LEONARD KESSELMAN v. SIDNEY KESSELMAN (C-000184-18, ESSEX COUNTY AND STATEWIDE) ( 2022 )

NOT FOR PUBLICATION WITHOUT THE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-3620-19
LEONARD KESSELMAN,
Plaintiff-Appellant,
v.
SIDNEY KESSELMAN,
individually and as Trustee of
Kesselman Living Trust, and
TERRI ZIMMERMAN,
individually and as Trustee of
Kesselman Living Trust,
Defendants-Respondents.
__________________________
Argued November 30, 2021 – Decided March 2, 2022
Before Judges Rothstadt and Natali.
On appeal from the Superior Court of New Jersey,
Chancery Division, Essex County, Docket No. C-
000184-18.
Robert J. Donaher argued the cause for appellant
(Herold Law, PA, attorneys; Robert J. Donaher, of
counsel and on the briefs).
Christine F. Marks argued the cause for respondents
(Fox Rothschild, LLP, attorneys; Christine F. Marks, of
counsel and on the brief).
PER CURIAM
In this ongoing intrafamily dispute, plaintiff Leonard Kesselman appeals
from the Chancery Division's February 10, 2020 order granting summary
judgment to the late Sidney Kesselman and his daughter, plaintiff's sister, Terri
Zimmerman, in their individual capacities and as trustees of the Kesselman
Living Trust (Family Trust). The Chancery judge granted the motion and
dismissed the complaint based on the doctrines of res judicata and collateral
estoppel, after the judge concluded plaintiff's claims in this case had been
disposed of in an earlier New York litigation. Plaintiff also appeals from the
same judge's May 5, 2020 denial of his motion for reconsideration.
On appeal, plaintiff argues his claims were not barred by res judicata or
collateral estoppel, "preclusion" was not applicable under the United States
Constitution's "Full Faith and Credit" clause, and the New York court's
determination should not be given "preclusive effect under the doctrine of
fraudulent concealment."
We affirm the two orders under appeal, except as to one specific claim
made by plaintiff in his complaint in this action. We do so because we conclude
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the New York judgment precludes plaintiff from re-litigating his claims about
his sister's alleged undue influence and its impact on the validity of 2002 and
2014 amendments to the Family Trust and about the enforceability of an alleged
intrafamily agreement. However, it did not preclude plaintiff from pursuing
claims relating to the validity of a 2015 amendment to the Family Trust,
including his claims of undue influence regarding that amendment.
I.
To give context to our decision, we begin with a detailed discussion of the
origins of the Family Trust and the parties' litigations, all viewed in a light most
favorable to plaintiff as the party opposing summary judgment.
The Family, the Business, and the Chelsea Building
As already noted, Leonard and Terri 1 are the only children of the late
Sidney Kesselman and his late wife Evelyn Kesselman. In the early 1950s,
Sidney opened a paint and hardware store in New York, known as London Paint.
In the mid-1960s, Sidney purchased a building on Nineth Avenue in Manhattan
(the Chelsea building) and began operating London Paint from its premises.
1
We refer to the parties by their first names to avoid any confusion caused by
their common last name. No disrespect is intended.
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Leonard began working at London Paint as a child and continued to work
in the business as an adult. In 1983, upon Sidney's retirement and Sidney and
Evelyn's purchase of a home in Florida, Leonard took control of the business,
although it was disputed what Leonard paid to acquire the business, if anything.
It was undisputed, however, that over the years London Paint paid a rent
that was significantly below the market rate. Between 1983 and 2003, London
Paint paid rent of $1,000 per month. In 2003, there were two rent increases, one
to $2,000 per month and a second to $3000 per month.
Leonard claimed a written ten-year lease covered the period from 1984 to
1994, but the record does not contain any written lease for any period. At most,
the record contains a letter dated October 13, 1997, three years after the alleged
written lease ended, addressed from Sidney and Evelyn to Leonard and Terri
and executed by all four individuals, which stated the following:
This letter will acknowledge the agreement between
[Sidney], [Evelyn], [Leonard] and [Terri] regarding the
[Chelsea] building owned by Sidney and Evelyn . . . .
Should Sidney or Evelyn be in possession of the
[Chelsea] Building . . . or as an entity owned by the
survivor at the time of the survivor's demise, it is agreed
that London Paint Company, Inc. or any other company
or business occupying the store or any other rental
space in the Building, will pay the "fair rental value" in
exchange for occupying such space. The fair rental
value shall be determined by a licensed real estate agent
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knowledgeable in rentals for that area of Manhattan. If
Leonard and Terri cannot agree on a real estate agent,
each of Leonard and Terri shall select one and if they
cannot agree on the fair rental value, both real estate
agents shall select a third licensed real estate agent who
shall determine the fair rental value. Also, the Building
shall be managed by both Leonard and Terri.
According to Leonard, after his father's stroke in 2012, a dispute arose
between Leonard and Sidney about Leonard's interest in the building and the
rent to be paid by London Paint. Leonard contended he continued to operate
London Paint out of the Chelsea building pursuant to a family agreement, and,
in reliance upon that agreement, he maintained and improved the building to the
benefit of the entire family, with building profits paid to Sidney and Evelyn.
Leonard claimed among the alleged terms of the family agreement were: an
understanding that London Paint could continue as a tenant of the Chelsea
building, paying an agreed-upon, below-market-rate rent until the deaths of
Sidney and Evelyn; during which Leonard would be paid $450 per month to
manage and maintain the property; and, upon the deaths of Sidney and Evelyn,
the building would be bequeathed in equal shares to Leonard and Terri, at which
time the siblings would agree upon a fair market rent for the business.
However, Sidney rejected Leonard's allegations about a family agreement.
He denied Leonard had any right to continued occupancy of the Chelsea
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building, and stated Leonard refused to pay an increased rental amount despite
repeated requests that he do so. He claimed Leonard was "a liar," who over the
years had "gone to great lengths to try to cheat and manipulate my wife and me
out of our money for his financial benefit." And, he stated that he retained full
control over how he would bequeath his estate and that there were no promises
of a specific inheritance amount or percentage to be given to Leonard .
Thereafter, the record reflects that in 2015, three years later, Sidney and
Leonard attempted to negotiate London Paint's rent, with Sidney demanding
$11,000 per month, which was still well below the market rate. When Leonard
refused to pay that amount, Sidney commenced summary proceedings in a New
York action to terminate London Paint's tenancy and change management of the
building. In response, as more fully discussed infra, Leonard commenced his
own lawsuit in New York.
The Trust, and Evelyn and Sidney's Deaths
A week prior to the October 13, 1997 letter discussed above, Sidney and
Evelyn established the Family Trust. Later, Sidney and Evelyn transferred
ownership of the Chelsea building to the trust.
The record does not include a copy of the 1997 version of the revocable
trust, however it contains a copy of the May 21, 2002 amendment (2002
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Amendment). Under the 2002 Amendment, upon the deaths of Sidney and
Evelyn, the Chelsea building was to be distributed sixty percent to Terri and
forty percent to Leonard, as tenants in common. Also, upon the death of either
spouse and based upon the consent of the surviving trustor, Leonard and Terri
were to share management responsibilities for the building. Finally, upon the
deaths of both Sidney and Evelyn, all tenants, including London Paint, would
be required to pay rent at a minimum of fair market value if they were not
already doing so.
In 2012, Sidney suffered a stroke at the age of ninety-one. Two years
later, on November 5, 2014, Sidney and Evelyn amended the trust for a second
time through a First Restatement of the Family Trust (2014 Amendment).
Among other things, the 2014 Amendment provided that: Sidney could act
independently, making decisions and binding the trust without the consent of
Evelyn; Sidney was named as Evelyn's successor trustee and Terri as Sidney's
successor trustee; and upon the deaths of Sidney and Evelyn, the Chelsea
building was to be distributed eighty percent to Terri and twenty percent to
Leonard, with London Paint's rent being increased to fair market rental value,
Terri would receive Sidney and Evelyn's property in Florida, and any remainder
of the trust would be shared equally by Leonard and Terri.
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In August 2015, while the Sidney's tenancy action and Leonard's New
York actions were pending, the trust was amended for a third time (2015
Amendment), such that Leonard's interest in the building was decreased to zero,
and Terri's interest was increased to 100 percent. However, no copy of the 2015
Amendment is included in the record, and Leonard did not learn about the
amendment until after he filed this action in New Jersey in 2018.
While the New York litigations were pending, in September 2017, Evelyn
died; and while this action was pending, in 2019, Sidney died.
The New York Litigation
Prior to Sidney and Evelyn's passing, as already noted, in early 2015, they
filed an action in New York to terminate London Paint's tenancy in the Chelsea
building and Leonard filed a complaint on his behalf and on behalf of London
Paint. Leonard named Sidney and Evelyn as defendants in their capacity as
trustees of the Family Trust, and, along with Terri, individually.
Leonard's New York complaint asserted causes of action for: (1) specific
performance of the alleged family agreements; (2) declaratory judgment that the
alleged family agreements are valid and enforceable; (3) equitable estoppel; (4)
preliminary and permanent injunction; and (5) breach of contract. Essentially,
Leonard demanded enforcement of alleged family agreements and
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understandings that, during Sidney's and Evelyn's lifetimes, London Paint would
be permitted to operate from the Chelsea building at an affordable, below market
rent and Leonard would be paid $450 per month to manage the building on his
parents' behalf, and that, upon Sidney and Evelyn's death, Leonard and Terri
each would receive fifty percent shares of the Chelsea building.
Leonard further alleged Terri instigated Sidney's breaches of the alleged
family agreements. In particular, he asserted that, after Sidney's stroke in 2012,
Terri exerted undue influence over Sidney and caused him to: alter the trust
such that Terri would receive more than fifty percent of Sidney and Evelyn's
estate upon their deaths; demand that plaintiffs pay unaffordable, market-rate
rent for occupancy of the Chelsea building; commence eviction proceedings to
remove plaintiffs from the building; and change the management of the building .
Finally, Leonard asserted these changes were made without notice to or consent
from Evelyn, who served as co-trustee of the trust and who had equal authority
with respect to ownership and control of the building.
All three defendants filed answers and affirmative defenses, denying that
the plaintiffs had a right to the relief sought, with Sidney and Terri represented
by separate counsel from Evelyn.
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In addition to the complaint, Leonard filed a motion in the New York
action for a preliminary injunction, to enjoin and restrain any landlo rd-tenant
proceedings commenced by Sidney. On July 28, 2015, the New York court
granted Leonard a preliminary injunction and stayed the summary tenancy
proceeding. The court did so, because "the issues [were] complex and the parties
intensely contest[ed] the facts." That is, the litigation involved "heavily
contested familial issues" and was "not a simple landlord-tenant matter as it
involve[s] issues of undue influence and mental capacity." To resolve the
matter, the court determined it "must examine the relationship between Terri and
her parents in order to assess whether Terri has unduly influenced her parents."
Afterward, Sidney and Terri filed an unsuccessful appeal from the stay order. 2
In the meantime, in September 2015, Leonard filed a motion for leave to
file an amended complaint to assert a claim for declaratory judgment that the
2014 Amendment was invalid and unenforceable due to Sidney and Evelyn's
lack of mental capacity and Terri's undue influence. Terri and her parents
opposed the motion and they filed a cross-motion for summary judgment, which
2
On April 28, 2016, a New York appellate court upheld the preliminary
injunction order, but remanded for the court to re-set the amount of the plaintiffs'
undertaking upon receipt of competent evidence of the fair market rent for the
commercial space.
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Leonard opposed. At that time, no discovery was taken in the New York
litigation, although Leonard had served discovery requests, but his family did
not respond.
Despite there being no discovery, Terri and her parents nevertheless
argued that summary judgment was appropriate because the discovery requests
were not related to the real estate claims asserted in the complaint, which were
premised upon the alleged family agreements and were barred by the statute of
frauds. Rather, the discovery requests related to Leonard's proposed amended
complaint, that is, "Sidney and Evelyn['s] mental capacity and Terri['s] alleged
influence over them," and the fact that Leonard was not being bequeathed an
equal share of his parents' assets upon their death.
On June 24, 2016, the New York trial court granted the summary judgment
motion and denied Leonard's motion for leave to amend the complaint. In its
decision, the court noted the parties did not complete discovery. Nevertheless,
the court found summary judgment was appropriate because: the alleged family
agreements were neither valid nor enforceable; London Paint's month-to-month
tenancy could be terminated by the landlord, the Family Trust; and Leonard did
not have a vested fifty percent interest in the Chelsea building.
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More specifically, the court found the alleged family agreement was
unenforceable because it was indefinite, vague, ambiguous, and uncertain as to
the amount of rent to be charged and constituted "nothing more than an
unenforceable agreement to agree." Moreover, the alleged oral agreements on
rent and the distribution of the building upon Sidney and Evelyn's deaths were
barred by the statute of frauds.
Rejecting Leonard's equitable claim of partial performance, the court
noted the improvements Leonard made to the building were made in 1973,
before he acquired London Paint, and in 1989, during the existence of a written
lease. Therefore, they were not related to an alleged oral agreement, and were
"as likely explainable" by the benefit London Paint received from the
improvements. Similarly, Leonard's decision to operate London Paint in the
Chelsea building was not unequivocally related to an alleged oral agreement that
Leonard would receive fifty percent of the building upon his parents' demise, as
it was equally explainable by the below-market rent paid by London Paint and
the payment Leonard received to manage the building.
The court also considered Leonard's claims of undue influence by Terri,
and lack of capacity on the part of Sidney and Evelyn and rejected them. The
court stated:
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This case can be resolved by answering one question:
is there a valid, enforceable agreement between the
family members as to London Paint's commercial
tenancy and Leonard's interest in the [Chelsea]
Building upon his parents' demise? The answer, as the
record reveals, is no.
Thus:
In the absence of an enforceable agreement as to
London Paint's tenancy, there is no evidence that Terri
had a motive to unduly influence Sidney and Evelyn to
change such agreement, and Leonard cannot meet the
burden of proof he has on this issue. Indeed, under the
[2014 Amendment], Sidney may act unilaterally on
behalf of the [Family] Trust in matters affecting Trust
property, and he did so. The record is devoid of
evidence that Sidney lacked capacity when, during rent
negotiations in winter 2015, he demanded an increase
in London Paint's rent to $11,000 per month, and, upon
not reaching an agreement, served the [t]hirty-[d]ay
[n]otice. Leonard's advanced age, ipso facto, does not
render him incapacitated, and, to this [c]ourt's
knowledge, there is no authority to support such
conclusion.
Moreover, on this record, as a whole and as to the
precise circumstances surrounding the Trust
amendments pursuant to which Terri received a greater
future interest in the Building, there is no evidence from
which an inference of undue influence reasonably could
be drawn. Sidney and Evelyn were, and are, well within
their rights to revoke, partially or completely, any
bequests to Leonard in the Trust, and to increase Terri's
future interest in the Building, as they have done.
People may freely dispose of their property as they see
fit and disinherit their children for any or no reason. On
this record, there is no evidence (or even an allegation)
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that Sidney and Evelyn lacked capacity in May of
2002[,] when they entered into the First Amended
Trust, reducing Leonard's future interest in the Building
to [forty percent]. Similarly, the record is devoid of
evidence substantiating Leonard's claim that Sidney
and Evelyn lacked capacity in November of 2014 when
they entered into the [2014 Amendment], further
reducing Leonard's interest to [twenty percent]. Rather,
the record shows that Sidney and Evelyn knowingly,
and of their own free will, amended the Trust in May of
2002 and again in November of 2014. Contrary to
Leonard's argument, Sidney's change of mind, in and of
itself, does not constitute undue influence by Terri.
Equally unavailing is Leonard's reliance on Evelyn's
January 29, 2015 affidavit to challenge her capacity in
mid-November 2014. The affidavit, notarized outside
of New York State, is inadmissible as it lacks a
certificate of conformity pursuant to CPLR 2309(c),
and the submission of such certificate on reply does not
cure the defect. Additionally, the record demonstrates
that Evelyn was not removed as Co-Trustee of the Trust
and that Sidney is authorized to act unilaterally on
behalf of the Trust to increase London Paint's rent.
Indeed, by affidavit dated May 14, 2015, Evelyn
disavowed the contents of her January 29, 2015
affidavit.
The Court rejects Leonard's contention that the
"drastic" change in his future interest in the Building
and Sidney's demand for increased monthly rent is
"alarming" and raises the specter of undue influence.
The record demonstrates that the changes to Leonard's
interest in the Building have been occurring over time,
not drastically or all of a sudden. Rather, Leonard's
insistence that London Paint should pay only $3,000
per month rent in a market which commands something
in the order of $17,500 per month rent, at a time when
his elderly parents claim financial distress, and after he
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enjoyed $2.3 million dollars in rent savings, is
unavailing. Accordingly, this [c]ourt finds that
Leonard's claims of undue influence and incapacity are
without merit as a matter of law, which provides an
additional ground for dismissal of plaintiffs' specific
performance, and other, causes of action.
Finally, as for the plaintiffs' motion for leave to amend the complaint, the
court stated:
Plaintiff's motion to amend the complaint is denied as
the original complaint has been dismissed, and the
causes of action in the proposed amended complaint are
the same as those pleaded in the original complaint,
except for the new cause of action respecting the [2014
Amendment]. On the merits, the new allegations
relating to the [2014 Amendment] and Terri's undue
influence are conclusory and without merit, for the
reasons set forth above.
Leonard appealed from the grant of summary judgment and the denial of
the motion for leave to amend the complaint. 3 On February 1, 2018, the New
3
Leonard argued the trial court erred in making findings of fact regarding
Sidney and Evelyn's mental capacity and Terri's undue influence because no
discovery had been taken, and at the risk of future claims about the validity and
enforceability of the trust amendments being barred under the doctrines of res
judicata and collateral estoppel. Terri and her parents responded that the issues
of undue influence and incapacity were irrelevant to whether the complaint was
properly dismissed because the alleged family agreements and rental agreements
were neither valid nor enforceable. Alternatively, they argued Leonard's
allegations of lack of capacity, and undue influence were unfounded, based upon
conjecture, and contradicted by evidence in the record. They also contended
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York appellate court affirmed. London Paint & Wallpaper Co. v. Kesselman,
70 N.Y.S.3d 476 (App. Div. 2018). In its opinion, that court concluded, in
pertinent part: Terri and her parents "demonstrated as a matter of law that
[Leonard] cannot prove that . . . Terri . . . unduly influenced her parents to
revoke, breach, or otherwise fail to perform under these unenforceable [family]
agreements." Id. at 477. With respect to the denial of Leonard's proposed
amendment to the complaint, the court stated his "proposed amendment to the
complaint, which alleges Terri's undue influence with respect to the 2014
[Amendment], is 'palpably insufficient' given [his] inability to allege facts
showing her actual exercise of such influence." Ibid. (citations omitted).
The New Jersey Litigation
After the New York appeal, on October 18, 2018, Leonard filed this
action. As noted, by that time, Evelyn had been gone for about a year.
In this action, Leonard reiterated and expounded upon the claims he made
in the New York litigation about the alleged family agreements and Terri's undue
influence upon Sidney after his stroke in 2012. Also, he made new allegations,
including that Sidney promised to transfer to Leonard a majority, sixty percent
Leonard's motion to amend the complaint was properly denied as moot upon the
granting of summary judgment and because the proposed cause of action was
without merit.
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interest in the Chelsea building, upon the deaths of his parents, in exchange for
Leonard's lifelong personal and professional commitment to continue operating
London Paint out of the Chelsea building. Additionally, while his undue
influence allegations focused primarily upon the 2014 Amendment, he also
asserted the "purported" 2002 Amendment was "fraudulent or fictitious or
otherwise legally insufficient and invalid," and "manufactured, created or
undertaken without Evelyn's knowledge or informed consent, and . . . the
product of Terri's fraudulent actions or undue influence."
Based upon his factual allegations, Leonard asserted causes of action for:
(1) declaratory judgment affirming his right to fifty percent of the trust proceeds
in accordance with the 1997 version of the trust; (2) reformation or rescission of
the trust such that he receives fifty percent of the trust proceeds; (3) undue
influence on the part of Terri over Sidney and/or Evelyn, and Sidney over
Evelyn, rendering the trust amendments null and void; (4) breach of the original
trust agreement through the nature and effect of the modifications to the original
trust; (5) equitable fraud; and (6) breach of fiduciary duty.
Sidney and Terri filed an answer, denying liability and asserting defenses,
including res judicata and collateral estoppel. Also, they moved to quash a
subpoena Leonard served upon Sidney and Evelyn's New Jersey estate counsel.
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In July 2019, Sidney and Terri moved for summary judgment, arguing that
this action was precluded by the judgment in the New York litigation, under the
doctrines of res judicata and collateral estoppel. Leonard opposed the motion.
While the motions were pending, Sidney passed away.
The Chancery judge heard arguments on the motions on October 15, 2019,
at which time he requested additional documents, including the pleadings and
briefs from the New York action, and further briefing. After submissions were
made, he resumed oral argument on February 6, 2020. Four days later, the judge
issued his order granting summary judgment and dismissing the complaint,
supported by a comprehensive twenty-nine-page written decision.
In his decision, the judge applied New York law and held the New Jersey
litigation was precluded by the judgment in the previous New York litigation,
wherein both the trial and appellate courts rejected as being without merit and
an evidential basis Leonard's claims that Terri had exerted undue influence over
Sidney and Evelyn and that Sidney and Evelyn lacked capacity when they
amended the trust and in 2015 when Sidney engaged in rent negotiations and
commenced the eviction proceedings. The judge identified, from numerous
specific paragraphs in the New York pleadings and the appellate court's opinion ,
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multiple assertions made by Leonard in the earlier litigation about Terri's undue
influence and the 2002 and 2004 Amendments. The judge found:
The New Jersey litigation, including timeframes,
issues, claims, pleadings and arguments are identical,
i.e., Evelyn and Sidney's mental capacity and Terri's
undue influence to the allegations in the New York
litigation. Moreover, the New York trial and Appellate
Division determinations are decisive of the present
action. This court undertook a review of the New York
Litigation pleadings, motions, brief, and opinions and
compared them with those in the New Jersey Litigation
and finds this determination inescapable.
The judge further found "Leonard had a full and fair opportunity to contest
the prior determinations," on both the summary judgment motion and the motion
to amend the pleadings, and the case was dismissed on the merits.
Leonard moved for reconsideration, and the judge heard argument on
April 24, 2020. By opinion and order dated May 5, 2020, the judge agreed to
reconsider his prior ruling, but, upon reconsideration, denied Leonard's
requested relief to vacate the February 10, 2020 order. The judge reiterated his
reasons for granting summary judgment and rejected Leonard's claim that Terri
committed a fraud on the New York court by not revealing the 2015
Amendment. This appeal followed.
II.
A.
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We review a trial court's grant of summary judgment de novo, "applying
the same standard as the trial court." State v. Anderson, 248 N.J. 53, 67 (2021)
(quoting Woytas v. Greenwood Tree Experts, Inc., 237 N.J. 501, 511 (2019)).
"By that standard, summary judgment should be granted 'when "the pleadings,
depositions, answers to interrogatories and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact
challenged and that the moving party is entitled to a judgment or order as a
matter of law."'" Woytas, 237 N.J. at 511 (quoting Brill v. Guardian Life Ins.
Co. of Am., 142 N.J. 520, 528-29 (1995)).
The questions presented in this appeal implicate only a question of law:
whether issue preclusion under res judicata and collateral estoppel were
applicable to Leonard's complaint. See Walker v. Choudhary, 425 N.J. Super.
135, 151 (App. Div. 2012). Therefore, our review of the court's rulings on that
issue here is de novo, giving no deference to the trial court's legal conclusions.
Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).
B.
Here, we are asked to determine the preclusive effect of a foreign
judgment, thereby implicating the Constitution's full faith and credit clause,
which states that: "Full Faith and Credit shall be given in each State to the . . .
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Judicial Proceedings of every other State. And the Congress may by general
Laws prescribe the Manner in which such . . . Proceedings shall be proved, and
the Effect thereof." U.S. Const. art. IV, § 1; see also 28 U.S.C. § 1738 (providing
that properly authenticated judicial proceedings of any state court " shall have
the same full faith and credit in every court within the United States . . . as they
have by law or usage in the courts of such State . . . from which they are taken").
"The full faith and credit doctrine is essential to our system of federalism,
a system comprised of fifty different states, each equal to the other and each
with its own distinctive judicial system." Simmermon v. Dryvit Sys., Inc., 196
N.J. 316, 329 (2008). "Because the doctrine recognizes that we are one nation,
not fifty principalities, respect for the judgments entered by the court of a sister
state is critical to avoid the type of divisive parochialism that breeds duplicative
litigation and waste of judicial resources." Id. at 329-30. "Thus, any judgment
properly executed in a foreign state, which complies with the requirements of
the due process clause is entitled to full faith and credit in New Jersey." Ewing
Oil, Inc. v. John T. Burnett, Inc., 441 N.J. Super. 251, 259 (App. Div. 2015); see
also Baker v. Gen. Motors Corp., 522 U.S. 222, 233 (1998) ("A final judgment
in one State, if rendered by a court with adjudicatory authority over the subject
matter and persons governed by the judgment, qualifies for recognition
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throughout the land."); Kremer v. Chem. Constr. Corp., 456 U.S. 461, 480-83
(1982) (recognizing that the due process condition requires only minimal due
process be provided and that full faith and credit is not required when there has
been a denial of due process in the foreign state's proceedings). Where due
process considerations are not challenged, we may not deny preclusive effect to
a foreign judgment simply because we believe the foreign court erred in its
rulings. See Velasquez v. Franz, 123 N.J. 498, 511-12 (1991). However, a
foreign judgment procured by fraud or misrepresentation is not entitled to
preclusive effect. Simmermon, 196 N.J. at 331.
As to defenses raised in a foreign action, the full faith and credit clause
requires we give the New York judgment the same respect it would receive in a
New York court. 28 U.S.C. § 1738; Durfee v. Duke, 375 U.S. 106, 109 (1963);
Simmermon, 196 N.J. at 330. We must apply New York's law on res judicata
and collateral estoppel because "the binding effect of a judgment is determined
by the law of the jurisdiction that rendered it." Watkins v. Resorts Int'l Hotel &
Casino, Inc., 124 N.J. 398, 411 (1991); Restatement (Second) of Conflict of
Laws § 95 (Am. Law Inst. 1971).
That being said, the full faith and credit clause is less exacting with respect
to laws than it is with respect to judgments. Baker, 522 U.S. at 232. Thus, the
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full faith and credit clause does not govern a choice of law analysis or require a
state court to apply the statutes or common law of another state where to do so
would violate the public policy of the forum state. Id. at 232-33; e.g.,
McDonnell v. Illinois, 163 N.J. 298, 299 (2000).
New York and New Jersey law are consistent on the issues of res judicata
and collateral estoppel. Therefore, the result would be the same regardless of
which law is applied. Under both states' law, the doctrine of res judicata bars
future actions between the same parties on the same cause of action. Simmons
v. Trans Express, Inc., 37 N.Y.3d 107, 111 (2021); Velasquez, 123 N.J. at 505.
The party seeking to apply the doctrine bears the burden of proof. Watts v.
Swiss Bank Corp., 27 N.Y.2d 270, 275 (1970); Sweeney v. Sweeney, 405 N.J.
Super. 586, 598 (App. Div. 2009).
Both states follow a transactional analysis approach in deciding res
judicata issues. Simmons, 37 N.Y.3d at 111; see Wadeer v. N.J. Mfrs. Ins. Co.,
220 N.J. 591, 606 (2015). Under this approach, "once a claim is brought to a
final conclusion, all other claims arising out of the same transaction or series of
transactions are barred, even if based upon different theories or if seeking a
different remedy." Simmons, 37 N.Y.3d at 311 (emphasis omitted) (quoting
O'Brien v. Syracuse, 54 N.Y.2d 353, 357 (1981)); Wadeer, 220 N.J. at 606
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(2015). However, the New York Court of Appeals has cautioned that the
doctrine of res judicata should not be applied so rigidly that it works an injustice
and deprives a litigant of their day in court. Simmons, 37 N.Y.3d at 111-12.
Similarly, both states' application of the doctrine of collateral estoppel is
narrower than res judicata. It prevents a party from relitigating any issue clearly
raised in a prior action and decided against that party, whether the tribunals or
the causes of action are the same. Simmons, 37 N.Y.3d at 112; Winters v. N.
Hudson Reg'l Fire & Rescue, 212 N.J. 67, 85 (2012). Like res judicata, it is
grounded in concepts of fairness and should not be rigidly applied if to do so
would work an injustice. Simmons, 37 N.Y.3d at 112; Allen v. V & A Bros.,
Inc., 208 N.J. 114, 138 (2011).
The essential ingredients necessary to apply the doctrine include: (1) the
issue in the second action is identical to an issue raised in the first action; (2)
the issue was necessarily decided and material in the first action; and (3) the
party to be precluded from relitigating the issue must have had a full and fair
opportunity to litigate the issue in the first action. Simmons, 37 N.Y.3d at 112;
Winters, 212 N.J. at 85; Restatement (Second) of Judgments § 27 (Am. Law
Inst. 1982).
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Under New York law, the proponent of collateral estoppel bears the
burden of demonstrating that the issues in the two proceedings are identical, and
the issues were decided by the prior tribunal, whereas the opponent bears the
burden of establishing the absence of a full and fair opportunity to litigate the
issue in the prior action or proceeding. Parker v. Blauvelt Volunteer Fire Co.,
93 N.Y.2d 343, 349 (1999).
A determination whether the first action or proceeding
genuinely provided a full and fair opportunity requires
consideration of "the 'realities of the [prior] litigation',
including the context and other circumstances
which . . . may have had the practical effect of
discouraging or deterring a party from fully litigating
the determination which is now asserted against him."
Among the specific factors to be considered are the
nature of the forum and the importance of the claim in
the prior litigation, the incentive and initiative to
litigate and the actual extent of litigation, the
competence and expertise of counsel, the availability of
new evidence, the differences in the applicable law and
the foreseeability of future litigation.
[Ryan v. N.Y. Tel. Co., 62 N.Y.2d 494, 501 (1984)
(alteration and omission in original) (quoting New
York v. Plevy, 52 N.Y.2d 58, 65 (1980)).]
New Jersey law is similar. For the doctrine of collateral estoppel to apply,
the party asserting the doctrine must show:
(1) the issue to be precluded is identical to the issue
decided in the prior proceeding; (2) the issue was
actually litigated in the prior proceeding; (3) the court
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in the prior proceeding issued a final judgment on the
merits; (4) the determination of the issue was essential
to the prior judgment; and (5) the party against whom
the doctrine is asserted was a party to or in privity with
a party to the earlier proceeding.
[Winters, 212 N.J. at 85 (quoting Olivieri v. Y.M.F.
Carpet, Inc., 186 N.J. 511, 521 (2006)).]
Finally, under both New York and New Jersey law, rulings on both
summary judgment motions and motions for leave to amend can have a
preclusive effect on future litigation. See, e.g., Syncora Guar. Inc. v J.P. Morgan
Sec., LLC, 970 N.Y.S.2d 526, 529-30 (App. Div. 2013); Velasquez, 123 N.J. at
506-08.
C.
Applying the doctrines of res judicata and collateral estoppel to the
present case, the record reflects that in the New York litigation, Leonard sought
enforcement of the alleged family agreement, which, according to Leonard,
included Sidney and Evelyn's promise to bequest the Chelsea building equally
to Leonard and Terri along with London Paint's tenancy in the Chelsea building.
Leonard refers to the Family Trust, but not any amendments to it, although he
alluded to rumored changes to "Sidney's estate plan."
Nevertheless, the validity of the 2014 Amendment was addressed in the
New York litigation because, upon learning about the amendment, Leonard
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moved for leave to amend the complaint to include a cause of action for
declaratory judgment, seeking a declaration that the 2014 Amendment was void
and unenforceable due to Sidney and Evelyn's lack of mental capacity and due
to the undue influence exerted by Terri over them.
The validity of the 2002 and 2014 Amendments were addressed in the
New York litigation also because Terri and her parents raised those amendments
in opposition to Leonard's motion for leave to amend the complaint , and in
support of their motion for summary judgment. Specifically, they relied, in part,
on the two amendments to oppose Leonard's claim of an enforceable family
agreement relating to the Chelsea building. They also used the 2002
Amendment to oppose Leonard's allegations that, after Sidney's stroke in 2012,
Terri unduly influenced Sidney to breach the family agreement and that Sidney
lacked the authority to terminate London Paint's tenancy because he did not have
the approval of Evelyn, who had equal control over the building.
In granting summary judgment, the New York court declared the alleged
family agreement and rental agreement were invalid and unenforceable under
the statute of frauds, and rejected Leonard's claim of partial performance . In so
doing, the court found no motive on Terri's part to unduly influence Sidney and
Evelyn with respect to the alleged family and rental agreements because those
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agreements were unenforceable. The court also noted that, under the 2014
Amendment, Sidney had authority to act unilaterally on behalf of the trust. And,
the court found no evidence in the record that Sidney lacked capacity when he
demanded an increase in London Paint's rent or that Sidney and Evelyn lacked
capacity or were unduly influenced by Terri in connection with the 2002 and
2014 Amendments.
In denying Leonard's motion for leave to amend the complaint, the court
noted the original complaint had been dismissed and, "[o]n the merits, the new
allegations relating to the [2014 Amendment] and Terri's undue influence are
conclusory and without merit" for the reasons stated in connection with the
ruling on summary judgment.
Leonard appealed from that judgment, and the New York appellate court
affirmed both the grant of summary judgment and the denial of the motion for
leave to amend. The court found the plaintiffs could not prove that Terri unduly
influenced Sidney and Evelyn in connection with the unenforceable family
agreements, and no evidence to support Leonard's proposed claim that Terri
unduly influenced Sidney and Evelyn in connection with the 2014 Amendment.
London Paint, 70 N.Y.S.3d at 477.
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On this record, the doctrines of res judicata and collateral estoppel
precluded Leonard's New Jersey claims to void the 2002 Amendment and the
2014 Amendment. The New York and New Jersey litigations involved an
identity of parties, as well as an identity of claims, issues, and reli ef sought. In
addition, the New York litigation resulted in a final judgment in which the
courts, as matter of necessity to resolve the summary judgment motion and the
motion for leave to amend the complaint, determined the merits of those claims
and issues.
Even if the New York courts erred in their rulings, 4 those errors do not
warrant the denial of res judicata effect to the New York judgment. Simmons,
37 N.Y.3d at 111-12. Leonard chose to pursue his claims in New York, and he
framed the issues to be resolved by the court, including his parents' promise to
bequeath a fifty percent interest in the Chelsea building to him, their alleged
mental incapacity, and Terri's alleged undue influence. Moreover, the New
York court had jurisdiction over the parties and the claims pursued, which
4
Given the fact sensitive inquiries relating to Sidney and Evelyn's mental
capacities and Terri's alleged undue influence over her parents, and the lack of
discovery on those issues, Leonard contends summary judgment in New York
was not warranted. However, a subsequent suit in New Jersey is not a proper
means for correcting an allegedly erroneous ruling from a foreign jurisdiction.
Velasquez, 123 N.J. at 511-12.
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related to a New York5 property and Leonard received due process. He argued
about the lack of discovery in both the trial and appellate courts and, on appeal
in New York, he contended that affirmance of the trial court's judgment could
result in future litigation about the trust amendments being barred under the
doctrines of res judicata and collateral estoppel. The courts thoroughly heard
and considered his arguments and ultimately rejected them, ruling against him
on the merits.
That being said, it is undisputed the New York judgment did not address
anything related to the Family Trust's 2015 Amendment. The 2015 Amendment
was never raised by any party in the context of the New York litigation, and its
validity was not ruled upon by the New York courts. At most, in the context of
Leonard's leasehold claims, the New York trial court found no evidence that
Sidney lacked capacity when he negotiated London Paint's rent in the winter of
2015, which did not result in an agreement.
5
Leonard argues that, after the leasehold claims were dismissed, New York no
longer had jurisdiction over claims relating to the validity of trust amendments
because New York did not have "inherent jurisdiction" over such claims as New
Jersey had a greater interest in the trust dispute than New York where all parties
maintained residences in New Jersey, and the Family Trust was allegedly
prepared by counsel in New Jersey.
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The New York judgment therefore cannot bar Leonard from pursuing his
New Jersey claims to void the 2015 Amendment. The New York court's rulings
as to the 2002 and 2014 Amendments are not dispositive of Sidney's mental
capacity to amend the trust in 2015, or whether Terri exercised undue influence
over Sidney with respect to the 2015 Amendment, because the amendment
occurred at a different time and in a different context. See, e.g., In re Swertlow,
168 N.J. Super. 89, 93-95 (App. Div. 1979) (noting New Jersey hearing officer
had authority to inquire into whether decedent's mental condition had improved
since New York conservatorship proceeding, such that decedent was mentally
competent to change his domicile).
The record reflects that in the New York litigation Sidney, Evelyn, and
Terri were not forthcoming with information about the trust: they did not
respond to Leonard's discovery requests; they made Leonard aware of the 2002
and 2014 trust amendments only in the context of their submission on motions;
and they did not disclose any information about the 2015 Amendment. The
record also reflects that Leonard first learned of the 2015 Amendment after he
filed his October 2018 complaint in New Jersey. Therefore, Leonard could not
have contested the validity of the 2015 Amendment in the context of the New
York litigation, which ended with the appellate ruling on February 1, 2018; the
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New York courts could not have ruled on that issue; and it would be un just to
deny Leonard an opportunity to contest that amendment in the present litigation.
The doctrines of res judicata and collateral estoppel should not be applied to
achieve such an unjust result.
Finally, we consider Leonard's claim that Sidney, Evelyn, and Terri's
conduct in the New York litigation gave rise to their committing a fraud on the
New York court based upon their failure to disclose the 2015 Amendment in the
New York proceedings, which Leonard argues now that his disinheritance is
material. To demonstrate fraud on court, "the nonoffending party must establish
by clear and convincing evidence that the offending 'party acted knowingly in
an attempt to hinder the factfinder's fair adjudication of case and his adversary's
defense of the action'" and that the conduct concerns issues "central" to the case.
CDR Créances S.A.S. v. Cohen, 23 N.Y.3d 307, 318, 320 (2014) (quoting
McMunn v. Mem'l Sloan-Kettering Cancer Ctr., 191 F. Supp. 2d 440, 445
(S.D.N.Y. 2002)); Triffin v. Automatic Data Processing, Inc., 394 N.J. Super.
237, 251 (App. Div. 2007) (stating that fraud on court occurs when it is proven
by clear and convincing evidence that party intentionally interfered with judicial
system's ability to impartially adjudicate case by improperly influencing trier or
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unfairly hampering opponent's presentation of claim or defense). We find no
clear and convincing evidence of same in the record.
Under these circumstances, we affirm the order and judgments under
appeal here, except regarding Leonard's claims relating to the 2015 Amendment,
including allegations that Terri's undue influence, if any, caused Sidney to
modify the Family Trust to Leonard's detriment. All other issues were correctly
determined to be precluded by the New York judgment.
Affirmed in part; reversed and remanded in part for further proceedings
consistent with this opinion. We do not retain jurisdiction.
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