COSIMO C. PEDICINI v. CEPS CONSTRUCTION CO., INC.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-5475-03T35475-03T3

COSIMO C. PEDICINI,

Plaintiff-Appellant,

v.

CEPS CONSTRUCTION CO., INC.,

EMIL J. SPADONE, JR.,

FRANK S. DEWEY, and

SUNAN, INC.,

Defendants-Counterclaimants-

Third Party Plaintiffs-

Respondents.

________________________________________________________________

 

Submitted September 28, 2005 - Decided

Before Judges Fall, Parker and Levy.

On appeal from Superior Court of New Jersey, Law Division, Hunterdon County, Docket No. C-14016-02.

Broderick, Newmark & Grather, attorneys for appellant (Alan J. Baldwin, on the brief).

Berman Rosenbach, attorneys for respondents CEPS Construction Co., Inc. and Emil J. Spadone, Jr. (William J. Berman, on the brief).

Lewis & McKenna, attorneys for respondents Frank S. Dewey and Sunan, Inc. (Duncan G. Cameron and James M. McMahon, on the brief).

PER CURIAM

Plaintiff Cosimo Pedicini appeals from a grant of summary judgment dismissing the complaint in which he sought to enforce an alleged oral contract for the sale of his interest in CEPS Construction Co., Inc. (CEPS) to defendants Emil Spadone, Jr. and Frank Dewey and alleged minority shareholder oppression by Spadone and Dewey. Plaintiff also appeals from denial of his motion for leave to amend the complaint to add claims for indemnification and compensatory and punitive damages.

Plaintiff, Spadone, and Dewey were co-equal owners and officers of CEPS. Plaintiff claimed that during a telephone conference on February 14, 2002, Spadone and Dewey agreed to purchase his interest in CEPS for $450,000. Dewey did not participate in the conference call, however, and plaintiff maintains that Walter J. Berman, Esq., who was Spadone's personal lawyer, participated in the conference call as Dewey's agent. Richard Salsburg, Esq., who represented CEPS, also participated in the telephone conference with Spadone, Berman and plaintiff.

The background facts that led to this dispute are as follows. CEPS, a construction company, was incorporated in New Jersey in 1985. Plaintiff and Spadone were the sole shareholders from 1985 to 1996, during which time they conducted business as equal owners. At the same time, plaintiff and Spadone were also employed by the Spiniello Construction Co., Inc. (Spiniello). Plaintiff began his employment with Spiniello in 1968 and eventually became its Chief Operations Officer. Spadone began working for Spiniello in 1959 and became its General Superintendent. Dewey worked for Spiniello, beginning in 1974, eventually becoming its Chief Estimator and East Coast Area Manager. CEPS, however, was a direct competitor of Spiniello and, despite plaintiff's, Spadone's and Dewey's assurances that CEPS would not interfere with Spiniello's projects, Spiniello terminated the three of them on January 19, 1996.

Prior to their termination, plaintiff and Spadone amended their original CEPS shareholder agreement on December 1, 1996 to admit Dewey as an equal co-owner. One provision of the agreement prohibited the transfer of any shareholder's interest without prior written consent of the other two and required any shareholder intending to transfer his interest in CEPS to provide the remaining shareholders with written notice, thereby triggering a thirty-day period during which the other shareholders could elect to purchase the shares. The agreement provided that the restrictions on the transfer of a shareholder's interest terminated upon the "voluntary agreement of all parties who are then bound by the terms of this Agreement." When Dewey joined CEPS he was also a corporate officer and board member of Sunan, Inc., a construction company controlled by his family.

On November 19, 1999, Spiniello filed an action in federal district court against plaintiff, Spadone, Dewey, CEPS and eventually Sunan, alleging that while they were employed by Spiniello they had engaged in a conspiracy and committed multiple acts of fraud to the financial detriment of Spiniello. The complaint sought treble compensatory damages under federal and state RICO statutes and punitive damages for the fraud claims.

Initially, plaintiff, Spadone, Dewey and CEPS were represented by Richard Salsburg, Esq. and Avrom Gold, Esq. in defending the Spiniello case. Subsequently, however, Dewey and Sunan substituted Duncan Cameron, Esq. of the Lewis & McKenna law firm as defense counsel.

Plaintiff claims that from the beginning of the Spiniello litigation he discussed the possibility of selling his interest in CEPS with Spadone and Dewey. By the time the parties were negotiating a settlement of the Spiniello case, plaintiff told Spadone and Dewey that he wanted to sell his shares in CEPS as part of the Spiniello settlement. Dewey testified in his deposition that he was aware of discussions between plaintiff and Spadone for the sale of plaintiff's interest in CEPS but he had just spent a lot of money on the Spiniello lawsuit and "had no intention of getting another lawyer or getting involved in another lawsuit." Dewey intended to wait until a "proposal came together" and then send it to a lawyer.

Cameron, who represented Dewey in the Spiniello case, certified that Dewey had contacted him in late February or early March 2002 and said that plaintiff and Spadone were discussing the sale of plaintiff's CEPS shares. Cameron certified that he and Dewey agreed that their "participation in the discussions between Mr. Spadone and [plaintiff] would wait until such time as we were contacted by either" of them.

On February 12, 2002, plaintiff and Spadone had a private conversation concerning the sale of plaintiff's interest in the company. According to plaintiff, the two had just learned from Salsburg, the attorney representing them in the Spiniello litigation, that the case would be settled. When plaintiff said he "wanted to bring the whole thing to a conclusion" and sell his interest in CEPS, Spadone said that he and Dewey wanted to continue operating the business. At that point, plaintiff claims that Spadone asked how much plaintiff wanted and plaintiff told him $450,000, whereupon Spadone telephoned Dewey and spoke privately with him. According to plaintiff, Spadone reported that Dewey "had a problem with the number." Plaintiff maintains that Spadone then said, "Let's settle the Spiniello thing and we'll pay you $450,000 for your shares in CEPS," to which plaintiff replied "Wait a minute, you said Dewey is not in agreement." Spadone allegedly replied, "That's not a problem" because if Dewey did not agree to the $450,000 sale price, Spadone would mortgage his house and pay plaintiff the full amount. Plaintiff claims the two shook hands and he believed that he had "an agreement individually with Mr. Spadone" for the sale of his shares in CEPS for $450,000 "[c]oincident with the Spiniello settlement."

After his conversation with Spadone, plaintiff spoke to Salsburg, and authorized him to settle the Spiniello case for $1,200,000. At the same time, plaintiff claims he told Salsburg about the deal to sell his shares in CEPS and that "payment was going to be made at the same time the Spiniello agreement was finalized."

On February 14, 2002, plaintiff, Spadone, Salsburg and Berman had a telephone conference in which they discussed the proposed settlement of the Spiniello case and the sale of plaintiff's shares in CEPS. At the outset, Salsburg disclaimed representation of plaintiff, Spadone or Dewey in the stock sale, indicating that his representation of plaintiff, Spadone and CEPS in the Spiniello case created a conflict of interest for him in the stock sale. Salsburg said he participated in the four-way conference as a "moderator-mediator" to facilitate a resolution of the stock sale so that the Spiniello case could be settled. Berman certified that he represented Spadone, but not Dewey, during the stock sale negotiations.

Plaintiff testified in his deposition, however, that during the telephone conference Berman said he "could speak for Mr. Spadone and his wife and Mr. Dewey but . . . could not speak for Mr. Dewey's wife." Later, plaintiff indicated that while he "believe[d]" that Berman stated he represented Dewey, plaintiff could not "remember specifically" whether Berman had made such a statement. Still later, plaintiff certified that during the telephone conference, "Berman stated that he could not speak for Suzi Dewey. By specifically disclaiming any representation of Mrs. Dewey, Mr. Berman implicitly informed us that he was speaking for Mr. Dewey." Thus, plaintiff's assertions regarding Berman's representation of Dewey became less certain as the litigation progressed.

Salsburg testified that during the conference call Berman did not explicitly state that he was representing Dewey but, because Berman negotiated contract terms that depended on Dewey's assent and cooperation, Salsburg "believed" that Berman represented Dewey's interest, but that he

thought clearly [during the telephone conference] that Spadone had full authority and was speaking for [CEPS] and Dewey, and it was inconceivable to me that we would have that conversation, and the nature of that conversation without Spadone having full authority.

[Emphasis added.]

Dewey certified that "[a]t no time did I retain William Berman as my counsel prior to the commencement of this [present legal] action."

Plaintiff testified that during the telephone conference, "[a] million two was agreed upon by Mr. Spadone and [me] and it was based upon my sale of the shares in CEPS to Mr. Spadone." He testified further:

It was my understanding . . . at the close of the telephone conversation, it was an agreement that CEPS would purchase my shares, and because there was a time period involved, I wanted some guarantees, personal guarantees, and I was going to get compensated over a two-year period $450,000 with six percent interest, that I would get personal guarantees from Mr. Spadone and his wife and Mr. Dewey.

Plaintiff claimed that after the telephone conference he had two enforceable agreements for the sale of his shares in CEPS: the oral agreement with Spadone that was entered into on February 12, 2002 and the oral agreement that was entered into during the conference call on February 14, 2002. According to plaintiff, he had accepted both offers.

The day after the telephone conference, February 15, 2002, Berman sent a letter to plaintiff stating that Salsburg had negotiated a settlement of the Spiniello case. In that letter, Berman "memorialize[d] the material terms of the settlement discussed yesterday regarding the sale of your ownership interest in CEPS." Salsburg certified that Berman's letter "accurately memorialized the agreement reached" during the telephone conference. Berman sent a copy of the letter to Dewey, as he did with all of the correspondence regarding the stock sale. The record also indicates that Berman placed telephone calls to Dewey at CEPS. Plaintiff maintains that the correspondence and telephone records are proof that Berman communicated with Dewey and had actual authority to represent Dewey's interests in the telephone conference and stock sale negotiations.

Dewey certified, however, that he did not review any documents copied to him by Berman because he viewed such documents as a "mere formality" and because he had separately settled Spiniello's claims against him. Dewey further certified that Berman's telephone calls to CEPS were related to Berman's efforts to contact Spadone, not him.

Berman certified that he copied documents to Dewey as a matter of course because Dewey was CEPS's vice-president. Berman also certified that any telephone contacts he had with Dewey were either attempts to reach Spadone or "brief conversations . . . because [Dewey] was in charge of the operations of my client CEPS."

In his letter to plaintiff, Berman advised plaintiff to seek independent legal counsel for the stock sale. Plaintiff did so, retaining attorney Dore R. Beinhaker, Esq. on February 18, 2003. Nevertheless, Beinhaker later certified that "[a]t no time prior to April 29, 2002 did Mr. Dewey, or anyone on his behalf, step forward and disavow the agreement to buy out [plaintiff's] interest . . . or inform me that Mr. Berman did not represent Mr. Dewey." Beinhaker and Berman exchanged numerous letters, faxes and telephone calls regarding the terms to be included in the stock sale agreement. These communications, however, do not shed light on the key issue before us: whether Berman represented Dewey and thereby had the authority to bind Dewey to the oral agreement.

In the two months following Berman's February 15, 2002 letter memorializing the agreement reached in the telephone conference, Berman prepared four drafts of the proposed stock sale agreement. Each draft stated in a prefatory clause that "Dewey and Spadone have been represented by and received advice from William J. Berman, Esq." Berman certified, however, that this language "was an error from the start and simply got carried along draft by draft as a result of word processing operations." Each of the proposed agreements also included a clause specifying that the "effective date of this Agreement shall be the date all parties execute the Agreement. . . . In the event that the Agreement is not fully executed, then this Agreement shall, in all respects, be null and void."

Plaintiff executed the draft agreement dated March 8, 2002 during the second week of March: "[t]hereafter there were at least two scheduled closings. Each time I prepared to go to Mr. Berman's office to deliver the executed documents and close the transaction. Each time the closing was cancelled by Mr. Berman. Beinhaker testified that he did not recall informing Berman that plaintiff had signed a draft of the agreement. Nevertheless, he later certified that "several closings" had been scheduled to complete the stock sale deal but "each [scheduled closing] was adjourned by Mr. Berman due to the unavailability of Mr. Dewey, Mr. Spadone or Mr. Berman." Spadone and Dewey never executed the agreement.

On March 13, 2002, CEPS's accountants issued a financial statement for 2001 containing a notation that the information contained therein was "the representation of the owners of CEPS." A note to the financial statement stated that CEPS "has tentatively agreed to redeem all the corporate stock owned by [plaintiff] for $450,000 to be paid over a (2) year period commencing from the date of signing, accruing interest at 6% per annum." Plaintiff certified, however, that "Dewey failed to forward to me the CEPS 2001 Financial Statement which was sent out in March of 2002. This is consistent with my belief that we had a binding agreement to sell my shares in CEPS."

The extensive record before us contains nothing to indicate that plaintiff and Dewey ever communicated directly or indirectly about the stock sale between February 12, 2002, when Spadone informed plaintiff at their private meeting that Dewey objected to the $450,000 purchase price, and April 29, 2002, when Berman informed plaintiff that Dewey objected to the terms of the proposed agreement.

On March 25, 2002, plaintiff approved the extension of his personal guarantee for loan funds from Valley National Bank to CEPS, because Beinhaker informed him that he was contractually obligated to do so under the stock sale agreement.

The Spiniello case settled on April 11, 2002 with the various parties executing three separate agreements. First, plaintiff and Spadone agreed between themselves to pay $600,000 each to Spiniello, satisfying the settlement amount of $1,200,000. Second, plaintiff, Spadone and Dewey entered into a "Unanimous Consent" agreement in their capacities as shareholders and directors of CEPS, authorizing CEPS to enter into the settlement agreement with Spiniello. And third, Spiniello, plaintiff, Spadone and CEPS agreed to a Stipulation of Dismissal with prejudice, disposing of the Spiniello litigation.

Plaintiff later certified that he "would not have signed the Spiniello settlement agreement nor would he have made the initial $150,000 payment unless he believed that the closing of the sale of his interest in CEPS was scheduled and imminent." Plaintiff voluntarily settled the Spiniello case, however, without concluding the stock sale.

On April 29, 2002, Berman sent Beinhaker a letter stating, "I have received information from Frank S. Dewey which leads me to conclude that the proposed terms which have been discussed between this office on behalf of Mr. Spadone and your office on behalf of [plaintiff] must be addressed so that the three owners are in agreement with the terms of the Redemption Agreement." According to Berman, CEPS's financial condition had deteriorated since the stock sale agreement was memorialized on February 15, 2002, leaving CEPS with a negative net value. As a result, Berman indicated that he had been "authorized to provide [plaintiff] with an offer to purchase his interest in the company for the total sum of $200,000." On February 27, 2002, plaintiff rejected that offer and demanded that a receiver be appointed or an inspection be made of the CEPS accounts.

Almost two months later, on May 1, 2002, Berman wrote to Beinhaker stating that he was "very disappointed in [plaintiff's] position with respect to our settlement offer. To reject the offer out of hand is clearly something that should be reconsidered." Berman invited Beinhaker and plaintiff "to review the books and records at any time. In fact, the door has been and continues to be open to [plaintiff], however, he has chosen not to participate in the business for well over a year." The next day, May 2, 2002, Beinhaker advised Berman that plaintiff wanted $450,000 for his interest or he would begin a lawsuit to liquidate the company.

On May 13, 2002, Berman sent a fax to Beinhaker, with copies to Spadone and Salsburg, asking if plaintiff intended to pay his share of the Spiniello settlement and added:

Also, please let me know if [plaintiff] will provide us with a counteroffer to our settlement offer of $225,000. If you believe he is and you believe a meeting with Mr. Salsburg will be helpful, please let me know that as well. Maybe you can just provide me with his counteroffer and we can resolve that matter as well. I look forward to hearing from you.

On May 15, 2002, plaintiff responded directly to Berman's fax stating that he intended "to tender his $450,000 in accordance with the settlement agreement." He further stated that his position respecting the sale of his stock in CEPS "is that the parties have entered into a final agreement with regard to [the] matter (the consideration being $450,000) and Mr. Spadone and Mr. Dewey have breached [the] agreement." Plaintiff filed the complaint commencing this litigation the same day.

Notwithstanding Berman's representation on April 29, 2002 that CEPS now had a negative net value, the record before us indicates that Dewey received a $20,000 bonus in January 2002. On April 22 and May 7, 2002, CEPS borrowed $100,000 from a private lender with Spadone and Dewey personally guarantying that loan. The notes were paid by CEPS on July 22 and August 7, 2002. On May 4, 2002, CEPS paid Spadone's wife $99,999, and on May 16 and June 13, 2002, CEPS paid Spadone $15,000 and $25,000, respectively. The reasons for these payments are not clear from the record. Plaintiff's argument with respect to his status as an oppressed minority shareholder arises out of these payments.

In his complaint, plaintiff sought a declaration that the oral agreement was enforceable and that defendants had breached the agreement. He alleged that Spadone and Dewey had been negligent, careless and fraudulent in their management of CEPS and that Sunan, Dewey's family corporation, had been unjustly enriched as a result of Spadone's and Dewey's mismanagement of CEPS. Plaintiff claimed that Spadone and Dewey had abused their authority as shareholders and corporate officers and had acted oppressively and unfairly toward him. He sought the appointment of an independent accountant to review CEPS records, the appointment of a custodian to sell CEPS assets, judicial dissolution of the company, and a directive that Spadone and Dewey repay to CEPS amounts lost as a result of their "intentional wrongful acts and negligence." Additionally, plaintiff sought to compel Sunan to pay the amount of "unjust enrichment" gained at the expense of CEPS.

Defendants denied the allegations and filed a counterclaim against plaintiff for breach of contract, tortious interference with prospective economic advantage, conspiracy and breach of plaintiff's duty of loyalty to CEPS and his fellow shareholders.

In early 2003, defendants moved for partial summary judgment, seeking the dismissal of plaintiff's demand to enforce the alleged oral agreement. Plaintiff cross-moved for leave to amend the complaint to add Spadone's wife as a defendant. After hearing argument on the cross-motions, the motion judge denied defendants' motion, stating that "it does appear that there is a factual dispute as to whether there was at the very least an oral agreement made on which plaintiff relied and [because of] which actions were taken by both sides on this [oral] agreement." Plaintiff's motion for leave to amend the complaint was denied.

On February 12, 2004, Dewey and Sunan moved for summary judgment to dismiss the complaint against them. On February 13, Spadone and CEPS filed their motion for summary judgment to dismiss the complaint against them. Plaintiff cross-moved on March 10, 2004, again seeking leave to amend the complaint, this time to allege that defendants acted against him with "actual malice," for which he sought to recover compensatory and punitive damages. He also sought to add a claim for indemnification by defendants in the then-pending Gulf litigation.

These cross-motions were argued on April 16, 2004 before a different judge. On May 3, 2004, the judge rendered a written decision in which she granted defendants' motions for summary judgment dismissing the complaint with prejudice. She correctly determined that the pivotal question was whether Berman had either actual or apparent authority to act on behalf of Dewey and that, absent such authority, there could be no oral agreement involving Dewey. In reviewing the record, however, she found no support for a finding that Berman had actual or apparent authority. She also rejected plaintiff's argument that he had a statutory claim for relief as an oppressed minority shareholder, noting that such claims were "not raised in the pleadings or at any time prior to this motion and there is nothing in the record to support such claims." Plaintiff's cross-motion for leave to amend the complaint was denied, but the judge stated that plaintiff "may seek the same relief as part of plaintiff's action in the Federal Court" in the Gulf case. On May 10, 2004, plaintiff moved for reconsideration. That motion was denied on June 2, 2004.

In this appeal, plaintiff argues (1) defendants are estopped to deny the existence of a binding contract; (2) Berman had authority to act as agent for Dewey and Spadone; (3) plaintiff produced sufficient evidence to support a finding that he is an oppressed minority shareholder; and (4) plaintiff should be permitted to amend his complaint to include Sandra Spadone as a defendant and add further claims for damages.

I.

Plaintiff first argues that defendants are estopped from denying the existence of a contract binding on Spadone and Dewey because Berman conducted the negotiations, drafted the agreement and provided Dewey with copies of all the documents exchanged among the parties, thereby operating with apparent authority to bind Dewey. Moreover, he maintains that Spadone and Dewey knew that plaintiff entered the Spiniello agreement based upon his understanding that his CEPS shares would be purchased for $450,000, requiring him to expend only $150,000 of his own funds for the settlement.

In her written decision, the motion judge recognized that plaintiff's estoppel claim rested upon proof that Berman had either actual or apparent authority to act on Dewey's behalf during the telephone conference. The judge determined that plaintiff failed to present sufficient proof of such authority to withstand defendants' motions for summary judgment and dismissed the claim with prejudice. We agree.

Summary judgment is appropriate

[I]f the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law. An issue of 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 therefrom favoring the non-moving party, would require submission of the issue to the trier of fact. The court shall find the facts and state its conclusions in accordance with R. 1:7-4.

[R. 4:46-2(c).]

We are bound by the same standard as the trial court in reviewing a grant of summary judgment. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998).

First, we decide "whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational fact finder to resolve the alleged disputed issue in favor of the non-moving party." Then, "if there exists a single unavoidable resolution of the alleged disputed issue of fact, that issue should be considered insufficient to constitute a 'genuine' issue of material fact for purposes of" summary judgment.

[Groen, Laveson, Goldberg & Rubenstone v. Kancher, 362 N.J. Super. 350, 358 (App. Div.) (quoting Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995)), certif. denied, 178 N.J. 35 (2003).]

"[W]e must then determine whether the Law Division's legal conclusions [are] correct," and if the evidence "'is so one-sided that one party must prevail as a matter of law,'" we must affirm the grant of summary judgment. Ibid. (quoting Brill, supra, 142 N.J. at 540). In considering whether Berman exercised apparent authority, we must focus on Dewey's conduct that allegedly gave rise to plaintiff's perception of Berman's authority to act on Dewey's behalf. "Apparent authority must be established clearly and convincingly by the actions of the principal[], not of the alleged agent." Busciglio v. DellaFave, 366 N.J. Super. 135, 140 (App. Div. 2004); Lobiondo v. O'Callaghan, 357 N.J. Super. 488, 497 (App. Div.), certif. denied, 177 N.J. 224 (2003).

As the motion judge noted, Dewey simply did not engage in any conduct to suggest that Berman had authority to act on his behalf. There is nothing in the record to demonstrate that Dewey played any part in drafting the stock sale agreement or that he participated in the negotiations that Berman apparently conducted. The record indicates that Berman represented Spadone, that Dewey was represented by other counsel and that on at least two occasions plaintiff was advised that Dewey objected to the $450,000 purchase price for plaintiff's interest in CEPS.

Plaintiff maintains that Busciglio requires a plenary hearing in order to determine whether an agent has apparent authority. Busciglio, supra, 366 N.J. at 140-41. In Busciglio, however, the issue of apparent authority had already been resolved in the plaintiff's favor, and the plenary hearing was necessary only to determine the extent of the agent's authority. Id. at 138-41. Here, the question is not the extent of Berman's authority, but whether he acted under any authority at all. Given the circumstances here where plaintiff has provided no evidence whatsoever that Dewey's conduct gave rise to apparent or actual authority for Berman to act on his behalf, no plenary hearing is necessary.

Plaintiff argues further that Berman had actual authority to bind Dewey to the oral agreement purportedly reached in the February 14, 2002 telephone conference. To support his position, plaintiff again points to the correspondence and draft documents prepared by Berman with copies sent to Dewey. That correspondence and documentation, however, proves only Berman's role in the contract discussions, not Dewey's.

Plaintiff also points to the "numerous phone records" indicating that Berman called Dewey at CEPS between February 13 and April 12, 2002. According to plaintiff, Berman telephoned Dewey fifteen times and Dewey telephoned Berman's office three times.

We reject plaintiff's argument, as did the motion judge, because plaintiff failed to present any evidence to demonstrate that the telephone conversations between Berman and Dewey had anything to do with the stock sale negotiations. Plaintiff's argument is merely conjecture and speculation. The telephone records, therefore, do not raise an issue of fact sufficient to avoid summary judgment.

Finally, with respect to the question of whether Berman had apparent or actual authority to bind Dewey, we note, as did the motion judge, plaintiff's misplaced reliance on Dewey's silence between February 12 and April 29, 2002. Given plaintiff's knowledge that Dewey's consent to the stock sale was necessary under the shareholder agreement, we find it remarkable that plaintiff, himself, never communicated directly with Dewey. We have found nothing in the extensive record before us to indicate Dewey's participation in the stock sale negotiations, except for Spadone's and Berman's advice to plaintiff that Dewey objected to the $450,000 sale price.

We have carefully considered the record before us in light of plaintiff's arguments and we are satisfied that summary judgment dismissing plaintiff's claims based upon Berman's apparent or actual authority was properly granted. Brill, supra, 142 N.J. at 540.

II.

Plaintiff next argues that he "produced sufficient evidence to support a finding that he is an oppressed minority shareholder" within the meaning of N.J.S.A. 14A:12-7(1). He maintains that the motion judge erred in determining that he failed to assert a claim as an oppressed minority shareholder and that he failed to present sufficient proofs of that claim to withstand defendants' motions for summary judgment. On this point, we agree.

While plaintiff did not specifically cite N.J.S.A. 14A:12-7(1)(a), (b) and (c), the complaint closely tracked the language of the statute. Moreover, in his application for an order to show cause, plaintiff clearly indicated that he was seeking relief pursuant to the statute. Both Spadone and Berman recognized in their arguments on the summary judgment motions that the complaint included plaintiff's oppressed minority shareholder claim.

In her written decision, the motion judge refused to address plaintiff's oppressed minority shareholder claims, stating that "these claims were not raised in the pleadings or at any time prior to this motion and there is nothing in the record to support such claims." In denying plaintiff's motion for reconsideration, the judge stated that plaintiff "[m]erely plucked[ed] language from one of thousands of laws without referencing the law" and found that plaintiff had not adequately pleaded his oppressed minority shareholder claim. We disagree.

In our view, plaintiff sufficiently alleged the claim. Moreover, both Spadone and Berman recognized that plaintiff had pleaded the claim, indicating that it was sufficiently stated in the complaint to put them on notice.

The motion judge's dismissal of these claims is tantamount to a ruling that plaintiff failed to state a claim within the ambit of R. 4:6-2(e).

In reviewing a complaint dismissed under Rule 4:6-2(e) our inquiry is limited to examining the legal sufficiency of the fact alleged on the face of the complaint. However, a reviewing court "searches the complaint in depth and with liberality to ascertain whether the fundament of a cause of action may be gleaned even from an obscure statement of claim, opportunity being given to amend if necessary." At this preliminary stage of the litigation the Court is not concerned with the ability of plaintiffs to prove the allegation contained in the complaint. For purposes of analysis plaintiffs are entitled to every reasonable inference of fact. The examination of a complaint's allegations of fact required by the aforestated principles should be one that is at once painstaking and undertaken with a generous and hospitable approach.

[Printing Mart-Morristown v. Sharp Elec. Corp., 116 N.J. 739, 746 (1989) (citations omitted).]

Although plaintiff did not specifically cite the statute, he did quote the appropriate language and set forth sufficient allegations to state a claim and avoid dismissal pursuant to R. 4:6-2(e).

We also disagree with the motion judge's determination that plaintiff failed to present sufficient evidence of his claim to withstand the motions for summary judgment. The record demonstrates that CEPS paid Dewey, Spadone and Spadone's wife large sums of money when CEPS was apparently facing financial difficulties and when CEPS was failing to perform its contractual obligations, which led to the Gulf lawsuit, in which plaintiff and his wife were named as defendants.

The motion judge seemed to believe that plaintiff had to demonstrate that CEPS's payments to Dewey, Spadone and Spadone's wife were unlawful in order to sustain an oppressed minority shareholder claim. That is not correct. To establish an oppressed minority shareholder claim, plaintiff need only show that the payments tended to frustrate his reasonable expectations as a shareholder in the company. Brenner v. Berkowitz, 134 N.J. 488, 506 (1993) (stating that "[o]ppression has been defined as frustrating a shareholder's reasonable expectations").

The payments made to Spadone, Spadone's wife and Dewey, together with the non-performance of contractual obligations, do not fall within the reasonable expectations of a shareholder under the circumstances presented. We are satisfied, therefore, that plaintiff did present sufficient proofs to withstand defendants' motions for summary judgment on the oppressed minority shareholder claim. Brill, supra, 142 N.J. at 540.

III.

Plaintiff's final argument, that both motion judges erred in denying his motions for leave to amend the complaint, is without merit.

The first motion judge denied plaintiff's motion to include Sandra Spadone as a defendant on the ground that the motion was untimely, plaintiff provided no reasonable excuse for the delay and failed to include in his motion papers a copy of the proposed amended complaint as required by R. 4:9-1. Plaintiff did not include that order in his notice of appeal, however, and "only the judgments or orders or parts thereof designated in the notice of appeal . . . are subject to the appeal process and review." Pressler, Current N.J. Court Rules, comment 6.1 on R. 2:5-1 (2005). Although we need not address plaintiff's arguments on this issue, we are satisfied that the judge was correct in denying that motion for the reasons stated on the record. R. 2:11-3(e)(1)(A).

Plaintiff did include in his notice of appeal the second order denying his motion to add an indemnification claim for any liability he and his wife may incur in the Gulf case and a demand for compensatory and punitive damages. With respect to the indemnification claim, the motion judge appropriately noted that plaintiff could seek indemnification in the Gulf litigation still pending in federal court, rather than pursue a separate claim in state court.

The judge denied plaintiff's motion to add compensatory and punitive damages to the complaint because she had dismissed the action and "there [was] no Complaint remaining to be amended." In view of our reversal of the grant of summary judgment dismissing the oppressed minority shareholder claims, we reverse that portion of the June 2, 2004 order to allow plaintiff to amend the complaint seeking compensatory and punitive damages on the oppressed minority shareholder claims.

To summarize our decision, the motion judge's grant of summary judgment dismissing plaintiff's claims respecting the alleged verbal agreement and Berman's apparent or actual authority to bind Dewey to the agreement is affirmed. The grant of summary judgment dismissing plaintiff's oppressed minority shareholder claims is reversed and remanded for further proceedings in accordance with this opinion. Denial of plaintiff's motion for leave to amend the complaint to add compensatory and punitive damage demands for the oppressed minority shareholder claims is reversed.

Affirmed in part; reversed in part and remanded.

 

Prior to entering the shareholder's agreement, plaintiff and Spadone executed an indemnification agreement on October 31, 1996 under which they agreed to hold Dewey harmless against any and all claims involving their activities as owners and operators of CEPS prior to January 1, 1996.

Dewey asserted cross-claims for indemnification based upon the agreement he had entered into with plaintiff and Spadone in October 1996, claiming that the tortious activities alleged by Spiniello occurred before January 1996. On February 8, 2001, Spiniello, Dewey and Sunan executed a Stipulation of Dismissal of Spiniello's claims against Dewey and Sunan. The Spiniello case continued against plaintiff, Spadone and CEPS.

In a letter dated April 11, 2002, Spadone confirmed his agreement with plaintiff that they would each pay $150,000 upon signing the settlement agreement and $450,000 in forty-five days to satisfy their obligations to Spiniello.

The settlement agreement required CEPS to change its corporate name. The company is now known as Centriline Construction Company, Inc.

The financial statement issued by CEPS's accountants a few weeks earlier on March 13, 2002, however, indicated that as of September 31, 2001, CEPS had an accumulated deficit of only $120,082 -- $17,075 less than the accumulated deficit at the beginning of 2001. That financial statement also showed that as of September 31, 2001, the total shareholders' equity amounted to $434,918.

On November 18, 2003, Gulf Insurance Company filed a complaint in the federal district court alleging that CEPS failed to perform work under several construction contracts and that the insurer had been obligated to make payments under six performance bonds that it had issued in favor of CEPS. Three of those bonds were issued after plaintiff filed his complaint against CEPS and the individual defendants. Plaintiff and his wife were named as defendants in the Gulf suit and plaintiff includes that claim in his oppressed minority shareholder claims.

Although plaintiff did not expressly cite N.J.S.A. 14A:12-7(1) as the basis of his claim of corporate oppression, the language in the complaint mirrors that of the statute.

Defendants also initiated a third party complaint against plaintiff's wife, alleging that she and plaintiff breached an agreement to execute necessary financial documents for CEPS and that she engaged in a conspiracy with plaintiff to cause CEPS to become insolvent. This claim was later severed.

(continued)

(continued)

30

A-5475-03T3

December 13, 2005