                                NOT FOR PUBLICATION WITHOUT THE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 NO. A-0274-17T2

REED S. KEAN,

          Plaintiff-Respondent/
          Cross-Appellant,

v.

INTOWN INVESTMENT GROUP, LLC, 1
DAVID BLACK, CATHLEEN BLACK,
and VICINITY MEDIA GROUP, INC.,

     Defendants-Appellants/
     Cross-Respondents.
____________________________________

                    Argued November 8, 2018 – Decided December 7, 2018

                    Before Judges Koblitz, Ostrer, and Mayer.

                    On appeal from Superior Court of New Jersey, Law
                    Division, Morris County, Docket No. L-2733-15.

                    Mitchell J. Decter argued the cause for
                    appellants/cross-respondents (Ferro Labella & Zucker


1
  InTown Investment Group, LLC was dissolved prior to this litigation and is
not a party to the appeal.
            LLC, attorneys; Mitchell J. Decter, of counsel and on
            the briefs).

            Jordan D. Weinreich argued the cause for
            respondent/cross-appellant (Sherman Wells Sylvester
            & Stamelman LLP, attorneys; Julian W. Wells and
            Jordan D. Weinreich, of counsel; Matthew F.
            Chakmakian, on the brief).

PER CURIAM

      Defendants David Black, 2 Cathleen Black, and Vicinity Media Group, Inc.

(VMG) appeal from an August 8, 2017 judgment entered against them, jointly

and severally, in favor of plaintiff in the amount of $112,500. 3 Plaintiff cross-

appeals from the trial court's denial of his claim that defendants violated the

New Jersey Uniform Securities Law, N.J.S.A. 49:3-47 to -83 (NJUSL).

      We affirm in part and remand in part. We affirm as to the entry of the

judgment, inclusive of plaintiff's $100,000 investment, and the trial court's

denial of plaintiff's claim under the NJUSL. We remand for the trial court to




2
   We refer to David Black interchangeably as David Black and Black. We refer
to his wife as Cathleen Black throughout this opinion.
3
  The trial court entered judgment in the amount of $112,500, finding $100,000
represented plaintiff's initial investment for the project known as InTown and
Around and $12,500 represented a subsequent investment by plaintiff to Black
for a different business venture known as Best of Essex. Defendants' appeal is
limited to the $100,000 portion of the judgment.
                                                                          A-0274-17T2
                                        2
provide findings of fact and conclusions of law regarding the imposition of joint

and several liability against Black, Cathleen Black, and VMG.

        The relevant facts are straightforward. Black had an idea to develop a

mobile application to link local residents with local businesses within a

particular community. The idea involved development of a new media platform,

capitalizing on Black's existing business connections in the print magazine field.

Black and his wife had experience marketing local businesses to area residents

through their company, VMG. 4 Black saw an opportunity to use his business

expertise and VMG's publishing skills to create a product tailored to the digital

age.

        To make his vision a reality, Black sought investors for his idea. Plaintiff

had no background in software development, but liked Black's idea and decided

to meet with Black. Black asked plaintiff to invest $100,000 and gave plaintiff

a spreadsheet with financial information. 5 The spreadsheet contained growth

projections for the venture over a five-year period.         The projections were

prepared by Black with the assistance of the owner of a landscaping company




4
    VMG published several print magazines touting local businesses.
5
    During depositions, the parties referred to the spreadsheet as the "prospectus."
                                                                            A-0274-17T2
                                          3
who advertised in VMG's print publications. Black did not consult any financial

advisors or other professionals in preparing the spreadsheet.

      Black sent plaintiff emails confirming the investment and describing each

investors' role in the application to be known as "InTownandAround.com"

(InTown). In December 2013, the parties signed an operating agreement for

InTown. In accordance with the operating agreement, spreadsheet, and Black's

emails, plaintiff was the only investor contributing cash for InTown. In August

2013, plaintiff agreed to invest $100,000, payable in several installments, for a

21.8 percent share of InTown. According to the documents, another investor,

Eric Lanel, was to provide an in-kind contribution toward the project, offering

his advertising and marketing expertise, in return for a 21.8 percent share of

InTown. The Blacks also would provide in-kind contributions for a collective

56.4 percent share of InTown.       Black's contributions included hiring and

managing staff, using VMG's offices, and creating the content for the mobile

application.   Cathleen Black, for her share of InTown, would provide

contributions in the form of marketing, bookkeeping, paying invoices, and

writing checks.

      Within ten months of plaintiff paying the first investment installment,

InTown failed. According to Black, due to advances in mobile technology, the


                                                                         A-0274-17T2
                                       4
platform was obsolete. Ultimately, InTown dissolved. Plaintiff then filed a

lawsuit against defendants alleging fraud, fraud in the inducement, breach of

contract, breach of fiduciary duty, conversion, unjust enrichment, and violation

of the NJUSL.

      The matter was tried before a judge without a jury. The judge heard

testimony on July 11, July 12, and July 28, 2017. Eric Lanel, plaintiff, and Black

testified. Cathleen Black, who was present in the courtroom during the trial, did

not testify.

      The judge summarized the testimony in an oral opinion. Overall, the

judge found the testimony provided by plaintiff and Lanel to be more credible

than the testimony provided by Black. Based on the testimony, the judge found

Black invoiced InTown for the in-kind contributions he was obligated to

perform. The judge also concluded plaintiff was not aware of the monthly

management fee InTown paid to VMG. The judge determined the operating

agreement afforded plaintiff "financial oversight" of InTown, which Lanel

believed included access to accounting and banking information and the ability

to challenge InTown's expenditure of money.

      While the judge found plaintiff unable to specifically recall receipt of the

emails and spreadsheet from Black, plaintiff did not deny reviewing the


                                                                          A-0274-17T2
                                        5
documents. The judge determined plaintiff opened InTown's bank account,

using the same bank where plaintiff had his personal account, to facilitate the

payment of his investment installments. Plaintiff claimed he was unaware

InTown was making payments to VMG because the Blacks, through VMG, were

supposed to provide in-kind services for the start-up of InTown. While plaintiff

attended several meetings regarding InTown, plaintiff testified he never

discussed where his investment money was being spent. Plaintiff characterized

himself as a "passive investor" of InTown despite being granted "financial

oversight" of InTown, opening InTown's bank account, and attending numerous

meetings to discuss InTown.

      The judge found Black's testimony "inconsistent," "unbelievable," and

"rambling and . . . unresponsive to the questions being asked." In reviewing the

financial projections in the spreadsheet sent to plaintiff, Black was asked about

several line items. The judge found Black could not identify the services a "pod

account manager" would perform despite listing a pod account manager in the

spreadsheet. Nor was Black able to explain the purpose of the legal fees listed

in the spreadsheet or explain how he arrived at the dollar amount for that line

item. In arriving at the projected gross profits for InTown, Black told the judge

the figures were "illustrative" and "potential based on the numbers." Black


                                                                         A-0274-17T2
                                       6
based his "numbers" on internet research but did not retain his search results.

Black admitted he did not seek the advice of investment bankers or professional

financial advisors in creating the spreadsheet. When Black was asked whether

the information in the spreadsheet provided to plaintiff was realistic, Black

responded the information was "totally speculative."

      Responding to questions about the language in InTown's operating

agreement, Black conceded the document was "unclear" regarding many terms,

including the terms "staff" and "office" used to describe his in-kind

contributions toward InTown.

      Also troubling to the judge was Black's lack of knowledge or information

regarding the invoices VMG submitted to InTown.          According to Black,

Cathleen Black prepared invoices on behalf of VMG and submitted them to

InTown for payment. Cathleen Black then issued payment for VMG's invoices

from InTown's bank account. Black was unable to explain the discrepancies

between the amounts invoiced by VMG and the line item amounts in the

spreadsheet.   The judge concluded, "Black's answers simply did not make

sense." In addition, Black told the judge any advertising revenue generated by

InTown was "deposited into VMG's accounts" and "none of the [advertising]

revenue was put back into InTown." Black also admitted VMG's revenue had


                                                                       A-0274-17T2
                                      7
declined approximately forty percent between 2008 and 2013 when InTown was

launched.

      Based on the testimony, the judge found plaintiff met his burden of proof

on his fraud claim as the "goals and the prospectus of InTown were totally

speculative." The judge found:

            Mr. Black had no basis for the financial projections for
            the venture. . . . Mr. Black came up with [the gross
            profit] figures on his own without consultation with
            financial advisors or investment bankers. Mr. Black
            had no basis or reason to expect such growth from
            InTown. In addition, at no point did Mr. Black disclose
            the extent to which he planned VMG's involvement in
            the venture. . . . Mr. Black was to make an in-kind
            contribution to staff, office[,] and infrastructure
            development and sales. Instead, Mr. Black, through
            VMG, invoiced InTown for the in-kind contribution he
            was obligated to perform. In total, VMG invoiced
            InTown for nearly $75,000 in services rendered. In
            addition, the cash infusion of VMG came at a time
            when revenue had declined by [forty] percent over a
            five-year period.

The judge concluded plaintiff was entitled to the return of his $100,000

investment for InTown.

      Plaintiff submitted a form of judgment pursuant to R. 4:42-1(c) reflecting

the judge's decision. According to the language in the proposed judgment, the

judge found against David Black, Cathleen Black, and VMG "jointly and

severally, in the amount of $112,500." While the judge made findings that Black

                                                                        A-0274-17T2
                                       8
committed fraud, he made no such findings as to Cathleen Black or VMG in his

decision.

      The judge also considered and rejected plaintiff's NJUSL claim. On the

issue of plaintiff's status as an investor to invoke the NJUSL, the judge found:

            Plaintiff is trying to argue essentially both sides of the
            same coin. Plaintiff asserts that the expectation of all
            parties was that plaintiff was to be a passive investor;
            however, plaintiff then states that defendant should be
            estopped from arguing that plaintiff is a passive
            investor and the [c]ourt should treat [plaintiff] as an
            active investor for the purpose of designated exception
            [ ] N.J.S.A. 49:3-50(a)(12)(b)(9).          Plaintiff has
            presented conflicting testimony as to whether [he] was
            or was not a passive investor. Accordingly, plaintiff
            has not met [his] burden in establishing a claim under
            New Jersey's Uniform Security Law.

      On appeal, defendants argue the judge erred in finding plaintiff's $100,000

cash investment was procured through fraud and imposing joint and several

liability against Cathleen Black and VMG.         On the cross-appeal, plaintiff

challenges the judge's denial of his claim under the NJUSL.

      Our review of a trial court's factual findings is limited to whether the

findings are supported by sufficient credible evidence. Rova Farms Resort v.

Investors Ins. Co., 65 N.J. 474, 483–84 (1974). A trial judge's evaluation of

credibility, based on his or her opportunity to see and hear witnesses, should be

honored unless manifestly against the weight of the evidence. Valdez v. Tri-

                                                                         A-0274-17T2
                                        9
State Furniture, 374 N.J. Super. 223, 232 (App. Div. 2005). However, a trial

court's legal conclusions are reviewed de novo. See, e.g., Kieffer v. Best Buy,

205 N.J. 213, 222 (2011). A trial court's application of the law to the facts is

also reviewed de novo. State v. Harris, 181 N.J. 391, 416 (2004).

      In reviewing a common-law fraud claim, a plaintiff is required to prove:

(1) a material misrepresentation by the defendant of a presently existing fact or

past fact; (2) knowledge or belief by the defendant of its falsity; (3) an intent

that the plaintiff rely on the statement; (4) reasonable reliance by the plaintiff;

and (5) resulting damages to the plaintiff. Gennari v. Weichert Co. Realtors,

148 N.J. 582, 610 (1997). A plaintiff must prove a fraud claim through clear

and convincing evidence. Stochastic Decisions, Inc. v. DiDomenico, 236 N.J.

Super. 388, 395 (App. Div. 1989).

      Generally, "the alleged fraudulent representation must relate to some past

or presently existing fact and cannot ordinarily be predicated upon matters in

futuro." Ocean Cape Hotel Corp. v. Masefield Corp., 63 N.J. Super. 369, 380

(App. Div. 1960) (alterations omitted). There is an exception to this rule in the

case of a false representation of an existing intention. Ibid. "A promise to pay

in the future is fraudulent if there is no present intent ever to do so." Van Dam




                                                                           A-0274-17T2
                                       10
Egg Co. v. Allendale Farms, Inc., 199 N.J. Super. 452, 457 (App. Div. 1985).

As we held in Stochastic Decisions, fraudulent intention

             may be derived from circumstantial evidence such as:
             the recklessness or implausibility of the statement in
             light of later events; showing that the promisor's
             intentions were dependent on contingencies known
             only to the promisor; or simply from evidence
             indicating that the promisor would not or could not
             fulfill the promise.

             [Stochastic Decisions, 236 N.J. Super. at 396.]

      Black's promises regarding InTown were not simply puffery or opinions

as to future events. Black made statements to plaintiff to obtain a $100,000 cash

investment for InTown, knowing the statements were made without financial

support, and the projections were "totally speculative." Black also committed

fraud by failing to disclose his intention to use money from InTown for his own

financially declining company, VMG, when Black expressly agreed to

contribute in-kind services through VMG in exchange for his percentage share

of InTown.

      Having reviewed the record, plaintiff met his burden of proving fraud

under the circumstances. Black made false misrepresentations about InTown

that were without any financial basis or other support, and dependent on

information known only to Black; specifically, his intention to bill InTown for


                                                                         A-0274-17T2
                                      11
VMG's services that were supposed to be included as Black's in-kind

contributions toward InTown in lieu of a cash contribution.

      Black also knew plaintiff would rely on the information in the spreadsheet.

Without the spreadsheet, there was no reason for plaintiff to invest in InTown.

Plaintiff testified he agreed to the $100,000 investment based on the materials

plaintiff received from Black, including the spreadsheet. Plaintiff reasonably

relied on Black's spreadsheet because plaintiff had no experience in the

development of mobile applications. Black's representations regarding InTown

were made in bad faith with the intent to induce plaintiff to make a large cash

investment.

      We next consider defendants' challenge to the entry of the final judgment

jointly and severally against all defendants. Rule 1:7-4 requires a trial court find

"the facts and state its conclusions of law thereon . . . on every . . . written order

that is appealable as of right[.]"      The failure of a trial court to meet the

requirements of the rule "constitutes a disservice to the litigants, the attorneys

and the appellate court."     Curtis v. Finneran, 83 N.J. 563, 569–70 (1980)

(quoting Kenwood Assocs. v. Bd. of Adj. Englewood, 141 N.J. Super. 1, 4 (App.

Div. 1976)). The failure to advance reasons in support of a judicial decision




                                                                              A-0274-17T2
                                         12
results in our speculating as to the trial court's thinking. See Salch v. Salch, 240

N.J. Super. 441, 443 (App. Div. 1990).

      Here, the judge failed to make the required findings of fact and state his

legal reasons for imposing joint and several liability against all defendants. The

judge determined David Black committed fraud. However, we are unable to

discern from the record whether the fraud findings extended to Cathleen Black

and VMG. Thus, we are constrained to remand the matter to the trial court to

explain the imposition of joint and several liability on David Black, Cathleen

Black, and VMG. We take no position on the court's determination of this issue

on remand.

      We next examine plaintiff's cross-appeal regarding the judge's denial of

his NJUSL claims. Having reviewed the record, we are satisfied that to be an

"investment contract" within the definition of a security under the NJUSL, an

investor must be a "passive investor." See S.E.C. v. Howey, 328 U.S. 293, 298

(1946) (applying federal securities law). 6 A "passive investor" is one who

derives profits "solely through the efforts of [others]." Ibid. An investor who




6
  Under the NJUSL, courts have to power to review federal law for guidance on
the sale of securities. See N.J.S.A. 49:3-75.
                                                                            A-0274-17T2
                                        13
has legal rights and enjoys certain powers is not a passive investor.         See

Goodwin v. Elkins & Co., 730 F.2d 99, 107 (3d Cir. 1984).

      The judge found plaintiff "presented conflicting testimony as to whether

[he] was or was not a passive investor." Plaintiff admitted he had certain rights

such as opening the bank account for InTown, an ability to access InTown's bank

statements and transactions, attending meetings with InTown's investors,

appointment as secretary of InTown, and "financial oversight" over InTown.

Whether or not plaintiff chose to exercise these rights with respect to InTown

does not equate with his being a "passive investor." Under the circumstances,

we are satisfied plaintiff was not a passive investor entitled to pursue a claim

under the NJUSL.

      We affirm as to the amount of the final judgment entered and the denial

of plaintiff's claims under the NJUSL. We remand to the court to explain the

basis for the entry of the judgment against David Black, Cathleen Black, and

VMG jointly and severally. We do not retain jurisdiction.




                                                                         A-0274-17T2
                                      14
