BUSINESS ENTITIES | FRANCHISES | CONTRACTS
12-2-5140 The Basement Store Franchise Corp. v. Natoli, App. Div. (per curiam) (11 pp.) Plaintiff The Basement Store Franchise Corp., a foreign corporation transacting business in New Jersey, appeals from three orders, the last of which denied its motion to reconsider the dismissal of its complaint with prejudice and to reinstate the complaint. Plaintiff, a franchisor business, was incorporated in Nevada, but its principal office was located in New Jersey, and it derived income from licensing fees generated here. Third-party defendants Philip Agoglia and Cheryl Agoglia were plaintiff’s principals and sole employees. Prior to instituting this action, plaintiff had no certificate of authority to transact business in New Jersey and had not paid taxes to the Department of the Treasury. Plaintiff entered into two franchise agreements with defendants Dominick Natoli and Roland Csenker. Defendants executed promissory notes and later defaulted and abandoned the franchises. Defendants then established two new businesses utilizing plaintiff’s unique pricing model, which allegedly violated a non-competition covenant in each franchise agreement. Plaintiff filed a verified complaint against defendants in the Chancery Division, Monmouth County, alleging breach of contract. Plaintiff also filed an order to show cause to enforce the non-competition covenants. The Order to Show Cause was resolved via a Consent Order which required defendants to relocate their new businesses, dismissed plaintiff’s request to enforce the non-competition covenants with prejudice, declared the covenants null and void, preserved plaintiff’s monetary damages claim not relating to the non-competition covenants, and transferred the matter to the Law Division. Defendants filed a motion for summary judgment and to dismiss the complaint, arguing that plaintiff lacked standing because it had no certificate of authority to transact business in New Jersey. Plaintiff contends that the judge erred in refusing to reinstate the complaint after plaintiff obtained a certificate of authority and paid back taxes, as required by court order. Plaintiff also contends that dismissal based on a discovery violation was improper. The appellate panel agrees and concludes that dismissal of the complaint with prejudice and denial of plaintiff’s motion for reconsideration and to reinstate the complaint was a mistaken use of discretion requiring reversal.
