THE ESTATE OF STANLEY J. WARNER VS. KITTY FAN KOO (C-000205-16, BERGEN COUNTY AND STATEWIDE) ( 2018 )

NOT FOR PUBLICATION WITHOUT THE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-1367-16T3
THE ESTATE OF STANLEY J.
WARNER,
Plaintiff-Appellant,
v.
KITTY FAN KOO and FASHION
PROPERTIES, a New Jersey
partnership,
Defendant-Respondents.
________________________________
Argued May 30, 2018 – Decided October 25, 2018
Before Judges Koblitz and Suter.
On appeal from Superior Court of New Jersey,
Chancery Division, General Equity, Bergen County,
Docket No. C-000205-16.
Jan Alan Brody argued the cause for appellant (Carella,
Byrne, Cecchi, Olstein, Brody & Agnello, attorneys;
Jan Alan Brody, of counsel and on the brief).
David M. Watkins argued the cause for respondents
(Law Office of David M. Watkins, attorneys; David M.
Watkins, on the brief).
The opinion of the court was delivered by
SUTER, J.A.D.
Stanley J. Warner (Warner) appeals the October 27, 2016 letter order that
granted summary judgment to defendants, Kitty Fan Koo (Koo) and Fashion
Properties (F.P.), and dismissed his verified complaint and order to show cause. 1
In his verified complaint, Warner claimed he was a partner with Koo in F.P., but
she would not provide information about it or make distributions; she wo uld not
allow a review of F.P.'s books and records; and she prevented his participation
in the business. He sought to dissolve F.P., appoint a receiver, disassociate Koo
from F.P., restrain further distributions, prepare an accounting from January
1993 to present, access F.P.'s books and records, and award him compensatory
and punitive damages and attorney's fees. We affirm the trial court's dismissal
of the verified complaint. 2
Warner and Koo formed F.P. in 1987 without a written partnership
agreement. Warner contends they agreed to share equally any profits and losses
1
Warner died while this appeal was pending. We granted his estate permission
to substitute as appellant on April 4, 2018. We continue to refer to plaintiff as
Warner.
2
The court denied Warner's request for preliminary injunctive relief. He did
not appeal that denial.
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from F.P. Additionally, Warner contends he and Koo were equal shareholders
in a corporation named Fashion Properties, Inc., that purchased a commercial
building in Carlstadt, New Jersey, for $5.2 million in 1986. Fashion Properties
transferred ownership of the Carlstadt property to F.P., which then mortgaged it
for $3.5 million. F.P. assigned the rents it collected from the property's
commercial tenants to pay the mortgage. The mortgage has been satisfied.
Warner and Koo were married in 1991, but divorced in January 1994.
They entered into a property settlement agreement (PSA) as part of their divorce,
but neither was able to produce a copy of the agreement. Koo claimed her copy
was destroyed in Hurricane Sandy; Warner claimed he did not retain a copy.
Neither Koo's prior attorney, Avron R. Vann, nor the accounting firm of
Druckman and Hill, LLP, appears to have retained a copy beyond their
scheduled document retention policy.
Warner alleged that after the divorce in January 1994, he had no access to
F.P.'s books and records. He claimed Koo did not share financial information
about the partnership, did not issue Schedule K-1's (K-1), 3 or pay him
distributions or profits. Koo did not dispute this. Warner claimed that in "late
3
A Schedule K-1 is a form that reports each partner's share of taxes on the
business' income.
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2012/early 2013," Koo's attorney asked him to endorse a $200,000 insurance
claim check relating to the Carlstadt property, but he refused. Warner claimed
that in April 2013, Vann asked him to sign a "[d]issolution of [t]rade [n]ame"
form to have Warner's name removed from the records on file with the Bergen
County Clerk as a co-owner of F.P, but again Warner refused. Three years later,
Warner's attorney wrote to Koo demanding access to the books and records of
F.P. and to "account for all rents, profits, proceeds, insurance payments and all
other monies in respect of the Carlstadt Property."
When the deadline specified in the attorney's letter was not met, Warner
filed an order to show cause against Koo and F.P. seeking to proceed summarily
under Rule 4:67 or for preliminary injunctive relief. The accompanying verified
complaint alleged in count one that Koo and F.P. violated the Uniform
Partnership Act (Partnership Act), N.J.S.A. 42:1A-1 to -56, by denying him
equal rights in the management of F.P., denying access to its books and records,
denying an accounting of profits, and breaching her fiduciary duty of loyalty to
him. Count two against Koo alleged that she breached her fiduciary duty to
Warner by denying him information about F.P. and that it was intentional,
willful and malicious. Count three against Koo alleged a breach of the
partnership agreement involving F.P. Count four against Koo alleged an
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intentional, willful and malicious conversion of Warner's property. Warner
requested a final judgment dissolving F.P., appointing a receiver to wind up its
affairs, dissociating Koo from F.P., restraining any further distributions or
payments, directing an accounting of F.P.'s business from January 1993 to
present, access to all of its books and records, damages and attorney's fees.
Koo filed a cross-motion to dismiss the verified complaint under Rule 4:6-
2, or for summary judgment, and filed an answer. Koo alleged that Warner was
not a partner in F.P. She claimed that he "relinquished all of his right, title and
interest in [F.P.]" in the PSA. After the divorce, "Warner was completely
uninvolved in [F.P.]," in contrast to his "very active" involvement before the
divorce. She agreed he did not receive any financial distributions, participate in
its ownership, operation or management, and did not receive income tax returns
or reports including any K-1's. She alleged he did not "file any personal income
tax returns reporting any income from [F.P.]." Koo claimed that Warner did not
make any claim of ownership about F.P. after the divorce or request any
information about the company. Koo stated "Warner knew he had transferred
and relinquished his entire ownership interest in [F.P.] and he was no longer
entitled to participate in any manner, whatsoever, in [F.P.]."
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Koo argued that Warner's claims in the verified complaint were released
by him in 2005 when he signed a "[g]eneral [r]elease" that settled a lawsuit filed
in 1999 by his corporation, Warner Licensing Company, Inc. (Licensing),
against her company, Fashion Franchises Limited (Limited), and Koo over use
of a trademark. In that general release, Warner "release[d] and discharge[d]"
Limited and Koo and their "subsidiaries, affiliates, employees, officers,
shareholders, directors, attorneys, heirs, executors, administrators, legal
representatives, successors and assigns" from "all actions, causes of action, suits
. . . and demands whatsoever, in law . . . or equity, known or unknown, for[e]seen
or unfor[e]seen" that Warner (including his heirs, executors or administrators)
"ever had, now have or hereafter can, shall or may have for, upon, or by reason
of any matter" from the "beginning of the world" to the date of the release,
December 8, 2005. She claimed it was "unthinkable" he would not have
included in that litigation a cause of action about F.P.'s ownership or funds, if
he believed he was a partner. Warner was a "sophisticated and knowledgeable
business entrepreneur;" they had been business partners in a number of different
companies.
F.P.'s accountant, Stuart M. Feuerstein, submitted a certification in which
he alleged that from "tax year 1992 and thereafter, the tax returns prepared and
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filed for [F.P.] did not reflect Warner as a partner." Rather, they identified Koo
as the owner of ninety percent of F.P. 4 He confirmed K-1's were not issued to
Warner after 1992, that Warner did not request their preparation for him or call
to discuss anything about F.P.'s business.
Warner denied as "patently false" that he had relinquished any rights or
interest in F.P. He claimed there was no reason to include F.P. in the PSA,
because it did not constitute a marital asset. He noted that Vann's supporting
certification did not mention the PSA or provide a copy of it. Warner alleged
for the first time that because of his poor health and the stress of the divorce, he
and Koo had agreed that after the divorce they would "limit [their] interactions
going forward." Thereafter, Koo "undertook full responsibility for th e day-to-
day operation and management of the partnership." However, he claimed he did
not relinquish any rights or interest in F.P. Warner continued to claim he was
treated as a partner because in late 2012 or early 2013, Vann asked him to sign
an insurance check for F.P. and in April 2013, he was asked to agree to remove
his name as a partner, both of which he declined to do.
4
The owner of the other ten percent was not identified.
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Warner asserted that the 2005 release did not apply. He was not a party
to the 1999 litigation involving the license, nor was F.P. a party. The claims in
that litigation had nothing to do with his partnership interest in F.P.
In reply, Koo claimed that Warner's allegation about the $200,000
insurance check was a "complete fabrication." In his certification, Vann agreed
the claim "[was] a figment of [Warner's] imagination." However, Koo
acknowledged Warner was asked to update the Bergen County Clerk's records
to confirm that he was not a partner in F.P.
The trial court granted Koo's cross-motion for summary judgment on
October 27, 2016. The court found that the claims were extinguished by the
statutes of limitations, stating "when there's a complete freeze out of an
individual, when a party who had been co-manager of this business goes from
that to having no rights, only the rights of a stranger in the business, you can't
in my view wait [twenty-two] years to bring those claims." He also found that
Warner's claims were barred by laches.
It's because of the decades that have passed and the mist
of time that has passed that we can't regroup and find
out what exactly was in the property settlement
agreement, so I'm left with the fact that I'm not going
to have that. But that’s exactly why you have laches . .
..
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Further, the court found that Warner had not "taken . . . one step consistent
with rights that he's been deprived of year after year since 1993." Warner
presented no evidence to support his claim.
Once the parties got divorced, he acted only consistent
with someone who was not a partner and never
consistent with someone who is a partner. Took not
one-step suggestive of being a partner for [twenty-two]
years. No evidence he sought to look at any books and
records. No evidence he visited businesses. No
evidence that he complained about the fact that he
wasn't getting any K-1's, complained about the fact that
he wasn't getting distributions. He only acted like
somebody who was no longer a partner, and he was
treated exactly that way by Ms. Koo.
Warner's "disinterest" provided the court with a record sufficient to conclude,
"no, it's too late for purposes of statute of limitations, for purposes of laches, for
these long ignored, indifferent claims . . . to now be brought forward."
The court considered the 2005 release, and found "the release
unambiguous that Ms. Koo has released any and all claims." The court also
found that "[t]he release does not specifically talk about releasing [F.P.], but the
release does not carve out [F.P.] either and does read rather broadly that Kitty
Koo and her affiliates and such are all released."
On appeal, Warner contends the trial court erred by granting summary
judgment because there were disputed issues of fact about his partnership
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interest in F.P. He claims the court improperly drew inferences against him as
the non-moving party on the summary judgment motion and should have
allowed him time for discovery. He argues his claims were not barred by any
statute of limitations or by laches, and the court erred in dismissing his claims.
He argues the court erred in holding the 2005 release applied because it had
nothing to do with F.P. and it expressly did not address any claims after the date
that it was signed.
We review a trial court's orders granting or denying summary judgment
under the same standard employed by the motion judge. Globe Motor Co. v.
Igdalev, 225 N.J. 469, 479 (2016). The question is whether the evidence, when
viewed in a light most favorable to the non-moving party, raises genuinely
disputed issues of fact sufficient to warrant resolution by the trier of fact, or
whether the evidence is so one-sided that one party must prevail as a matter of
law. Templo Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co., 224 N.J. 189,
199 (2016) (citing R. 4:46-2(c)); see also Brill v. Guardian Life Ins. Co. of Am.,
142 N.J. 520, 540 (1995). Our review is plenary. Bhagat v. Bhagat, 217 N.J.
22, 38 (2014). We review issues of law de novo and accord no deference to the
trial judge's legal conclusions. Nicholas v. Mynster, 213 N.J. 463, 478 (2013).
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We agree with the trial court that Warner's causes of action in the verified
complaint for breach of fiduciary duty, breach of contract and conversion were
barred by applicable statutes of limitations. N.J.S.A. 2A:14–1 provides:
[e]very action at law . . . for taking, detaining, or
converting personal property . . . for any tortious injury
to the rights of another . . . or for recovery upon a
contractual claim or liability, express or implied, not
under seal . . . shall be commenced within [six] years
next after the cause of any such action shall have
accrued.
That statute expressly references contract claims as having a six year
statute of limitations. The statute of limitations for a breach of fiduciary duty
which results in purely economic loss is controlled by the substantive law
governing the relationship and is typically six years. Balliet v. Fennell, 368 N.J.
Super. 15, 22 (App. Div. 2004). In addition, the six-year statute generally
governs conversion claims. See Weiss v. Stelling, 130 N.J.L. 235, 237 (E. & A.
1943); Dynasty Bldg. Corp. v. Ackerman, 376 N.J .Super. 280, 288 (App. Div.
2005).
A claim accrues, for statute of limitations purposes, on "the date on which
'the right to institute and maintain a suit' first arose." Cty. of Morris v. Fauver,
153 N.J. 80, 107 (1998) (citations omitted). Generally, "a wrongful act with
consequential continuing damages is not a continuing tort," and does not
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lengthen the statute of limitations. Russo Farms v. Vineland Bd. of Educ., 144
N.J. 84, 114 (1996).
We find no error in applying the six-year statute of limitations here to
dismiss the breach of fiduciary duty, breach of contract and conversion claims.
Assuming, as Warner says, that he was a partner in F.P., he did not dispute that
the last K-1 he received was in 1992 or that he did not ask for, or receive, any
information about F.P. from the divorce in 1994 until his attorney's letter in 2016
requesting information. These causes of action accrued in 1994 when he claims
he was shut out of the company. He failed to act on them for twenty-two years,
which warranted application of the statutes of limitations to bar these claims.
We agree with the court that laches applied to these claims as well.
"Laches is an equitable doctrine, operating as an affirmative defense that
precludes relief when there is an 'unexplainable and inexcusable delay' in
exercising a right, which results in prejudice to another party." Fox v. Millman,
210 N.J. 401, 417-18 (2012) (quoting Fauver, 153 N.J. at 105). It can be applied
"in the absence of the statute of limitations." Lavin v. Hackensack Bd. of Educ.,
90 N.J. 145, 151 (1982). Its application "is a matter within the sound discretion
of the trial court." Mancini v. Twp. of Teaneck, 179 N.J. 425, 436 (2004)
(quoting Garrett v. Gen. Motors Corp., 844 F.2d 559, 562 (8th Cir. 1988)).
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The court did not abuse its discretion in dismissing the breach of contract,
breach of fiduciary duty and conversion claims based on laches.
The key factors to be considered in deciding whether to
apply the doctrine are the length of the delay, the
reasons for the delay, and the 'changing conditions of
either or both parties during the delay . . . .' The core
equitable concern in applying laches is whether a party
has been harmed by the delay.
[Chance v. McCann, 405 N.J. Super. 547, 567 (App.
Div. 2009) (quoting Knorr v. Smeal, 178 N.J. 169, 180-
81 (2003)).]
There is no dispute that Warner delayed making a claim for twenty-two
years. He said based on his health and the stress of the divorce that he and Koo
agreed to limit their interactions going forward. He did not certify that he and
Koo agreed he would not ask for or receive any information about the company,
that he did not need a K-1, or that he did not want distributions of profits.
Warner's health was good enough in 1999 for his company to sue Koo in the
licensing case. That litigation continued for five years. These claims could have
been the subject of a lawsuit had Warner chosen to do so. Warner, however,
took no action in late 2012/ early 2013 when he claims he was asked to sign an
insurance check for the partnership, or in 2013 when he was asked to sign a form
to be filed with the clerks' office that he no longer was a partner in F.P.
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Koo has been prejudiced by the passage of time. Koo's copy of the PSA
was destroyed in flooding from Hurricane Sandy. Her attorney and accountant
certified that their firms retained documents for specified timeframes. Now,
Warner has passed away. This would require Koo to litigate against his estate
based on representations he made in certifications, without the ability for cross -
examination or meaningful discovery.
Warner relies on Todd v. Adm'rs of Rafferty, 30 N.J. Eq. 254 (Ch. Div.
1878). That case involved the early application by a trial court of the discovery
rule in the context of a fraud by one partner against another. We choose to rely
on more recent authority in our application of the statutes of limitation and of
laches in this case.
We do not find factual issues about whether Warner continued as a partner
of F.P. after the divorce precluded summary judgment on Warner's claim in
count one of his verified complaint alleging violations of the Partnership Act.
The trial court recognized there were factual issues when it declined to order
preliminary restraints, stating:
I don't grant injunctions when the material facts are in
dispute. The plaintiff says he's a member of . . . the
partnership. The defendant says he's not . . . the
plaintiff says he surrendered his interest as part of a
divorce degree. He says he did not. To the extent that's
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. . . a material issue, it mitigates dispositively against
granting any sort of injunctive relief.
However, that said, Warner simply delayed too long in asserting any claim of
violation of the Partnership Act. He did not file a claim in 1999 when his
company sued Koo in the licensing matter. He knew that he was not getting K-
1's or information about the partnership. He knew that he was not getting any
distributions. Thus, we agree with the trial judge that any such claim also is
barred by laches.
Affirmed.
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