NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court."
Although it is posted on the internet, this opinion is binding only on the
parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NOS. A-0698-14T3
A-0858-14T3
SHEILA MARTELLO,
Plaintiff-Respondent,
v.
ROBERT A. FRANCO, ESQ. and
RANDI K. FRANCO, ESQ.,
Defendants-Appellants,
and
FRANCO & FRANCO, ATTORNEYS AT LAW,
ELLIOT H. VERNON, ESQ.,
MICHAEL KIRKOVICH, ESQ.,
TODD SIEGMEISTER, ESQ.,
CROWN FINANCIAL SOLUTIONS, LLC,
CROWN PRECIOUS METALS GROUP, LLC, and
VERDE TROPICAL DEVELOPMENT GROUP, LLC,
Defendants.
_____________________________________________
SHEILA MARTELLO,
Plaintiff-Respondent,
v.
ROBERT A. FRANCO, ESQ.;
RANDI K. FRANCO, ESQ.;
FRANCO & FRANCO, ATTORNEYS AT LAW,
ELLIOT H. VERNON, ESQ.,
MICHAEL KIRKOVICH, ESQ.,
CROWN FINANCIAL SOLUTIONS, LLC,
CROWN PRECIOUS METALS GROUP, LLC, and
VERDE TROPICAL DEVELOPMENT GROUP, LLC,
Defendants,
and
TODD SIEGMEISTER,
Defendant-Appellant.
_____________________________________________
Argued October 24, 2017 – Decided November 14, 2017
Before Judges Carroll and Mawla.
On appeal from Superior Court of New Jersey,
Law Division, Morris County, Docket No. L-
2704-11.
Robert A. Franco and Randi K. Franco,
appellants in A-0698-14, argued the cause pro
se.
Todd Siegmeister, appellant in A-0858-14,
argued the cause pro se.
Geoffrey T. Bray argued the cause for
respondent (Bray & Bray, LLC, attorneys;
Geoffrey T. Bray, on the briefs).
PER CURIAM
Defendants Robert A. Franco, Randi K. Franco, and Todd
Siegmeister appeal from a September 19, 2014 order enforcing two
stipulations of settlement reached with plaintiff Sheila Martello,
requiring defendants to re-pay plaintiff funds she advanced
2 A-0698-14T3
relating to a gold venture in Africa.1 They also appeal from an
order entered the same date denying their cross-motion to vacate
the settlement agreements. These are back-to-back appeals
consolidated for the purpose of this opinion. We affirm.
This matter commenced when plaintiff filed a Law Division
complaint asserting Robert A. Franco and Randi K. Franco committed
fraud, negligence, misappropriation, civil conspiracy to commit
fraud, and conversion. The complaint sought veil piercing remedies
against the Francos' law firm. Plaintiff also asserted: fraud,
misappropriation, civil conspiracy to commit fraud, conversion,
and piercing the corporate veil against Todd Siegmeister.
Plaintiff claimed defendants fraudulently induced her to loan
them $785,000 for a fictitious venture. Specifically, Robert
allegedly informed plaintiff's brother, Paul Martello, "he could
make money quickly if he could find people to make a [thirty] day
loan of $200,000 to Crown Financial who would re-pay the loan plus
[twelve percent] interest and $100,000 within [thirty] days."
Robert allegedly assured Paul Martello he was part owner of Crown
Financial and that the company needed the money to finance the
shipment of gold from Africa.
1
We will refer to Robert A. Franco and Randi K. Franco collectively
as "the Francos." As defendants share a common last name, we will
refer to them individually by their first names; no disrespect is
intended.
3 A-0698-14T3
Paul Martello informed Robert he thought his sister could
make the loan. Robert and Siegmeister contacted plaintiff. Robert
allegedly represented he was Crown Financial's international
general counsel, and Siegmeister its President. Robert allegedly
informed plaintiff her monetary contribution would be used to pay
the taxes, insurance, and freight for the gold transaction, and
that he would personally "ensure the payment of those expenses out
of his Law Firm's Trust Account." Plaintiff also alleges
defendants stated her investment would be insured and guaranteed
by an all-risk policy issued by Lloyd's of London.
Plaintiff loaned defendants $200,000 on December 23, 2010,
$150,000 on January 13, 2011, $60,000 on March 7, 2011, $175,000
on April 11, 2011, $56,000 on June 3, 2011, and $144,000 on June
9, 2011. Defendants executed loan agreements and promissory notes
for the funds plaintiff provided. Plaintiff alleged these funds
were never used to pay taxes, insurance, or freight, but were
distributed from the Francos' Law Firm Trust Account to defendants.
Plaintiff also alleged her loans were not insured by Lloyd's of
London. Plaintiff was never repaid.
On January 6, 2014, the matter was scheduled in the Law
Division for a default proof hearing. Defendants' pleadings had
previously been stricken for failing to comply with a court order
to pay an award of counsel fees and accounting fees to plaintiff.
4 A-0698-14T3
The parties engaged in settlement discussions and plaintiff
reached two settlement agreements with defendants.
The settlement agreement between plaintiff and Siegmeister
also resolved all claims against Michael Kirkovich, Elliot Vernon,
Crown Financial Solutions, LLC, Crown Precious Metals Group, LLC,
and Verde Tropical Development, Group LLC. The agreement with
Siegmeister required plaintiff be re-paid a total of $550,000 in
three equal installments of $183,333.33, payable on June 30,
September 30, and December 30, 2014. In exchange, plaintiff agreed
to dismiss her complaint. In the event of a default, the
settlement agreement provided plaintiff could file a motion to
seek entry of a judgment against Siegmeister, Michael Kirkovich,
Elliot Vernon, Crown Financial Solutions, LLC, Crown Precious
Metals Group, LLC, and Verde Tropical Development Group, LLC in
the amount of $900,000, less any sums paid by these defendants.
The settlement agreement between plaintiff and the Franco
defendants provided for a payment obligation totaling $350,000,
payable in three installments of $116,670.00, due on June 30,
September 30, and December 30, 2014. The Franco settlement
agreement contained the same default provisions as the agreement
with Siegmeister, and stipulated plaintiff would be able to seek
entry of judgment in the amount of $800,000, less any payments
made by the Franco defendants.
5 A-0698-14T3
Neither the Francos nor Siegmeister made the June 30, 2014
payment. Consequently, plaintiff filed a motion to enter judgment
in accordance with the settlement agreements. Both Siegmeister
and the Francos opposed the motion and filed cross-motions to
invalidate the settlement agreements, claiming they were usurious,
fraudulent, and unconscionable. After oral argument, the motion
judge entered an order denying both cross-motions, and entered
judgment for plaintiff, in accordance with the settlement
agreements, for $800,000 against the Francos and $900,000 against
Siegmeister.
On appeal, the Francos and Siegmeister argue the September
19, 2014 order entering judgment should be vacated as a matter of
law because both settlement agreements are illegal. Specifically,
defendants allege the settlement agreements are usurious and
violate N.J.S.A. 31:1-1, since the combined amount they are
obligated to pay is more than two-hundred percent of the original
loan amount. Defendants also argue the motion court should not
have enforced an illegal agreement, which contained a punitive
amount of interest. Defendants claim they are entitled to relief
by framing these arguments within Rule 4:50-1(a), (b), (c), (d)
and (f).
6 A-0698-14T3
I.
We begin by reciting our standard of review. We review a
trial judge's entry of judgment pursuant to Rule 1:10-3, under an
abuse of discretion standard. Barr v. Barr, 418 N.J. Super. 18,
46 (App. Div. 2011). Generally, Rule 1:10-3 is "a civil proceeding
to coerce the defendant into compliance with the court's order."
Pasqua v. Council, 186 N.J. 127, 140 (2006) (citing Essex Cty.
Welfare Bd. v. Perkins, 135 N.J. Super. 189, 195 (App. Div.),
cert. denied, 68 N.J. 161 (1975)). In fact, a proceeding under
Rule 1:10-3 "is [the] proper tool to compel compliance with a
court order." Ridley v. Dennison, 298 N.J. Super. 373, 381 (App.
Div. 1997). As such, a trial judge's exercise of discretion will
not be disturbed absent a demonstration of an abuse of discretion
resulting in injustice. Cunningham v. Rummel, 223 N.J. Super. 15,
19 (App. Div. 1988). "An abuse of discretion 'arises when a
decision is "made without a rational explanation, inexplicably
departed from established policies, or rested on an impermissible
basis.'" Barr, supra, 58 N.J. Super. at 46 (quoting Flagg v.
Essex Cnty. Prosecutor, 171 N.J. 561 (2002)).
II.
Defendants argue the judgments are unenforceable because both
settlement agreements are illegal and represent a "mistake of the
exploitive amount calculated in the settlement agreement and
7 A-0698-14T3
applied in the judgment; plaintiff and plaintiff's attorney's
fraudulent acts of fashioning a judgment which is tantamount to
criminal and civil usury; and the judgment's void nature since it
is illegal." Specifically, defendants allege the agreements are
unenforceable since they penalize defendants in the event of a
default.
We have stated that:
An agreement to settle a lawsuit is a contract
which, like all contracts, may be freely
entered into and which a court, absent a
demonstration of "fraud or other compelling
circumstances," should honor and enforce as
it does other contracts. Indeed, "settlement
of litigation ranks high in our public
policy." Moreover, courts will not ordinarily
inquire into the adequacy or inadequacy of the
consideration underlying a compromise
settlement fairly and deliberately made. . . .
[W]here there is no showing of "artifice or
deception, lack of independent advice, abuse
of confidential relation, or similar indicia
generally found in the reported instances
where equity has declined to enforce, as
unfair or unconscionable, an agreement
voluntarily executed by the parties," the
agreement should be enforced. It is only
where the inadequacy of consideration is
grossly shocking to the conscience of the
court that it will interfere.
[Pascarella v. Bruck, 190 N.J. Super. 118,
124-25 (App. Div.) (citations omitted), cert.
denied, 94 N.J. 600 (1983).]
Rule 4:50-1 states:
On motion, with briefs, and upon such terms
as are just, the court may relieve a party or
8 A-0698-14T3
the party's legal representative from a final
judgment or order for the following reasons:
(a) mistake, inadvertence, surprise, or
excusable neglect; (b) newly discovered
evidence which would probably alter the
judgment or order and which by due diligence
could not have been discovered in time to move
for a new trial under R. 4:49; (c) fraud[,]
. . . misrepresentation, or other misconduct
of an adverse party; (d) the judgment or order
is void; . . . (f) any other reason justifying
relief from the operation of the judgment or
order.
Generally, "[c]ourts should use Rule 4:50-1 sparingly, [and] in
exceptional situations[.]" Hous. Auth. of Morristown v. Little,
135 N.J. 274, 289 (1994). Relief under Rule 4:50-1 "is designed
to reconcile the strong interests in finality of judgments and
judicial efficiency with the equitable notion that courts should
have authority to avoid an unjust result in any given case."
Manning Eng'g, Inc. v. Hudson Cty. Park Comm'n, 74 N.J. 113, 120
(1977) (citing Hodgson v. Applegate, 31 N.J. 29, 43 (1959)).
"The kind of mistake contemplated by [Rule 4:50-1(a)] has
been described as one in which the parties could not have protected
themselves from during the litigation." Pressler & Verniero,
Current N.J. Court Rules, cmt. 5.1.1 on R. 4:50-1 (2018); See DEG,
LLC v. Twp. of Fairfield, 198 N.J. 242, 263 (2009). Therefore,
"neither the court's nor an attorney's error as to the law or the
remedy constitutes mistake under this section." Pressler &
Verniero, supra, cmt. 5.1.1 on R. 4:50-1.
9 A-0698-14T3
To establish relief from a judgment based on newly discovered
evidence under Rule 4:50-1(b) the evidence must be:
(1) [] material to the issue and not merely
cumulative or impeaching, (2) have been
discovered since the trial and must be such
as by the exercise of due diligence could not
have been discoverable prior to the expiration
of the time for moving for a new trial; and
(3) be of such a nature as to have been likely
to have changed the result if a new trial had
been granted.
[Pressler & Verniero, Current N.J. Court
Rules, cmt. 5.2 on R. 4:50-1 (2018).]
Fraud, under Rule 4:50-1(c) requires proof of: "(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." Banco
Popular N. Am. v. Gandi, 184 N.J. 161, 172-73 (2005) (quoting
Gennari v. Weichert Co. Realtors, 148 N.J. 582, 610 (1997)).
Fraudulent misrepresentation occurs when an individual purports
to represent a fact when it is in fact false. Jewish Ctr. of
Sussex Cty. v. Whale, 86 N.J. 619, 624 (1981). Legal fraud or
fraudulent misrepresentation must be established by clear and
convincing evidence. See Stochastic Decisions, Inc. v.
DiDomenico, 236 N.J. Super. 388, 395-96 (App. Div. 1989), certif.
denied, 121 N.J. 607 (1990).
10 A-0698-14T3
Under Rule 4:50-1: "No categorization can be made of the
situations which warrant redress under subsection (f). . . . [T]he
very essence of (f) is its capacity for relief in exceptional
situations. And in such exceptional cases its boundaries are as
expansive as the need to achieve equity and justice." DEG, supra,
198 N.J. at 269-71 (quoting Court Inv. Co. v. Perillo, 48 N.J.
334, 341 (1966)).
Here, the record demonstrates the parties voluntarily entered
into two settlement agreements, whose terms were unambiguous,
including the provisions pertaining to enforcement of the
agreements in the event of a default. The agreements were reached
at arms-length, and with each party having provided consideration.
There is no evidence in the record to the contrary.
We do not view the motion judge's enforcement of the
settlement agreements by entering judgment against defendants as
an unconscionable penalty. A settlement agreement providing for
enforcement is considered a penalty, and thus unenforceable when:
a) the penalty is designed to be a punishment for a breach of the
contract; and b) the penalty has no relation whatsoever to the
amount of damages. See Westmount Country Club v. Kameny, 82 N.J.
Super. 200, 206-07 (App. Div. 1964).
Here, plaintiff's claims against defendants exceeded $1.7
million. She agreed to compromise those claims for $900,000, in
11 A-0698-14T3
exchange for surety of payment under an agreed upon schedule, and
the ability to seek a $1.7 million judgment in the event of
default. Thus, the sums set forth in the settlement did not exceed
the total amount claimed in plaintiff's complaint and had a
relation to the damages plaintiff alleged.
We reject defendants' claims the settlement agreement and
judgment enforcing them are usurious. Defendants misconstrue
N.J.S.A. 31:1-1. This statute does not apply to the settlement
agreements here because they were not loan instruments. See
Loigman v. Keim, 250 N.J. Super. 434, 437 (Law Div. 1991) ("[T]he
law of this State is consistent with the majority view that the
usury statute N.J.S.A. 31:1-1, does not apply to interest on
defaulted obligations.").
Also, the settlement agreements do not impose an interest
rate. The motion judge explained the sums due in the event of
default encompassed the damages sought by plaintiff in her
complaint under the parties' contract, including plaintiff's
claims against defendants for misappropriation, fraud, and legal
fees. Therefore, the terms of the settlement agreements are fair
and entitled to enforcement.
The record is devoid of a material misrepresentation by
plaintiff that defendants relied upon resulting in damages.
Indeed, defendants do not profess ignorance of the express terms
12 A-0698-14T3
of the settlement agreements. They negotiated the agreements for
which there was a bargained for consideration. These facts do not
support a finding of mistake, fraud, or misrepresentation.
The record lacks any evidence, other than defendants' claim
the settlement agreement was usurious, which we have rejected, to
support their arguments on the grounds of newly discovered evidence
or exceptional circumstances. Defendants do not point out what
new evidence came to light that they did not have when they entered
into the agreements. Also, because the settlement agreements were
not usurious and the order enforcing the settlement was not an
abuse of discretion, there are no exceptional circumstances
warranting relief under Rule 4:50-1(f).
III.
Defendants challenge the September 19, 2014 order and
reassert their arguments that they have no personal or individual
obligation to plaintiff because the loans she made were to the
corporate defendants, not the Francos or Siegmeister individually.
The record clearly demonstrates defendants acknowledged individual
responsibility for the funds provided by plaintiff by personally
obligating themselves to repay plaintiff, and in default thereof
to accept the imposition of a judgment for the unpaid amounts. We
deem this argument without sufficient merit to warrant further
discussion in a written opinion. R. 2:11-3(e)(1)(E).
13 A-0698-14T3
Lastly, Siegmeister argues the motion judge improperly denied
his request for an adjournment of the motion, which Siegmeister
made on the return date of the motion. We find no abuse of
discretion in this regard, and this argument also lacks merit to
warrant further discussion. R. 2:11-3(e)(1)(E).
Affirmed.
14 A-0698-14T3