ASCENTIUM CAPITAL LLC VS. A&A MANAGEMENT SYSTEMS LIMITED LIABILITY COMPANY (L-1419-16, BERGEN 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NOT FOR PUBLICATION WITHOUT THE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-3813-17T4
ASCENTIUM CAPITAL LLC,
Plaintiff-Respondent,
v.
A&A MANAGEMENT SYSTEMS
LIMITED LIABILITY COMPANY,
and ALI R. MAZANDARANI,
Defendants/Third-Party
Plaintiffs-Appellants,
and
HELIOS ENERGY GROUP LLC,
and JARED KUNISH,
Third-Party Defendants.
________________________________
Argued May 21, 2019 – Decided October 28, 2019
Before Judges Rothstadt and Gilson.
On appeal from the Superior Court of New Jersey,
Law Division, Bergen County, Docket No. L-1419-16.
Vafa Sarmasti argued the cause for appellants
(Sarmasti PLLC, attorneys; Vafa Sarmasti, on the
briefs).
Robert L. Hornby argued the cause for respondent
(Chiesa Shahinian & Giantomasi PC, attorneys;
Robert L. Hornby and Ryan Patrick O'Connor, on the
brief).
The opinion of the court was delivered by
ROTHSTADT, J.A.D.
Defendants A&A Management Systems (AMS) and its principal, Ali R.
Mazandarani, appeal from the Law Division's January 23, 2018 order granting
plaintiff Ascentium Capital LLC summary judgment and from a March 16,
2018 order denying reconsideration. The parties' dispute arose from
agreements under which plaintiff financed AMS's purchase of a co-generation
system from third-party defendant, Helios Energy Group, LLC (Helios),
through its salesperson, third-party defendant, Jared Kunish. Helios delivered
the equipment for the system but never had it installed.1
In moving for summary judgment, plaintiff relied on a "hell or high
water" clause contained in paragraph four of each of the parties' financing
1
On March 30, 2018, Helios and Kunish were dismissed from the action
without prejudice due to lack of prosecution under Rule 1:13-7.
A-3813-17T4
2
agreements. It stated in bold and conspicuous lettering: "YOUR
OBLIGATION TO MAKE PAYMENTS AND PAY OTHER AMOUNTS
DUE HEREUNDER IS ABSOLUTE AND UNCONDITIONAL AND NOT
SUBJECT TO ABATEMENT, REDUCTION OR SET-OFF FOR ANY
REASON WHATSOEVER. THIS IS A NON-CANCELABLE
AGREEMENT."
In opposition, defendants asserted that that clause did not bar their
claims because Kunish and Helios acted as plaintiff's agent and they
fraudulently failed to install the equipment. Moreover, defendants averred that
despite that provision, they should have been relieved of any obligation to pay
plaintiff because plaintiff imperfectly executed its internal policies to
safeguard against vendor fraud.
In awarding summary judgment to plaintiff, the motion judge rejected
defendants' contentions and enforced the "hell or high water" clause, entered
judgment in plaintiff's favor, and awarded attorneys' fees. On appeal,
defendants contend that the motion judge did not correctly apply the summary
judgment standard, failed to recognize that plaintiff breached its "duty to
protect [its] borrowers from vendor fraud," improperly dismissed their
counterclaim for damages under the New Jersey Consumer Fraud Act (CFA),
A-3813-17T4
3
N.J.S.A. 56:8-1 to -211, and awarded damages and attorneys' fees that were
excessive.
Having considered defendants' arguments in light of the record and the
applicable law, we affirm the two orders under appeal as we conclude
defendants' contentions are without merit, except as to the motion judge's
award of attorneys' fees that we now vacate and remand for reconsideration.
I.
The pertinent facts and the parties' factual contentions taken from the
motion record, are viewed in a light most favorable to defendant, W.J.A. v.
D.A., 210 N.J. 229, 237 (2012), and are summarized as follows. Plaintiff was
in the nationwide business of financing companies' purchases or leasing of
equipment. As part of the total amount that plaintiff provided to its customers,
plaintiff financed up to forty percent for soft costs, such as installation and
consulting fees. Helios was in the business of selling energy systems and
related equipment to its customers so they could generate their own energy and
not be dependent upon public utilities.
A few months before Kunish sold a co-generation system to AMS,
Helios established a relationship with plaintiff. Under plaintiff's internal
ranking system, it approved Helios as a "Tier 3" vendor. As a "Tier 3" vendor,
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4
in any transaction involving a Helios customer, plaintiff would not release
funds to Helios until the equipment was on site and the customer notified
plaintiff that the funding could be released. According to John Scott Linton,
plaintiff's Vice President of Sales, although it was not unusual for some
vendors to act as if plaintiff was the vendor's financing arm, plaintiff had no
control over those representations being made.
Kunish first approached Mazandarani in 2014 and proposed that Helios
install a solar co-generation system for AMS. Kunish represented that AMS
could lease the system for a period of five years through Helios's in-house
leasing company, and that once the lease payments concluded, AMS would
only be responsible for monthly energy costs. Kunish also told AMS that lease
payments would not begin until the system was installed and operational.
Mazandarani agreed to Kunish's proposal and completed Helios's
"Commercial Credit Application" on behalf of AMS, as well as plaintiff's
"Commercial Credit Application." One week later, Mazandarani learned that
Helios and plaintiff had approved AMS's applications.
On October 1, 2014, "Kunish and [plaintiff] presented AMS with"
documents on plaintiff's letterhead for AMS's signature, which plaintiff
required relative to AMS's leasing of the equipment being supplied by Helios.
A-3813-17T4
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These documents consisted of an "Authorization to Perform Verbal
Verification," an "Equipment Finance Agreement No. 2141980" (Agreement
#1), an "Authorization for Pre-Authorized Payments," and a "Delivery and
Acceptance Certificate." Mazandarani signed Agreement #1, the
"Authorization for Pre-Authorized Payments," and the "Delivery and
Acceptance Certificate," and he executed a personal guaranty of Agreement
#1. The next day, AMS paid an initial payment of $2130.86 to plaintiff.
Plaintiff later secured repayment by filing a UCC-1 financing statement,
establishing a lien on the leased equipment.
According to Mazandarani, when he signed Agreement #1 there was no
"Schedule A" attached to it describing the equipment, despite the reference to
the schedule in the upper-right corner of the agreement. "Schedule A" was to
be a copy of Helios's invoice, breaking down the prices for the equipment,
LED lighting, a ten-year maintenance contract, labor for installation, and a fee
for project management and consulting, which totaled $46,169.00. According
to Linton, plaintiff typically did not provide customers with the vendor's
invoice from the "Schedule A" information, as it was up to the vendor to
provide that information to its customer. Before signing the agreement,
Mazandarani did not ask plaintiff or Kunish for the "Schedule A" information.
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On October 3, 2014, plaintiff's representative called Mazandarani to
verify that the system had been "delivered and installed." During the
conversation, plaintiff's representative asked if AMS had "received everything
yet." Mazandarani answered "[y]eah," and authorized plaintiff to "release
payment to the vendor and start [AMS's] agreement." Plaintiff then "paid the
entire amount" owed by AMS to Helios and commenced its electronic
withdrawal of monthly lease payments from AMS's account, as previously
authorized by Mazandarani. However, unbeknownst to plaintiff, although
AMS received all of the equipment from Helios, the system had not been
installed.
In March 2015, Kunish informed Mazandarani that the cost of the
project and equipment went over budget and that additional funds had to be
secured, which would increase AMS's lease payments. Plaintiff provided the
additional funds pursuant to a new set of agreements that Mazandarani signed.
The second set of documents included plaintiff's form "Equipment Finance
Agreement No. 2152350" (Agreement #2) that also referenced a "Schedule A,"
which Mazandarani claimed was not attached at the time of signing. They also
included plaintiff's "Authorization for Pre-Authorized Payments" form and
A-3813-17T4
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"Delivery and Acceptance Certificate." In addition, Mazandarani signed a
personal guaranty of Agreement #2.
The "Schedule A," which was intended to accompany Agreement #2
listed miscellaneous equipment, including a generator, two heat exchangers, a
UPS battery, backup systems, and installation costs, totaling $8400.00. In
connection with Agreement #2, AMS paid an initial payment of $567.20.
Plaintiff filed another UCC-1 financing statement concerning the equipment
listed in Agreement #2. However, Mazandarani claims AMS never received
the equipment listed.
On March 26, 2015, plaintiff's representative called Mazandarani to
verify that the equipment subject to Agreement #2 had been "delivered and
installed," and to obtain his authorization for the release of funding to Helios.
On that call, Mazandarani confirmed that he had "received everything from the
vendor" and that "everything . . . is completed." Plaintiff's representative then
asked Mazandarani if he knew "the completion date," to which Mazandarani
responded, "in a few days, hopefully." The representative evidently misheard
him and asked, "[y]ou said a few days ago?" Mazandarani responded
affirmatively. Based on that authorization, plaintiff commenced withdrawals
from the AMS account, as provided for in the signed documents.
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In October 2015, although Helios had still not completed installation of
the co-generation system, Mazandarani realized that plaintiff had been
withdrawing lease payments from an AMS bank account that he claimed was
not monitored regularly. AMS stopped the withdrawals and "demanded the
return of the money" taken based on its understanding that the lease payments
were not to begin until the system was operational.
After Mazandarani stopped plaintiff's automatic withdrawals, AMS
ceased making payments and plaintiff declared AMS to be in default under the
two agreements. Plaintiff demanded possession of its collateral but AMS
refused to relinquish it to plaintiff.2 Plaintiff then demanded "the accelerated
balance, plus interest, expenses and late charges" under Agreement #1 for a
total of $43,942.07, and "the accelerated balance, plus interest, expenses and
late charges" under Agreement #2 for a total of $9246.93. 3 Defendants did not
make any payments in response to plaintiff's demands.
2
Although AMS later offered to relinquish the equipment, plaintiff was not
seeking recovery of the equipment because it believed it had no value.
3
Due to AMS's default and the default of AMS's neighbor on a similar
transaction involving Helios, plaintiff terminated its relationship with Helios.
A-3813-17T4
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Plaintiff filed its complaint in 2016 seeking compensatory damages in
the amount of $53,189.00, title and possession of the equipment, and attorneys'
fees and costs. AMS and Mazandarani filed an answer, counterclaim, and a
third-party complaint against Helios and Kunish, sought a declaration that the
two agreements with plaintiff were "void and/or unenforceable," and
demanded damages under the CFA, and for conversion, unjust enrichment, and
negligence. Plaintiff filed an answer to the counterclaims and a week later
filed a notice of motion for summary judgment. A Law Division judge denied
the motion on September 30, 2016, because it was premature as discovery had
not been commenced.
After completion of discovery, plaintiff filed a second motion for
summary judgment on November 16, 2017. Oral argument was held on
January 11, 2018, before a different judge.
In support of its motion, plaintiff argued that defendants were parties to
a fully integrated agreement that plaintiff had performed under the agreement
by providing the funding to Helios, and therefore, plaintiff was entitled to
summary judgment for defendants' default and breach of the contract. Plaintiff
also argued that the absence of "Schedule A" when Mazandarani signed the
agreements was not material, as the agreements were loans and the amounts
A-3813-17T4
10
due on the loans were listed on the face of the documents. Plaintiff asserted
that it was entitled to counsel fees under paragraph nine of both agreements
and its attorneys included copies of their bills to plaintiff in support of its
application for an award of fees and costs.
Defendants argued that the "hell or high water" clauses in the
agreements could not constitute an absolute defense to fraud in the
inducement, and that plaintiff acquiesced to Helios's and Kunish's
representations that plaintiff was a part of Helios. Defendants contended that
"soft costs" should not be awarded because plaintiff's internal policy
disallowed it. Defendants also argued that plaintiff's failure to include
"Schedule A" in either of the agreements constituted fraud. Defendants did not
raise any objection to plaintiff's application for counsel fees.
In his January 23, 2018 order, the motion judge granted summary
judgment in favor of plaintiff and awarded counsel fees. Attached to the order
was a rider with eleven bullet points explaining why he granted plaintiff the
relief it was seeking. Among the reasons stated were that defendants presented
no evidence that there was "any relationship between Kunish [or] Helios and
[p]laintiff," that the two agreements specifically disclaimed any principal-
agent relationship between plaintiff and any other party, defendants and
A-3813-17T4
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plaintiff never had any direct interactions, and any fraud or misrepresentation
was attributable solely to Kunish or Helios.
The motion judge also found that defendants had knowledge of "what
equipment [they were] to receive," as a result of their "communications with
Kunish leading up to [the a]greements" and that the absence of "Schedule A"
was not material. He also found that AMS "ratified the [a]greements" by
allowing monthly payments to be withdrawn from its bank account. The judge
ruled that the "hell or high water" clauses were enforceable, regardless of
whether the agreements were characterized as leases or loans. He also found
that plaintiff had "no legal obligation" to protect defendants from fraud
irrespective of their internal "fraud prevention guidelines." Finally, the judge
awarded plaintiff attorneys' fees as provided for in the two agreements.
Defendants filed a motion for reconsideration on February 12, 2018.
The judge denied the motion on March 16, 2018, after concluding defendants
"raise[d] issues already argued" and that the parties' agreements did not limit
defendants' obligation to only include "the 'hard' elements of the transaction."
This appeal followed.
A-3813-17T4
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II.
We review a grant of summary judgment de novo, using the same
standard that governed the motion court's decision. RSI Bank v. Providence
Mut. Fire Ins. Co., 234 N.J. 459, 472 (2018); see also Davis v. Brickman
Landscaping, Ltd., 219 N.J. 395, 405 (2014). Under that standard, summary
judgment will be granted when "the competent evidential materials submitted
by the parties," viewed "in the light most favorable to" the non-moving party,
show that there are no "genuine issues of material fact" and that "the moving
party is entitled to summary judgment as a matter of law." Grande v. Saint
Clare's Health Sys., 230 N.J. 1, 23-24 (2017) (quoting Bhagat v. Bhagat, 217
N.J. 22, 38 (2014)); accord R. 4:46-2(c). "An issue of material fact is 'genuine
only if, considering the burden of persuasion at trial, the evidence submitted
by the parties on the motion, together with all legitimate inferences the refrom
favoring the non-moving party, would require submission of the issue to the
trier of fact.'" Grande, 230 N.J. at 24 (quoting Bhagat, 217 N.J. at 38). We
owe "no special deference" to the motion court's legal analysis or its
interpretation of a statute. RSI Bank, 234 N.J. at 472; see also Hitesman v.
Bridgeway, Inc., 218 N.J. 8, 26 (2014).
A-3813-17T4
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III.
We begin our de novo review by considering defendants' contention that
the motion judge's limited findings of fact and conclusions of law—his eleven
bullet points—demonstrated that he applied the wrong standard by not drawing
all legitimate inferences in favor of defendants as the non-moving parties. We
agree that the motion judge's statement of reasons is an imperfect example of
what is required under Rule 1:7-4 because "[n]aked conclusions do not satisfy
the purpose of [the Rule]. Rather, the trial court must state clearly its factual
findings and correlate them with the relevant legal conclusions." Curtis v.
Finneran, 83 N.J. 563, 570 (1980), see also Gnall v. Gnall, 222 N.J. 414, 428
(2015). However, because appeals are taken from judgments and not "reasons
given for the ultimate conclusion," Do-Wop Corp. v. City of Rahway, 168 N.J.
191, 199 (2001), and because our review is de novo, we are not persuaded that
either a remand or reversal is warranted. Ellison v. Evergreen Cemetery, 266
N.J. Super. 74, 78 (App. Div. 1993) ("[A]n order or judgment will be affirmed
on appeal if it is correct, even though the judge gave the wrong reasons for
it."). Although we reach the same conclusion as the motion judge in response
to plaintiff's motion, except as to an award of counsel fees and costs, we do so
for the reasons expressed below.
A-3813-17T4
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A.
We turn first to defendants' contention that the motion judge incorrectly
determined in his first three bullet points that there was no agency relationship
between plaintiff and Kunish or Helios, despite the plain language of the two
agreements. Moreover, defendants state that if there was no agency
relationship, the judge incorrectly concluded that plaintiff was entitled to
payment as it allowed Kunish and Helios to hold themselves out as plaintiff's
partner. According to defendants, plaintiff should have been estopped from
denying this relationship and from recovering against defendants. We find no
merit to these arguments.
Agency that is not express or implied can be established through
evidence of "apparent authority" to act on behalf of another. See Sears Mortg.
Corp. v. Rose, 134 N.J. 326, 343-44 (1993). However, it only "arises when a
principal 'acts in such a manner as to convey the impression to a third party
that the agent has certain power which he may or not possess.'" Lobiondo v.
O'Callaghan, 357 N.J. Super 488, 497 (App. Div. 2003) (quoting Rodriguez v.
Hudson Cty. Collision Co., 296 N.J. Super. 212, 220 (App. Div. 1997)).
"Liability will be imposed upon the principal . . . where the actions of a
principal have misled a third party into believing that a relationship of
A-3813-17T4
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authority existed." Ibid. (emphasis added) (quoting Rodriguez, 296 N.J.
Super. at 221).
The question is "whether the principal has by [its] voluntary act placed
the agent in such a situation that a person of ordinary prudence, conversant
with business usages and the nature of the particular business, is justified in
presuming that such agent has authority to perform the particular act in
question . . . ." Ibid. (quoting Legge, Indus. v. Kushner Hebrew Acad., 333
N.J. Super. 537, 560 (App. Div. 2000)). "[A] court must examine the totality
of the circumstances to determine whether an agency relationship existed even
though the principal did not have direct control over the agent." AMB Prop.,
LP v. Penn Am. Ins. Co., 418 N.J. Super. 441, 454 (App. Div. 2011) (quoting
Sears Mortg. Corp, 134 N.J. at 338).
A party relying on the apparent authority of an agent must establish:
(1) that the appearance of authority has been created
by the conduct of the alleged principal and it cannot
be established alone and solely by proof of [conduct
by] the supposed agent; (2) that a third-party has
relied on the agent's apparent authority to act for a
principal; and (3) that the reliance was reasonable
under the circumstances.
[Ibid. (alteration in original) (quoting Mercer v.
Weyerhaeuser Co., 324 N.J. Super. 290, 318 (App.
Div. 1999)).]
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In this case, defendants failed to establish the first factor because they
did not identify any voluntary conduct by plaintiff that would have given the
impression that Kunish or Helios was acting on its behalf. Although plaintiff
was aware that some vendors chose to present plaintiff as their "financing
arm," there was no evidence that plaintiff had any control over this behavior.
Additionally, the representations were belied by all documents provided to
defendants that identified plaintiff as a separate entity, including the two
agreements that clearly stated in paragraph five in bold and conspicuous
lettering: "NEITHER THE SUPPLIER NOR ANY OTHER PARTY IS
SECURED PARTY'S AGENT." For that reason, defendants also cannot
establish the third factor that their belief Kunish or Helios acted on behalf of
plaintiff was reasonable.4
Defendants' unreasonable belief that there was an agency relationship
also defeats their claim that plaintiff should be estopped from denying that
Kunish or Helios was its agent. Agency by estoppel, as argued by defendants,
is different than apparent authority. See Estate of Cordero ex rel. Cordero v.
4
Defendants' reliance on a no-longer-extant Helios website, which listed
plaintiff as an "Investment Partner," is unavailing. The website also listed as
investment partners, other well-known financial companies such as Goldman
Sachs and Morgan Stanley. It would be unreasonable for defendants to believe
that those companies were also part of the "financing arm" of Helios.
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Christ Hosp., 403 N.J. Super. 306, 315 n.3 (App. Div. 2008). See also Atl.
Guar. & Title Ins. Co. v. McDevitt, 105 N.J. Eq. 570, 571-72 (Ch. 1930)
(holding that "where one of two innocent [parties] must suffer" from fraud of a
third-party, loss should be sustained by the one whose conduct made the fraud
possible). Under the theory of estoppel, an otherwise innocent party can be
held liable for another's actions if the injured party "make[s] a detrimental
change in position because the transaction is believed to be on the person's
account." Restatement (Third) of Agency § 2.05 (Am. Law. Inst. 2006).
Liability will be imposed only "if (1) the [otherwise innocent] person
intentionally or carelessly caused such belief, or (2) having notice of such
belief and that it might induce others to change their positions, the person did
not take reasonable steps to notify them of the facts." Ibid.
The doctrine applies "when the person against whom estoppel is asserted
has made no manifestation that an actor has authority as an agent," usually due
to a "failure to use reasonable care, either to prevent circumstances that
foreseeably led to the belief, or to correct the belief once on notice of it." Id.
at cmt. c. "The principal's failure to use care enables the agent, or an actor
who purports to be an agent, to misrepresent the agent's authority or to
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masquerade as an agent." Id. at cmt. d. "If the third party's [belief] is
unreasonable," however, that "party should not recover." Ibid.
Applying that doctrine here, while plaintiff was aware that some vendors
made representations similar to defendants and did not attempt to prevent such
behavior, for the reason already discussed, it was not reasonable for defendants
to rely upon any representation made by Kunish or Helios that contradicted the
documents that defendants signed and delivered to plaintiff.
B.
Next, we address defendants' challenge to the motion judge's finding in
his fifth bullet point that AMS was aware of the equipment it was to receive.
According to defendants, that finding was incorrect and in any event, AMS
bargained for a co-generation system from Helios and not just the equipment
that was delivered.
We conclude that even if the judge was wrong, defendants' contention in
this regard did not establish a material issue of fact. While AMS did contract
for a system, it is undisputed that plaintiff only made payment to Helios once it
received verbal verification that the equipment was "delivered and installed."
Defendants were in the best position to make that determination and provided
verification in accordance with its agreement with plaintiff. Plaintiff was not
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under any obligation beyond waiting for defendants' verification before
releasing funds to Helios.
C.
Defendants next challenge the motion judge's sixth bullet point, finding
that defendants ratified their "[a]greements with [p]laintiff." Defendants
concede that they authorized the payments to be made in October 2014, but
were only notified "as of March[] 2015 . . . that the [co-generation] system
would work." Under these circumstances, we conclude defendants' contention
is meritless.
Other than their arguments about an agency relationship between
plaintiff and Kunish or Helios, defendants offer no legal support for their
argument that the discovery of that fraud somehow rescinded the ratification of
their agreements with plaintiff through Mazandarani verifying "delivery and
installation" of the system and AMS allowing payments to be made from its
account. When a party to a contract is confronted with knowledge of fraud, "if
by his conduct he affirms the contract, he cannot be heard to say that he did
not 'voluntarily' or 'intentionally' relinquish his right to call off the deal."
Merchs. Indem. Corp. v. Eggleston, 37 N.J. 114, 131 (1962) (quoting
Massachusetts Accident Co. v. Stone, 127 N.J. Eq. 97, 100 (1940)).
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Defendants knew the equipment was not installed and failed to take any action.
To the extent defendants had any right to "call off the deal," they took no
action for a prolonged period thereby giving up that right.
D.
We turn our attention now to defendants' argument about the motion
judge's "penultimate point," that plaintiff was under no duty to protect
defendants from Kunish's or Helios's fraudulent conduct, and that if plaintiff
followed its own internal guidelines completely, it might have prevented
defendants' loss. They argue that the "hell or high water" provisions in their
agreements should not be enforced because plaintiff voluntarily assumed a
duty to protect defendants through issuing internal security policies.
Defendants concede there is no legal support for their position and argue that
the "[r]esolution of this first-impression issue should have awaited the creation
of a complete and nuanced record at a plenary trial."
In support of their argument, defendants rely upon Litton's deposition
testimony that plaintiff's internal procedures were designed to protect plaintiff
and its customers. Notably, Litton explained that plaintiff's policies were to
insure "first and foremost" that plaintiff was protected and that it was not
entering into transactions that would "blow up in [its] face" by "accepting
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deals that are fraudulent [and] could potentially . . . cause a customer to not
want to pay us."
We conclude that Litton's testimony did not establish any factual issues
that prevented summary judgment from being awarded, as it did not establish
plaintiff was negligent. Plaintiff neither owed nor assumed any legal duty to
protect defendants from Kunish's or Helios's actions.
"To recover under a negligence theory, it is paramount that a defendant
first owe the plaintiff a duty." Kernan v. One Wash. Park Urban Renewal
Assocs., 154 N.J. 437, 445 (1998); see also Globe Motor Car v. First Fidelity,
273 N.J. Super. 388, 393 (Law Div. 1993) ("Generally, to establish a
negligence claim there must be a finding that the defendant owed some duty to
the party complaining and a breach of that duty."). The question of whether
one party owes a duty to another is a question of law that has "traditionally
been the responsibility of the courts." Hopkins v. Fox & Lazo Realtors, 132
N.J. 426, 439 (1993) (citing Kelly v. Gwinnell, 96 N.J. 538, 552 (1984)).
Whether a person owes a duty of reasonable care
toward another turns on whether the imposition of
such a duty satisfies an abiding sense of basic fairness
under all of the circumstances in light of
considerations of public policy. That inquiry involves
identifying, weighing, and balancing several factors --
the relationship of the parties, the nature of the
attendant risk, the opportunity and ability to exercise
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care, and the public interest in the proposed solution.
The analysis is both very fact-specific and principled;
it must lead to solutions that properly and fairly
resolve the specific case and generate intelligible and
sensible rules to govern future conduct.
[Davis v. Devereux Found., 209 N.J. 269, 293 (2012)
(quoting Hopkins, 132 N.J. at 439).]
The relationship between defendants and plaintiff as debtor and creditor
did not give rise to any duty being owed by plaintiff to defendant. We have
recognized that the interests of the parties on the opposite side of a loan
transaction are inherently adversarial. United Jersey Bank v. Kensey, 306 N.J.
Super. 540, 553 (App. Div. 1997). While the lender wishes to obtain the
greatest security and the highest interest rate, the borrower seeks to obtain the
greatest amount of money at the lowest cost. See ibid. "[I]t would be
anomalous to require a lender to act as a fiduciary for interests on the opposite
side of the negotiating table because their respective positions are essentially
adversarial." Ibid. (citations omitted) (holding that the plaintiff had no duty to
disclose to defendant appraisals, valuing assets at significantly less than the
amount at which defendant purchased them). "[I]mposing a duty on a bank
that would obligate it to be responsible for its depositor's financial affairs
would be impractical as a matter of public policy." Globe Motor, 273 N.J.
Super. at 394.
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Courts have recognized three contexts in which a duty may arise: where
the parties have a fiduciary relationship; where special circumstances
necessarily imply the presence of "trust and confidence"; and contracts which
are "intrinsically fiduciary" in nature. United Jersey Bank, 306 N.J. Super. at
551 (quoting Berman v. Gurwicz, 189 N.J. Super. 89, 93-94 (Ch. Div. 1981)).
Absent egregious circumstances involving a lender's "gross acts of misconduct
and deceit," id. at 554, or where "the lender encourage[s] the borrower to
repose special trust or confidence in its advice, thereby inducing the borrower 's
reliance," id. at 555, there is no added duty to a borrower when a lender
"simply [takes] appropriate steps on its own behalf" to protect itself in the
transaction. Rzepiennik v. U.S. Home Corp., 221 N.J. Super. 230, 238 (App.
Div. 1987).
There is no evidence that any of those circumstances exist in this matter.
We are not persuaded otherwise by defendants' contentions about the
formulation and implementation of plaintiff's policies relating to its internal
assessments of vendors in transactions in which plaintiff is supplying the
financing. The motion judge correctly concluded that there was no duty that
was owed by plaintiff to defendants.
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IV.
Defendants also argue that the amount the motion judge awarded as
damages was in excess of what was owed by them to plaintiff. Defendants
correctly contend that the motion judge did not "expressly address" their
arguments when he awarded $53,189.00 to plaintiff for compensatory
damages, although defendants did not raise an objection to the amount sought
by plaintiff on summary judgment.
According to a certification filed by plaintiff in support of its motion,
$43,942.07 was demanded as due and owing as of February 1, 2017, under
Agreement #1, "plus accruing interest," based upon defendants' failure to make
any payments beginning on October 1, 2015. As to the second agreement,
plaintiff certified that $9246.93 was owed.5 After entry of that judgment,
defendants moved for reconsideration, arguing that the amount fixed by the
motion judge was incorrect and, as already noted, the judge denied their
motion.
5
A January 27, 2016 statement, attached to plaintiff's supporting certification,
indicated the balance owed was $46,460.64 on the first agreement, calculated
as the total scheduled payments $58,075.80, less $11,615.16 in payments
through October 1, 2015. As to the second agreement, the same type of
records stated that defendants owed $9863.30 based upon total scheduled
payments of $11,166, less payments made of $1302.70.
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Defendants again argue that because Mazandarani only confirmed the
delivery of the equipment and its payment, and because Helios never installed
the equipment, Mazandarani never authorized the portion of the amount
financed that was attributable to Helios's soft costs. For that reason, plaintiff
was only entitled to be paid $25,075 on the first agreement and $1000 on the
second, less payments it made under both agreements that totaled $14,138.46,
leaving a balance owed of $11,936.54. We disagree.
At the outset, we observe that because defendants never raised any issue
about the amount being claimed by plaintiff in response to the summary
judgment motion, we do not consider the matter properly raised before us.
"Filing a motion for reconsideration does not provide the litigant with an
opportunity to raise new legal issues that were not presented to the court in the
underlying motion." Medina v. Pitta, 442 N.J. Super. 1, 18 (App. Div. 2015).
We will not address on appeal an issue that defendant did not properly raise in
the trial court. See Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973).
Even if we did, defendants' contention that Mazandarani's authorization for the
release of funds by plaintiff to Helios was limited to the cost of the equipment
is without any merit, especially in light of the authorization that did not limit
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the amount to be released, and AMS's monthly repayments towards the total
amount owed.
V.
Defendants' next contention challenges the dismissal of their
counterclaim, seeking damages under the CFA against plaintiff. In the motion
judge's decision, he found the undisputed facts that neither Mazandarani nor
anyone else from AMS met with or had any contact with anyone representing
plaintiff and that any false promises or misrepresentation was committed by
Kunish or Helios.
On appeal, defendants maintain that the record supports a finding that
plaintiff employed "unconscionable commercial practices" in violation of the
CFA. We disagree.
The CFA provides, in relevant part:
The act, use or employment by any person of any
unconscionable commercial practice, 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 thereby,
is declared to be an unlawful practice.
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[N.J.S.A. 56:8-2.]
"Sale" in the CFA is defined to "include any sale, rental or distribution, offer
for sale, rental or distribution or attempt directly or indirectly to sell, rent or
distribute." N.J.S.A. 56:8-1(e).
The CFA applies to claims by business entities as well as consumers.
Hundred E. Credit Corp. v. Eric Shuster Corp., 212 N.J. Super. 350, 354-57
(App. Div. 1986); see also Dreier Co. v. Unitronix Corp., 218 N.J. Super. 260
263-64, 273 (App. Div. 1986) (applying the CFA to a business's purchase,
after finding that the plaintiff's company "had no knowledge or expertise in the
computer field and . . . relied upon [the defendants] to provide a system to
meet [the] plaintiff's particular needs," and therefore, the plaintiff was "just as
vulnerable to unconscionable business practices as a private consumer").
Here, there was no evidence that plaintiff employed any unconscionable
commercial practice. Therefore, in order for defendants to have succeeded on
their CFA claim they had to establish the agency relationship between plaintiff
and Kunish or Helios, which the motion judge and we have found to not exist.
Without such evidence, defendant's CFA claim was not viable and the motion
judge properly dismissed the counter-claim with prejudice.
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VI.
Finally, we address defendants' challenge to the motion judge's award of
$31,362.50 in attorneys' fees to plaintiff under "[p]aragraph [nine] of both
[a]greements" that, as the judge found, "permit a counsel fee award to
[p]laintiff if same was incurred, reasonable and necessary to collect the
moneys owed under the [a]greements." On appeal, defendants argue that the
judge provided no reason for the amount of attorneys' fees awarded. Plaintiff
argues that it was clearly entitled to attorneys' fees by contractual agreement,
that their request for such fees was unopposed during the summary judgment
proceedings, and that the fees are not excessive.
On appeal, we will disturb the award "only on the rarest of occasions,
and then only because of a clear abuse of discretion." Litton Indus., Inc. v.
IMO Indus., Inc., 200 N.J. 372, 386 (2009) (quoting Packard-Bamberger & Co.
v. Collier, 167 N.J. 427, 444 (2001)).
We agree with the motion judge and plaintiff that under the two
agreements, plaintiff was entitled to an award of attorneys' fees and costs.
However, merely attaching copies of its bills for the judge's consideration did
not satisfy plaintiff's obligation to support its application with information the
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judge needed in determining whether the fees incurred were reasonable under
Rule 4:42-9.
Although "New Jersey disfavors the shifting of attorneys' fees . . . 'a
prevailing party can recover those fees if they are expressly provided for by
statute, court rule, or contract.'" Id. at 385 (quoting Packard-Bamberger, 167
N.J. at 440) (citing N. Bergen Rex Transp., Inc. v. Trailer Leasing Co., 158
N.J. 561, 569 (1999)). "When the fee-shifting is controlled by a contractual
provision, the provision should be strictly construed in light of our general
policy disfavoring the award of attorneys' fees." Ibid. (citing N. Bergen, 158
N.J. at 570).
If the provision does indeed provide for an award of attorneys' fees, a
court must analyze whether the requested award is reasonable. See id. at 386.
"The reasonableness of attorney's fees is determined by the court considering
the factors enumerated in [Rule] 4:42-9(b). That rule incorporates the factors
stated in R.P.C. 1.5." McGowan v. O'Rourke, 391 N.J. Super. 502, 508 (App.
Div. 2007). In order to enable a court to make that determination, the Rule
requires in "all applications for the allowance of fees shall be supported by an
affidavit of services addressing the factors enumerated in [RPC] 1.5(a)." R.
4:42-9(b).
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Upon the filing of the required affidavit, the court must first determine
"whether the party seeking the fee prevailed in the litigation," and second, the
court must "calculate the 'lodestar,' which is that number of hours reasonably
expended . . . multiplied by a reasonable hourly rate." Litton Indus., Inc., 200
N.J. at 386 (first quoting N. Bergen, 158 N.J. at 570; and then quoting Furst v.
Einstein Moomjy, Inc., 182 N.J. 1, 21 (2004)). In calculating the lodestar,
courts are required to consider:
(1) the time and labor required, the novelty and
difficulty of the questions involved, and the skill
requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, that the
acceptance of the particular employment will preclude
other employment by the lawyer;
(3) the fee customarily charged in the locality for
similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the
circumstances;
(6) the nature and length of the professional
relationship with the client;
(7) the experience, reputation, and ability of the
lawyer or lawyers performing the services;
(8) whether the fee is fixed or contingent.
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[Id. at 387 (quoting R.P.C. 1.5(a)).]
A proportionality analysis may be required "in cases in which the fee requested
far exceeds the damages recovered," however, "[t]he ultimate goal is to
approve a reasonable attorney's fee that is not excessive." Id. at 387-88.
Once a court makes a determination as to the reasonableness and amount
of an applicant's fees and costs, it must set forth its findings in an oral or
written decision as required under Rule 1:7-4 to allow for meaningful appellate
review. See S.N. Golden Estates, Inc. v. Cont'l Cas. Co., 317 N.J. Super. 82,
91 (App. Div. 1998).
Here, although paragraph nine of both agreements established plaintiff's
entitlement to an award of fees and costs under the circumstances, neither
plaintiff's counsel nor the motion judge followed the requirements of our rules.
Although plaintiff's attorneys certified that they incurred $68,461.35 in
attorneys' fees and costs, they did not file any certification that comported with
Rule 4:42-9(b) and R.P.C. 1.5. The motion judge made no findings about the
reasonableness of the fees once he determined that plaintiff was entitled to an
award of fees under the agreements.
Under these circumstances and despite defendants' failure to object to
the fee application in its opposition to plaintiff's summary judgment motion,
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we are constrained to remand the award of fees for reconsideration, after the
submission of an affidavit of services that complies with the Rule 4:42-9(b)
and defendant is given an opportunity to respond. Thereafter, the motion
judge is to issue a decision that comports with Rule 1:7-4. The remand must
be complete within thirty days.
Affirmed in part and remanded in part for further proceedings consistent
with our opinion. We do not retain jurisdiction.
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