SHEILA MARTELLO VS. ROBERT A. FRANCO, ESQ. Â (L-2704-11, MORRIS COUNTY AND STATEWIDE)(CONSOLIDATED), A-0858-14T3/A-0698-14T3

Background

Sheila Martello sued Robert A. Franco, Randi K. Franco, Todd Siegmeister and related entities alleging fraud, misappropriation, conversion, civil conspiracy and sought veil-piercing remedies for funds she advanced for an alleged gold venture.
Martello loaned a series of amounts (totaling $785,000) to defendants between Dec. 2010 and June 2011; she alleged the funds were never used for the stated purpose and were not insured as represented.
Defendants’ pleadings had been stricken for noncompliance with prior court orders; the case was set for a default-proof hearing on Jan. 6, 2014, but the parties negotiated two settlement agreements instead.
Settlement with Siegmeister: total repayment obligation $550,000 in three equal installments; default left plaintiff able to seek entry of judgment up to $900,000 less payments made. Settlement with Francos: total repayment obligation $350,000 in three installments; default allowed plaintiff to seek entry of judgment up to $800,000 less payments made.
Defendants defaulted on the June 30, 2014 payment; plaintiff moved to enter judgment under the settlement agreements. The motion judge denied defendants’ cross-motions to vacate and entered judgment for plaintiff ($900,000 vs. Siegmeister; $800,000 vs. Francos).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Enforceability of settlement agreements	Martello argued the agreements are valid, knowingly negotiated compromises of claims and enforceable, including default-judgment provisions	Defendants contended the settlements are illegal/usurious and thus unenforceable; they sought relief under R. 4:50-1 (mistake, fraud, newly discovered evidence, voidness, or other grounds)	Court enforced the agreements: they were valid, voluntarily negotiated, supported by consideration, and not unconscionable penalties
Usury / N.J.S.A. 31:1-1 application	Martello argued the agreements did not create a usurious loan obligation but were settlements of litigation claims	Defendants argued the default judgments function as punitive interest and exceed statutory usury limits (more than 200% of original loans)	Court held the usury statute did not apply: settlement agreements were not loan instruments; sums related to asserted damages and claims, not an interest rate
Relief under Rule 4:50-1 (mistake, fraud, newly discovered evidence, voidness, or §(f))	Martello maintained no mistake, no newly discovered evidence, and no fraud in entering the settlements	Defendants claimed mistake, fraud, and newly discovered evidence justifying vacatur under Rule 4:50-1(a)-(d),(f)	Court rejected Rule 4:50-1 relief: defendants failed to show mistake, clear-and-convincing fraud, newly discovered material evidence, or exceptional circumstances warranting relief
Personal liability vs. corporate obligation	Martello relied on defendants’ personal promissory undertakings in the settlement agreements	Defendants asserted they had no individual obligation because loans were to corporate entities	Court found the record showed defendants personally obligated themselves in the settlement documents; personal liability upheld

Key Cases Cited

Barr v. Barr, 418 N.J. Super. 18 (App. Div. 2011) (abuse-of-discretion standard reviewing Rule 1:10-3 enforcement)
Pascarella v. Bruck, 190 N.J. Super. 118 (App. Div. 1983) (settlement agreements are contracts generally enforced absent fraud or unconscionability)
DEG, LLC v. Twp. of Fairfield, 198 N.J. 242 (2009) (scope of Rule 4:50-1(f) for exceptional circumstances)
Hous. Auth. of Morristown v. Little, 135 N.J. 274 (1994) (Rule 4:50-1 relief should be used sparingly)
Manning Eng'g, Inc. v. Hudson Cty. Park Comm'n, 74 N.J. 113 (1977) (finality of judgments balanced with equitable authority to avoid unjust results)
Ridley v. Dennison, 298 N.J. Super. 373 (App. Div. 1997) (Rule 1:10-3 is proper tool to compel compliance with court orders)
Westmount Country Club v. Kameny, 82 N.J. Super. 200 (App. Div. 1964) (when a contractual provision constitutes an unenforceable penalty)
Loigman v. Keim, 250 N.J. Super. 434 (Law Div. 1991) (usury statute does not apply to interest on defaulted obligations)