NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION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.
Plaintiff Virendra Patel was a business partner with defendants Sunil Shah, Nimesh Shah and Mukesh Parikh (collectively, the Shahs)
Over time, Patel became dissatisfied with the operation and financing of the stores. Consequently, on November 3, 2008, Patel filed a complaint against the Shahs claiming violations of the New Jersey Limited Liability Company Act,
In March 2009, Patel filed a separate action against HJS claiming breach of contract, breach of the implied covenant of good faith and fair dealing, and seeking an accounting of the loans in question and an injunction against executing on the collateral that secured the loans from HJS to the S&Ps. In September 2009, HJS filed an answer along with a counterclaim seeking nearly $5 million for amounts unpaid on the 2006 and 2007 loans.
The trial court consolidated the two cases because they involved many of the same underlying factual circumstances.
Importantly, Judge Jacobson noted "the analysis in this case is highly dependent on the credibility of the parties." In Patel's action against the Shahs, the judge "found Patel mostly candid and credible, and came away with the strong impression that the Shahs had taken advantage of him[.]" The judge rejected defendants' efforts to discredit Patel's testimony, "especially in light of the self-dealing of defendants and the divided loyalty of the Shahs that so totally infects the record along with defendants' own credibility problems." In contrast to Patel, Judge Jacobson found Sunil's testimony with respect to the bookkeeping fees "incredible," and ultimately she "lacked confidence in Sunil's testimony." The judge likewise found Parikh's testimony was "troubling" and "lacking in credibility."
In the end, Judge Jacobson noted:
Judge Jacobson went on to make detailed findings with respect to each of the parties' claims and defenses. On February 28, 2014, she memorialized her extensive findings in a judgment that ordered Patel to pay the Shahs $100,000 for breach of the purchase agreement; held Sunil and Nimesh jointly liable for the bookkeeping and management fees totaling about $840,000; ordered their company, Fairless Hills Development Company (FHDC), to refund $287,854.24 to S&P Fairless Hills; required them to refund $154,992.81 in pre-opening rent improperly paid to FHDC and $67,596 in pre-opening rent charged by another of their companies, Penndel Realty LLC; and to pay $863,595.77 for breach of fiduciary duty as to four of the S&Ps in connection with the 2007 loan transaction. Sunil, Nimesh, and Parikh were ordered to pay S&P Penndel $150,000 as damages for breach of fiduciary duty. The judgment also directed the dissolution of the S&Ps and the distribution of their assets, including a sale of the remaining stores.
With respect to Patel's action against HJS, Judge Jacobson again found "the record reveals deep conflicts of interest by the Shahs, who operated on both sides of these loan transactions." The judge held that the 2006 loans and Patel's personal guarantees were void because they were procured through fraudulent inducement. Specifically, the judge found "clear and convincing evidence that Sunil's undisclosed plan to repay the 2006 HJS loans only when and if some of the stores were sold and necessary proceeds generated was a material omission." The judge found that because "Sunil was in a fiduciary relationship with both Patel and the S&Ps themselves, as well as acting as the representative of HJS, he was under an obligation in both roles to disclose this fact."
Judge Jacobson declined to make a similar determination regarding the 2007 loan. However, she found that HJS breached its duty of good faith and fair dealing to Patel in connection with the 2007 loan transaction. She wrote:
Based on these findings, the February 28, 2014 judgment rescinded Patel's personal guaranties given in connection with the 2006 loans and reduced the maximum amount HJS could collect on the 2006 loans to the principal amount plus simple interest calculated consistent with
On October 22, 2014, Judge Jacobson issued a comprehensive eighty-one page written opinion on the parties' post-judgment motions for counsel fees and their motions to reconsider and clarify the judgment. On the same date, she entered a memorializing order granting in part Patel's motion by increasing the refund of bookkeeping and management fees awarded to five of the S&Ps by $52,232.90, but granting the Shahs' motion in part by reducing that award to the other five S&Ps by $11,040. The judge also awarded Patel $532,173.45 in counsel fees and costs from the Shahs, pursuant to
In its appeal, HJS argues, among other things, that the trial court erred in: (1) determining that Sunil's fraud was imputable to HJS, thereby providing justification "for the curtailment of HJS's contractual rights;" (2) voiding Patel's personal guarantee of the 2006 loan; (3) reducing the amount of Patel's personal guarantee to HJS in connection with the 2007 loan by the $863,595.77 damage award assessed against the Shahs on the 2006 loan; (4) reducing the contractual nine percent interest rate on the 2006 loan; (5) striking the contractual fourteen percent default interest rate on the 2007 loan; and (6) reducing its contractual counsel fee request by eighty percent. HJS further contends that the relief sought by Patel is barred by the doctrine of unclean hands.
The Shahs separately contend that the trial court erred in: (1) ordering a $863,595.77 refund for breach of fiduciary duty in connection with the 2007 loan; (2) ordering that they refund more than $840,000 in bookkeeping and management fees; (3) awarding the S&P's $150,000 for the Shahs' breach of their fiduciary duty with respect to S&P Penndel; (4) ordering a refund of pre-opening rent paid to S&P Penndel and S&P Fairless Hills, and striking the twenty-five percent FHDC development fee totaling $287,854.24; (5) ordering a refund of Nimesh's salary; and (6) awarding attorney's fees to Patel. The Shahs also argue that the refunds and damages awarded were the result of improper "second guessing" by the court because Patel ratified the transactions and thereby waived any objection to them.
Patel urges that we affirm the February 20, 2014, October 22, 2014, and January 6, 2015 orders for the reasons expressed in Judge Jacobson's opinions. Nonetheless, in his cross-appeal, Patel argues that the judge erred in: (1) failing to find that he was fraudulently induced to sign the 2007 loan; (2) holding that the S&Ps owed interest to HJS on the money HJS loaned to FHDC; (3) not reducing the principal on the 2007 loan by the amount that Patel alleges was interest that was rolled into it from the 2006 loan; (4) dismissing the RICO claim against the Shahs; and (5) dismissing the accounting malpractice claim against Sunil.
"`The scope of appellate review of a trial court's fact-finding function is limited.'"
Guided by these standards, after reviewing the voluminous record in light of the applicable law, we find no merit in either of the appeals or in the cross-appeal. Judge Jacobson's lengthy, detailed decisions, which resulted in the orders challenged here, are supported by sufficient credible evidence and are legally correct. We therefore affirm substantially for the reasons expressed in Judge Jacobson's thorough written opinions.