, 2012


On appeal from Superior Court of New Jersey, Chancery Division, Hunterdon County, Docket No. C-14034-07.

Per curiam.


Argued February 14, 2012

Before Judges A. A. Rodriguez and Fasciale.

Defendant, Richard Coluccio appeals from the September 16, 2010 Chancery Division order denying, with prejudice, his motion to vacate a judgment entered against him. Plaintiff, Phil Besler, also known as Philip A. Besler, cross-appeals from that portion of the same order which denied his cross-motion "for frivolous claim costs against" Coluccio. We affirm the order.

In a certification, Coluccio established the following facts. He had known Besler for over fifteen years. In 2003, Coluccio was employed performing carpentry work for James A. D'Angelo, Jr., a general contractor, building custom houses. In the past, D'Angelo had borrowed money from both Coluccio and Besler to fund small housing developments.

D'Angelo offered Coluccio an opportunity to join a partnership with a land developer. For $6,000,000, the partnership would purchase two parcels of land in Kingwood Township (the Frenchtown/Horseshoe project), develop them, and sell them to Pulte Homes (Pulte) pursuant to an existing contract. Because D'Angelo needed to raise $1,400,000 for his share, he offered to make Coluccio a partner if Coluccio was able to immediately raise the money. Coluccio began to solicit family and friends, including Besler, for investments.

Initially, Besler was not interested because he had previously lost $400,000 in a direct investment with D'Angelo. Eventually, however, Besler agreed to loan Coluccio $800,000 conditioned on receipt of a personal guarantee from Coluccio. In his certification, Coluccio contends that Besler sought only a guarantee, and "[a]t no time did [] Besler request that his loan to me be secured with any real property let alone the property being purchased by the partnership."

D'Angelo prepared some loan documents from prior deals for Coluccio to give Besler. These consisted of: a mortgage note (Note), a guaranty and suretyship agreement (Guaranty), and a mortgage and security agreement (Agreement). On August 14, 2003, Coluccio delivered those documents to Besler and each signed them. Besler gave Coluccio a check in the amount of $700,000 payable to "Rick Coluccio" that was signed over to "Horseshoe Bend LLC," which was then crossed out and replaced by "D'Angelo Construction." A few days later, Besler wired $100,000 to the partnership's bank account.

In a June 2008 deposition, Coluccio testified that the check was indorsed in that manner so that the other partners in the venture would only see the money coming from D'Angelo's company, not from Besler. Coluccio also testified that he understood the documents to reflect that a mortgage would exist against the lands in the Frenchtown/Horseshoe project.

The Note provided for a 720-day term, with an interest rate of thirty percent per annum, and a default rate of twenty-four percent per annum. The term could be reduced to reflect the sale date of the Frenchtown/Horseshoe property to be purchased by the partnership, or upon the sale of another property in Cape May. The Note was secured by the land in Frenchtown (Kingwood Township) to be purchased by the partnership.

The Note also contained a choice of law provision:

Make[r] consents to the personal jurisdiction of the Courts of the Commonwealth of Pennsylvania for Philadelphia and Montgomery Counties, including the jurisdiction of the United States District Court for the Eastern District of Pennsylvania and waives trial by jury in connection with any action or proceeding in connection with this Note.

This Note has been executed and delivered in and shall be governed by and construed under the laws of the Commonwealth of Pennsylvania.

The Guaranty made Coluccio personally obligated for the loan's repayment. It stated that:

Borrower hereby guarantees that Lender is guaranteed to receive a return of $330,000 at the calendar date of the first year which will be held by Borrower until the date of principal and interest payoff. Borrower also guarantees that Lender shall receive an additional $330,000 on the calendar date of the second year of note.

The Guaranty also contained a Confession of Judgment clause which provided that, in the event of default, Coluccio, as guarantor, authorized a confession of judgment to be entered against him in a Pennsylvania court. The Guaranty was to be "construed in accordance with and governed in all respects by the laws of the Commonwealth of Pennsylvania."

Likewise, the Agreement provided that: "This Mortgage shall be construed in accordance with and governed by the laws of the Commonwealth of Pennsylvania."

Besler did not have an attorney review the documents or conduct a title search. Nor did he record the loan documents.

In January 2005, the partnership purchased the subject property for more than $6,000,000, though it was encumbered by a $6,300,000 mortgage held by Wilmington Trust. Once development approvals had been secured, however, the real estate market collapsed and Pulte cancelled the sales contract. Besler demanded repayment pursuant to the terms of the Note and agreements. He never received a payment.

On August 24, 2007, Besler filed a complaint against Coluccio, D'Angelo, D'Angelo Construction, Inc. ("DCI"), Horseshoe Bend, LLC ("Horseshoe"), and Frenchtown Run, LLC ("Frenchtown"). On April 23, 2008, Besler amended his complaint to include JAD Jr., Inc. (JAD). The causes of action were: equitable mortgage, unjust enrichment, joint venture liability, legal fraud, civil conspiracy, estoppel and negligent misrepresentation.

On October 19, 2007, a plaintiff moved for entry of a default against defendants Coluccio, D'Angelo, JAD and DCI.

On July 23, 2008, Judge Harriet Derman held a hearing on defendants Horseshoe and Frenchtown's motion for summary judgment.

Judge Derman granted summary judgment in favor of Horseshoe and Frenchtown, the actual titleholders to the land, finding that there was no "evidence indicating that [Horseshoe or Frenchtown] intended to give [p]laintiff any interest in their respective properties. Tellingly, [Horseshoe and Frenchtown] did not own the properties at issue when the mortgage was executed," and at least one of the main partners was not aware of the mortgage between Besler and Coluccio. Judge Derman also found that "[p]laintiff's own statements indicate that the mortgage was always intended to be a personal loan between him and Coluccio personally." The court relied on a March 29, 2007 email from Besler to Coluccio, in which Besler stated:

The reason I [loaned the money to Coluccio personally] . . . was I already loaned D'Angelo 900k and did not want to loan him any more money. So you [Coluccio] convinced me to loan you the money because you would guarantee it. . . . [m]y understanding of the 800k was a loan to you personally.

In addition to granting summary judgment in favor of Horseshoe and Frenchtown,*fn1 Judge Derman denied Besler's summary judgment motion. She also imposed an equitable lien against JAD and its interests in Horseshoe and Frenchtown, and against Coluccio, D'Angelo, and DCI. Besler requested a proof hearing to preserve his entry of default against Coluccio and the other defaulting defendants.

The proof hearing was held by Judge Derman on December 17, 2008. Besler testified that he understood the documents would create a lien against the partnership property acquired with his loaned funds.

Q. Now, this note, was it just what we call an unsecured note or was there supposed to be a lien against the property?

A. No. It was supposed to be a lien against the property that the money was supposed to be used for.

Documents indicated that JAD, of which D'Angelo was an authorized representative, was a fifty percent owner of both Horseshoe and Frenchtown; D'Angelo was President of Horseshoe.*fn2

Besler testified that as of December 17, 2008, Coluccio owed him $1,436,500 in interest on the $800,000 loan and $78,260.17 in attorneys fees Besler paid, for a total of $2,314,760.17. On December 17, 2008, Judge Derman entered a judgment in that amount against Coluccio, D'Angelo, DCI, and JAD.

Coluccio moved to vacate the default judgment pursuant to Rule 4:50-1, contending it was void for lack of jurisdiction and, alternatively, for Besler's fraud upon the court in obtaining the default. His primary contention was that the forum selection clause in the Note required litigation to be brought in Pennsylvania. Additionally, Coluccio alleged Besler committed fraud on the court when he claimed at the proof hearing that the loan to Coluccio was conditioned on receiving a mortgage against the partnership properties.

On September 16, 2010, Judge Allison E. Accurso heard argument on the motion, and concluded that, in spite of the forum selection clause requiring litigation in Pennsylvania, Judge Derman had personal jurisdiction over the parties when she entered the default judgment. Recognizing that New Jersey case law was limited in discussing permissive versus mandatory forum selection clauses, Judge Accurso relied, in part, on Plum Tree, Inc. v. Stockment, 488 F.2d 754 (3d Cir. 1973).

In Plum Tree, the court noted:

A valid forum-selection agreement may be treated as a waiver by the moving party of its right to assert its own convenience as a factor favoring a transfer from the agreed upon forum or as one element to be considered in weighing the interest of justice. Whether the forum-selection agreement should be treated in either or both of these ways will often depend on its specific terms. In some agreements, one court is assigned exclusive jurisdiction of cases arising under the contract, while in others the parties merely consent to the jurisdiction and venue of a court that might otherwise lack them. [Plum Tree, supra, 488 F.2d at 758 n.7.]

Analyzing the language of the forum selection clause here, Judge Accurso concluded that it presented "a circumstance where the parties have merely consented to the jurisdiction and venue of a court that might otherwise lack them. It is not a direction that suit may only be brought in a particular forum."

Furthermore, Judge Accurso found no evidence that Besler committed fraud at the proof hearing. She observed that Judge Derman had found, as a basis for granting summary judgment in favor of Frenchtown and Horseshoe, that Coluccio did not own the properties. Therefore, he could not "possibly be giving a mortgage against it despite the [mortgage] note . . . and the accompanying guarantee and suretyship agreement." However, the basis for Coluccio's motion was that Besler lied in his testimony at the proof hearing that he understood the documents to be creating a mortgage against the properties. Because Judge Derman decided both the summary judgment and default matters, Judge Accurso declined to find that Judge Derman was unaware of her previous summary judgment grant when entering the default judgment. Simply stated, just because Judge Derman had found Frenchtown and Horseshoe had no liability to Besler because they did not own property at the time the Note and agreements issued, it did not follow that Judge Derman could not make a later finding from the proof hearing that Coluccio was still personally liable pursuant to those same documents for the money Besler loaned him. Judge Derman's finding in that regard did not mean that Besler had lied in his testimony in order to square with her findings on summary judgment. Additionally, Judge Accurso found that Coluccio had not presented a meritorious defense, nor excusable neglect, necessary to reopen the default judgment. The June 2008 deposition of Coluccio made him aware that Besler had sued him, and Coluccio did not argue that he did not receive notices for the default entry and the proof hearing. Finally, Judge Accurso denied Besler's motion for frivolous litigation sanctions, concluding that she did not find the claim to be frivolous.

On appeal, Coluccio contends that Judge Accurso erred by denying his motion to vacate the default judgment and by finding the forum selection clause to be permissive, rather than mandatory. On cross-appeal, Besler challenges the denial of his motion for frivolous litigation sanctions against Coluccio.

We reject these contentions substantially for the reasons expressed by Judge Accurso in her well-reasoned September 16, 2010 oral decision.


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