Court Opinion

ID: 4994913
Source: CourtListenerOpinion
Date Created: 2021-09-27 15:11:58.611497+00
Date Added: 2024-06-11T08:16:48.056056
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
     internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

                                                         SUPERIOR COURT OF NEW JERSEY
                                                         APPELLATE DIVISION
                                                         DOCKET NO. A-2339-19

NICHOLAS CORCORAN,

           Plaintiff-Respondent,

v.

JAMES BENNETT,

     Defendant-Appellant.
_________________________

                    Argued September 16, 2021 – Decided September 27, 2021

                    Before Judges Haas, Mawla, and Mitterhoff.

                    On appeal from the Superior Court of New Jersey, Law
                    Division, Cape May County, Docket No. L-0501-17.

                    Buneka J. Islam argued the cause for appellant
                    (Hornstine & Vanderslice, LLC, attorneys; Beverly
                    McCall and Buneka J. Islam, on the briefs).

                    Norman W. Briggs argued the cause for respondent
                    (Briggs Law Office, LLC, attorney; Norman W. Briggs,
                    on the brief).

PER CURIAM
      Defendant, James Bennett, appeals from a February 11, 2020 order

granting plaintiff, Nicholas Corcoran's, motion to vacate the warrant of

satisfaction and the stipulation of dismissal. We affirm.

      We discern the following facts from the record. In 2017, plaintiff made

several loans to defendant, the proprietor of a Sea Isle City establishment called

the LaCosta Lounge. This appeal concerns only the last of these loans: a

promissory note executed by defendant on March 6, 2017, promising to repay

plaintiff $150,000, along with $15,000 in interest, on or before July 5, 2017 (the

loan). Defendant failed to make any payments toward this note by the maturity

date. On October 25, 2017, plaintiff sued defendant on the note. Defendant

filed his answer on December 11, 2017.

      On June 25, 2018, Bennett Enterprises, a corporation whose sole

shareholder was defendant, executed a contract to sell the liquor license for the

LaCosta Lounge property for $1,000,000 to a corporation named 42nd Place

Liquor, LLC. 42nd Place Liquor sought to purchase the property and its liquor

license, which were owned by separate entities, to build a hotel on the premises.

In addition to seeking to obtain the liquor license from defendant, 42nd Place

Liquor had also entered into a contract to purchase the LaCosta Lounge real

estate from the owner, To-Glo, Inc. Defendant, however, already held a right of

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                                        2
first refusal to purchase the LaCosta Lounge property from To-Glo in the event

of a sale. 42nd Place Liquor elected to "pay more for the purchase of the [liquor]

license that would go on [defendant's] side in order to avoid any possible

litigation and time loss in pursuing the first right of refusal that was on record."

The liquor license contract arranged for the closing to occur more than a year

later, on September 30, 2019. 1

      Plaintiff filed a motion for partial summary judgment in the amount of

$165,000, which the court granted on August 13, 2018.                 Post-judgment

settlement negotiations ensued. Plaintiff "requested a Financial Statement [from

d]efendant" and in response defendant generated an "unaudited Financial

Statement as of August 20, 2018". . . . (Statement). An accountant's letter

included as part of the Statement noted defendant "is responsible for the

preparation and fair presentation of the financial statement in accordance with

accounting principles generally accepted in the United States . . . ."

1
  The record indicates this did not occur, and that due to the alleged machinations of
defendant, 42nd Liquor ultimately consented to defendant running the LaCosta
Lounge until September 2020. The record sheds no light on what transpired with
the property—or the contract—after that date.
                                                                               A-2339-19
                                          3
      The Statement listed defendant's liabilities as totaling $3,316,556 and his

assets equaling $2,559,500. Defendant included among his assets an interest in

Bennett Enterprises:

            Bennett Enterprises is a Sub-S Corporation.
            [Defendant] is the sole shareholder. The sole asset is a
            liquor license valued at [$]725,000. No goodwill is
            added to the value of this . . . asset since losses have
            been reported for a few years from the operation of a
            restaurant and bar.

      However, the Statement made no reference to the $1,000,000 contract

defendant had entered with 42nd Liquor, nor did it reference the right of first

refusal.

      The parties settled for $125,000, and defendant timely paid.            On

September 6, 2018, plaintiff filed a warrant of satisfaction of judgment and a

stipulation of dismissal.     Plaintiff subsequently learned, defendant had

contracted to sell the liquor license to 42nd Place Liquor for $1,000,000 —

$275,000 more than its valuation in the Statement.

      On April 8, 2019, plaintiff, now represented by different counsel, filed a

motion to set aside the warrant of satisfaction pursuant to R. 4:50-1. Plaintiff

certified he only accepted the sum of $125,000 in satisfaction of the $165,000

judgment because defendant fraudulently misrepresented the value of the liquor

license in the Statement. Plaintiff argued the $275,000 disparity between the

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Statement's listed price and the contracted sale price for the license constituted

fraud "designed to induce [p]laintiff to accept less than the full amount of the

judgment." Defendant averred during oral argument that the difference in the

valuations was because the contract also reflected a $275,000 payment for the

right of first refusal.

      After a two-day trial, the court issued a February 11, 2020 order granting

plaintiff's motion to vacate the warrant of satisfaction and the stipulation of

dismissal.       The      court   found   the   Statement   contained   a   material

misrepresentation. The court determined it did not matter whether the missing

$275,000 related to the value of the liquor license or the Right of First Refusal

because in either case defendant improperly concealed $275,000 in assets when

preparing the Statement. It reasoned plaintiff would "not have accepted the

$125,000 as full and final settlement" had he known defendant stood "to realize

another $275,000 in a year on the sale of the liquor license . . . ." As a result,

the court vacated the warrant of stipulation and ordered plaintiff to return to

defendant the $125,000 previously paid. This appeal followed.

      Defendant raises the following issues on appeal:

             POINT I

             THE COURT ERRED IN DETERMINING THAT
             [DEFENDANT] COMMITTED EQUITABLE

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                                           5
            FRAUD.

                  a. Legal Standard for Review of [Trial]
                  Court's Decision

                  b. Elements of Equitable Fraud at Issue in
                  This Case

                  c. The [Trial] Court Abused Its Discretion
                  in Finding That Plaintiff Reasonably
                  Relied on Defendant's Financial Statement.

            POINT II

            THE [TRIAL] COURT ABUSED ITS DISCRETION
            IN FINDING THERE EXISTED A MATERIAL
            MISREPRESENTATION OF A FACT.

                  a. The [Trial] Court Erred in Finding a
                  Material Misrepresentation Occurred
                  Based on the Financial Statement, which
                  was Based on Opinion.

                  b. The [Trial] Court Erred in Finding that
                  the License Contract with 42nd Place
                  Liquor, LLC Established the Value of the
                  Liquor License.

                  c. The [Trial] Court Erred in Finding that
                  the Right of First Refusal was Inaccurate as
                  it Related to Defendant's Financial Position
                  at the Time it was Given to Plaintiff.

      "The decision granting or denying an application to open a judgment will

be left undisturbed unless it represents a clear abuse of discretion." Hous. Auth.

of Town of Morristown v. Little, 135 N.J. 274, 283 (1994). An abuse of

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discretion "arises when a decision is 'made without a rational explanation,

inexplicably departed from established policies, or rested on an impermissible

basis.'" Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561, 571 (2002) (quoting

Achacoso-Sanchez v. I.N.S., 779 F.2d 1260, 1265 (7th Cir.1985)). This court

"accord[s] no deference to the judge's interpretation of applicable law, which

[it] review[s] de novo." Barlyn v. Dow, 436 N.J. Super. 161, 170 (App. Div.

2014).

      A court may overturn a final judgment or order for "fraud . . .

misrepresentation, or other misconduct of an adverse party . . . ." R. 4:50-1(c).

"In a claim of equitable fraud, a plaintiff must . . . prove: '(1) a material

misrepresentation of a presently existing or past fact; (2) the maker's intent that

the other party rely on it; and (3) detrimental reliance by the other party.'"

Allstate N.J. Ins. Co. v. Lajara, 222 N.J. 129, 148 n.5 (2015) (quoting First Am.

Title Ins. Co. v. Lawson, 177 N.J. 125, 136-37 (2003)). "[A] party claiming

equitable fraud must prove the required elements by clear and convincing

evidence." Daibo v. Kirsch, 316 N.J. Super. 580, 588 (App. Div. 1998).

      Guided by these standards, we find no error in the trial judge's decision.

First, the Statement contains a material omission. The Statement claims Bennett

Enterprises' sole interest was a liquor license valued at $725,000. However, less

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                                        7
than two months earlier, on June 25, 2018, Bennett Enterprises contracted with

42nd Liquor to sell the same liquor license for $1,000,000. Despite defendant's

knowledge of this contract and his right of first refusal, defendant failed to

disclose any of this information in the Statement.

         The price in the liquor license contract cannot credibly be dismissed as

defendant's opinion because defendant was already aware of its actual, higher

value.     "Where a seller withholds accurate financial information about [a]

business . . . it cannot be said that a purchaser relies upon his own investigation

by, in fact, examining falsified records." Walid v. Yolanda for Irene Couture,

Inc., 425 N.J. Super. 171, 184 (App. Div. 2012). Thus, defendant should have

included the $275,000 right of first refusal as a second asset of Bennett

Enterprises, or valued the liquor license at $1,000,000.

         Regarding detrimental reliance, the court in Golden v. Nw. Mut. Life Ins.

Co. noted the matter centered on whether the party "relied upon its own

investigation or to an appreciable degree on the false representation of the [other

party]." 229 N.J. Super. 405, 415 (App. Div. 1988). "[T]he law is settled in this

State that fraudulent misconduct is not excused by the credulity or negligence

of the victim or by the fact that he [or she] might have discovered the fraud by

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                                         8
making his [or her] own prior investigation." Bilotti v. Accurate Forming Corp.,

39 N.J. 184, 205 (1963).

      Here, the record clearly shows plaintiff relied "to an appreciable degree"

on the Statement based on the timeline and the testimony at trial. Golden, 229

N.J. Super. at 415. Plaintiff's original attorney, Larry E. Hardcastle, testified

that the Statement formed "a centerpiece of [his] advice [to plaintiff] . . . about

the defendant's financial condition . . . ." Hardcastle additionally testified that

defendant represented he had various other creditors beyond plaintiff, with

whom defendant "had negotiated deals . . . for far less of a percentage than what

[plaintiff] was seeking . . . ." Therefore, plaintiff materially relied on the

Statement to his detriment in accepting $125,000 instead of the $165,000

awarded to him.

      In sum, the court did not err in finding defendant committed equitable

fraud and ordering rescission of the settlement agreement. To the extent not

addressed, we conclude defendant's remaining arguments lack sufficient merit

to warrant discussion in a written opinion. See R. 2:11-3(e)(1)(E).

      Affirmed.

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