NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued May 15, 2013.
On appeal from the Superior Court of New Jersey, Law Division, Burlington County, Docket No. L-3020-08.
Nicola G. Suglia argued the cause for appellant (Fleischer, Fleischer & Suglia, attorneys; Ms. Suglia, on the briefs).
Joseph M. Pinto argued the cause for respondent (Polino and Pinto, P.C., attorneys; Mr. Pinto, on the brief).
Before Judges Parrillo, Sabatino and Maven.
Plaintiff Vincent Cocuzza filed a complaint against defendant Domenico Renna alleging fraud, equitable fraud, unjust enrichment, and breach of contract related to the sale of a pizzeria business to plaintiff. Plaintiff sought rescission, compensatory and punitive damages, the return of all monies paid to defendant, and costs, interest, and counsel fees. Defendant's answer included counterclaims for breach of the promissory note, breach of a lease, conversion, and quantum meruit.
After a five-day bench trial, the Honorable Marc M. Baldwin, J.S.C., found that defendant had committed an act of equitable fraud, ordered that the contract be rescinded, and awarded plaintiff $122, 585.60 in damages. On appeal, defendant argues that plaintiff's claim of equitable fraud should fail because plaintiff's reliance on defendant's representations was not reasonable. Defendant also argues that the trial judge incorrectly measured gross revenues at trial, and that the judge improperly awarded rescission damages. We have considered the arguments raised in light of the record and the applicable legal standards. We affirm.
A. In approximately 1994 or 1995, defendant purchased property in Bordentown and opened a pizzeria business. Defendant decided to sell the pizzeria and, on March 3, 2007, placed an advertisement for the sale of the business in an Italian-language newspaper, "America Oggi." The advertisement represented that weekly income from the pizzeria was between $11, 000 and $12, 000.
Plaintiff's son, Alexander Cocuzza, contacted defendant regarding the advertisement, and the two arranged a meeting for roughly two days later at the pizzeria. Plaintiff, his wife, and his sons, Alexander and Christopher, attended the meeting with defendant. At the meeting, defendant told plaintiff that the restaurant generated between $11, 000 and $12, 000 in gross sales per week. Defendant also said that, in certain weeks, the weekly gross would reach $14, 000. Defendant also told plaintiff at this meeting that he was selling the pizzeria because he was ill with cancer and his children were pursuing careers elsewhere.
According to Alexander, he asked defendant at the meeting "if there was a way that we could see how that pizzeria really would have made [$11, 000] to $12, 000 [each week]." Alexander said that defendant replied that they would have to "trust him." Alexander testified that defendant "refused [to show] us records and proof of whatever he was making." Alexander said that defendant also refused their request to allow them to observe the pizzeria's operations for two weeks. Alexander further testified that defendant showed them around the pizzeria, but did not show them the cash register system.
The parties thereafter held a second meeting with plaintiff's family in attendance, at which they discussed the purchase price and other terms. Defendant told plaintiff at that meeting of his intention that plaintiff would buy the business, but that defendant would keep the building and lease it to plaintiff under a five-year lease at $3800 per month. According to Alexander, defendant said at this meeting that his income tax forms substantiating his claim as to the pizzeria's income were "personal" and that he did not wish to produce them. Alexander said that "[w]hen you buy a business, the first thing you want to see [is] how much money you [will be] generating, " and that claims on tax forms were a good indicator of that number. He added that defendant did, however, agree to allow them to observe the pizzeria for a week.
Defendant alleged that at the end of the meeting, plaintiff indicated that he wished to purchase the business, but wanted to observe the pizzeria to ensure that defendant's representations about its income were accurate. According to defendant, plaintiff was not interested in seeing defendant's sales records despite his offer to that effect, and instead said that he had to "be in the place and check the business for myself."
Defendant testified at trial that he would have allowed plaintiff to see computer records from the cash register and a handwritten record book to substantiate his claim that the pizzeria grossed between $11, 000 and $12, 000 each week, but defendant also stated that he would not have shown plaintiff his tax returns because they would not have reflected that the business grossed that amount. Plaintiff said at trial that to understand a business's earnings, he would "at minimum" have to spend a month there observing its operations. In addition, records, including tax records, would have to be examined.
On March 12, 2007, plaintiff issued a check of $5000 to defendant as a deposit for the purchase of the pizzeria. Defendant's attorney confirmed the receipt of the check in a letter to plaintiff dated March 14, 2007.
Plaintiff's two sons thereafter spent one week observing the pizzeria by "stay[ing] morning to night inside the shop[.]" Alexander said that he wanted to observe the pizzeria so that he could confirm defendant's representations as to the pizzeria's gross income. Alexander stated in particular that during this time he watched defendant order supplies and balance the register. He said that he also watched defendant count money from the cash register each day, but he himself did not count the money with defendant. He stated that defendant also accepted credit card payments from customers, but defendant did not show him the receipts.
Alexander testified that defendant showed him the daily gross revenues each day, and that at the end of the week the total was "close" to $11, 000. He added that the week he observed the pizzeria's operations was "one of the busy weeks" in the year. During this time, Alexander also reviewed the pizzeria's bills for items such as supplies, gas, electricity, water, garbage pickup, and insurance, and estimated the operation costs. He testified that defendant did not show him all of the pizzeria's expenses, but indicated that an estimate could nevertheless be made from what was shown.
Alexander testified that defendant refused to allow him to observe for a second week. Defendant again refused to allow plaintiff's family to review his records, allegedly repeating his assertion that they should "trust" him. Alexander said that he and his family were "hoping that the pizzeria was making really that money." He said that they would not be able successfully operate the pizzeria if it was not making the advertised amount. Alexander stated that he did not believe at that time that the pizzeria was generating $12, 000 per week, and he informed plaintiff of this belief. According to Alexander, plaintiff asked defendant for assurances ...