NICHOLAS C. NOTO v. SKYLANDS COMMUNITY BANK, ET AL.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0322-04T30322-04T3

NICHOLAS C. NOTO,

Plaintiff-Appellant,

v.

SKYLANDS COMMUNITY BANK,

FULTON MORTGAGE, MICHAEL

HALPIN, MARIE DEGIOVANI,

Defendants-Respondents.

 

Submitted September 21, 2005 - Decided

Before Judges Weissbard and Winkelstein.

On appeal from the Superior Court of New Jersey, Law Division, Warren County, L-331-02.

Mark Rogers, attorney for appellant.

Courter, Kobert & Cohen, attorneys for respondents (Lawrence P. Cohen, of counsel; James F. Moscagiuri, on the brief).

PER CURIAM

Plaintiff, Nicholas C. Noto, appeals from a summary judgment entered by the Law Division on August 6, 2004, dismissing his complaint in which he sought damages for unpaid wages; a violation of the Conscientious Employee Protection Act, N.J.S.A. 34:19-1 to -8 (CEPA); and a violation of the covenant of good faith and fair dealing. We affirm the dismissal of plaintiff's CEPA claim, and reverse so much of the August 6, 2004 order that dismissed plaintiff's claim for unpaid wages and a violation of the covenant of good faith and fair dealing.

In that plaintiff's complaint was dismissed on summary judgment, what follows are the facts construed in a light most favorable to him. See Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).

Plaintiff has more than twenty years experience as a mortgage originator in New Jersey. By letter dated April 27, 2001, he was offered employment by defendants Skylands Community Bank and Fulton Mortgage Company as a "Full Time Mortgage Originator." The pertinent portions of that letter read as follows:

This is to confirm our offer of employment with the Fulton Mortgage Company division of Skylands Community Bank, as a Full Time Mortgage Originator. Your compensation . . . will be based on a monthly forgivable draw of $1,000.00 plus any commission entitlements that are in excess of this monthly draw amount. After the initial three months (probationary period), you will receive an unforgivable draw of $1,000.00 (in the first pay of each month) against commission. Your compensation will be based on the basic commission structure as outline[d] below. Your date of hire will be Monday, April 30, 2001.

. . . .

This offer of employment is contingent upon a satisfactory background and credit history check. Your employment with Skylands Community Bank is also contingent upon a satisfactory completion of an initial probationary period of employment which normally extends ninety days. During the ninety-day probationary period you are provided with free banking services. After successfully completing the probationary period, you are entitled to all other regular full-time benefits. . . .

While it is our sincere hope that your employment with Skylands Community Bank may be a long one, the bank does not offer employment contracts on any fixed term basis, and the representations in this letter and from our meetings with you should not be construed in any manner to create a contract of employment for a definite period. Employment with the bank is on an at will basis.

. . . .

The letter was signed by representatives of both Skylands and Fulton.

Soon after plaintiff began work, he became concerned that his signature was being affixed to commitment letters that he did not personally sign. His signature was conformed to the commitment letters with a slash next to it, and was initialed by the person who actually signed plaintiff's name to the document.

He also became concerned because the mortgage commitments issued in the name of Skylands originated from Fulton's Reading office, not directly from Skylands. This troubled plaintiff because it was his understanding that Fulton was the entity licensed to make mortgage loans in New Jersey, while Skylands was not. Plaintiff raised these concerns with his employer.

Approximately three weeks after plaintiff began working for defendants, a Skylands employee, Kathy Klein, was assigned to assist him, despite that Klein had virtually no residential mortgage experience. She identified purported deficiencies with plaintiff's work.

Subsequently, on July 18, 2001, a Skylands employee, Mary Ellen Schutter, prepared a performance review of plaintiff's work. The review, captioned "Employee Counseling Summary," indicated that plaintiff's performance did not meet the organization's expectations, and extended his probationary period without benefits. It listed eight areas of deficiency, which included a lack of general knowledge about mortgage originations; inaccurate good faith estimates and service provider notices; concern about plaintiff's customer service and his general attitude; and other areas of perceived deficiencies. In a meeting with plaintiff, Schutter delivered the summary and explained it to him. She asked him to complete that part of the form that required him to say whether he understood, agreed with the comments, or had any comments of his own.

Approximately twenty minutes later, plaintiff resigned. He handed Schutter a copy of the counseling summary on which he had handwritten: "Under stated circumstances I do not feel that continued employment would be constructive." He continued: "Resignation as of 7-18-01." Plaintiff signed the form.

After plaintiff left Skylands' employment, he claimed he was entitled to receive commissions on all loans he originated; according to plaintiff, that meant that as soon as the loan application was filled out, an application fee had been paid, and the borrower's signatures had been affixed to the application, the loan was originated and he was entitled to his commission. He believes that a loan did not have to be funded or closed for it to be originated. Defendants take the position that loans were originated only after they were closed and funded.

A dispute also arose between plaintiff and defendants as to whether plaintiff's draw was an advance on his commissions. Plaintiff understood that a "forgivable draw" was "money up front for a certain period of time that [the employer] would not deduct against . . . commission earnings." He considered it to be "an automatic payment that you receive whether or not you do one loan." He believed he was entitled to his draw plus his commissions.

His employer, on the other hand, considered a forgivable draw to be an advance on commissions; if the employee earns less in commissions than the amount of the draw, the employee is not required to pay the shortfall back to the employer. Nevertheless, if the employee earned more commissions than the draw, the employee would receive only those commissions above the amount of the draw.

As an additional reason for not paying plaintiff the commissions he sought, defendants took the position that because other employees would have to perform the tasks needed to fund and close the loan after a mortgage originator left his or her employment, no commissions would be paid to a departing employee for loans that closed more than thirty days after the employee's resignation or termination date. This policy was applied notwithstanding that it was unwritten and not included in plaintiff's offer of employment.

Plaintiff's CEPA claims arise out of his repeated objections to defendant's improper use of his name; and his objections to what he considered to be an illegal scheme to have an unlicensed, out-of-state bank, make mortgage loans in New Jersey. He asserts that his complaints about this conduct to his employer, and the way he was treated by his employer as a result, caused his constructive discharge on July 18, 2001, the date he received his employee counseling summary and left his employment.

Given this record, the judge, in dismissing plaintiff's complaint in its entirety, made the following findings and conclusions:

Upon review of the actual April 27, 2001 letter from the defendant Skylands to the plaintiff, it is clear that the plaintiff was an employee at will.

. . . .

Therefore, it is apparent to this court there was no employment contract in this matter. Thus, the Parole Evidence Rule is not even a factor to consider. The plaintiff was an at-will employee.

With regard to the purported commissions that vested within 30 days after the plaintiff's resignation, the plaintiff incorrectly believes that he earned his commission as soon as he submitted a loan application to underwriting. However, the plaintiff earned a commission only after a loan, on which he performed all that was required of him, was originated, closed and funded. It has long been recognized in certain parts of the mortgage industry that a loan is not originated until it is closed and funded. Origination of a mortgage loan includes receiving loan applications from prospective borrowers, making the necessary appraisals of the real estate offered as security, making the necessary credit and employment checks, seeing that the necessary documents are prepared and properly executed. See 29 New Jersey Practice, Law of Mortgages, paragraphs 2.1 of page 29. In addition, the plaintiff was required to perform other critical tasks after submitting a loan to underwriting. That the plaintiff was required to order title, order the appraisal, set the closing date, fill out and provide compliance disclosures and resolve contingencies set forth in the commitment letter.

. . . .

With regard to the commission purportedly vested more than 30 days after the plaintiff's resignation, the defendant Skyland[s] and [Fulton] required the mortgage originator to perform the additional tasks noted by this court earlier. Therefore, a commission was earned only after these additional duties had been performed and the loan closed and funded. Due to the fact that another employee would have to perform these tasks if the mortgage originator resigned or was terminated, [Fulton] applied a policy already in use for all other mortgage originators employed by Fulton Affiliates, thereby no commissions were paid to a terminated employee for loans which closed more than 30 days after the termination date. This policy of a 30-day period is reasonable because it allows terminated employees to be paid for the loans on which he or she did the bulk of the work and which closed shortly after the termination. There was an agreement between them.

. . . .

In this matter the plaintiff's commissions structure is set forth in the offer of employment. The offer clearly states that it is not an employment contract. Further, while it does not specifically address the question of when plaintiff's commissions were earned, it is the opinion of this court that the letter implies that they are earned when loans are originated. Loans are originated when they are closed and funded. The process of closing and funding a loan entails several additional steps. Therefore, plaintiff's commissions were not earned until all of these duties were completed. The commissions he seeks were never vested.

. . . .

In count two of the complaint, the plaintiff alleges that the defendants violated the New Jersey Conscientious Employee Protection Act, better known as CEPA. . . .

It is the opinion of the court that there is no genuine issue of material fact as to the third element. There was no adverse employment action taken against the plaintiff. He resigned. N.J.S.A. 34:19-2(e) defines retaliatory action as the discharge, suspension or demotion of an employee, or other adverse employment action taken against an employee in the terms and the conditions of employment. In order to qualify as an adverse action under CEPA, an employer's action must have been a significant impact upon an employee's compensation or rank. [Hancock v. Borough of Oaklyn, 347 N.J. Super. 350 (App. Div. 2002).] In the context of a CEPA claim, a constructive discharge can constitute an adverse action. The Appellate Division had stated that a constructive discharge occurs when the employer has imposed upon an employee working conditions so intolerable that a reasonable person subject to them would resign. . . .

In the instant matter, the counseling session is not in and of itself an adverse employment action. The plaintiff was being counseled on issues entirely unrelated to the alleged whistle-blowing activities. Nor does the fact that the plaintiff's probationary period was . . . extended alter this conclusion. The offer of employment specifically stated that his employment was contingent upon successfully completing the probationary period. Therefore, this court will grant the defendant's motion for summary judgment, deny the plaintiff's motion for summary judgment as to the second count.

Finally, in the third count of the amended complaint, the plaintiff alleged that the defendants had violated the implied covenant of good faith and fair dealing. It is the opinion of this court that there is no genuine issue of material fact in this matter. The plaintiff cannot maintain this particular claim for the simple reason that there was no contract of employment. Defendant's motion for summary judgment is granted. Plaintiff's motion for summary judgment denied.

We first address plaintiff's CEPA claim. We agree with the Law Division that this claim fails as a matter of law.

To qualify as an adverse employment action under CEPA, the employer's action must have a significant impact on the employee's compensation or rank. Hancock v. Borough of Oaklyn, 347 N.J. Super. 350, 360 (App. Div. 2002). Nonetheless, an employer's action may fall short of a discharge, but may be the equivalent of an adverse employment action. Nardello v. Twp. of Voorhees, 377 N.J. Super. 428, 433-34 (App. Div. 2005). Here, however, we agree with the Law Division judge that the employer took no action that would be the equivalent of an adverse action. Not every employment action that makes an employee unhappy constitutes an actionable adverse action. Cokus v. Bristol-Myers Squibb Co., 362 N.J. Super. 366, 378 (Law Div. 2002), aff'd, 362 N.J. Super. 245 (App. Div.), certif. denied, 178 N.J. 32 (2003). Here, based on what his employer considered deficiencies in plaintiff's performance review, his probationary period was extended and he was not entitled to full-time benefits at that time because his offer of employment made full-time benefits contingent upon successful completion of his probationary period. That he disagreed with his employer's criticisms, and his probationary period was extended, was not tantamount to an adverse employment action sufficient to sustain a CEPA claim.

We also agree with the Law Division that plaintiff was not constructively discharged. A constructive discharge occurs when "the employer knowingly permit[s] conditions of discrimination in employment so intolerable that a reasonable person subject to them would resign." Wood-Pirozzi v. Nabisco Foods, 290 N.J. Super. 252, 275-76 (App. Div. 1996). Here, the job situation as described by plaintiff may have been uncomfortable for him, but we cannot say that the conditions were so intolerable as to amount to a constructive discharge. He was neither demoted nor transferred. His salary remained the same. Simply because his employer authorized another employee to check his work does not render his employment intolerable. Consequently, we affirm that portion of the court's order that dismissed plaintiff's CEPA claim.

We next turn to the contract claims. In addressing a summary judgment motion, a trial court must not decide issues of fact, but only decide if such issues exist. Brill, supra, 142 N.J. at 540. We apply the same standards on appeal. First, we decide whether there exists a genuine issue of fact; if there does not, we decide whether the trial court's ruling on the law was correct. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div. 1998). Here, when the evidence is presented in a light most favorable to plaintiff, we conclude that genuine issues of material fact exist as to the terms and conditions of his employment.

Plaintiff is seeking payment pursuant to N.J.S.A. 34:11-4.3, which provides payment for an employee who is either discharged by his employer or otherwise quits or resigns. Putting the specific calculations aside, plaintiff contends that he was entitled to commissions on all loans that he originated; that is, he claims entitlement to commissions where he had the application completed and the application fee had been paid. Defendants disagree with plaintiff's understanding of what was required to entitle plaintiff to commissions. They claim that the loan had to be funded and closed.

The offer of employment of April 27, 2001, however, does not define when a loan is originated. It merely indicates that plaintiff was offered employment as a "Full Time Mortgage Originator." As noted earlier, plaintiff claims this provision means he was required only to obtain a signed loan application and receive the application fee to be entitled to his commission; and he has twenty years of experience in the industry to support his claim. The judge, however, disregarded plaintiff's reasons, and relied on defendant's contrary position, which the judge found to be supported by practice in the industry. Given that this was a motion for summary judgment, the trial judge should have drawn all inferences in plaintiff's favor. But he did not.

To have a bilateral contract, both parties must have a common intention to the contract's terms and meaning. Friedman v. Tappan Dev. Corp., 22 N.J. 523, 531 (1956). The parties must have "a meeting of the minds on the material terms" of the contract, which means that "both parties must understand what each is agreeing to do or not to do. The contract cannot be based upon the secret or hidden intention or understanding of one party." Model Jury Charge (Civil), 4.10(C)(4)(1) "Bilateral Contracts," (1998).

Here, giving plaintiff the benefit of all inferences to which he is entitled on a summary judgment motion, it was a jury question as to what tasks plaintiff had to complete to be entitled to a commission. We disagree with the judge that under the facts of this case such a decision could be reached as a matter of law.

We also take issue with the trial court's conclusion that defendant's unwritten rule that a mortgage originator who leaves employment is not entitled to reimbursement for mortgages that close more than thirty days after the employee left his or her employment was "reasonable." Not only is a finding of reasonableness inappropriate in a summary judgment motion, but the court's decision was necessarily dependent upon accepting defendant's interpretation of the duties and responsibilities of a mortgage originator. If, in fact, plaintiff's interpretation was correct, there would be no basis for a conclusion that additional duties had to be performed by others before the employee's entitlement to commissions vested.

Finally, we address plaintiff's complaint for breach of the covenant of good faith and fair dealing. That obligation exists in every contract, "including those contracts that contain express and unambiguous provisions permitting either party to terminate the contract without cause." Sons of Thunder, Inc. v. Borden, Inc., 148 N.J. 396, 421 (1997). The implied covenant of good faith and fair dealing means that "'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; in other words, in every contract there exists an implied covenant of good faith and fair dealing.'" Id. at 420 (quoting Palisades Props., Inc. v. Brunetti, 44 N.J. 117, 130 (1965)). The obligation of good faith performance of a contract, even where it may be terminated without cause, exists "up until its right of termination was actually effective." United Roasters, Inc. v. Colgate Palmolive Co., 649 F.2d 985, 990 (4th Cir.), cert. denied, 454 U.S. 1054, 102 S. Ct. 599, 70 L. Ed. 2d 590 (1981).

In this case, defendants argued, and the trial judge seemed to agree, that because the offer of employment indicated that plaintiff was an at-will employee no contract existed. We disagree. No doubt, a breach of the implied covenant of good faith and fair dealing may not arise "absent an express or implied contract." Wade v. Kessler, 172 N.J. 327, 345 (2002). Here, however, a contract did exist. While plaintiff was an employee at-will, that does not mean there was no employment contract. There clearly was. Some of the terms of employment were expressly set forth in the April 2001 offer of employment, while other terms were implied. See Model Jury Charge (Civil), 4.10E "Bilateral Contracts," (1998) (a contract may not only be express or implied, it may be a mixture of the two). In either event, as noted, the employer "had an obligation of good faith performance up until its right of termination was actually effective." United Roasters, Inc., supra, 649 F.2d at 990; see also Bak-A-Lum Corp. of Am. v. Alcoa Bldg. Prods., Inc., 69 N.J. 123, 127-30 (1976) (despite defendant's unconditional right to terminate contract, defendant found to have breached implied covenant of good faith and fair dealing). Consequently, the trial court erred by dismissing plaintiff's claim for a breach of the covenant of good faith and fair dealing as a matter of law.

We affirm that portion of the summary judgment order that dismissed plaintiff's CEPA claim; we reverse the summary judgment order to the extent that it dismissed plaintiff's claim for unpaid wages and a violation of the implied covenant of good faith and fair dealing. We remand for further proceedings consistent with this opinion.

 
Affirmed in part, reversed in part, and remanded.

(continued)

(continued)

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A-0322-04T3

September 28, 2005