Court Opinion

ID: 9728698
Source: CourtListenerOpinion
Date Created: 2023-08-26 14:14:32.976042+00
Date Added: 2024-06-11T13:25:34.521661
License: Public Domain

GAULKIN, P.J.A.D.
(temporarily assigned), concurring in part and dissenting in part.
Part III of the per curiam opinion concludes that, although the project notes are contracts of adhesion, “plaintiffs are bound by the provision for notice by publication because of the unique policy considerations attendant on securities offerings.” Ante at 361, 605 A.2d at 689. But Part IV then gives plaintiffs what the notice provision denies them: interest after the published redemption date. I join in Part III but dissent from the patently contradictory holding of Part IV.
The law and policy considerations recited in Part III persuasively support the conclusion that “the asserted unfairness of the notice provision is not sufficient to justify judicial intrusion.” Ante at 359, 605 A.2d at 688. However, in Part IV, the Court holds that such an intrusion is warranted because of the “overwhelming inequity” in Fidelity’s “perhaps benefiting from the use of the retained money.” Ante at 361, 605 A.2d at 690. That inconsistency is neither overcome nor explained away by the Court’s application — without any invitation or argument of the parties — of labels of constructive trust and “fair dealing.”
*381The Court acknowledges that the “principle [of fair dealing] will not alter the terms of a written agreement.” Ante at 366, 605 A.2d at 692. The same must be said of constructive trust principles: a party to a contract cannot be said to be unjustly enriched by a benefit granted by an otherwise enforceable term of the agreement. The Court says, however, that “allowing plaintiffs some portion of the return on their withheld funds does not in any sense alter the written terms of the agreement between these parties.” Ante at 366, 605 A.2d at 692. Saying that does not make it so. The project notes provide that they “shall cease to bear interest” from the published redemption date, yet the Court awards plaintiffs an “equitable share of any income earned on [their] funds” after the redemption date. Ante at 366, 605 A.2d at 692. The Court has altered or negated the contractual term.
The Court implicitly recognizes that constructive trust or fair dealing principles could not overcome the contractual terms solely on a showing that the stakeholder, Fidelity, earned money on the unredeemed proceeds. Rather, the Court bases its finding of unjust enrichment on the fact that “Fidelity was aware of the noteholders’ lack of notice but acted for only its own customers.” Ante at 366, 605 A.2d at 692. Why that should trigger the cause of action is unexplained. The Court does not suggest that Fidelity’s investment department used inside information or otherwise acted improperly in notifying its customers of the redemption; nor does the Court hold that Fidelity’s trust department had any fiduciary duties beyond those spelled out in the documents. Ante at 366, 605 A.2d at 692. If each department acted appropriately, how is it that their combined conduct was inequitable? Would the unfairness perceived by the Court evaporate if Fidelity had not informed even its own customers of the early redemption?
Simply stated, the Court’s award of interest after the published redemption date cannot be squared with the purported enforcement of the contract. Melding the two holdings is not only logically unsustainable, it creates a new uncertainty about *382the rights and liabilities of parties to securities transactions. Indeed, the Court’s instructions for the remand proceedings, ante at 367-368, 605 A.2d at 692-693, indicate how unclear the obligations of Fidelity and the Commission remain even now. As Part III of the per curiam opinion convincingly demonstrates, avoidance of such uncertainty is one of the “unique policy considerations” justifying enforcement of the contract as written. Those policy considerations should at least restrain the Court from announcing rights and duties the litigants have never argued.
I would reverse the judgment entered in the Appellate Division and reinstate the Law Division judgment.
Judge KEEFE joins in this opinion.