Court Opinion

ID: 4430721
Source: CourtListenerOpinion
Date Created: 2019-08-20 19:46:09.225763+00
Date Added: 2024-06-11T14:51:09.537076
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NOT FOR PUBLICATION WITHOUT THE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-3411-16T3

DAVID MCMULLIN, RENEE
MCMULLIN and RAQUELLE
DAVID, INC.,

        Plaintiffs-Appellants,

v.

ERIC CASABURI, DONALD GRASSO
and VECKK ENTERPRISES, LLC,

     Defendants-Respondents.
________________________________

              Submitted June 4, 2018 – Decided August 3, 2018

              Before Judges Whipple and Rose.

              On appeal from Superior Court of New Jersey,
              Law Division, Monmouth County, Docket No. L-
              2094-16.

              Bathgate Wegener & Wolf, PC, attorneys for
              appellants (Dominic J. Aprile and Ryan S.
              Malc, on the brief).

              Marks & Klein, LLP, attorneys for respondent
              (Justin M. Klein, on the brief).

PER CURIAM

        Plaintiffs David and Renee McMullin, the sole shareholders

of Raquelle David, Inc., appeal from a March 3, 2017 Law Division
order dismissing with prejudice their complaint against defendants

Eric Casaburi, Donald Grasso, and Veckk Enterprises, LLC.1              Having

reviewed   plaintiffs'      arguments   in    light    of   the   record   and

applicable legal principles, we affirm.

     The essential facts from the record follow.              In June 2012,

plaintiffs negotiated with defendants to purchase a yogurt shop

in Shrewsbury under the name "Let's Yo."              On June 18, 2012, the

parties    entered   into    an   Asset      Acquisition    Agreement      (the

Agreement) for plaintiffs to purchase the assets of the business

for $479,000 and defendants assigned the store lease to plaintiffs.

The Agreement contained a "Buyers' Satisfaction" clause, which

stated,

           [Plaintiffs]   acknowledge[]   that   [their]
           accountant or other advisors have had free
           access to [defendants'] books and records.
           Both     [defendants]    and     [plaintiffs]
           acknowledge that the value allocated to the
           particular assets . . . is fair and accurate.
           [Plaintiffs] further acknowledge[] that [they
           have] entered into this agreement based upon
           [their] own evaluations and forecasts and
           [have] not relied upon any representation of
           [defendants] regarding the vitality of the
           [b]usiness.

Additionally, the Agreement contained a clause that reads,

           [Defendants] make[] no representation as to
           the condition of the fixtures and equipment
           sold herein.   [Plaintiffs] may inspect and

1
   Casaburi and Grasso were the agents and principals of Veckk
Enterprises, LLC.

                                    2                                 A-3411-16T3
          test   all   equipment  prior    to   closing.
          [Plaintiffs have] personally reviewed the
          financial records of [defendants] and agree[]
          to take same in its "as is" condition, except
          that   to   the   best  of   its    knowledge,
          [defendants] represent[] that the books of
          [defendants] are true and accurate.

     In   June     2016,   plaintiffs      filed   a    complaint     against

defendants, alleging: (1) fraud in the inducement, (2) negligent

misrepresentation, (3) breach of the covenant of good faith and

fair dealing, (4) violations of the New Jersey Consumer Fraud Act,

(5) civil conspiracy, and (6) aiding and abetting.                Plaintiffs

allege after they began operating, the store did not generate

positive cash flow consistent with the information, documentation

and representations provided to them by defendants.              Plaintiffs

also allege the operation of the store resulted in substantial

losses.

     In August 2016, Grasso filed an answer denying all allegations

in   plaintiffs'       complaint   and     asserting     cross-claims      for

indemnification and contribution from his co-defendants, and a

counterclaim     for   frivolous   litigation.         Shortly   thereafter,

Casaburi and Veckk moved to dismiss plaintiffs' complaint and

plaintiffs moved to dismiss Grasso's counterclaims.

     On November 18, 2016, the court granted defendants' motion,

dismissing plaintiffs' claims under the Consumer Fraud Act and for

conspiracy     with      prejudice,       and   for     fraud,      negligent

                                      3                               A-3411-16T3
misrepresentation, and breach of the covenant of good faith and

fair dealing without prejudice and allowed plaintiffs thirty-five

days to file an amended complaint.        The judge granted plaintiffs'

motion to dismiss the counterclaim under the Frivolous Claims Act

without prejudice.

     In December 2016, plaintiffs moved for reconsideration of the

portion of the order granting defendants' motion to dismiss.

Plaintiffs also filed an amended complaint, asserting: (1) fraud

in the inducement, (2) negligent misrepresentation, (3) breach of

the covenant of good faith and fair dealing, and (4) aiding and

abetting. Casaburi and Veckk again moved to dismiss plaintiffs'

complaint with prejudice.

     On March 3, 2017, the court granted plaintiffs' motion for

reconsideration     regarding     dismissal     of     plaintiff's     civil

conspiracy claims with prejudice, but at the same time, granted

defendants' motion to dismiss all counts of plaintiffs' amended

complaint with prejudice.       Relying on the plain language of the

Buyer Satisfaction clause of the Agreement, the motion judge

determined plaintiffs expressly stated they did not rely on any

misrepresentations made by defendants when deciding whether to

purchase   the   business.      The   signed   Agreement    disclaimed    any

reliance on any financial representations made by defendants,

foreclosing      any    fraudulent        inducement       and   negligent

                                      4                              A-3411-16T3
misrepresentation claims. Moreover, plaintiffs' amended complaint

contained    insufficient       facts    to    support      the    allegations        the

representations were false, defendants knew they were false and

plaintiffs       reasonably     relied    on    the        information      to     their

detriment.       The court found the conclusory allegations did not

rise to the heightened pleadings standards mandated for assertions

of fraud.    This appeal followed.

     We review an order granting a motion to dismiss de novo.

Castello    v.    Wohler,   446   N.J.   Super.       1,    14    (App.    Div.    2016)

(citation omitted).           A court must deny a motion to dismiss a

complaint for failure to state a cause of action if, giving

plaintiffs the benefit of all their allegations and all favorable

inferences, the complaint states a basis for relief.                      R. 4:6-2(e);

see Burg v. State, 147 N.J. Super. 316, 319-20 (App. Div. 1977).

     When examining the legal sufficiency of the facts alleged on

the face of the complaint, Rieder v. State, 221 N.J. Super. 547,

552 (App. Div. 1987), we search the complaint "in depth and with

liberality" to see whether the basis for a cause of action may be

found even in an obscure statement of a claim.                   If so, opportunity

to amend, if necessary, should be given.              Printing Mart-Morristown

v. Sharp Electronics Corp., 116 N.J. 739, 746 (1989).

     At the outset we note, when construing contracts, our Supreme

Court has instructed that clear and unambiguous contracts leave

                                         5                                       A-3411-16T3
"no room for interpretation or construction" and must be enforced

"as written". Kutzin v. Pirnie, 124 N.J. 500, 507 (1991) (citation

omitted).   Clear contractual provisions "must be given effect

without reference to matters outside the contract."        Moreover, "'a

party who enters into a contract in writing, without any fraud or

imposition being practiced upon him, is conclusively presumed to

understand and assert to its terms and legal effect.'"             Rudbart

v. N. Jersey Dist. Water Supply Comm'n, 127 N.J. 344, (N.J. 1992)

(citation omitted).

     Rule 4:5-8(a), requires allegations of fraud be pleaded with

particularity.   See State ex rel. Campagna v. Post Integrations,

Inc., 451 N.J. Super. 276, 278 (App. Div. 2017); see also Nostrame

v. Santiago, 213 N.J. 109, 129 (2013).          Plaintiffs argue they

sufficiently   pled   their   causes   of   action   for   fraud   in    the

inducement and negligent misrepresentation and the trial court

erred in dismissing their amended complaint.         We disagree.

     To state a claim for common law fraud, a plaintiff must allege

facts that, if proven, would establish the following five elements:

"(1) a material misrepresentation of a presently existing or past

fact; (2) knowledge or belief by the defendant of its falsity; (3)

an intention that the other person rely on it; (4) reasonable

reliance thereon by the other person; and (5) resulting damages."

                                   6                                A-3411-16T3
Gennari   v.     Weichert      Co.    Realtors,          148 N.J. 582,   610    (1997)

(citation omitted).

     Plaintiffs        assert    by    concealing          adverse     information       and

documentation that would have disclosed the true nature of the

operations        of     the         store,         defendants         made     material

misrepresentations sufficient to satisfy the first element of

fraud.      Plaintiffs      allege      the       June    4,    2012   Profit   and     Loss

statement provided by defendants represented the operations of the

store during the period January to June 2012 resulting in gross

profits of $164,202.90.               Plaintiffs argue defendants concealed

that the operations of the store during the period January to June

2012 did not generate actual gross profits of $164,202.90 and upon

information and belief had generated less than one-half that

amount.     Searching the complaint "in depth and with liberality"

to see whether the basis for a cause of action may be found even

in an obscure statement of a claim, we agree plaintiffs have

satisfied the first element of a fraud claim.

     Moreover, plaintiffs' minimal assertions defendants knew or

should    have   known    they       would    rely       upon    the   information       and

documentation satisfies the second element of a fraud claim,

requiring      "knowledge       or     belief       by     the    defendant     of      [the

representation's] falsity."             Hoffman v. Hampshire Labs, Inc., 405
N.J. Super. 105, 115 (App. Div. 2009) (citations omitted).                            Under

                                              7                                     A-3411-16T3
Rule   4:5-8,       general    assertions       of   knowledge    on    the    part    of

defendants here are sufficient.             But see Hoffman, 405 N.J. Super.

at   116     (finding    insufficient       a    complaint    which     alleged       the

defendants knew their representations about a product were false,

but lacked "specific facts which would establish that defendants

had such knowledge.").             Plaintiffs here provided little else,

other than conclusory statements, to show specifically defendants

had knowledge of the falsity of the representations made.

       For    the    third     element,     plaintiffs       assert,     "defendants

purposefully and intentionally engaged in the conduct complained

of   above."        Here,     plaintiffs    provide     nothing    to    demonstrate

defendants      acted       with   the    intent     that    plaintiffs       rely     on

misrepresentations and have not established the third element of

a common-law fraud claim.

       The fourth element, reliance, "is an essential element of

common-law fraud."            Byrne v. Weichert Realtors, 290 N.J. Super.
126, 137 (App. Div. 1996) (citation omitted).                     Plaintiffs argue

they "reasonably relied upon the information, documentation and

representations provided to them by [defendants]," and that the

information provided was "material to [plaintiffs'] decision" to

enter into the Agreement with defendants.

       "[T]he buyer of a business is entitled to rely on the seller's

statement concerning [the business's] . . . income."                          Trautwein

                                           8                                    A-3411-16T3
v. Bozzo, 35 N.J. Super. 270, 278 (Ch. Div. 1955), aff'd o.b., 39
N.J. Super. 267 (App. Div. 1956).            Here, plaintiffs assert they

relied upon defendants' statements about the store's income in

deciding to buy the business, however the Agreement contains two

specific   clauses     that   defeat   such    assertions.         The   Buyers'

Satisfaction    clause    provides     plaintiffs    had    free    access      to

defendants' books and records, and plaintiffs did not rely on any

representation    of    defendants     regarding    the    vitality      of   the

business   in    making       their    decision.           Furthermore,       the

"Miscellaneous" section contains an "as is" clause confirming

plaintiffs had the opportunity to personally review the financial

records of defendants and agreed to take the business in its 'as

is' condition.

     Plaintiffs assert they expected the equipment in the store

to be "turn-key" and fully functional. However, the "as is" clause

states defendants made no "representation as to the condition of

the fixtures and equipment" and plaintiffs were free to "inspect

and test all equipment prior to closing."

     Moreover, plaintiffs' complaint did not sufficiently plead

the final element of fraud, requiring provable resulting damages.

There must be a demonstrable causal nexus between the alleged

common-law fraud and the claimed harm.          Borbonus v. Daoud, 34 N.J.

Super. 54, 60-61 (Ch. Div. 1955).          In addition, the damages cannot

                                       9                                 A-3411-16T3
be speculative.    See Finderne Mgmt. Co., Inc. v. Barrett, 402 N.J.

Super. 546, 574 (App. Div. 2008) (noting that it is "essential"

that damages arising out of fraud be proven with "sufficient

certainty") (citing Gardner v. Rosecliff Realty Co., 41 N.J. Super.
1, 11 (App. Div. 1956)).

     Notwithstanding          plaintiffs'      assertion   the        conduct       of

defendants caused them "substantial losses," they make no specific

claim for damages. They generally aver they "have been irreparably

harmed, have incurred, and will in the future incur, substantial

monetary and other losses." As such, on the face of the complaint,

plaintiffs have not satisfied the fifth element of their fraud

claim.

     For   the    same   reasons,       plaintiffs'     claim    for    negligent

misrepresentation also fails.                Negligent misrepresentation is

"[a]n incorrect statement, negligently made and justifiably relied

upon," which "may be the basis for recovery of damages for economic

loss or injury sustained as a consequence of that reliance."                        H.

Rosenblum, Inc. v. Adler, 93 N.J. 324, 334 (1983) (citing Pabon

v. Hackensack Auto Sales, Inc., 63 N.J. Super. 476 (App. Div.

1960)).

     Plaintiffs have not shown either justifiable reliance or

damages.    Kaufman      v.    I-Stat   Corp.,    165 N.J. 94,    109    (2000)

(citation omitted).       ("The element of reliance is the same for

                                        10                                   A-3411-16T3
fraud    and   negligent   misrepresentation.")           Plaintiffs     made    no

allegations adequate to suggest defendants acted negligently.                   The

bare    assertions,   without   more,      that    the    defendant's    conduct

constitutes negligent misrepresentation and nondisclosure, are

insufficient.     For these reasons, the trial court did not err in

dismissing      plaintiffs'     claims       for    fraud     and      negligent

misrepresentation.

       Plaintiffs assert the motion judge erred dismissing their

claim against defendants for allegedly breaching the covenant of

good faith and fair dealing.         Under New Jersey law, "[a] covenant

of good faith and fair dealing is implied in every contract[.]"

Wilson v. Amerada Hess Corp., 168 N.J. 236, 244 (2001) (citing

Sons of Thunder, Inc. v. Borden, Inc., 148 N.J. 396, 420 (1997)).

This means "neither party shall do anything which will have the

effect of destroying or injuring the right of the other party to

receive the fruits of the contract[.]"             Sons of Thunder, 148 N.J.

at 420 (citing Palisades Properties, Inc. v. Brunetti, 44 N.J.
117, 130 (1965)).

       While "the implied covenant of good faith and fair dealing

cannot    override    an   express    term   in    a     contract,   a   party's

performance under a contract may breach that implied covenant even

though that performance does not violate a pertinent express term."

Wade v. Kessler Inst., 172 N.J. 327, 341 (2002) (citing Wilson,

                                      11                                 A-3411-16T3
168 N.J. at 244).      Hence, the question is not whether a party acts

in bad faith simply by terminating a contract, but whether the

party terminated a contract in bad faith and therefore breached

the covenant.

      Here,   plaintiffs    allege   defendants       acted    in     bad     faith

negotiating the contract itself, and therefore there was a breach

of   the   covenant.     Reading   the    complaint   "in     depth    and      with

liberality" to see whether the basis for a cause of action may be

found even in an obscure statement of a claim, the implied covenant

of good faith and fair dealing is not applicable.

            [T]he application of the implied covenant of
            good faith and fair dealing has addressed
            three distinct type of situations: (1) when
            the contract does not provide a term necessary
            to fulfill the parties' expectations; (2) when
            bad faith served as a pretext for the exercise
            of a contractual right to terminate; and (3)
            when the contract expressly provides a party
            with discretion regarding its performance.

            [Seidenberg v. Summit Bank, 348 N.J. Super.
243, 260 (App. Div. 2002) (internal citations
            omitted).]

      Here, there are no missing terms alleged, and there were no

discretionary powers remaining in the contract or termination by

either party.     As such, plaintiffs have presented no cognizable

claim defendants breached the implied covenant of good faith and

fair dealing.

                                     12                                     A-3411-16T3
     Finally,   plaintiffs'    claim   the   trial    court   erred    in

dismissing their claim against defendants for civil conspiracy and

aiding and abetting.   A civil conspiracy is "a combination of two

or more persons acting in concert to commit an unlawful act, . .

. the principal element of which is an agreement between the

parties to inflict a wrong against or injury upon another, and an

overt act that results in damage."     Banco Popular N. Am. v. Gandi,

184 N.J. 161, 177 (2005) (citing Morgan v. Union County Bd. of

Chosen Freeholders, 268 N.J. Super. 337, 364 (App. Div. 1993)).

In order for there to be a civil conspiracy to commit fraud, there

must have been an underlying unlawful act.           See Malaker Corp.

Stockholders Protective Comm. v. First Jersey Nat'l Bank, 163 N.J.

Super. 463, 491 (App. Div. 1978) (finding that "civil liability

cannot be imposed for an unexecuted conspiracy" because "[w]here

the conspiracy fails of its purpose, damage flowing therefrom

would normally be absent.").

     Liability for aiding and abetting "is found in cases where

one party 'knows that the other's conduct constitutes a breach of

duty and gives substantial assistance or encouragement to the

other so to conduct himself.'"    Qwest Commc'ns Intern., Inc., 387
N.J. Super. at 481 (quoting Judson v. Peoples Bank Trust & Co.,

25 N.J. 17, 29 (1957)).   "[T]he mere common plan, design or even

express agreement is not enough for liability in itself, and there

                                 13                             A-3411-16T3
must   be   acts    of   a   tortious    character       in   carrying    it     into

execution."        Id. at 483 (citing Restatement (Second) of Torts

(1979), 876(b) comment d).         "A claim for aiding and abetting fraud

also requires proof of the underlying tort[.]"                Id. at 484.

       In their claim for aiding and abetting, plaintiffs alleged

no details to prove any defendant had knowledge that another's

"conduct constitutes a breach of duty and [gave] substantial

assistance    or    encouragement."           Further,    fatal   to     both     the

conspiracy and the aiding and abetting claims, as stated above,

plaintiffs     presented      no   legally      cognizable     case    for    fraud,

negligent misrepresentation, or a breach of the implied covenant

of good faith and fair dealing.              As such, there is no underlying

unlawful act, and their claims of conspiracy and aiding and

abetting cannot stand.

       Affirmed.

                                        14                                   A-3411-16T3