Stonefield Investment Fund III, LLC v. L and J Enterprises 1, LLC ( 2024 )

NOT FOR PUBLICATION WITHOUT THE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-0509-23
STONEFIELD INVESTMENT
FUND III, LLC, SF2 RE1, LLC,
and MAPLE ROCK, LLC,
Plaintiffs-Appellants,
v.
L AND J ENTERPRISES 1,
LLC and LANCE SCHONER,
Defendants-Respondents.
____________________________
Argued September 10, 2024 – Decided September 24, 2024
Before Judges Firko, Bishop-Thompson, and
Augostini.
On appeal from the Superior Court of New Jersey, Law
Division, Ocean County, Docket No. L-1807-19.
Adam D. Greenberg argued the cause for appellants
(Honig & Greenberg, LLC, attorneys; Adam D.
Greenberg, on the briefs).
Michael B. York argued the cause for respondents
(Novins York Jacobus & Dooley, attorneys; Michael B.
York, on the brief).
PER CURIAM
This matter returns to us a second time. In our earlier opinion, Stonefield
Inv. Fund III, LLC v. L and J Enterprises 1, LLC, No. A-2882-21 (App. Div.
June 27, 2023), we reversed the trial court's dismissal of plaintiffs' complaint
and remanded for the court to make appropriate findings of fact and conclusions
of law under Rule 1:7-4(a). We also directed the court to reconsider anew its
dismissal of plaintiffs' New Jersey Consumer Fraud Act (CFA) 1 count. Id. at
19.
We also left it up to the court on remand to determine whether to re-open
the record and permit additional cross-examination of Schoner. Id. at 20. The
record was not re-opened on remand by the court, and the parties did not request
to re-open the record. On October 2, 2023, the court placed its decision on the
record, dismissed plaintiffs' complaint with prejudice, and found the CFA
inapplicable. Plaintiffs now appeal from the October 2, 2023 order of dismissal
issued following our remand.
Specifically, plaintiffs claim that the court erred by: (1) failing to follow
our mandate and make factual findings and conclusions of law, and the factual
1
N.J.S.A. 56:8-1 to -227.
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findings made were contradicted by the testimony; and (2) again concluding the
CFA was inapplicable. Finally, plaintiffs urge that we assert original
jurisdiction and enter judgment for plaintiffs or alternatively, remand the matter
to a different judge.
We decline to exercise original jurisdiction. As to the issues presented,
we affirm.
I.
The details underlying the matter under review are set forth in our prior
opinion and need not be repeated here. Id. at 3-12. In its October 2, 2023
decision placed on the record following remand, the court noted plaintiffs
presented only one witness, Michael Finkelstein, a licensed realtor, who would
buy properties, attend auctions, manage plaintiffs' real estate port folios, inspect
the properties after title was acquired, and assess whether renovations were
needed.
Plaintiffs owned "between 100 and 150 properties," and "[a]bout [twenty]
properties are being rehabbed at any one time." The court stated "the total to be
rented and/or sold . . . was about [fifty][-][fifty]." The court found Finkelstein
used local contractors to perform the renovations based upon referrals he
received from local real estate agents.
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The court explained that Finkelstein came to know Schoner through a
local realtor back in "late 2017." The court found Finkelstein "is extremely
knowledgeable in this area." The court stated the invoices submitted into
evidence were unclear as to whether Schoner was working for Finkelstein or
plaintiffs. According to the court, it was indeterminate whether the invoices
were "actually intended as a contract, or simply as proof" of what the work
would cost, and whether Schoner was a "subcontractor" for Finkelstein, who
was the "general contractor" for plaintiffs. The court emphasized that
Finkelstein was not individually named as a plaintiff in the case.
The court concluded that the evidence "was unclear" as to exactly who
Schoner was working for. In considering a series of checks admitted into
evidence by plaintiffs, the court noted there was no dispute that plaintiffs had
paid money to L and J Enterprises 1, LLC. However, the court found that while
Finkelstein testified defendants did not perform all of the work, and he had to
"hire other people to finish the work," no estimates, documents, photographs, or
other evidence was proffered to support plaintiffs' claim. On cross-examination,
the court highlighted that Finkelstein "offered no documents to prove that he
contracted others to complete the work and no proof of payment to those other
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contractors," but would "estimate" what needed to be done by "just looking at
it."
Moreover, the court stated that Schoner testified that he did the work he
was paid for and "didn't leave any work undone." The court noted that
Finkelstein indicated he had communicated with Schoner via text message but
did not offer any of those text messages into evidence.
The court found Schoner testified there were problems on some of the
jobs, such as "squatters" and stolen material, but Finkelstein "never complained,
or said that he would get someone else to complete the work." The court
concluded Finkelstein and Schoner were both "credible," but the court "had
difficulty believing [Finkelstein] completely," based on his expertise because he
"would [not] allow this to happen this way." The court determined plaintiffs did
not sustain their burden of proof to prove a breach of contract.
In addition, the court found defendants did not violate the CFA. The court
noted the properties being renovated were residential but were not being
improved for Finkelstein's own use but instead he was working for plaintiffs.
The court found Finkelstein and Schoner were "sophisticated businessmen," and
plaintiffs were renovating the properties "for somebody else's use." The court
characterized Finkelstein as a general contractor and Schoner as a subcontractor.
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In analyzing the applicability of the CFA, the court concluded defendants
were doing the work for Finkelstein at his request, he "was running the show,"
he is an "expert," and "not the type of residential owner that the [CFA] is
intended to protect" as opposed to plaintiffs contracting directly with
defendants. Since the court found the "deal" was between Finkelstein and
defendants and not the plaintiffs, the court held plaintiffs were not the "ultimate
consumer of the goods" under the CFA. Under these circumstances, the court
concluded the CFA did not apply. A memorializing order was entered
dismissing the complaint with prejudice. This appeal followed.
II.
We note that factual determinations "made by the trial court sitting in a
non-jury case are subject to a limited and well-established scope of review[.]"
Seidman v. Clifton Sav. Bank, S.L.A., 205 N.J. 150, 169 (2011) (citing In re
Trust Created by Agreement Dated Dec. 20, 1961, ex. rel. Johnson, 194 N.J.
276, 284 (2008)). "[W]e [will] not disturb the factual findings and legal
conclusions of the trial judge unless we are convinced that they are so manifestly
unsupported by or inconsistent with the competent, relevant and reasonably
credible evidence as to offend the interests of justice." Ibid. (quoting In re Trust,
194 N.J. at 284).
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The trial court's decisions on issues of law are, however, subject to plenary
review. See Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J.
366, 378 (1995)). "A trial court's interpretation of the law and the legal
consequences that flow from established facts are not entitled to any special
deference." Ibid. (citations omitted).
A trial judge must obey the mandate of an appellate court. Miah v.
Ahmed, 179 N.J. 511, 528 (2004), whose "instructions to the trial court on
remand are binding on that court." Tomaino v. Burman, 364 N.J. Super. 224,
234 (App. Div. 2003). In fact, "the very essence of the appellate function is to
direct conforming judicial action." Id. at 233.
Rule 1:7-4(a) mandates that "[t]he court shall, by an opinion or
memorandum decision, either written or oral, find the facts and state its
conclusions of law thereon in all actions tried without a jury." The Rule requires
a trial court sitting without a jury to clearly state its factual findings and
"'correlate them with the relevant legal conclusion.'" State v. Locurto, 157 N.J.
463, 470 (1999) (quoting Curtis v. Finneran, 83 N.J. 563, 570 (1980)).
Based on our review of the issues on remand, we affirm for the reasons
provided by the court. The court's decision was based upon substantial credible
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evidence in the record and complied with Rule 1:7-4(a). We add only the
following comments.
Plaintiffs first assert the factual findings made by the court contradicted
the testimony. In particular, plaintiffs argue that the remand court failed to
consider that Schoner: (1) testified the majority of the work was completed for
284-286 Ellison Street but did not complete the contract; (2) testified the work
was completed at 110 Schooner Drive, and he was owed "$7,800.00" for this
project when plaintiffs claimed defendants did no work on this property; (3) he
performed the work at 106 Lawrence Drive, but plaintiffs claimed "[h]e never
showed up" after making two payments of $16,666.66 and $16,666.67; (4) did
not address the 1410 Kay Street property in his testimony, and plaintiffs'
undisputed proofs showed Schoner was paid $4,000.00 for window
replacements, and he never showed up; (5) did not address the 25 Deer Run
Drive North property, but plaintiffs undisputed proofs showed a $21,666.66
payment was made but no work was done; and (6) did not address 10 Forest
Edge Court, but the proofs showed he agreed to a $5,000.00 refund for
uncompleted work.
However, the court specifically credited Schoner's testimony that he did
the work he was paid for, and plaintiffs failed to produce any testimonial or
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documentary evidence to the contrary. Saliently, the court found that the
invoices plaintiffs moved into evidence did not establish a contract was entered
into or were merely proof of what the work would cost. In addition, Schoner
stated he did hundreds of jobs for plaintiffs previously without any issue.
Finkelstein never fired Schoner and never gave him any opportunity to correct
any problems. The court concluded plaintiffs failed to establish their breach of
contract claim.
Failure to perform a contract in accordance with its terms constitutes a
breach of contract. In order to prevail on a breach of contract claim, our
Supreme Court has stated:
[o]ur law imposes on a plaintiff the burden to prove
four elements: first, that "the parties entered into a
contract containing certain terms"; second, that
"plaintiffs did what the contract required them to do";
third, that "defendants did not do what the contract
required them to do," defined as a "breach of the
contract"; and fourth, that "defendants' breach, or
failure to do what the contract required, caused a loss
to the plaintiffs."
[Goldfarb v. Salimine, 245 N.J. 326, 338 (2021) (citing
Globe Motor Co. v. Igdalev, 225 N.J. 469, 482 (2016)
(alterations omitted) (quoting Model Jury Charges
(Civil), 4.10A, "The Contract Claim—Generally"
(approved May 1998)).]
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"A contract is an agreement resulting in an obligation enforceable at law."
Borough of W. Caldwell v. Borough of Caldwell, 26 N.J. 9, 24 (1958). "[T]he
basic features of a contract" [are] "offer, acceptance, consideration, and
performance by both parties." Shelton v. Restaurant.com, Inc., 214 N.J. 419,
439 (2013).
The Goldfarb Court explained that
[t]he traditional remedy for breach of contract is
expectation damages. See Coyle v. Englander's, 199
N.J. Super. 212, 214 (App. Div. 1985) (characterizing
expectation damages, "i.e., loss of the benefit of the
bargain," as the "traditional" form of damages for
breach of contract). The purpose of such compensating
damages "is to put the injured party in as good a
position as if performance had been rendered." Totaro,
Duffy, Cannova & Co., LLC v. Lane, Middleton & Co.,
LLC, 191 N.J. 1, 13 (2007) (ellipsis omitted) (quoting
Donovan v. Bachstadt, 91 N.J. 434, 444 (1982)); see
Restatement (Second) of Contracts: Purposes of
Remedies, § 344(a) (Am. Law Inst. 1981) ("Judicial
remedies under the rules stated in this Restatement
serve to protect one or more of the following interests
of a promisee: (a) his 'expectation interest,' which is
his interest in having the benefit of his [or her] bargain
by being put in as good a position as he [or she] would
have been in had the contract been performed.").
[Goldfarb, 245 N.J. at 339.]
Here, the court concluded Schoner was credible when he testified all of
the work was performed, and Finkelstein never made any complaints. We defer
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to the court's credibility finding. See Seidman, 205 N.J. at 169. Plaintiffs have
the burden to prove breach of contract and show any breach caused measurable
injury of damage.
We are satisfied that the court complied with Rule 1:7-4(a) and made the
requisite findings on plaintiffs' breach of contract claim. The court found there
was insufficient evidence to prove a breach of contract claim. Moreover, the
court found Finkelstein's testimony "credible" but had "difficulty belie ving him
completely." The record supports that determination, and we find no reversible
error, especially because plaintiffs presented no factual or expert testimony on
the issue of damages.
III.
We also reject plaintiffs' argument that the remand court erred in
dismissing the CFA claim. The court found there was insufficient evidence to
demonstrate a CFA violation. We are persuaded plaintiffs' CFA claim was
properly dismissed, albeit for somewhat different reasons than expressed by the
court on remand. First, since plaintiffs' pleading did not meet the heightened
standard required to proceed with fraud-based causes of action, we affirm the
dismissal order.
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In their complaint filed against defendants, plaintiffs alleged fraud and
CFA violations, stating:
COUNT TWO
(Fraud)
59. The above actions and omissions of all [d]efendants
constitute actual fraud, thereby causing damage to
[p]laintiffs.
COUNT FOUR
[CFA] Violations
63. The above acts and omissions of all [d]efendants
constitute violations of the [CFA], thereby causing
damage to [p]laintiffs.
Plaintiffs demanded the following relief in the complaint: compensatory,
punitive, and where applicable, treble damages, counsel fees and costs. In their
answer, defendants generally denied the allegations contained in plaintiffs'
complaint and asserted failure to state a claim and failure to allege statements
with specificity as affirmative defenses.
Under Rule 4:5-2, a plaintiff's claim "shall contain a statement of the facts
on which the claim is based, showing that the pleader is entitled to relief, and a
demand for judgment for the relief to which the pleader claims entitlement."
When a plaintiff alleges fraud, a heightened standard applies to the pleading
under Rule 4:5-8(a): "all allegations of misrepresentation, fraud, mistake,
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breach of trust, willful default or undue influence, particulars of the wrong, with
dates and items, if necessary, shall be stated insofar as practicable. Malice,
intent, knowledge, and other condition of mind of a person may be alleged
generally."
The elements of a common law fraud claim are: (1) a representation or
omission of a material fact; (2) made with knowledge of its falsity; (3) made
with the intention that the representation or omission be relied upon; (4)
reasonable reliance on the representation or omission; and (5) damages.
DepoLink Ct. Reporting & Litig. Support Servs. v. Rochman, 430 N.J. Super.
325, 336 (App. Div. 2013).
In Hoffman v. Hampshire Labs, Inc., 405 N.J. Super. 105, 114-16 (App.
Div. 2009), we affirmed the trial court's order dismissing the plaintiff's
complaint for failure to state a claim under the CFA and common law fraud. In
Hoffman, the plaintiff alleged the defendants' promises in a product
advertisement were false, deceptive, and misleading but did not "plead sufficient
facts which would establish that he . . . detrimentally relied upon [the]
defendants' representations or suffered some monetary loss as a result of such
reliance." Id. at 116.
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Here, plaintiffs did not sufficiently plead each element of common law
fraud in the complaint with the specificity required under the heightened
pleading standard set forth in Rule 4:5-8(a). Plaintiffs merely allege in the
"background and preliminary statement" of their complaint that defendants
entered into "agreements" with them for "home improvement work to be
performed on the various properties"; that defendants failed to complete the
projects; they engaged in "unconscionable commercial practices, deception,
false promises"; and misrepresented and omitted material facts.
Plaintiffs claim defendants failed to include cancellation language, the
toll-free number, and their contractor registration number on the documents.
Plaintiffs also alleged defendants provided no written copies of guarantees or
warranties, start and completion dates, and failed to obtain permits. However,
plaintiffs do not aver in the complaint that they relied to their detriment on these
allegations. Therefore, plaintiffs failed to allege or prove detrimental reliance
that cause damage as required to plead common law fraud.
Second, we similarly conclude the CFA count failed to comport with Rule
4:5-8(a). "To prevail on a CFA claim, a plaintiff must establish three elements:
'(1) unlawful conduct by defendant; (2) an ascertainable loss by plaintiff; and
(3) a causal relationship between the unlawful conduct and the ascertainable
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loss.'" Zaman v. Felton, 219 N.J. 199, 222 (2014) (quoting Bosland v. Warnock
Dodge, Inc., 197 N.J. 543, 557 (2009)). Under the CFA, an unlawful practice is
defined as:
The act, use or employment by any person of any
commercial practice that is unconscionable or abusive,
deception, fraud, false pretense, false promise,
misrepresentation, or the knowing, concealment,
suppression, or omission of any material fact with
intent that others rely upon such concealment,
suppression or omission, in connection with the sale or
advertisement of any merchandise or real estate, or with
the subsequent performance of such person as
aforesaid, whether or not any person has in fact been
misled, deceived or damaged . . . .
[N.J.S.A. 56:8-2.]
In Hoffman, we found that the plaintiff's allegations under the CFA were
"merely statements of a legal conclusion. Plaintiff did not plead specific facts
that would allow a fact-finder to draw that conclusion." Hoffman, 405 N.J.
Super. at 114. Similarly, here plaintiffs assert only conclusory statements and
do not plead the elements of a CFA claim, warranting dismissal under Rule 4:5-
8(a). Plaintiffs' complaint lacks specificity as to what unlawful practice under
the CFA is alleged. Therefore, we affirm dismissal of the CFA claim.
Moreover, plaintiffs' pleaded facts did not even suggest a CFA claim. Because
plaintiffs' claims lacked averment of fraudulent conduct or an unconscionable
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practice by defendants that was prohibited under the CFA, dismissal of the CFA
count was warranted.
Third, we are mindful that "[i]t is well established that the CFA is
applicable to commercial transactions." All the Way Towing, LLC v. Bucks
Cnty. Int'l, Inc., 236 N.J. 431, 443 (2019). Our Supreme Court has clarified,
however, that "context is important" and that not "all business-to-business
transactions automatically fit the intendment of a sale offered to the public."
Ibid. "In business-to-business transactions it is the 'nature of the transaction'
that will determine whether it can fit within the CFA's definition of
'merchandise.'" Id. at 447 (quoting D'Agostino v. Maldonado, 216 N.J. 168, 187
(2013)).
Our Court adopted four considerations "[t]o promote consistency in
assessing the nature of a transaction in a business-to-business setting for
purposes of determining whether the CFA will apply to the merchandise." Ibid.Those four considerations are:
(1) the complexity of the transaction, taking into
account any negotiation, bidding, or request for
proposals process; (2) the identity and sophistication of
the parties, which includes whether the parties received
legal or expert assistance in the development or
execution of the transaction; (3) the nature of the
relationship between the parties and whether there was
any relevant underlying understanding or prior
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transactions between the parties; and . . . (4) the public
availability of the subject merchandise.
[Id. at 447-48.]
Here, the court dismissed plaintiffs' CFA claim as to both defendants. The
court found that the CFA did not apply here because it found Finkelstein and
Schoner were "sophisticated businessmen," and the properties being renovated
were residential but not improved for Finkelstein himself. Moreover, the court
reasoned that it was indeterminate whether the invoices were "intended as a
contract, or simply as proof" of what the work would cost. These findings
support the result here.
Based upon our review of the record, we conclude the court properly
reconsidered its dismissal of plaintiffs' CFA claim anew. We are satisfied the
court did not err in determining the CFA did not govern the parties' relationship
here.
IV.
Finally, we reject plaintiffs' request that we exercise original jurisdiction
under Rule 2:10-5. Resort to original jurisdiction authority is inappropriate
because no controversy remains unresolved. The court made sufficient factual
findings here, which precludes our granting this extraordinary relief.
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To the extent not addressed, plaintiffs' remaining arguments lack
sufficient merit to warrant discussion in our written opinion. R. 2:11-3(e)(1)(E).
Affirmed.
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