Opinion
DOCKET NO. A-6269-11T3
09-04-2013
VINCENZO COCUZZA, Plaintiff-Respondent, v. DOMENICO RENNA, Defendant-Appellant.
Nicola G. Suglia argued the cause for appellant (Fleischer, Fleischer & Suglia, attorneys; Ms. Suglia, on the briefs). Joseph M. Pinto argued the cause for respondent (Polino and Pinto, P.C., attorneys; Mr. Pinto, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Parrillo, Sabatino and Maven.
On appeal from the Superior Court of New Jersey, Law Division, Burlington County, Docket No. L-3020-08.
Nicola G. Suglia argued the cause for appellant (Fleischer, Fleischer & Suglia, attorneys; Ms. Suglia, on the briefs).
Joseph M. Pinto argued the cause for respondent (Polino and Pinto, P.C., attorneys; Mr. Pinto, on the brief). PER CURIAM
Plaintiff Vincent Cocuzza filed a complaint against defendant Domenico Renna alleging fraud, equitable fraud, unjust enrichment, and breach of contract related to the sale of a pizzeria business to plaintiff. Plaintiff sought rescission, compensatory and punitive damages, the return of all monies paid to defendant, and costs, interest, and counsel fees. Defendant's answer included counterclaims for breach of the promissory note, breach of a lease, conversion, and quantum meruit.
After a five-day bench trial, the Honorable Marc M. Baldwin, J.S.C., found that defendant had committed an act of equitable fraud, ordered that the contract be rescinded, and awarded plaintiff $122,585.60 in damages. On appeal, defendant argues that plaintiff's claim of equitable fraud should fail because plaintiff's reliance on defendant's representations was not reasonable. Defendant also argues that the trial judge incorrectly measured gross revenues at trial, and that the judge improperly awarded rescission damages. We have considered the arguments raised in light of the record and the applicable legal standards. We affirm.
I.
A.
In approximately 1994 or 1995, defendant purchased property in Bordentown and opened a pizzeria business. Defendant decided to sell the pizzeria and, on March 3, 2007, placed an advertisement for the sale of the business in an Italian-language newspaper, "America Oggi." The advertisement represented that weekly income from the pizzeria was between $11,000 and $12,000.
Plaintiff's son, Alexander Cocuzza, contacted defendant regarding the advertisement, and the two arranged a meeting for roughly two days later at the pizzeria. Plaintiff, his wife, and his sons, Alexander and Christopher, attended the meeting with defendant. At the meeting, defendant told plaintiff that the restaurant generated between $11,000 and $12,000 in gross sales per week. Defendant also said that, in certain weeks, the weekly gross would reach $14,000. Defendant also told plaintiff at this meeting that he was selling the pizzeria because he was ill with cancer and his children were pursuing careers elsewhere.
Defendant conceded at trial that the pizzeria never grossed an amount that high in any one week.
According to Alexander, he asked defendant at the meeting "if there was a way that we could see how that pizzeria really would have made [$11,000] to $12,000 [each week]." Alexander said that defendant replied that they would have to "trust him." Alexander testified that defendant "refused [to show] us records and proof of whatever he was making." Alexander said that defendant also refused their request to allow them to observe the pizzeria's operations for two weeks. Alexander further testified that defendant showed them around the pizzeria, but did not show them the cash register system.
The parties thereafter held a second meeting with plaintiff's family in attendance, at which they discussed the purchase price and other terms. Defendant told plaintiff at that meeting of his intention that plaintiff would buy the business, but that defendant would keep the building and lease it to plaintiff under a five-year lease at $3800 per month. According to Alexander, defendant said at this meeting that his income tax forms substantiating his claim as to the pizzeria's income were "personal" and that he did not wish to produce them. Alexander said that "[w]hen you buy a business, the first thing you want to see [is] how much money you [will be] generating," and that claims on tax forms were a good indicator of that number. He added that defendant did, however, agree to allow them to observe the pizzeria for a week.
Defendant alleged that at the end of the meeting, plaintiff indicated that he wished to purchase the business, but wanted to observe the pizzeria to ensure that defendant's representations about its income were accurate. According to defendant, plaintiff was not interested in seeing defendant's sales records despite his offer to that effect, and instead said that he had to "be in the place and check the business for myself."
Defendant testified at trial that he would have allowed plaintiff to see computer records from the cash register and a handwritten record book to substantiate his claim that the pizzeria grossed between $11,000 and $12,000 each week, but defendant also stated that he would not have shown plaintiff his tax returns because they would not have reflected that the business grossed that amount. Plaintiff said at trial that to understand a business's earnings, he would "at minimum" have to spend a month there observing its operations. In addition, records, including tax records, would have to be examined.
Defendant destroyed the book after the sale, but testified that the information contained in the book would still be in the computer.
On March 12, 2007, plaintiff issued a check of $5000 to defendant as a deposit for the purchase of the pizzeria. Defendant's attorney confirmed the receipt of the check in a letter to plaintiff dated March 14, 2007.
Plaintiff's two sons thereafter spent one week observing the pizzeria by "stay[ing] morning to night inside the shop[.]" Alexander said that he wanted to observe the pizzeria so that he could confirm defendant's representations as to the pizzeria's gross income. Alexander stated in particular that during this time he watched defendant order supplies and balance the register. He said that he also watched defendant count money from the cash register each day, but he himself did not count the money with defendant. He stated that defendant also accepted credit card payments from customers, but defendant did not show him the receipts.
Alexander testified that defendant showed him the daily gross revenues each day, and that at the end of the week the total was "close" to $11,000. He added that the week he observed the pizzeria's operations was "one of the busy weeks" in the year. During this time, Alexander also reviewed the pizzeria's bills for items such as supplies, gas, electricity, water, garbage pickup, and insurance, and estimated the operation costs. He testified that defendant did not show him all of the pizzeria's expenses, but indicated that an estimate could nevertheless be made from what was shown.
Alexander testified that defendant refused to allow him to observe for a second week. Defendant again refused to allow plaintiff's family to review his records, allegedly repeating his assertion that they should "trust" him. Alexander said that he and his family were "hoping that the pizzeria was making really that money." He said that they would not be able successfully operate the pizzeria if it was not making the advertised amount. Alexander stated that he did not believe at that time that the pizzeria was generating $12,000 per week, and he informed plaintiff of this belief. According to Alexander, plaintiff asked defendant for assurances that the pizzeria was, in fact, grossing that amount. The family determined that they "could rely on [defendant]" and "trust him."
Plaintiff admitted in his testimony that he had "faith" in defendant. He acknowledged that he did not have the necessary information to be certain whether the pizzeria would actually gross $11,000 to $12,000 each week, but he said that defendant assured him to "stay calm" and that defendant said he would see that the pizzeria did make that amount. Plaintiff said, through his interpreter at trial:
I became convinced over time going to his house when I was bringing him the [deposit installment] money, that he would indicate he couldn't work any longer because of his health status and that his children could not work at the pizzeria any longer. So I became convinced that he wouldn't have a motive to not tell the truth based on that.
Plaintiff added that he had repeatedly mentioned to defendant the discrepancy between defendant's assertions and the pizzeria's income calculations, and that defendant reassured him that he should not worry. Plaintiff said that these reassurances convinced him to move forward with the purchase.
At trial, defendant's attorney read from plaintiff's deposition testimony. At his deposition, plaintiff said that his "number one reason" for determining that the pizzeria was worth buying was his son's experience. Plaintiff said at trial that there were interpretation problems at the deposition, and so he was not "sure" of his prior testimony.
Plaintiff said that on approximately April 6, 2007, the parties held what was intended to be the closing. At that meeting, defendant's lawyer read the contract to plaintiff in English, and asked for a $90,000 deposit. Plaintiff said that defendant read portions of the contract to him in Italian, but plaintiff said he was not concerned with its contents because "I assumed that that would be the same contract . . . , because I had already taken it to my lawyer." Defendant and his attorney then spoke privately, and informed plaintiff that they would have to rewrite the contract "to fix a few little things."
Approximately ten days later, defendant called plaintiff and informed him that the new contract was ready, and the two arranged to meet at the office of defendant's lawyer. Plaintiff did not have an attorney present at closing. Defendant admitted that no one at the closing translated the changes in the signed version of the agreement to plaintiff. Plaintiff testified that defendant and his attorney informed him that the new contract was the same as before but with adjustments. He said he "felt comfortable" signing the documents presented to him at closing because he thought they were the same as those shown to him previously. He believed that the only change in the new contract was the $75,000 alteration of the lump-sum amount from $85,000 to $10,000. On that day, April 16, 2007, the parties signed a document titled "Agreement of Sale." An earlier, unsigned version of that document is contained in the record. The two documents are not identical.
Pursuant to the signed version of the agreement, plaintiff agreed to buy defendant's assets in relation to the business, excluding cash on hand, bank accounts, accounts receivable, vehicles, and the real property itself. The Agreement of Sale also contemplated that a lease between the parties would be executed at closing. The purchase price under the agreement was $265,000, consisting of a non-refundable deposit of $5000, a lump sum payment of $10,000 payable at closing, and the remaining $250,000 was to be paid in equal monthly installments to defendant pursuant to a promissory note.
The original version of the agreement listed the purchase price of $340,000, including a $5000 deposit and a lump sum payment of $85,000.
Defendant testified at trial that plaintiff gave him $90,000 in cash as part of the agreement. The $90,000 was paid at defendant's request in installments of less than $10,000 each. Defendant said that the total purchase price, including the cash payments, was $340,000, and the parties agreed not to put the entire sale price into the final written agreement. Defendant further said that his attorney, who prepared the agreement, was not aware of the undocumented cash payments.
The record does not make clear what became of the $75,000 down payment monies.
Another significant difference between the first and second versions of the agreement is found in the section titled, "Due Diligence, Access and Information." In the earlier, unsigned version of the agreement, the relevant paragraph reads:
[Defendant] makes no representations or warranties with respect to the state of the assets and business being sold hereunder and are being sold AS IS. Without limitation, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPPOSE. For a period of fourteen (14) days from execution of this Agreement by all parties, [defendant] shall give [plaintiff] full access, during normal business hours, to [defendant's] books and records, contracts and commitments and [plaintiff] shall be entitled during such period to make reasonable examination of the [b]usiness'[s] premises and the fixtures, furniture and equipment purchased and sold hereunder.
[(Emphasis added).]
The modified, signed agreement reads:
[Defendant] makes no representations or warranties with respect to the state of the assets and business being sold hereunder and are being sold AS IS. Without limitation, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPPOSE. [Plaintiff] hereby acknowledges that [defendant] has given [plaintiff] full access to [defendant's] books and records, contracts and commitments and that [plaintiff] has had an adequate opportunity to make reasonable examination of the [b]usiness'[s] premises and the fixtures, furniture and equipment purchased and sold hereunder and that [plaintiff] is satisfied with the same.
[(Emphasis added).]
Defendant admitted that the changes to the due diligence portion of the agreement were not in the version that plaintiff's attorney reviewed prior to closing. However, defendant said that he himself did not know that changes were made to the agreement.
Also on April 16, 2007, plaintiff executed the promissory note, promising to pay defendant a total of $250,000 in eighty-four monthly installments of $3,303.33. As collateral for that note, plaintiff gave defendant a security interest in all of plaintiff's accounts receivable. Moreover, the parties executed the related lease on the same day, whereby plaintiff agreed to pay $3800 per month to rent the property on which the pizzeria is located.
After the closing, plaintiff's family began operating the pizzeria. Alexander testified that after a few months, they realized that the business was grossing an average of $8000 each week. This was not a profitable amount. Plaintiff said that the weekly gross reached $11,000 "[m]aybe once" and it never reached $12,000, and that if the pizzeria had made between $12,000 and $14,000 per week, he would have "ma[de] a decent living." Alexander stated that plaintiff contacted defendant with concerns that the pizzeria did not make as much money as defendant had said it would, and he tried to negotiate a lower monthly rent or a decreased purchase price, but defendant was uncooperative. Plaintiff testified that with a lowered purchase price and decreased rental payments, the pizzeria "perhaps" could have survived if it grossed roughly $9000 or $10,000 per week. Plaintiff said that the pizzeria never made the amount of money that defendant said it would.
Plaintiff defaulted on his obligations to defendant in May 2008. The family closed the pizzeria on October 21, 2008. Between the time the family ceased operations, Alexander estimated that the family had invested "around" $50,000 of its own money.
The court reviewed reports of annual sales for the years preceding the sale and the year of plaintiff's operation. A yearly period summary report of the pizzeria's sales in 2004, while still operated by plaintiff, states that the pizzeria grossed $365,290.27 that year and received an additional $20,978.10 from customers for sales tax. A similar report for 2005 shows that the pizzeria grossed $442,462.74 and received $25,257.31 for sales tax. The 2006 report states that the pizzeria grossed $524,279.88 plus $31,547.62 for sales tax. The 2007 summary report states that the pizzeria grossed $485,866.45 and received an additional $32,031.05 for sales tax.
According to defendant's 2006 Form 1040-C, the pizzeria grossed $144,081 and had $132,349 in expenses, yielding a net profit of $11,732.
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Defendant could not confirm at trial whether the numbers reflected in the yearly summary reports were accurate. Alexander said that he printed these summaries from the business computer acquired from defendant in the sale in June and July 2008. He said that he did not initially know that the computer could be used to access past sales information.
When confronted by plaintiff's family with the past sales information, defendant claimed that the numbers were not reliable because they could be changed.
Defendant's trial attorney, who was also defendant's transactional attorney in this matter, testified at trial without apparent objection. The attorney denied specific knowledge of many aspects of the transaction.
B.
At the conclusion of trial, Judge Baldwin issued an oral decision. The judge found that, based on the sales records from the pizzeria computer, the weekly gross income in 2006 averaged $10,083.30. The judge observed that after the sale of the pizzeria, the weekly average gross dropped to approximately $9000. The judge found that in 2008, the pizzeria had a weekly gross average of $8556.43 until it was closed. Judge Baldwin found that the critical measure of these numbers was the gross income without sales tax because "the parties can't spend the sales tax." The judge noted further that even if the revenues from sales taxes collected were included, the weekly average gross income was still less than $11,000 per week.
Judge Baldwin found that the assertion that the pizzeria grossed between $11,000 and $12,000 per week was "a material misrepresentation" because the weekly average was below that amount prior to the sale. The judge, however, did not believe that defendant's misrepresentations were intentional, because he found that defendant "wasn't real analytic[al] in his numbers" and he lacked an apparent motive to lie. For this reason, Judge Baldwin determined that only the claim for equitable fraud remained viable, as that claim did not require scienter.
Judge Baldwin found that equitable fraud had been proven by clear and convincing evidence based on the disparity between the represented weekly income and the weekly income generated stated in the summary reports, and plaintiff's reliance on the representations. The judge reviewed the extent of plaintiff's investigation before the purchase. The judge stated:
[F]rom the plaintiff's point of view, [he was] relegated to one week of observation, not being able to look at the computer, not being able to see the tax returns, [and] not being able to see the book. Only being able to see a one[-]sheet compilation.
[T]he only reasonable reliance aspect is . . . the one week observation. But I do believe that . . . the hiding of potentially relevant information goes into the mix . . . as to the buyers, as to whether the buyers reasonably relied on the representations in the face of hidden information and the face of being prevented from seeing the property more than one week.
The judge found that following the limited investigation, plaintiff did not have enough information to know that defendant misrepresented the income of the pizzeria, and therefore he reasonably relied on those representations to his detriment.
Judge Baldwin rescinded the contract, and ordered defendant to pay, as rescission damages, $122,585.60, which represented monies plaintiff paid pursuant to the agreement, namely, the $90,000 deposit and lump sum payments, and $32,585.60 in principal on the promissory note. The judge denied defendant's ensuing motion for reconsideration.
This appeal followed, in which defendant argues that plaintiff's claim of equitable fraud should fail because plaintiff's reliance on defendant's representations was not reasonable. Defendant also argues that the trial judge incorrectly measured gross revenues at trial, and that the judge improperly awarded rescission damages. For the reasons that follow, we reject these contentions.
II.
A claim of equitable fraud requires proof that: (1) the defendant made a material misrepresentation of fact; (2) the defendant intended that the plaintiff would rely on that misrepresentation; and (3) the plaintiff relied on the misrepresentation to his detriment. Jewish Ctr. of Sussex Cty. v. Whale, 86 N.J. 619, 624 (1981); Liebling v. Garden State Indem., 337 N.J. Super. 447, 453 (App. Div.), certif. denied, 169 N.J. 606 (2001). The plaintiff's reliance must also be reasonable. Daibo v. Kirsch, 316 N.J. Super. 580, 588 (App. Div. 1998). These elements must be proven by clear and convincing evidence. Ibid. Unlike legal fraud, equitable fraud does not require proof that the defendant knew of the falsity of his representation. Jewish Ctr., supra, 86 N.J. at 625.
The precise definition of what is "reasonable" has been examined previously by our courts. Reliance on a misrepresentation is not reasonable or justifiable if the recipient "knows that it is false or its falsity is obvious to him." Restatement (Second) of Torts § 541 (1977); see also Walid v. Yolanda for Irene Couture, 425 N.J. Super. 171, 182 (App. Div. 2012) ("The principles set forth in the Restatement accurately reflect the law in New Jersey."). Thus, a recipient of a misrepresentation is justified in relying on that misrepresentation even though an investigation might have revealed its falsity. Restatement, supra, at § 540; Walid, supra, 425 N.J. Super. at 181. "One who engages in fraud . . . may not urge that one's victim should have been more circumspect or astute." Jewish Ctr., supra, 86 N.J. at 626 n.1. However, "if a mere cursory glance would have disclosed the falsity of the representation," the falsity of the representation will be deemed obvious, and reliance upon it therefore not reasonable. Restatement, supra, at § 540, comment a.
Our jurisprudence in cases of equitable fraud has evolved in recent years. In Trautwein v. Bozzo, 35 N.J. Super. 270, 272 (Ch. Div. 1955), aff'd o.b., 39 N.J. Super. 267 (App. Div. 1956), the plaintiff sought rescission of his purchase of a hotel because, he alleged, the defendant misrepresented the weekly gross of the bar within the hotel. In particular, the seller represented in an advertisement that the weekly gross was $1100. Id. at 273. The plaintiff said that prior to the sale, he saw a notebook containing records of daily bar receipts for each week indicating that receipts were "far less than" the advertised amount. Id. at 278. For those reasons, the judge concluded in that case that the plaintiff "was not in fact deceived" and that the plaintiff entered into the agreement for other reasons. Id. at 279. The court therefore refused to order rescission of the sale. Ibid.
In Byrne v. Weichert Realtors, 290 N.J. Super. 126, 130 (App. Div.), certif. denied, 147 N.J. 259 (1996), a home with a significant termite infestation was listed for sale. The defendants told the plaintiffs, who were interested in purchasing the home, that the infestation was "very minimal" and "fixable." Id. at 131. An inspection of only the visible areas was conducted at the request of the plaintiffs' attorney, and the inspector concluded that limited repairs were needed in the garage, a bedroom closet, and a door frame in the furnace area. Id. at 132. After the sale was finalized, the plaintiffs discovered the true extent of the damage and sued for fraud. Id. at 132-33. Summary judgment was granted in favor of the defendants on that claim. Id. at 130.
On appeal, we observed that when a party "undertakes an independent investigation and relies on it, there can be no reliance." Id. at 137. We reversed the grant of summary judgment upon recognizing that it was unclear to what extent the plaintiffs in that case relied on their inspection as opposed to the defendants' assurances that the damage was minimal. Id. at 130, 137.
More recently in Walid, supra, 425 N.J. Super. at 174-75, we examined a fraud claim arising from a purchase of a bridal shop. The seller in that case provided the purchasers with bank deposit summaries, tax returns, pending purchase orders, profit and loss statements, and a "fact sheet" listing annual sales and operating profit. Id. at 175-76. Against the advice of their attorney, the purchasers decided not to engage an accountant to examine these documents, and opted instead to review the documents themselves. Ibid. After the sale, the business failed and the purchasers filed suit. Id. at 176. The plaintiffs alleged, and the judge subsequently found, that the seller had misrepresented the business's gross incomes. Id. at 177.
This court first noted in Walid that the plaintiffs were not experts in examining business documents, and so the documents provided by the seller would not have been obviously fraudulent to the plaintiffs. Id. at 184. Moreover, the plaintiffs did not conduct any additional investigation beyond reviewing the documents, and so they would not have had any other way of knowing that a fraud was being perpetrated upon them. Ibid. The court therefore concluded that the plaintiffs were justified in their reliance upon the seller's representations of the business's profitability. Id. at 184-86.
Against this legal backdrop, we turn to the case at bar and consider whether the factual determinations made by the judge support his legal conclusion that plaintiff reasonably relied on defendant's misrepresentations. Initially, we reject defendant's claim that he was prejudiced because the judge omitted sales tax revenues when calculating the business's weekly gross income. Defendant asserts now, as he did at trial, that by including the sales tax revenue, the pizzeria's actual revenues "generally fall within the scope of the alleged representations," and so there was no detriment to plaintiff. As the judge found at trial, this claim is mathematically false. According to the evidence adduced at trial, in the pizzeria's best year of record, 2006, its product sales were $524,279.88, and it collected an additional $31,547.62 for sales tax. After averaging the combined total of $555,827.50 for the year, the weekly average gross income, inclusive of sales tax revenues, is $10,688.99. Even this amount falls short of the claimed $11,000 minimum, as recognized by Judge Baldwin. Therefore, because the pizzeria's best year falls short of defendant's claims of gross revenue under either measure, and because no other pre-sale year of record even approaches the advertised minimum, defendant's claim of harmful error from an alleged miscalculation is unavailing.
Next, we reject defendant's argument that plaintiff "knew precisely what the state of the restaurant was and the volume of business it typically generated." In his opinion, the judge found that plaintiff was permitted only limited access to pivotal information about the business operations and its finances. The record reflects that plaintiff's sons were permitted to observe the business operations for one week. Defendant denied their request for additional time in the restaurant, and failed or refused to disclose all of the business records, including the computerized reports. The judge reasonably found that defendant hid potentially relevant information thereby depriving plaintiff of the ability to conduct a more in-depth investigation.
Here, as in Jewish Center, supra, defendant cannot shield himself from a claim of fraud by arguing that plaintiff "should have been more circumspect or astute." 86 N.J. at 626 n.1. Defendant not only misrepresented the gross income of the pizzeria, but also prevented plaintiff and his family from fully verifying his repeated assurances that the pizzeria would generate the represented sum. The withheld information that would have revealed the true state of financial affairs was exclusively and peculiarly within defendant's control, as was access to the physical facility. Although some similarly situated buyers would have undoubtedly shied away from the deal, under these particular circumstances where plaintiff was not only thwarted in his due diligence investigation, but furnished with misinformation, defendant should not be allowed to undermine plaintiff's legitimate claim of reasonable reliance on the misrepresentations. We therefore conclude that plaintiff's reliance was sufficiently reasonable to warrant the relief that the judge equitably granted.
III.
We are bound to defer to the trial court's factual findings as long as they are supported by adequate, substantial and credible evidence. Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 483-84 (1974) (noting that a trial judge's findings of fact are not disturbed on appeal unless "they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice"). "[T]he scope of appellate review is expanded when the alleged error on appeal focuses on the trial judge's evaluations of fact, rather than his or her findings of credibility." Walid, supra, 425 N.J. Super. at 179 (citation omitted).
We are also bound to defer to the trial judge's findings that are "substantially influenced by his opportunity to hear and see the witnesses and to have the 'feel' of the case, which a reviewing court cannot enjoy." State v. Locurto, 157 N.J. 463, 471 (1999) (quoting State v. Johnson, 42 N.J. 146, 161-62 (1964)). However, we do not owe any deference to the legal conclusions reached by the trial court, because our review of the law is de novo. Borough of Harvey Cedars v. Karan, __ N.J. __, __ (2013) (slip op. at 33) (citing Manalapan Realty v. Manalapan Twp. Comm., 140 N.J. 366, 378 (1995)); see also Little v. KIA Motors America, Inc., 425 N.J. Super. 82, 90 (App. Div. 2012).
We are satisfied that Judge Baldwin's extensive recitation of his factual findings with respect to defendant's representations regarding the income of the pizzeria business, defendant's conduct during the negotiations, and plaintiff's independent investigation, are supported by competent evidence and are consistent with our own comprehensive review of the record. We conclude that the trial judge correctly found that plaintiff's reliance on defendant's representations was reasonable and that equitable fraud had been proven.
IV.
Lastly, we address the damages award and defendant's contention that the trial judge improperly granted rescission, or alternatively, that the damages award should have been offset by monies plaintiff paid out to his sons, or the diminution of the value of the business. These claims lack merit.
Plaintiffs claiming equitable fraud are entitled only to seek equitable remedies, such as rescission or reformation. Daibo, supra, 316 N.J. Super. at 591-92; Enright v. Lubow, 202 N.J. Super. 58, 72 (App. Div. 1985), certif. denied, 104 N.J. 376 (1986). The purpose of rescission as a remedy is to "restore the parties to the status quo ante and prevent the party who is responsible for the misrepresentation from gaining a benefit." Rutgers Cas. Ins. Co. v. LaCroix, 194 N.J. 515, 527 (2008) (alteration in original) (quoting Bonco Petrol, Inc. v. Epstein, 115 N.J. 599, 612 (1989)).
In this case, the trial judge recognized that no evidence had been presented on loss of value to the business, and refused to extend discovery after trial to allow defendant to pursue such evidence at that late stage. Furthermore, inasmuch as money damages are not permitted in an action for equitable fraud, see Daibo, supra, 316 N.J. Super at 591-92, the judge's order rescinding the contract and returning to plaintiff monies he paid to defendant was a reasonable and equitable remedy to this dispute. We discern no abuse of discretion or legal error in the award of damages.
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION