JOEMAX REALTY, INC. VS. STONEWALL OF SADDLE RIVER, L.P.(L-3629-14, UNION COUNTY AND STATEWIDE) ( 2017 )

NOT FOR PUBLICATION WITHOUT THE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-3377-14T2
JOEMAX REALTY, INC.,
Plaintiff-Appellant/
Cross-Respondent,
v.
STONEWALL OF SADDLE RIVER,
L.P., NORTH AMERICAN LINEN,
L.L.C., PAUL V. D'AMBROSIO,
and MICHAEL D'AMBROSIO,
Defendants-Respondents/
Cross-Appellants,
and
NORTHEAST LINEN SUPPLY CO., INC.,
Defendant-Respondent.
__________________________________
Argued October 18, 2016 – Decided June 20, 2017
Before Judges Yannotti, Kennedy, and Gilson.
On appeal from the Superior Court of New
Jersey, Law Division, Union County, Docket No.
L-3629-14.
Robert J. Jeney, Jr., argued the cause for
appellant/cross-respondent (Jeney, Jeney &
O'Connor, attorneys; Mr. Jeney, on the brief).
Ronald L. Davison argued the cause for
respondents/cross-appellants (Starr, Gern,
Davison & Rubin, P.C., attorneys; Mr. Davison,
on the brief).
Richard J. Allen, Jr., argued the cause for
respondent (Kipp & Allen, attorneys; Mr. Allen
and Karen A. Beerbower, on the brief).
PER CURIAM
Plaintiff Joemax Realty, Inc. (Joemax or plaintiff) appeals
from a January 16, 2015 order that dismissed with prejudice its
complaint against all defendants. Joemax also appeals from a
February 20, 2015 order denying its motion for reconsideration.
Certain defendants cross-appeal from an April 10, 2015 order
denying their motion seeking sanctions against Joemax and its
counsel for filing frivolous litigation. N.J.S.A. 2A:15-59.1; R.
1:4-8.
We affirm the order granting summary judgment to all
defendants and the order denying Joemax's motion for
reconsideration because the applicable statute of limitations
barred Joemax's fraudulent transfer claims. We also affirm the
order denying defendants' motion for sanctions.
I.
The underlying litigation arose out of a commercial lease and
a separate sale of the lessee's assets. The facts were established
in the summary judgment record.
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Defendant North American Linen, LLC (NA Linen) operated a
commercial laundry business and leased its business premises from
plaintiff Joemax. Before 2008, NA Linen was apparently losing
money and was unable to make its lease payments.
Defendant Michael D'Ambrosio managed NA Linen. Defendant
Paul D'Ambrosio was Michael's father and, before 2008, he leant
NA Linen significant monies through a partnership that he
controlled. That partnership is defendant Stonewall of Saddle
River, L.P. (Stonewall).
In April 2008, NA Linen sold most of its assets to defendant
Northeast Linen Supply Co., Inc. (NELS). The purchase price for
those assets was $3,382,686, which NELS paid with $2,113,131 in
cash and a promissory note of $1,047,565 (the Promissory Note).
At the time of the 2008 asset sale, NA Linen owed Stonewall
over $3 million and Stonewall held security interests in NA Linen's
assets. Consequently, to make the asset sale, NA Linen had to
discharge Stonewall's security interest. To accomplish that
discharge, NA Linen, Stonewall, and NELS signed a "Release of
Security Interest Letter," dated April 17, 2008. That letter
provided that the purchase price for NA Linen's assets, including
the Promissory Note, would be paid to Stonewall. Thus, on April
17, 2008, NA Linen assigned the Promissory Note to Stonewall.
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Separately, in January 2009, Joemax sued NA Linen and others
in Monmouth County for failure to pay the rents and other costs
due under the commercial lease (the Monmouth County action). In
July 2009, Joemax obtained a default judgment for $817,000 against
NA Linen.
Joemax had also named other defendants in the Monmouth County
action, including Paul D'Ambrosio. Joemax alleged that Paul
D'Ambrosio had signed a guarantee to pay NA Linen's rents. The
claims against Paul D'Ambrosio were ultimately settled and
dismissed with prejudice in an order entered on July 21, 2014, in
the Monmouth County action.
In December 2009, after Joemax obtained the default judgment
against NA Linen, Joemax applied for a writ seeking to attach the
Promissory Note given by NELS to NA Linen. Joemax's attorney sent
a copy of that application to NELS. An attorney representing NELS
responded to Joemax's attorney in a letter dated January 8, 2010.
That January 8, 2010 letter enclosed a copy of the Promissory Note
and advised Joemax that the Promissory Note was "subordinated to
two different superior creditors of NELS . . . As a result of
those subordination agreements, NELS is currently required to
withhold payment to [NA Linen]."
A copy of the January 2010 letter was also sent to an attorney
who had represented NA Linen in the asset sale. That attorney
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sent Joemax's attorney a letter dated January 14, 2010, which
advised Joemax that the Promissory Note had been assigned. In
that regard, the January 14, 2010 letter stated:
[W]e believe that a further clarification of
the said Promissory Note is required in view
of [Joemax seeking a writ of attachment
against the Promissory Note.]
. . .
[P]lease be advised that on April 17, 2008,
the said Promissory Note was assigned by [NA
Linen] to its secured creditor. As a result,
[NA Linen] has no interest in the Promissory
Note that is subject to attachment.
In February 2010, Joemax's attorney served a subpoena on NELS
seeking documents related to the sale of NA Linen's assets to
NELS. NELS responded in July 2010, by producing a compact disc
containing various documents related to the asset sale. The
documents included a copy of the "Release of Security Interest
Letter" dated April 17, 2008. That letter explained that the
entire purchase price for the assets of NA Linen would be paid to
Stonewall "in satisfaction of the indebtedness of [NA Linen] to
Stonewall."
More than four years later, on September 10, 2014, Joemax's
attorney wrote to NELS's attorney, claiming that NELS had withheld
the "Release of Security Interest Letter." On September 15, 2014,
NELS's attorney responded, noting that a copy of the letter had
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been provided as part of the collection of documents on the compact
disc that had been produced in July 2010.
On September 30, 2014, Joemax filed a verified complaint
alleging that the transfer of the Promissory Note by NA Linen to
Stonewall was a fraudulent transfer and that NELS assisted that
fraudulent transfer.1 Joemax's complaint asserted two counts under
the fraudulent transfer action and named as defendants Stonewall,
NA Linen, NELS, Paul D'Ambrosio, and Michael D'Ambrosio.
After filing answers, defendants moved to dismiss Joemax's
complaint or, in the alternative, for summary judgment. Defendants
argued that Joemax knew of the assignment of the Promissory Note
by July 2010, but it waited beyond the applicable four-year statute
of limitations to file its complaint. Defendants also argued that
the assignment of the Promissory Note was not a fraudulent
transfer. Finally, defendant Paul D'Ambrosio argued that the
claims against him were barred by the entire controversy doctrine.
The trial court initially denied defendants' motion on
November 21, 2014. A written statement of reasons accompanied
that order. Defendants, however, moved for reconsideration, which
the court granted. The court found that it had not fully
appreciated the documents submitted and that defendants were
1
On October 6, 2014, Joemax also filed an order to show cause,
which was entered that same day.
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entitled to summary judgment because Joemax's claims were barred
by the statute of limitations. The court also held that the claims
against Paul D'Ambrosio were barred by the entire controversy
doctrine. The court explained the reasons for the rulings on the
record on January 16, 2015. That same day, the court entered an
amended order dismissing with prejudice Joemax's complaint against
all defendants.
Joemax filed for reconsideration, but the court denied that
motion in an ordered entered on February 20, 2015.
Thereafter, all defendants except NELS filed a motion for
sanctions against Joemax and its attorney. Defendants argued that
sanctions were warranted under the frivolous litigation statute,
N.J.S.A. 2A:15-59.1, and Rule 1:4-8. The trial court denied that
motion in an order entered on April 10, 2015. The court issued a
written statement of reasons explaining that Joemax acted
reasonably in bringing the lawsuit and the action was not
frivolous. The court also clarified that it dismissed Joemax's
complaint because the record established that by July 2010, Joemax
knew of the assignment of the Promissory Note based on the
documents produced to Joemax by defendants.
II.
Joemax now appeals from the January 16, 2015 order granting
summary judgment to defendants and the February 20, 2015 order
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denying its motion for reconsideration. All defendants with the
exception of NELS cross-appeal from the April 10, 2015 order
denying their motion for sanctions. We address the appeal and
cross-appeal in turn.
A. Joemax's Appeal
In reviewing a summary judgment order, we use a de novo
standard of review and apply the same standard employed by the
trial court. Davis v. Brickman Landscaping, Ltd., 219 N.J. 395,
405 (2014). Accordingly, we determine whether the moving party
has demonstrated that there were no genuine disputes as to any
material facts and, if not, whether the moving party is entitled
to judgment as a matter of law. Id. at 405-06; Brill v. Guardian
Life Ins. Co. of Am., 142 N.J. 520, 540 (1995); R. 4:46.
Joemax makes two arguments on its appeal. First, it contends
that the trial court applied an outdated version of the statute
of limitations found in N.J.S.A. 25:2-31(a). Second, it contends
that the court erred in applying the entire controversy doctrine.
We need not spend time addressing the nuances of these arguments
because the record establishes that by July 2010, Joemax knew that
the Promissory Note had been assigned and, therefore, the
applicable statute of limitations bars its claims against all
defendants.
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The claims in Joemax's complaint are based on the Uniform
Fraudulent Transfer Act (the Act), N.J.S.A. 25:2-20 to -34. While
Joemax does not expressly identify which sections of the Act it
relies on, such claims can either be brought under N.J.S.A. 25:2-
25(a) or (b), or N.J.S.A. 25:2-27(a) or (b). The statutes of
limitations for all of those claims are set forth in N.J.S.A.
25:2-31. That statute of limitations provides that claims under
N.J.S.A. 25:2-25(a) must be brought "within four years after the
transfer was made or the obligation was incurred or, if later,
within one year after the transfer or obligation was discovered
by the claimant[.]" N.J.S.A. 25:2-31(a). Claims under N.J.S.A.
25:2-25(b) or N.J.S.A. 25:2-27(a) must be brought "within four
years after the transfer was made or the obligation was
incurred[.]" N.J.S.A. 25:2-31(b). Finally, claims under N.J.S.A.
25:2-27(b) must be brought "within one year after the transfer was
made or the obligation was incurred." N.J.S.A. 25:2-31(c).
Here, the undisputed facts establish that Joemax knew of the
transfer of the Promissory Note by July 2010, but it waited more
than four years to file its fraudulent transfer action.
The document giving notice to Joemax was the letter sent by
NA Linen's lawyer to Joemax's lawyer on January 14, 2010. At that
point in time, Joemax was seeking to attach the Promissory Note.
NA Linen's lawyer, however, informed Joemax that the Promissory
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Note had been assigned to a secured creditor. Specifically, the
letter stated: "[P]lease be advised that on April 17, 2008, the
said Promissory Note was assigned by [NA Linen] to its secured
creditor. As a result, [NA Linen] has no interest in the
Promissory Note that is subject to attachment." There is no
ambiguity in that disclosure. The letter informed Joemax that the
Promissory Note had been assigned and, thus, transferred.
That Joemax knew of the transfer is reinforced by two
additional documents that Joemax received by July 2010. In January
2010, Joemax received a copy of the Promissory Note. The
Promissory Note stated that it could be assigned to Stonewall. In
July 2010, Joemax received the Release of Security Interest Letter,
which explained that the entire purchase price for the assets of
NA Linen had been paid to Stonewall, in part through assignment
of the Promissory Note. Those two documents established that
Joemax knew by July 2010, that the Promissory Note had been
assigned.
Thus, we need not address Joemax's argument that the trial
court relied on an outdated version of N.J.S.A. 25:2-31(a). The
question here is not whether or when Joemax could have or should
have discovered the transfer of the Promissory Note. Instead, the
undisputed material facts established that Joemax did discover the
transfer of the Promissory Note by July 2010. We note further
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that the trial court, here, ultimately clarified that it was
granting summary judgment because it found that the record
established that Joemax knew of the transfer by July 2010.
We also need not address the entire controversy doctrine
argument because the claims by Joemax are barred by the applicable
statute of limitations. Thus, we affirm the January 16, 2015
order granting summary judgment to defendants and the February 20,
2015 order denying reconsideration to Joemax.
B. Defendants' Cross-Appeal
In their cross-appeal, defendants, with the exception of
NELS, argue that plaintiff's claims were frivolous and the trial
court erred in not granting them fees and sanctions.
We review a trial judge's decision on an application for fees
or sanctions under an abuse of discretion standard. United Hearts
v. Zahabian, 407 N.J. Super. 379, 390 (App. Div.) (citing Masone
v. Levine, 382 N.J. Super. 181, 193 (App. Div. 2005)), certif.
denied, 200 N.J. 367 (2009). N.J.S.A. 2A:15-59.1 provides that a
prevailing party in a civil action may be awarded reasonable costs
and attorney's fees if the court finds that the complaint or
defense of the non-prevailing party was frivolous. To be
considered frivolous, the filing must be found to have been made
in "bad faith, solely for the purpose of harassment, delay or
malicious injury[,]" or made "without any reasonable basis in law
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or equity and could not be supported by a good faith argument for
an extension, modification or reversal of existing law." N.J.S.A.
2A:15-59.1(b).
Rule 1:4-8(b) provides that a party may make a motion for
sanctions against another party's attorney that has filed a paper
with a court for a frivolous purpose. The rule goes on to provide
certain procedures that must be followed in order to qualify. The
rule also imposes limitations on the amount that can be imposed
as a sanction. R. 1:4-8(b) and (d).
The conduct warranting sanctions under Rule 1:4-8 or fees
under N.J.S.A. 2A:15-59.1 has been strictly construed and narrowly
applied. McKeown-Brand v. Trump Castle Hotel & Casino, 132 N.J.
546, 561 (1993); Wyche v. Unsatisfied Claims & Judgment Fund of
N.J., 383 N.J. Super. 554, 560 (App. Div. 2006). Here, it was not
initially obvious that plaintiff's claim was barred by the statute
of limitations. Thus, we find no abuse of discretion in the trial
court's decision denying defendants' motion for sanctions and
fees.
Affirmed.
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