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Wreh v. Tuck

A-1113-02T2 (N.J. Super. App. Div. 2003) (Unpublished)

CONTRACTS; FRAUD—Leasing a financed vehicle in possible contravention of the owner’s financing agreement is not an illegal transaction and is enforceable, but the lessee may be entitled to collect damages, if any, arising out of what might be a fraud against the financing company.

A van owner entered into a written agreement to lease his van to a man who would use it for an airport taxi service. The van was financed, and presumably subject to a financing lien. The two men prepared their own written agreement which called for monthly payments from the taxi operator and an agreement by the taxi operator to be responsible for any and all damage and any and all traffic violations. It provided that after a certain number of payments, the van would become the taxi operator’s personal property. About two years later, the taxi operator returned the van to its owner, telling the van owner that he did not want it anymore. At that time, he signed another document agreeing to be responsible for the balance of the financing payments. Next to his signature was written “in protest.” At trial, the taxi operator “alleged that this document was signed because someone was threatening him with a knife.” The van owner sued for breach of contract and for recovery of unpaid E-Z pass fines. After a bench trial, the lower court found that there was a contract and it had been breached by the taxi operator. The lower court awarded damages for repair, E-Z pass fines, and the remaining payments.

The taxi operator, appealed, contending “that the agreement between him and [the van owner could not] be enforced because the van was being financed and title could not be transferred without the consent of the finance company.” Essentially, the taxi operator argued that the agreement was illegal. The Appellate Division rejected that contention. The agreement did not purport to transfer ownership of the van while it was being financed. To the contrary, it provided that “after full payment” the van would become the personal property of the taxi operator. According to the Court, “[a]lthough this [was] an unusual agreement, it [was] not illegal, void, or contrary to public policy. An illegal contract is one where the contract violates a law or statute.” The Court also rejected the taxi operator’s contention that the van owner committed fraud by subleasing the van because the financing arrangement prohibited such subleasing. There was no evidence presented at trial of any such prohibition. Further, even if there were and such leasing activity constituted fraud, the taxi operator wasn’t able to show any damages arising out of such an alleged fraud.

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