PARKE BANK VS. 2820 MT. EPHRAIM AVENUE, LLC (L-3553-14, CAMDEN 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NOT FOR PUBLICATION WITHOUT THE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-4164-15T1
PARKE BANK,
Plaintiff-Respondent,
v.
2820 MT. EPHRAIM AVENUE, LLC,
HADDON FARMERS MARKET, LLC,
LSQ BEVERAGE CO., INC.,
ANTHONY CALZARETTO, WILLIAM
EPP, JOHN DINASO and
KEITH LUDWICK, jointly and
severally,
Defendants,
and
JOHN CALZARETTO,
Defendant-Appellant.
________________________________
Submitted September 14, 2017 – Decided October 12, 2017
Before Judges Nugent and Currier.
On appeal from Superior Court of New Jersey,
Law Division, Camden County, Docket No. L-
3553-14.
John Calzaretto, appellant pro se.
Dembo, Brown & Burns, LLP, attorneys for
respondent (Kyle Eingorn, of counsel and on
the brief).
PER CURIAM
Following the primary obligor's default on a $3,750,000
commercial mortgage modification note to plaintiff, Parke Bank,
the bank obtained judgments against defendant John Calzaretto, a
guarantor, and others. Defendant appeals from an April 15, 2016
"Order for Payments out of Income." He argues the order violated
statutory restrictions on the extent to which a judgment creditor
can execute on a limited liability company member's transferrable
interest and also violates the statutory limitations on wage,
earnings, and salary garnishments. The bank disputes these
contentions. We are unable to discern from the record the basis
for the trial court's order. For that reason, we reverse and
remand for further proceedings.
After the bank obtained a default judgment against defendant,
it conducted discovery to determine defendant's assets and then
filed a motion entitled "Notice of Motion for an Order for Payments
out of Income." Neither the notice of motion nor the supporting
certification cited the statutory or other authority under which
the bank was proceeding. According to the transmittal letter and
notice of motion, the bank intended to rely on a supporting
certification.
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In the supporting certification, filed by the bank's
attorney, the bank asserted "[d]efendant . . . is the sole owner
of Calzaretto & Company, LLC, which had gross income of
$458,916.00, which amounts to $38,243.00 per month." The
certification further states defendant held interests in three
other LLCs "from which he claims to have had $171,571.00 in non-
passive income, which equates to $14,297.58 per month." According
to the certification, "the [b]ank is entitled to 10% of the gross
income of [defendant] which as set forth in his [t]ax [r]eturn is
the monthly sum of [f]ifty-[t]wo [t]housand [f]ive [h]undred
[f]orty [d]ollars and 58/100 ($52,540.58)."1
Defendant, an attorney and certified public accountant,
pointed out that the bank's certification referenced Calzaretto &
Company, LLC's gross receipts, ignored its expenses, ignored the
company's loss for the income tax year in question, and simply
attributed receipts of gross income to defendant. Defendant noted
the same alleged deficiencies in the bank's assertions concerning
the other LLCs. Defendant attached a schedule allegedly
summarizing his income by activity as per his 2014 tax return. He
claimed the schedule demonstrated he suffered an aggregate loss
1
The reference to ten percent is apparently a reference to
N.J.S.A. 2A:17-56, entitled "[l]imitation on amount specified in
execution."
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for the 2014 tax year, "and therefore under both Federal law at
15 U.S.C.A. § 1573 and New Jersey State law at N.J.S.A. 2A:17-56,
[defendant] is not required to make payments out of income."
During oral argument on the bank's motion, the parties
reiterated and, to some extent, amplified their positions. The
court then issued a short oral opinion from the bench.
In its opinion, the court noted that the debt had been
longstanding, a fact the court considered. The court implied the
amount defendant owed was undisputed and acknowledged defendant's
arguments concerning "the LLC law." After doing so, the court
concluded: "But, the bottom line is that the judgment is against
the individual in regards to that." The court then indicated it
was going to enter the order for payment of income, but would
reduce the monthly payment to $4,800 "in regard[] to some of the
defense's discretion in the income and also taking in account the
expenses of the office." The court entered a memorializing order
and defendant filed this appeal.
When entering orders appealable as of right, trial courts
must issue opinions. Rule 1:7-4 mandates that a trial court, "by
an opinion or memorandum decision, either written or oral, find
the facts and state its conclusions of law thereon . . . on every
motion decided by a written order that is appealable as of
right[.]" The trial court must clearly state its factual findings
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and correlate them with relevant legal conclusions so the parties
and appellate courts may be informed of the rationale underlying
the decision. Monte v. Monte, 212 N.J. Super. 557, 564-65 (App.
Div. 1986). "In the absence of reasons, we are left to conjecture
as to what the judge may have had in mind." Salch v. Salch, 240
N.J. Super. 441, 443 (App. Div. 1990). Here, we are unable to
discern from the trial court's opinion the precise factual findings
underlying its legal conclusions.
N.J.S.A. 42:2C-43 restricts execution by a judgment creditor
on a limited liability company member's transferrable interest.
The statute declares the creditor "may charge the transferrable
interest of the member with payment of the unsatisfied amount of
the judgment with interest." The statute further declares that a
judgment creditor "shall have no right under 42:2C-1 et seq. or
any other State law to interfere with the management or force
dissolution of a limited liability company or to seek an order of
the court requiring a foreclosure sale of the transferrable
interest." Ibid.
In the case before us, defendant contended the bank's
application and the erroneous assertions in its supporting
certification violated N.J.S.A. 42:2C-43. We cannot discern from
the trial court's opinion where it addressed this argument or why
it deemed the gross revenues of four limited liability companies
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to be defendant's individual gross income. If the court determined
either that the form of the LLCs should be disregarded or the
entities' operating expenses should be ignored, its reasons for
making such determinations are not clear. Similarly, we are unable
to determine from the record the basis for the order of $4800 per
month.
The bank argues "[t]he reality is that the value of the
companies . . . is in the income derived from [defendant's] work
and not in the assets of the companies; as such, the [b]ank has
not sought foreclosure of a management role because it would reduce
the companies' income and in turn reduce the amount the [b]ank can
charge." The bank further argues there is nothing about the trial
court's decision inconsistent with N.J.S.A. 42:2C-43, which by its
own terms permits a court order charging the transferrable interest
of a limited liability member.
The bank also argues that N.J.S.A. 2A:17-56, which permits
execution by a judgment creditor not to exceed ten percent of
"wages, debts, earnings, salary, income from trust funds or profits
due and owing, or which may thereafter become due and owing to a
judgment debtor," authorizes execution on a debtor's gross income
rather than net profit.
In a footnote, the bank repeats a previous assertion that
during asset discovery, defendant did not produce his jointly
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filed income tax return, but instead produced a return he prepared
solely for the purposes of the asset deposition. The bank contends
defendant refused to produce his actual tax return because he was
attempting to conceal exorbitant rents his LLCs paid to his wife.
The bank apparently makes this accusation to underscore the
propriety of the trial court's decision.
To the extent the arguments the parties now make on appeal
were developed before the trial court, the trial court did not
appear to address them in its opinion. If the trial court ordered
defendant to produce his income tax returns, and if he arbitrarily
refused to comply with the court's order, then the trial court can
consider defendant's recalcitrance in fashioning an appropriate
remedy. Defendant has no right to disregard or only partially
comply with a trial court's order. That is not to suggest
defendant did so here. This is simply one more aspect of the
record that has not been properly developed, either before the
trial court or on appeal.
For the foregoing reasons, we reverse the trial court's order
and remand for further proceedings. The trial court, in its
discretion, may decide to permit additional discovery so that a
proper record can be developed. If necessary, the trial court
should conduct a hearing to resolve factual disputes material to
the parties' respective contentions. This opinion should not be
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construed as either requiring or restricting additional discovery,
or as suggesting the motion's outcome. We leave these issues to
the trial court's sound discretion.
Reversed and remanded. We do not retain jurisdiction.
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