Opinion
DOCKET NO. A-0553-13T4
02-24-2015
NOVA BANK f/k/a NOVA SAVINGS BANK, Plaintiff, v. SAMUEL D. SCHENKER, L.L.C. and SAMUEL D. SCHENKER, M.D., Defendants/Third-Party Plaintiffs-Appellants, v. ATLAST FINANCIAL SERVICES, L.L.C., RICHARD W. CAMPANARO, and SAMUEL V. CONVERY, III, Third-Party Defendants, and AMERICAN GENERAL LIFE INSURANCE COMPANY, Third-Party Defendant-Respondent, and JERRY CAMPANARO, Third-Party Defendant.
Lueddeke Law Firm, attorneys for appellants (Karri Lueddeke, on the brief). Fishkin Lucks L.L.P., attorneys for respondent (Andrew P. Fishkin and Steven M. Lucks, of counsel and on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Fasciale and Whipple. On appeal from Superior Court of New Jersey, Law Division, Ocean County, Docket No. L-3073-10. Lueddeke Law Firm, attorneys for appellants (Karri Lueddeke, on the brief). Fishkin Lucks L.L.P., attorneys for respondent (Andrew P. Fishkin and Steven M. Lucks, of counsel and on the brief). PER CURIAM
Third-party plaintiffs Samuel D. Schenker, L.L.C. (the "LLC") and Samuel D. Schenker, M.D. (the "Doctor"), (collectively "Schenker"), appeal from a July 12, 2013 order granting summary judgment to third-party defendant American General Life Insurance Company ("AGLIC"). We affirm.
I.
In January 2005, the Doctor met with Atlast Financial Services, L.L.C. ("AFS") about purchasing a wealth accumulation and asset protection plan known as the "Magnifier Advantage Program" (the "Program"). The Program functions by using the proceeds of a bank loan to purchase a single premium immediate annuity (the "annuity"), which then pays the premiums for a life insurance policy (the "life insurance policy"). AFS advertised that the Program would "[c]reate and immediately deposit a large sum of money in a protected manner that grows tax deferred" by "leverage[ing the LLC's] corporate income . . . to create an additional appreciating asset." AFS would use the annuity and life insurance policy to fund the Program and provide Schenker with "creditor protection," "tax deferred growth," "tax free withdrawal of basis," and "tax free borrowing."
The LLC subsequently secured a $700,000 commercial loan with a five-year term (the "loan") from Nova Bank ("Nova"), which the Doctor personally guaranteed. AFS used the loan to purchase the annuity and the life insurance policy from AGLIC. The annuity and the life insurance policy were assigned to Nova as additional security for the loan. When the loan matured on January 1, 2010, the Doctor and Nova negotiated an extension of the maturity date to May 1, 2010. However, Nova did not renew the loan after May 1, 2010, the Doctor defaulted, and Nova subsequently foreclosed.
Nova filed a complaint against Schenker for failure to repay the loan. Schenker then impleaded AFS, its officers, and AGLIC alleging common law fraud, violations of the Consumer Fraud Act, N.J.S.A. 56:8-1 to -20, conspiracy to commit fraud, breach of contract, and violations of the Truth-in-Consumer Contract, Warranty and Notice Act, N.J.S.A. 56:12-14 to -18.
The Doctor maintained that AFS had represented to him that Nova would renew the loan every five years on a perpetual basis. At his deposition, the Doctor testified that AFS informed him that it had "received assurances from [Nova]" that the loan would be renewed, and that it would be "absurd" for Nova not to renew the loan. The Doctor also learned from a representative of Nova that "there wouldn't be a problem in renewing the loan[] after five years." The Doctor believed Nova would renew the loan because
[Nova] had an interest-generat[ing] loan and was receiving interest on an annual basis based on the interest rates as scheduled, according to what [Nova was] saying, and based on the feedback that [AFS] had received from the bank, [renewal] would not be an issue, and that they were extremely happy to receive that interest based on this, and that over time I would be paying down the loan in conjunction with the interest that I would be receiving, and it was for [Nova] a good product in that regard.Without the guarantee of the loan renewal after the initial five-year term, the Doctor contended he would have not "enter[ed] into this kind of contract . . . ."
Schenker reached a settlement agreement with Nova and did not pursue the claims against AFS and its officers. Schenker also voluntarily dismissed the Consumer Fraud Act, breach of contract, and the Truth-in-Consumer Contract, Warranty and Notice Act claims against AGLIC. Schenker's remaining claims against AGLIC were of common law fraud and conspiracy to commit common law fraud.
AGLIC then moved for summary judgment, the judge held oral argument, and he granted the motion. In his statement of reasons, the judge found that a question of fact existed as to whether AFS was a broker or agent of AGLIC, but concluded that any statements made by AFS regarding Nova's future renewal of the loan could not be fraudulent because "a statement regarding a future event . . . does not constitute a misrepresentation."
II.
Schenker primarily contends on appeal that summary judgment was inappropriate because (1) there was a question of fact as to whether AFS was an agent or broker of AGLIC, and (2) AFS's misrepresentation was sufficient to state a claim for common law fraud and conspiracy to commit common law fraud.
A court should grant summary judgment when the record reveals "no genuine issues as to any material fact" and "the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). We review a ruling on summary judgment de novo. Davis v. Brickman Landscaping, Ltd., 219 N.J. 395, 405 (2014). In deciding whether summary judgment was properly granted, we apply "the same standard governing the trial court." Gormley v. Wood-El, 218 N.J. 72, 86 (2014) (citation and internal quotation marks omitted). We consider "whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). We also give the non-moving party "the benefit of the most favorable evidence and most favorable inferences drawn from that evidence." Gormley, supra, 218 N.J. at 86.
Applying this standard, we conclude the judge properly granted summary judgment to AGLIC.
A.
It is well-established that "[a]n insurance agent owes a fiduciary duty to the insurance company" while an insurance broker "owes a duty directly to his or her principal, the insured." Weinisch v. Sawyer, 123 N.J. 333, 340 (1991). Because of this difference, the insurer can be "held responsible" for the "negligence of the insurer's agent," while a broker is only liable to the insured and "may not obtain indemnification from the insurer." Id. at 340-41.
Here, a factual dispute exists as to whether AFS was a broker or agent of AGLIC. AGLIC provides evidence that AFS was considered a "broker" of AGLIC, including an affidavit from AGLIC's Director of Advance Case Design. Schenker, however, provides many documents that refer to AFS as an agent of ALGIC. Because Schenker's claim against AGLIC is viable if AFS is considered an agent of AGLIC, we give Schenker every favorable inference from the evidence, and conclude that there is a genuine issue of material fact as to whether AFS acted as an agent of AGLIC.
B.
Assuming for purposes of this decision that AFS acted as an agent of AGLIC, Schenker failed to make out a prima facie case of common law fraud and conspiracy to commit common law fraud, thus making summary judgment appropriate.
The five elements of common law fraud are "(1) a material misrepresentation of a presently existing or past fact; (2) knowledge or belief by the defendant of its falsity; (3) an intention that the other person rely on it; (4) reasonable reliance thereon by the other person; and (5) resulting damages." Gennari v. Weichert Co. Realtors, 148 N.J. 582, 610 (1997) (emphasis added) (citing Jewish Ctr. of Sussex Cty. v. Whale, 86 N.J. 619, 624-25 (1981)). The first element requires that the "fraud must relate to a present or pre-existing fact and cannot ordinarily be predicated on representations which involve things to be done in the future." Anderson v. Modica, 4 N.J. 383, 391-92 (1950); see also Suarez v. E. Int'l. College, 428 N.J. Super. 10, 29 (App. Div. 2012) (stating that "[a]s to the claims of affirmative misrepresentation, [a] plaintiff must show the misrepresentation of a fact that exists at or before the time the representation is made"), certif. denied, 213 N.J. 57 (2013).
The alleged misrepresentation here, AFS's statement that Nova would renew the loan, related to Nova's future intention to renew the loan five years after its initial issuance. Because this statement is about a future event and not a present or past fact, it cannot be an affirmative misrepresentation as a matter of law.
The Doctor's own undisputed statements during his deposition support this conclusion. The Doctor freely admitted at his deposition that there were no "documents provided by [Nova] stating that it would renew the loan on a perpetual basis." The Doctor "in [his] mind" thought that renewal of the loan "would be from [Nova's] perspective good business . . . if they were receiving interest-driven funds on an annual basis[.]" The Doctor also stated that he had no criticism of AFS's efforts to convince Nova to renew the loan; he understood that banking conditions had changed because "the United States was in a recession[;]" and that he thought AFS "actually believed" Nova would renew the loan at the time the statement was made.
Because summary judgment was properly granted to AGLIC on Schenker's common law fraud claim, the claim of conspiracy to commit common law fraud fails. Our Supreme Court has stated that
a civil conspiracy is a combination of two or more persons acting in concert to commit an unlawful act, or to commit a lawful act by unlawful means, the principal element of which is an agreement between the parties to inflict a[n] . . . injury upon another, and an overt act that results in damage.Because civil conspiracy requires "an underlying wrong," we have stated that civil conspiracy to commit fraud is untenable if the underlying claim of common law fraud failed. Rezem Family Assocs., L.P. v. Borough of Millstone, 423 N.J. Super. 103, 122 (App. Div.) (citation and internal quotations omitted), certif. denied, 208 N.J. 368 (2011). Because Schenker's common law fraud claim failed, so too must its claim of conspiracy to commit common law fraud.
[Banco Popular N. Am. V. Gandi, 184 N.J. 161, 177 (2005) (citation and internal quotations marks omitted).]
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION