On Cloaking Devices And Usury: Lender Can Be Sued If It Uses Corporate Shell To Cloak A Personal Loan As A Business Loan

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Cloaking devices are common in sci-fi movies like Star Trek and Star Wars. They are used to render an object, usually a spaceship, invisible to nearly all forms of detection. Although scientists are apparently working to make real-life cloaking devices, at this point they exist only in the movies and, apparently, in New Jersey courts, at least according to the Appellate Division in Amelio v. Gordon.

In Amelio, plaintiff owed an apartment building in Hoboken. He approached defendants about obtaining a loan to finish renovations on three units in the building, along with the common areas. Plaintiff claimed that defendants instructed him to create a corporate entity to obtain the loan. Plaintiff did as he was instructed, and formed a limited liability company, which obtained the loan from defendants. Plaintiff, who was identified as the managing member of the limited liability company, signed the loan documents on behalf of the company.

Plaintiff later sued, arguing that the fees and interest payments under the loan exceeded the amounts allowable under New Jersey's usury laws. He also claimed that defendants fraudulently convinced him to create a limited liability company and have that entity obtain the loan, just so they could charge him usurious fees and interest. Plaintiff sued in his individual capacity, not on behalf of the limited liability company. On the day of trial, defendants argued that the complaint had to be dismissed because plaintiff lacked standing to sue since the company was the borrower, not plaintiff. With little explanation, the trial court granted the motion and dismissed the complaint. Plaintiff appealed.

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Lease “Signed Under Protest” Not Binding (And Have You Ever Heard Of “Grumbling Acceptance”?)

What happens if a tenant signs a lease but writes "signed under protest" under the signature? According to the Appellate Division, it means the lease is not binding. More importantly, perhaps, the Appellate Division has never heard of the contract theory known as "grumbling acceptance." If this is one that you did not cover in law school, join the club.

In Bergenline Property Group, LLC v. Coto, defendant was a longtime tenant of premises owned by plaintiff. There was an oral lease between the parties for most of the tenancy. But, in 2013, plaintiff served a notice to quit on defendant, requiring defendant to sign a written lease and pay a security deposit or vacate the property. Defendant refused and plaintiff served another notice to quit, requiring defendant to vacate the property for refusing to agree to reasonable changes to the terms of the lease. Defendant did not vacate and plaintiff filed an eviction complaint.

At the hearing on plaintiff's eviction complaint, the parties agreed to allow the court to determine the reasonableness of several provisions in the proposed lease and modify the lease as necessary. The court did just that, issuing a written opinion that modified some of the terms of the lease. Despite defendant's prior agreement to be bound by the court-modified lease, defendant refused to sign it. Plaintiff then moved for a judgment of possession. At the hearing on that request, the court gave defendant another chance to sign the lease. In response, Defendant first delivered a lease with a signature that was not witnessed and a post-dated check for the security deposit. Plaintiff refused to accept both. Defendant then delivered a lease, signed by defendant and witnessed by defendant's counsel, and a money order for the security deposit. However, directly below defendant's signature on the lease appeared the words "signed under protest." Plaintiff refused to accept this lease as well, but gave defendant one more chance to come to plaintiff's counsel's office and sign the lease. Defendant was apparently driven to plaintiff's counsel's office, but refused to leave the car or execute a new lease.

Plaintiff then renewed its request for a judgment of possession. Defendant opposed the motion, arguing, among other things, that the "signing under protest" language did not change the document, and stating, "parenthetically," that if plaintiff was "offended" by that language, plaintiff could strike it. The court entered the judgment of possession, finding that, by placing the "signing under protest" language on the lease, there was no meeting of the minds, and therefore no binding contract. As a result, defendant failed to sign the lease and violated the court's order requiring her to do so.

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Not Quite El Chapo’s Escaping Through A Tunnel Under His Shower, But Still An Escape From “Custody”

There have been two high-profile prison escapes in recent weeks — one in Mexico and one in upstate New York. In United States v. Small, the U.S. Court of Appeals for the Third Circuit dealt with a third escape that was much lower-profile but still interesting. It presented the question of whether an individual could be guilty of the federal crime of escape even if he was never in the physical custody of the federal government or its agents.

In Small, defendant was serving a state prison term when he was convicted of federal tax fraud and sentenced to 135 months in a federal prison. The federal sentence was set to begin after the state sentence expired. To that end, the U.S. Marshal delivered to the state prison a detainer, which "governed Small's transfer to federal authorities upon completion of his state sentence." A few years later, however, the state prison "received documents in the mail, ostensibly from the [federal court], but which in reality were forgeries sent at Small's direction," which purported to vacate Small's conviction and sentence. The forgeries must have been good because the state prison believed them to be genuine and released Small after his state prison sentence ended.

A few months after he was released from state prison, a federal agent learned of Small's release. Federal agents quickly located and arrested Small, charging him with several crimes including escape. Small moved to dismiss that charge on the ground that he was never in federal custody, a requisite element of the federal crime of escape. He then entered an "open plea of guilty" and was sentenced to 60 months in prison on each count of the indictment (to be served concurrently with each other but consecutively to his tax fraud sentence).

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Landlords Have Duty To Maintain Premises Attractive To Tenants’ Customers

by: Katharine A. Muscalino

Although a landlord is generally required to maintain a leasehold in good condition, the Appellate Division has now clarified that the leasehold’s condition must make the premises attractive to tenants’ customers and assist in the tenants’ “in selling their wares and goods.” In Wallington Plaza, LLC v. Taher, decided on July 7, 2011, the tenant vacated the premises upon one months’ notice, with six months remaining in the lease term. The landlord demanded judgment in the amount of six months’ rent. However, the tenant claimed that because the landlord had breached an implied covenant to maintain the shopping center in a good condition attractive to tenants’ customers, tenant was only obligated to pay rent for the time it occupied the premises. Finding that the parking lot of the shopping center was run-down and that many of the other shopping center stores were vacant, the court agreed that landlord had breached this obligation. The court held that tenant was responsible for paying two months’ rent, inclusive of its last month of occupancy following its notice, because the lease required two months’ notice of termination of the lease.