PHIL BESLER v. RICHARD COLUCCIO

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2213-09T2

PHIL BESLER, a/k/a

PHILIP A. BESLER,

Plaintiff-Appellant,

v.

RICHARD COLUCCIO, an Individual,

JAMES A. D'ANGELO, JR., an

Individual, JAMES A D'ANGELO

CONSTRUCTION, INC., a Pennsylvania

Business Corporation, and JAD JR., INC.,

a Pennsylvania Business Corporation,

Defendants,

and

HORSESHOE BEND, LLC, a New Jersey

Limited Liability Company,

FRENCHTOWN RUN, LLC, a New Jersey

Limited Liability Company,

Defendants-Respondents.

________________________________________________________________

March 23, 2011

Argued October 26, 2010 - Decided

Before Judges Skillman, Yannotti and Espinosa.

On appeal from Superior Court of New Jersey, Law Division, Hunterdon County, Docket No. L-000178-09.

James P. Manahan argued the cause for appellant (Bernstein & Manahan, LLC, attorneys; Mr. Manahan, of counsel and on the brief).

Jeffrey A. Cohen argued the cause for respondents (Flaster/Greenberg, PC, attorneys; Mr. Cohen and Adam E. Gersh, on the brief).

PER CURIAM

Plaintiff Phil Besler appeals from an order granting summary judgment to defendants Horseshoe Bend, LLC (Horseshoe Bend) and Frenchtown Run, LLC (Frenchtown Run) (collectively, the entities), dismissing his claims against them, discharging a lis pendens on certain properties owned by those defendants, and denying his motion for summary judgment. We affirm.

In August 2003, plaintiff loaned $800,000 to defendant Richard Coluccio (the Besler loan). This amount was to be part of a total investment of $1.4 million for Coluccio and defendant James A. D'Angelo, Jr. to purchase a 50% interest in an entity that would purchase property for a new project. Besler previously loaned money to Coluccio and D'Angelo. Because one of those loans was not fully repaid, Besler did not want to loan the sum to D'Angelo but was willing to make a personal loan to Coluccio.

As part of this transaction, Coluccio executed a mortgage note (the Note) that identified the holder of the note as Besler and the maker of the note as Coluccio, a mortgage and security agreement between Richard Coluccio as mortgagor and Phil Besler as mortgagee (the Agreement), and a guaranty and suretyship agreement in which he personally guaranteed the loan. Coluccio executed each of these documents individually, with no indication that he was acting as an agent for any entity.

In the Agreement, Coluccio warranted that he "presently possesse[d] an unencumbered fee simple title to the Mortgaged Property" and "that this Mortgage is a valid and enforceable first lien on the Mortgaged Property . . . ." However, the Agreement stated that the purpose of the loan was "for acquisition of" the mortgaged property, and the description of the mortgaged property revealed the property was owned, not by Coluccio, but by Joseph and Susan Clinton. Coluccio never personally purchased the "Mortgaged Property" and the mortgage was never recorded.

Instead, approximately one and one-half years later, in January 2005, the mortgaged property was acquired by Horseshoe Bend and Frenchtown Run. In two transactions conducted on the same day, Horseshoe Bend acquired property for $5,765,295 (Horseshoe Bend property) and Frenchtown Run acquired property for $634,705 (Frenchtown Run property). The property was encumbered at the closing by a mortgage held by Wilmington Trust for $6.3 million.1

At the time, both Horseshoe Bend and Frenchtown Run were owned by three members: FCP Group, LLC (25% share); FCP Group, LP (25% share); and JAD, Jr., Inc. (JAD) (50% share). FCP Group, LLC and FCP Group, LP were owned solely by Frank C. Palopoli, Sr. and members of his immediate family.

Horseshoe Bend's operating agreement was executed on August 14, 2003.2 It was incorporated almost one year later, on July 1, 2004. Frenchtown Run's operating agreement was signed on January 3, 2005, and reflected identical ownership; it was incorporated on January 23, 2007, over three years after Besler's loan to Coluccio.

JAD was incorporated on October 24, 2003, approximately two months after Besler's loan, solely to invest in the Frenchtown Run Project. Coluccio gave the proceeds of the Besler loan to D'Angelo, JAD's sole shareholder, to fund the capital contribution of JAD into Horseshoe Bend and Frenchtown Run. However, Coluccio was later granted a fifty percent interest in JAD because he had raised the $1.4 million that permitted JAD to be an equal partner in the project, and eventually became 100% owner of JAD. The Besler loan of $800,000 was part of the $1.4 million investment.

Besler and Palopoli were each unaware of the other's involvement at the time of the Besler loan. Indeed, neither Coluccio nor D'Angelo ever told Palopoli about the Besler loan or mortgage.

The operating agreements for both Horseshoe Bend and Frenchtown Run provided that no member was authorized to encumber the assets of the company without the unanimous agreement of the respective members. Such unanimous consent was neither given nor sought for the Besler loan and mortgage.

Plaintiff filed a complaint against Coluccio, D'Angelo, D'Angelo Construction, Inc., Horseshoe Bend, LLC, and Frenchtown Run, LLC, that sought, among other relief, an equitable lien and mortgage against the premises owned by Horseshoe Bend and Frenchtown Run for the Besler loan. He simultaneously filed notices of lis pendens against the properties. He later filed an amended complaint that included defendant JAD. After pretrial discovery was completed, plaintiff and defendants Horseshoe Bend and Frenchtown Run moved for summary judgment. The court granted summary judgment to Horseshoe Bend and Frenchtown Run, dismissing the complaint against them, and discharged the notices of lis pendens. The court granted plaintiff an equitable lien against the interests of JAD or any of its owners and, following a proof hearing, entered default judgment against Coluccio, D'Angelo, and D'Angelo Construction, Inc. in the amount of $2,314,760.17.

In this appeal, plaintiff argues that the trial court erred in granting summary judgment to Horseshoe Bend and Frenchtown Run, contending genuine issues of material fact are disputed and the intent and credibility of the parties is at issue. In addition, he argues that the court erred in denying summary judgment to him.

When reviewing a grant of summary judgment, we employ the same standards used by the trial court, which grants summary judgment if the record shows "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." R. 4:46-2(c). Burnett v. Gloucester County Bd. of Chosen Freeholders, 409 N.J. Super. 219, 228 (App. Div. 2009); Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). First, we determine whether the moving party has demonstrated there are no genuine disputes as to material facts, and then we decide whether the motion judge's application of the law was correct. Atl. Mut. Ins. Co. v. Hillside Bottling Co., 387 N.J. Super. 224, 230-31, (App. Div.), certif. denied, 189 N.J. 104 (2006). In so doing, we view the evidence in a light most favorable to the non-moving party. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995). We accord no deference to the motion judge's conclusions on issues of law. Zabilowicz v. Kelsey, 200 N.J. 507, 512-13 (2009).

After carefully reviewing the record, briefs and arguments of counsel, we are satisfied that plaintiff's arguments regarding the denial of summary judgment to him, the dismissal of the complaint in its entirety and the discharge of the lis pendens lack merit. We are further satisfied that, apart from plaintiff's arguments regarding an equitable lien and unjust enrichment, none of these issues have sufficient merit to warrant discussion in a written opinion, R. 2:11-3(e)(1)(E).

The seminal case of J.W. Pierson Co. v. Freeman, 113 N.J. Eq. 268 (E. & A. 1933), explained that an equitable mortgage may be created by the agreement of the parties when a deed or contract, lacking the characteristics of a common law mortgage, is used for the purpose of pledging real property, or some interest therein, as security for a debt or obligation, and with the intention that it shall have effect as a mortgagee." Id. at 270-71. The intention of the parties at the time of the transaction is the determinative factor.

The character of the instrument is determined by the intention of the parties at the time of its execution. While it is true that it does not require express words to create an equitable mortgage, where the intention to create such a lien is evident, yet it must clearly appear from the instrument or the surrounding circumstances, at the time of entering into the same, that the maker of the instrument intended that the property therein described is to be held, given or transferred as security for the obligation.

[Id. at 271 (internal citations omitted) (emphasis added).]

The trial court described plaintiff's failure of proof to meet this requirement: "The Court cannot find that there is any evidence indicating that Horseshoe Bend or Frenchtown Run intended to give Plaintiff any interest in their respective properties. Tellingly, the Entities did not own the properties at issue when the mortgage was executed." The court noted plaintiff's own statement that the mortgage was intended to be a personal loan to Coluccio and his acknowledgement that, prior to the litigation, neither Coluccio nor any entity owned entirely or substantially by Coluccio or D'Angelo held title to the properties. Whatever Coluccio's intention may have been at the time of the Besler loan, he had no ability to personally convey a security interest in property he did not own. The court similarly rejected plaintiff's argument that Coluccio, D'Angelo and/or JAD were acting as agents for the entities.

Citing VRG Corp. v. GKN Realty Corp., 135 N.J. 539, 554 (1994), the court noted plaintiff's claim of unjust enrichment required proof the defendant received a benefit, that retention of that benefit without payment would unjustly enrich defendant beyond its contractual rights, and that he "expected remuneration from the defendant at the time" he conferred a benefit on defendant. The court concluded plaintiff's claim for unjust enrichment failed:

[I]t is clear that Plaintiff could not have expected remuneration from the Entities when the mortgage was executed. Defendants were not signatories to the mortgage and did not own the subject properties at that time . . . . [T]here is no indication that the Entities were even aware of the mortgage prior to this litigation. Even assuming that the mortgage proceeds were applied to JAD, Jr., Inc.'s capital contribution, JAD, Jr., Inc., Coluccio and D'Angelo were the parties that were unjustly enriched.

On appeal, plaintiff argues that genuine issues of fact precluded summary judgment here. He contends that the loan documents plainly establish an intent that the money was loaned in exchange for a valid first lien against the described property. Plaintiff notes that the Agreement prohibited any additional financing or transfer of title to the property without his consent. While these facts would preclude entry of a judgment in favor of Coluccio, they fail to create a genuine issue of fact as to Horseshoe Bend and Frenchtown Run in light of the following undisputed facts: Plaintiff did not loan any money to Horseshoe Bend or Frenchtown Run or enter into any contract with either entity. Plaintiff loaned $800,000 to Coluccio personally. Neither the Note nor the Mortgage Agreement indicate that Coluccio was acting in anything other than a personal capacity. Coluccio lacked the authority to encumber the assets of either Horseshoe Bend or Frenchtown Run without Palopoli's consent. While the document memorialized Coluccio's intent to grant plaintiff a security interest, the trial court correctly concluded there was no evidence Horseshoe Bend or Frenchtown Run intended to provide any security for the Besler loan.

Plaintiff also argues that the court erred in failing to give any weight to the fact that part of the $800,000 loan was provided in a $100,000 wire transfer to Horseshoe Bend's account. Even recognizing Horseshoe Bend's receipt of that sum from plaintiff, the record remains devoid of evidence that Horseshoe Bend ever intended to grant plaintiff a security interest in the property or ever authorized Coluccio, D'Angelo or JAD to act in a way that would lead plaintiff to reasonably conclude that any one of them was its agent. Totally apart from Horseshoe Bend's actions, there remains no evidence plaintiff expected repayment from Horseshoe Bend.

Finally, the record is devoid of evidence that would support the imposition of liability on these defendants pursuant to the doctrine of apparent authority. "Apparent authority 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.) (quoting Rodriguez v. Hudson County Collision Co., 296 N.J. Super. 213, 220 (App. Div. 1997)), certif. denied, 177 N.J. 224 (2003). "Apparent authority imposes liability on the principal not as a result of an actual contractual relationship, but because the principal's actions have misled a third-party into believing that a relationship of authority in fact exists." Mercer v. Weyerhaeuser Co., 324 N.J. Super. 290, 317 (App. Div. 1999); see also Kuhn v. Tumminelli, 366 N.J. Super. 431, 445 (App. Div.), certif. denied, 180 N.J. 354 (2004).

The doctrine of apparent authority instructs that:

[T]he principal is bound by the acts of his agent within the apparent authority which he knowingly permits the agent to assume, or which he holds the agent out to the public as possessing. The question in every case depending upon the apparent authority of the agent is whether the principal has by his 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.

Legge Indus. v. Joseph Kushner Hebrew Acad., 333 N.J. Super. 537, 560 (App. Div. 2000); see also Lobiondo, supra, 357 N.J. Super. at 497. At the time plaintiff made the loan, he was unaware that Horseshoe Bend or Frenchtown Run would be the principals that purchased the mortgaged property. Indeed, those entities did not exist at the time. He was also unaware of Palopoli's involvement in the project, as Palopoli was unaware of plaintiff's involvement. Finally, both plaintiff and Coluccio conducted and documented the loan as a personal loan from plaintiff to Coluccio. There is, then, no evidence to support a conclusion that Horseshoe Bend or Frenchtown Run knowingly permitted Coluccio to act in a manner that would have misled plaintiff to reasonably believe that Coluccio possessed authority to act as their agent.

A

1 Plaintiff has conceded the legitimacy of Wilmington Trust's lien against the properties.

2 Part of the proceeds of the Besler loan were distributed in a $700,000 check dated August 14, 2003, made payable to Coluccio, which he endorsed to the order of Horseshoe Bend, LLC. That endorsement was crossed out on the back of the check and the check was deposited in the account of D'Angelo Construction, Inc. The remaining $100,000 was sent by wire transfer to the account of Horseshoe Bend, LLC, on August 18, 2003, pursuant to instructions from Besler that identified the account as personal.