DAVID MCMULLIN VS. ERIC CASABURI (L-2094-16, MONMOUTH COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE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.
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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
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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
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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
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"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."
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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
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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
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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
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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
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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,
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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.
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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
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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.
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