PROVIDENT BANK VS. RAJENDRA KANKARIYA (L-2729-18, BERGEN COUNTY AND STATEWIDE) (CONSOLIDATED) ( 2019 )

NOT FOR PUBLICATION WITHOUT THE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 NOS. A-3472-18T1
A-3473-18T1
PROVIDENT BANK,
Plaintiff-Respondent,
v.
RAJENDRA KANKARIYA
and JYOTI KANKARIYA,
Defendants-Appellants.
____________________________
Argued September 11, 2019 – Decided October 9, 2019
Before Judges Whipple, Gooden Brown and Mawla.
On appeal from an interlocutory order of the Superior
Court of New Jersey, Law Division, Bergen County,
Docket No. L-2729-18.
Michael Angelo Baldassare argued the cause for
appellants (Baldassare & Mara, LLC, attorneys for
appellant Rajendra Kankariya; Michael Angelo
Baldassare, on the joint briefs).
Gruppuso Legal, attorneys for appellant Jyoti
Kankariya (Anthony M. Gruppuso, on the joint brief).
John R. Stoelker argued the cause for respondent (Mc
Carter & English LLP, attorneys; Joseph J. Lubertazzi,
of counsel and on the brief; John R. Stoelker, on the
brief).
PER CURIAM
The power to compel testimony is limited by the Fifth Amendment. In
these consolidated appeals, on leave granted, we examine application of that
limitation. Defendants Rajendra and Jyoti Kankariya appeal the trial court's
February 11, 2019 discovery order requiring them to comply with plaintiff
Provident Bank's discovery requests or face potential imprisonment pursuant to
a writ of capias ad satisfaciendum (ca. sa.). We affirm.
I.
Defendants own Lotus Exim International, Inc. (LEI), a marble and
granite wholesaler. In January 2017, defendants, on behalf of LEI, obtained a
$17 million dollar loan from plaintiff Provident Bank. To secure the loan,
defendants executed personal guarantees promising to repay the loan in the
event of a default. As part of the loan application, defendants submitted personal
financial statements wherein they claimed to own: a home valued at $1,200,000,
$700,000 worth of securities, life insurance policies with cash surrender values
of $160,000, and personal property worth $90,000.
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Soon after securing the loan, LEI defaulted and, in addition to other
related entities, filed for bankruptcy in the United States Bankruptcy Court for
the District of New Jersey. Defendants filed a personal petition for chapter
seven bankruptcy, but it was dismissed. On April 16, 2018, plaintiff filed a
complaint in the Superior Court against defendants, seeking a judgment for the
full amount due on the loan by means of the personal guarantees. Defendants
did not file responsive pleadings and default was entered against them. On June
26, 2018, a final judgment of default was entered against defendants in the
amount of $16,972,003.52. Defendants do not dispute the judgment's validity.
In order to collect on its judgment, plaintiff filed a verified petition for
discovery under Rule 4:59-1, to obtain an order directing defendants to provide
documents and sworn testimony concerning their personal assets. On July 5,
2018, the trial judge entered a discovery order and required defendants to
produce documents by July 20, 2018, and attend depositions on July 30, 2018.
Meanwhile, in the bankruptcy proceeding, the trustee served defendants with
subpoenas to obtain documents and testimony related to the debtor. In response
to a motion to quash, the bankruptcy court ordered defendants turn over
documents in their custodial capacity, but provided that the act of production
could not be used against them in any criminal, civil, or other legal proceeding ..
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On July 20, 2018, defendants did not deliver any documents to plaintiff
and during their respective depositions, defendants asserted their Fifth
Amendment privilege in response to all of plaintiff's questions, except their
name, address and date of birth. Some questions appeared innocuous, such as:
whether defendants drove a car to the deposition; whether defendants owned
furniture; whether defendants held bank accounts; whether defendants owned
jewelry and the value of the jewelry Jyoti was wearing; whether defendants paid
for utilities at their home; whether defendants maintained health insurance;
whether defendants owned any collections, like a wine or stamp collection and;
whether defendants brought their drivers licenses to the deposition. A few
questions were directed at whether defendants received any money from LEI.
As a result of defendants' assertion of Fifth Amendment rights, plaintiff
moved for an order enforcing litigant's rights, issuance of a writ of ca. sa., and
other related relief. Oral argument was held on November 2, 2018. Plaintiff
argued defendants were not entitled to make a "blanket" assertion of their Fifth
Amendment privilege without showing there is a link between the questions
asked and potential criminal prosecution. In response, defendants argued that
all the questions about defendants' personal finances and assets were "link s in
the chain" of potential criminal prosecution. When pressed on the credibility of
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their fear of criminal prosecution, defendants cited to an allegation made in the
bankruptcy proceeding that LEI's principals, i.e., defendants, fraudulently
procured the loan.
The fraud allegation appeared in a preliminary statement included in
plaintiff's brief in support of its motion for summary judgment in the bankruptcy
proceeding. Plaintiff was engaged in a priority dispute with Itria Ventures LLC
(Itria), who allegedly induced plaintiff to extend the loan to LEI. Thus, plaintiff
asserted "it can easily establish the fraud committed by Itria, Biz2Credit [Itria's
affiliate], LEI and their principals on creditors, including Provident."
"Principals" includes defendants, who own LEI. No grand jury investigations
or pending criminal prosecutions were brought to the court's attention.
According to defendants, the fraud allegation provided them with
sufficient grounds to assert the privilege and resist all plaintiff's questions, even
the innocuous ones. Defendants argued, if a ca. sa. were to issue, they would be
forced to choose between jail or relinquishing their Fifth Amendment privilege.
Thus, defendants argued the statute authorizing a ca. sa., N.J.S.A. 2A:17-78,
was unconstitutional on its face and as applied. The court disagreed and granted
plaintiff's motion on February 11, 2019.
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Pursuant to N.J.S.A. 2A:17-78, a court may order the imprisonment of a
debtor, if the debtor possesses fifty dollars or more and he refuses to devote his
assets to satisfy the debt. However, the New Jersey Constitution provides that
"No person shall be imprisoned for debt in any action, or on any judgment
founded upon contract, unless in cases of fraud[.]" N.J. Const. of 1947, art. I, ¶
13. Despite the constitutional prohibition, the trial judge concluded writs of
ca. sa. may still validly issue in New Jersey. Considering defendants had assets
greater than fifty dollars, and they were resisting applying their assets to satisfy
plaintiff's judgment, the trial judge found the writ was an appropriate remedy.
With respect to defendants' Fifth Amendment claims, the trial judge found
they did not demonstrate a "real and appreciable" danger that their answers could
lead to criminal prosecution. The trial judge rejected defendants' argument that
they were not obligated to answer any of the plaintiff's questions and noted the
Fifth Amendment privilege must be asserted "with reference to the ordinary
operation of the law[.]" Additionally, the judge found the privilege did not
relieve defendants of their obligation to produce documents plaintiff requested.
To facilitate cooperation with her discovery order, the trial judge required
defendants to produce the requested documents by February 22, 2019, and attend
depositions ten days later. In the event defendants renewed their Fifth
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Amendment privilege claim, the trial judge ordered that the parties were to
return for an evidentiary hearing where the trial judge could assess the merits of
their assertions. The trial judge warned if she found defendants' Fifth
Amendment assertions baseless, and they continued to disobey the discovery
order, a ca. sa. would issue. An unsigned arrest order was attached to the order
as an exhibit.
On February 22 and 28, 2019, the trial judge amended her original order
and extended the document production and deposition deadlines. On March 12,
2019, defendants filed orders to show cause seeking a stay of the arrest orders
while their motion for leave to appeal was pending. After oral argument on
March 22, 2019, the trial judge granted a stay, and we granted leave to appeal.
This appeal followed.
II.
Defendants argue the trial judge erred in her ruling that defendants
unjustifiably invoked the Fifth Amendment privilege and must establish a
justification in an evidentiary hearing. They also assert it was error for the judge
to order their appearance at another deposition, answer questions and provide
documents without immunity. Additionally, they argue their constitutional
rights were violated and the writ ca. sa. is unconstitutional.
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Defendants frame the issues on appeal as a matter of constitutional
interpretation, which would require de novo review. See, e.g., State v. S.S., 229
N.J. 360, 380 (2017). However, these perceived constitutional injuries have yet
to occur. We review the judge's discovery order under an abuse of discretion
standard. See Pomerantz Paper Corp. v. New Cmmty. Corp., 207 N.J. 344, 371
(2011) ("[W]e apply an abuse of discretion standard to decisions made by our
trial courts relating to matters of discovery."). And only to the extent we
examine the judge's legal conclusions, we review de novo. See Manalapan
Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995) ("A trial
court's interpretation of the law and the legal consequences that flow from
established facts are not entitled to any special deference.").
Because defendants have not appeared for additional depositions and have
not been jailed, they ask us to review a prospective and unmaterialized violation
of their Fifth Amendment privilege. However, the harm complained of, issuance
of a ca. sa. will force defendants to relinquish their Fifth Amendment privilege,
will not be ripe for review unless and until the trial court holds a Fifth
Amendment privilege hearing consistent with its February 11, 2019, order. The
trial court's February 11, 2019 order contains two triggering events: (1) the trial
judge must, after a Fifth Amendment hearing, order defendants to answer
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questions under oath and (2) if defendants decline to do so, arrest orders would
issue. Since neither event has ocurred, we can only consider the procedures the
trial judge designed to secure compliance with her discovery order.
"The Fifth Amendment declares in part that 'No person . . . shall be
compelled in any criminal case to be a witness against himself.'" Hoffman v.
United States, 341 U.S. 479, 485–86 (1951) (quoting U.S. Const. amend. V).
"Although New Jersey's privilege against self-incrimination is not enshrined in
our State Constitution, 'the privilege itself is firmly established as part of the
common law of New Jersey and has been incorporated into our Rules of
Evidence.'" State v. Kucinksi, 227 N.J. 603, 617 (2017) (quoting State v.
Hartley, 103 N.J. 252, 260 (1986)); see N.J.R.E. 503. "[The privilege] can be
asserted in any proceeding, civil or criminal, administrative or judicial,
investigatory or adjudicatory; and it protects against any disclosures which the
witness reasonably believes could be used in a criminal prosecution or could
lead to other evidence that might be so used." Kastigar v. United States, 406
U.S. 441, 444–45 (1972) (footnotes omitted); see also Lefkowitz v.
Cunningham, 431 U.S. 801, 805 (1977) ("[S]ince the test is whether the
testimony might later subject the witness to criminal prosecution, the privilege
A-3472-18T1
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is available to a witness in a civil proceeding, as well as to a defendant in a
criminal prosecution.").
"The privilege afforded not only extends to answers that would in
themselves support a conviction under a federal criminal statute but likewise
embraces those which would furnish a link in the chain of evidence needed to
prosecute the claimant for a federal crime." Hoffman, 341 U.S. at 486. "But
this protection must be confined to instances where the witness has reasonable
cause to apprehend danger from a direct answer." Ibid.
"To sustain the privilege, it need only be evident from the implications of
the question, in the setting which it is asked, that a responsive answer to the
question or an explanation of why it cannot be answered might be dangerous
because injurious disclosure could result." Id. at 486-87.
The test for the judge, "governed as much by his [or
her] personal perception of the peculiarities of the case
as by the facts actually in evidence," is whether . . .
"there is reasonable ground to apprehend danger to the
witness from his [or her] being compelled to answer[.]"
[In re Pillo, 11 N.J. 8, 19 (1952) (citing Hoffman, 341
U.S. at 487) (quoting R. v. Boyes, 1 B. & S. 311, 321
(1861)).]
"[T]he danger to be apprehended must be real and appreciable[,]" id. at
19–20, because the privilege "protects against real dangers, not remote and
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speculative possibilities." Zicarelli v. N.J. State Comm. of Investigation, 406
U.S. 472, 478 (1972).
"A witness'[s] mere claim of the privilege does not establish the hazard of
incrimination. In re Ippolito, 75 N.J. 435, 440 (1978). It is for the court to say
whether, under all of the circumstances, silence is justified." Id. (citing
Hoffman, 341 U.S. at 486). A witness's sincere belief that his or her answers
may be incriminating, without more, is not enough "to foreclose his [or her]
answering or making a disclosure[.]" N.Y. State Nat'l Org. for Women v. Terry,
886 F.2d 1339, 1356 (2d Cir. 1989). "If the court determines that the
incriminatory nature is not readily apparent, the witness then must endeavor to
explain how his answer will be incriminatory." United States v. Edgerton, 734
F.2d 913, 919 (2d Cir. 1984). "This burden forces a witness to come
dangerously close to doing that which he is trying to avoid." Ibid.
A party "does not have a 'blanket' right to refuse all questions." State
Farm Indem. Co. v. Warrington, 350 N.J. Super. 379, 388 (App. Div. 2002). To
execute a "particularized inquiry" the court must consider on a question-by-
question basis whether each "might elicit [an] incriminatory answer[][.]" United
States v. Bowe, 698 F.2d at 560,566 (2d Cir. 1983); see Ippolito, 75 N.J. at 439
(explaining how the Superior Court evaluated a witness's privilege claims on a
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question-by-question basis). Thus, the trial judge must examine each question,
determine whether "there is a reasonable basis for believing a danger to the
witness might exist in answering a particular question," and consider "whether
a narrower privilege would suffice to protect the witness from danger" all before
determining whether the privilege was validly asserted. United States v.
Thornton, 733 F.2d 121, 125 (D.C. Cir. 1984) (alterations in original); see also
Magid v. Winter, 654 So. 2d 1037, 1039 (Fla. Dist. Ct. App. 1995) (requiring the
trial court to assess witness's privilege claim "on a question-by-question basis").
It is within the judge's discretion, "[i]n unusual cases . . . [to] sustain a blanket
assertion of privilege after determining that there is a reasonable basis for
believing a danger to the witness might exist in answering any relevant
question." Thornton, 733 F.3d at 126 (alterations in original). But that requires
a finding that the witness "could 'legitimately refuse to answer all relevant
questions.'" United States v. Tsui, 646 F.2d 365, 367–68 (9th Cir. 1981)
(quoting United States v. Goodwin, 625 F.2d 693, 701 (5th Cir. 1980)).
Moreover, the court is not limited to the formal record in making a
privilege determination to minimize the risk a witness will disclose
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incriminatory information. See Hoffman, 341 U.S. at 487–88 (considering news
reports and information from sources outside the record). 1
Defendants' personal documents are given the same Fifth Amendment
protections. See State v. Andrews, 457 N.J. Super. 14, 22 (App. Div. 2018); but
see In re Guarino, 104 N.J. 218, 232–33 (1986) (holding that a corporation,
partnership, or sole proprietorship's business records are not afforded the same
Fifth Amendment protections as personal records). "When the privilege is
asserted with respect to records, the witness must produce them so that the court
may determine whether the claim is spurious[.]" In re Addonizio, 53 N.J. 107,
117 (1968).
1
The court also has the discretion to utilize in camera proceedings to ensure the
witness's privilege claim is legitimate. See United States v. Duncan, 704 F.
Supp. 820, 822–23 (N.D. Ill. 1989) (conducting in camera review of records and
requiring witness to respond in writing to each question he refused to a nswer to
explain how each response was incriminating); Commonwealth v. Pixley, 933
N.E.2d 645, 649 (Mass. App. 2010) ("In exceptional circumstances, the
information made available to the judge in open court will not be adequate to
permit the judge to assess the validity of the asserted privilege. When this is the
case, the judge may conduct an in camera hearing with the witness and the
witness's counsel at which the witness will be required to disclose enough
additional information to permit the judge to make the determination.")
(emphasis added). However, all of these procedures bring their own particular
peril. See Sheridan v. Sheridan, 247 N.J. Super. 552, 565 (Ch. Div. 1990) .
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Under federal law, "a person may be required to produce specific documents
even though they contain incriminating assertions of fact or belief because the
creation of those documents was not 'compelled' within the meaning of the
privilege." United States v. Hubbell, 530 U.S. 27, 35-36 (2000). In United
States v. Fisher, 425 U.S. 391, 409–10 (1976), a taxpayer was not permitted to
withhold documents because they were voluntarily created, and therefore their
disclosure not compelled, prior to issuance of a subpoena. Of course, the act of
production may be testimonial in and of itself. Hubbell, 530 U.S. at 36. We
presume this is why, in this case, the bankruptcy court granted defendants
immunity to produce documents in their custodial, not personal, capacity.
However, unlike in the bankruptcy proceeding, defendants here are not acting
in a custodial capacity. This suit concerns personal guarantees on a debt. Based
on this record, defendants have not demonstrated the jeopardy apparent as
principals in the bankruptcy proceeding.
Defendants argue they are "under no duty to explain or prove the hazard
posed by answering [plaintiff's] questions or producing the documents sought
by [plaintiff]." We disagree. The judge was correct in ordering the parties to
return for a Fifth Amendment hearing in the event defendants continue to
disobey the discovery order.
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If and when that hearing occurs, the judge must analyze the deposition
questions on a question-by-question basis and defendants must demonstrate
their fear of providing an incriminating response is "real and appreciable[,]"
Pillo, 11 N.J. at 19–20, "not remote and speculative[.]" Zicarelli, 406 U.S. at
478. The judge should determine whether "there is a reasonable basis for
believing a danger to the witness might exist in answering a particular question,"
and consider "whether a narrower privilege would suffice to protect the witness
from danger" all before finding the privilege was validly asserted. Thornton,
733 F.2d at 125 (alteration in original).
Defendants must also produce the requested documents for the court to
review. Addonizio, 53 N.J. at 116–17. Defendants should be held to the same
burden as under the testimonial privilege, and the judge should analyze th eir
privilege claim on a document-by-document basis.
III.
For the first time on appeal, defendants argue that they must be given use
immunity before providing testimony or producing documents under Whippany
Paper Board, Co. v. Alfano, 176 N.J. Super. 363, 369 (App. Div. 1980), and
suggest, like the defendants in that case, the trial court should not have required
defendants to testify unless and until they received a grant of use immunity. We
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decline to entertain the argument. "[A]ppellate courts will generally 'decline to
consider questions or issues not properly presented to the trial court when an
opportunity for such a presentation is available,' unless the issues relate to
jurisdiction or substantially implicate public interest." Tractenberg v. Twp. of
W. Orange, 416 N.J. Super. 354, 377 (App. Div. 2010) (quoting Nieder v. Royal
Indem. Ins. Co., 62 N.J. 229, 234 (1973)).
IV.
Finally, we reject defendants' argument challenging the constitutionality
of the statute authorizing writs of ca. sa. The statute authorizing writs of ca. sa.
has persisted as constitutionally firm since the passage of the 1844 constitution,
which abolished debtor imprisonment except in cases of fraud. Moreover, we
decline to address a constitutional question until it is necessary to do so.
Defendants' argument, the ca. sa. issued because they invoked their Fifth
Amendment rights, distorts the case's procedural history. The judge has yet to
hold a Fifth Amendment hearing. Therefore, defendants' perceived
constitutional injury is, at best, unripe.
We affirm the trial judge's order, vacate the stay so the parties may
proceed to discovery as directed and a hearing, if necessary, consistent with this
opinion.
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Affirmed.
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