US ELECTRONICS, INC. D/B/A US COMP. v. COSMETICS & PERFUME FILLING & PACKAGING, INC.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0747-05T1

US ELECTRONICS, INC. D/B/A

US COMP.,

Plaintiff-Respondent,

v.

COSMETICS & PERFUME FILLING &

PACKAGING, INC.,

Defendant and Third-Party

Plaintiff-Appellant,

v.

KANJI PATOLIA,

Third-Party Defendant-Respondent.

______________________________________________________

 

Submitted September 27, 2006 - Decided October 24, 2006

Before Judges Collester and Baxter.

On appeal from the Superior Court of

New Jersey, Law Division, Essex County,

L-4570-03.

Nashel Kates Nussman Rapone & Ellis,

attorneys for defendant and third-party

plaintiff-appellant (David A. Cobin, on

the brief).

Respondents have not filed a brief.

PER CURIAM

This is an appeal from the dismissal of a counterclaim seeking damages for breach of contract. Because we find that the trial judge, sitting without a jury, failed to resolve credibility disputes and failed to make findings of fact on the disputed claims, as required by R. 1:7-4, we vacate the dismissal of the counterclaim and remand for fact-finding.

I.

Plaintiff, US Electronics entered into a contract on September 28, 2002 with defendant Cosmetics & Perfume Filling & Packaging, Inc. to provide computer hardware, software and networking services at the defendant's perfume packaging facility. Prior to the execution of the contract which is the subject of this appeal, the parties had had business dealings in 1999. As a result, Kanji Patolia, president of plaintiff company, and third-party defendant herein, designed and installed inventory tracking software for defendant's plant. When defendant decided to move its operation to a significantly larger facility, its principals Ashvin and Vigay Vaghani entered into the September 28, 2002 contract with plaintiff and Patolia.

The contract, in the amount of $90,000.01, required plaintiff to purchase and install computers, servers, and access point routes at the new facility; to upgrade defendant's current software package; to supply and "prescribe" (i.e. specify) all wiring for the new facility within five days of signing the contract; to supply all title licenses, warranty documents, operating instructions, manuals and software CD's to defendant; and to provide $1,000,000 of product liability insurance and a $5,000,000 premises liability insurance certificate to the new landlord prior to starting installation of the hardware at the new facility. Installation of the hardware was to begin once the mezzanine in the new facility was complete, which was projected to occur 45 to 60 days from the date of signing of the contract.

Ashvin Vaghani, testifying on behalf of the defendant, stated that his company never received a full working version of the new software. Plaintiff disputed that assertion, insisting that a fully functioning version of the software was provided to defendant.

As to the hardware, Patolia testified that he was not able to install it because the mezzanine was not complete, which caused him to fear that the hardware might be stolen by the many construction workers at the site. In contrast, Ashvin Vaghani testified that the mezzanine was complete, and he had specifically advised Patolia that there was a locked cage at the new site in which to store the hardware. Vaghani further testified that he had agreed to hold plaintiff harmless for any loss if the computer hardware were to be damaged or stolen, and therefore that plaintiff should have had no concerns about delivering and installing the hardware.

By early December 2002, defendant began to press plaintiff to deliver the hardware outlined in the contract. Plaintiff replied, indicating that the hardware was not yet available, and offering instead to install temporary hardware. Defendant responded by e-mail, refusing to accept any temporary hardware, and demanding that all permanent equipment be installed and that the insurance required in the contract be immediately provided. Despite defendant's demand, the computer hardware was never installed and the insurance was never provided. Ashvin Vaghani testified that he continually called Patolia to check on the status of the project, and that Patolia responded solely with profanities.

On January 6, 2003, defendant, through its attorney, sent plaintiff a letter of termination of the contract declaring plaintiff in breach of the contract because plaintiff had never provided defendant with the required software, or any accompanying source codes or passwords, and had never supplied the required insurance or "prescribed" any wiring at the new facility. Plaintiff received the letter of termination on January 10, 2003. Although defendant testified that plaintiff never responded to the letter of termination, plaintiff was able to produce a letter at trial sent by its lawyer asking defendant to reconsider canceling the contract. Subsequent to these letters, there was no further communication between the two sides.

In December, 2002, defendant's computer system "locked up" and a password was needed in order to reopen it. Plaintiff never responded to defendant's request to supply the password. Having received no response, defendant contacted NetLink, another computer services firm, to assist it in unlocking the system. NetLink was successful, and as a result, defendant decided to enter into a contract with NetLink to provide the new hardware/software package for defendant's new facility that plaintiff had failed to provide.

The contract with NetLink originally provided for a total cost of $90,000, which included all hardware, software, and setup. Within a week after signing the contract the hardware was provided to defendant and the insurance requirements were met. The hardware was installed in the secured caged area at the new facility. After the hardware was installed, NetLink attempted to upgrade the software and quickly realized that a password for the source code would be required to complete the upgrade. After NetLink informed defendant of this problem, defendant contacted Patolia seeking the password for the source code. Ashvin Vaghani testified that once again he was greeted with profanities from Patolia and was repeatedly denied the password that was required.

NetLink consultant Craig Thakkar, testifying on behalf of defendant, explained that without the password for the source code, NetLink had no option other than to design new software to meet defendant's needs. This re-design would cost an additional $56,000, above and beyond NetLink's original $90,000 contract with defendant.

On June 2, 2003, plaintiff filed a three count complaint alleging breach of contract, account stated and unjust enrichment. Defendant counterclaimed, and filed an amended third party complaint against plaintiff's principal, Patolia. The Law Division, in a ten page written opinion, dismissed the claims of both parties with prejudice holding that neither side had established its case by a preponderance of the evidence.

Plaintiff did not appeal from the dismissal, nor did plaintiff or Patolia participate in this appeal.

Defendant argues that the trial judge erred in failing to determine witness credibility and consequently failing to make specific findings of fact in support of his decision to dismiss appellant's claims. Defendant asks us to reverse the lower court's decision and to remand for a second trial with instructions that proper rulings on credibility be made.

R. 1:7-4(a) requires that "the court shall, by an opinion or memorandum decision, either written or oral, find the facts and state its conclusions of law thereon in all actions tried without a jury... The court shall thereupon enter or direct the entry of the appropriate judgment."

Because several important factual issues may turn on the credibility of the parties it is imperative that the judge make full credibility determinations and adequate findings of fact. "In a non jury civil action, the role of the trial court at the conclusion of the trial is to find the facts and state conclusions of law." Curtis v. Finneran, 83 N.J. 563, 569 (1980), citing R. 1:7-4.

Further, a judge's findings of fact in support of any conclusion reached must be specific. The trial judge must avoid merely reciting each party's contentions and following them with a conclusion. Ibid. "Naked conclusions do not satisfy the purpose of R. 1:7-4. Rather, the trial court must state clearly its factual findings and correlate them with the relevant legal conclusions." Id. at 570. The judge's mandate is to be "explicit in his recital of evidence and in his factual findings and [he] must . . . correlate them to his legal conclusions. . . ." Reiser v. Simon, 63 N.J. Super. 297, 300 (App. Div. 1960).

In Barnett & Herenchak v. Dep't of Transp., 276 N.J. Super. 465 (App. Div. 1994), when the Law Division did not make sufficient factual findings in support of its decision, we ruled that the trial court failed to resolve the conflict when it merely held that certain pieces of evidence were "ineffective on the facts presented", and went no further. Id. at 471. Because of the lack of fact finding, we remanded for reconsideration and appropriate fact finding by the Law Division. Id. at 473.

In the present case, the trial court judge dismissed both parties' claims without resolving the conflicting contentions. He did not resolve the material disputes of fact, and failed to satisfy the command of Curtis, that a judge must find the facts and make conclusions of law, not simply catalog the facts. Curtis, supra, 83 N.J. at 569-570. The judge here made no determination of which witnesses were credible. Several times in his opinion the judge recognized factual disputes between the parties, but did nothing to resolve them. For instance, regarding an initial document between the parties labeled "proposal", the judge stated:

The parties allegedly memorialized their preliminary negotiation in a proposal dated June 21, 2002 . . . (h)owever, defendant denies that the June 2002 proposal was any sort of contract between the parties. And that . . . defendant, despite appearances to the contrary, denies Vigay Vaghani ever signed the proposal.

In these statements, the judge stated the opposing views of the parties; however, he failed to go any further. Rather, his analysis of these facts ends when he simply acknowledges the conflicting claims. The lack of factual findings occurs again when the judge discusses the postdated checks that were given to the plaintiff by the defendant on the date of the signing of the contract:

According to plaintiff, the second check was postdated to ensure that the software upgrades were functioning properly before authorizing payment. . . . In contrast, defendant asserts that the reason for issuing two postdated checks was simply due to financing uses with defendant's bank.

The record contains numerous additional instances of inadequate fact finding. Whether the contractual insurance requirement was waived, whether fully functioning software was ever completed, whether the new software should or should not have been registered in Mr. Patolia's name, and whether a password required to complete the upgrade was ever given to defendant are opposing factual contentions of the parties that were never resolved by the judge's findings. Regarding the password the judge stated:

[T]he failure to provide the alleged password is clearly in dispute. Most significantly, defendant cannot point to one writing wherein the password was requested. One would assume that in a matter of this nature, where relations between the parties had at least turned toward the prospect of litigation, requests surrounding the subject of this dispute would be placed in writing.

On the issue of whether software upgrades were ever provided, the judge noted the dispute in testimony but never resolved the conflicting claims:

Further, there is a significant dispute as to whether fully functional software upgrades were ever provided. This dispute essentially pits Mr. Patolia's word against the Vaghanis and Mr. Thakkar. . . . [D]efendant's basic premise that it was shown incomplete, demonstration versions of the software is entirely plausible.

Not only did the trial judge fail to resolve disputed facts, but he also failed to analyze the legal significance of those facts which were not in dispute.

For example, during trial, Patolia admitted that, in violation of his contract with defendant, he never purchased or provided the "new hardware", never "prescribed" the wiring, never provided the $1,000,000 product liability insurance, and never provided the $5,000,000 premises liability insurance certificate.

Despite these admitted violations of the contract, the judge failed to apply the law to these facts. He made no findings as to whether Patolia and plaintiff had breached the contract with defendant, notwithstanding the fact that Patolia admitted to breaching it.

After recognizing the admissions by Patolia and discussing all of the factual contentions, but without making any factual findings or any credibility determinations, the judge dismissed the claims of both sides in view of the fact, that "neither plaintiff nor defendant has established their claims by a preponderance of the evidence."

Here, the claims of the opposing parties are in direct opposition to each other. Our review of the record persuades us that sufficient facts were available for the trier of fact to have made an informed decision. Had proper credibility determinations and adequate factual findings been made, the court might have determined that one side or the other had met its burden, rather than dismissing both the complaint and the counterclaim. While it is certainly theoretically possible for neither party to have sustained its burden of proof, in this case where the complaint and the counterclaim were essentially the converse of each other, the failure to have rendered judgment in favor of either one of the parties is suggestive of inadequate fact finding.

Plaintiff seeks a new trial. That is not necessary. There is substantial evidence in the record to allow the judge to make credibility determinations and adequate factual findings without the need for a new trial.

We reverse and remand with instructions that the trial court resolve the contradictory contentions. The court is directed to find the facts and make conclusions of law based on the evidence adduced at trial.

We do not retain jurisdiction.

 

(continued)

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A-0747-05T1

October 24, 2006