MEDICAL INDICATORS, INC. VS. MOSHE LAVID (C-000032-16, MERCER COUNTY AND STATEWIDE) ( 2021 )

NOT FOR PUBLICATION WITHOUT THE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-0656-19
MEDICAL INDICATORS, INC.,
Plaintiff-Respondent,
v.
MOSHE LAVID,
Defendant-Appellant.
____________________________
Argued March 8, 2021 – Decided October 4, 2021
Before Judges Hoffman, Suter, and Smith.
On appeal from the Superior Court of New Jersey,
Chancery Division, Mercer County, Docket No.
C-000032-16.
Bruce I. Afran argued the cause for appellant.
Mary Sue Henifin argued the cause for respondent
(Buchanan Ingersoll & Rooney, PC, attorneys for
respondent; Mary Sue Henifin, of counsel and on the
brief).
The opinion of the court was delivered by
SUTER, J.A.D.
Defendant Moshe Lavid appeals the trial court's September 5, 2019 order
that limited his ownership interest in plaintiff Medical Indicators, Inc . (MII) to
100,000 shares of common stock. He argues the order was not supported by
substantial, credible evidence and that it relied on the erroneous admission
under New Jersey Rule of Evidence 804(b)(6) of business journal entries by a
deceased declarant. Defendant argues the trial court erred as a matter of law
by finding his claims were barred by the statute limitations for contracts and
by the equitable doctrine of laches. We affirm the September 5, 2019 order
largely for reasons expressed by Judge Paul Innes, P.J. Ch., in his
comprehensive, written decision of August 14, 2019.
I.
A.
1
The case involves a dispute over the number of MII shares that
defendant owns. In June 2016, MII filed an order to show cause and verified
complaint in the Chancery Division seeking injunctive and declaratory relief
against defendant. Count One sought to enjoin defendant from claiming he
was entitled to more than 100,000 shares in MII. Count Two alleged
defendant's material breach of an agreement excused MII from issuing any
1
On April 15, 2019, MII was acquired by Medical Indicators Holding, Inc.
A-0656-19
2
more shares to him. Count Three alleged defendant's claim was barred by the
six-year statute of limitations for contracts, while Count Four claimed it was
barred by the doctrine of laches. Counts Five and Six requested declaratory
relief barring additional shares because defendant breached an agreement and
failed to make required payments. Count Seven claimed defendant did not
participate in required research. Count Eight claimed there was an accord and
satisfaction.
On August 1, 2016, defendant filed an answer that included
counterclaims. In Count One, he requested a declaratory judgment that he
owned twelve-and-a-half percent of the shares of MII. Count Two requested a
judgment dismissing MII's verified complaint.
The case was tried over multiple days. On August 14, 2019, the trial
court issued a written decision granting "judgment in favor of [MII] on its
complaint and against defendant on his counterclaim." The court found
defendant owned 100,000 shares of MII. On September 5, 2019, it entered an
order granting relief to MII on Counts One (injunction), Two (breach of
agreement), Three (statute of limitations), Four (laches) and Six (failure to
pay). The court found the remaining claims were moot in light of its decision
on the other counts.
A-0656-19
3
Defendant appealed the September 5, 2019 order. The value of these
shares — which is $1,831,809.63 — remains on deposit with the Superior
Court Clerk's office by consent of the parties.
B.
MII was incorporated in New Jersey in 1984 by Robert J. Witonsky
("Witonsky"). He was MII's president and chief executive officer. MII
manufactured clinically accurate disposable thermometers. Witonsky passed
away in 2002.
On June 7, 1988, MII and defendant entered into a written shares
agreement (the Shares Agreement). Pursuant to the Shares Agreement,
defendant agreed to invest $25,000 in MII payable as follows: $10,000 on or
before June 13, 1988, and $15,000 on or before September 30, 1988. He
agreed to assist MII in "[s]mall [b]usiness [i]novation (sic) [r]esearch
[p]rograms" and to submit applications to the State for additional funding that
MII might be able to obtain because of these small business contracts. In
exchange, the Shares Agreement provided defendant was granted common
stock in MII "equivalent to ownership of ten . . . percent of all shares," which
were protected against "dilution" for a year. He also would receive common
stock "at a rate of one . . . percent of the total authorized shares for every
A-0656-19
4
twenty thousand . . . dollars of contracts awarded to MII on which [defendant]
is a participant of record." If defendant did not pay $15,000 on or before
September 30, 1988, the Shares Agreement provided "the terms [sic] of this
agreement shall become null and void; however, [defendant] shall retain one
hundred thousand (100,000) shares of MII common stock." Witonsky signed
the Shares Agreement for MII; defendant signed it individually.
The parties do not dispute that defendant paid $10,000 and that he is a
shareholder of MII holding 100,000 shares. What is disputed is whether
defendant paid the second payment of $15,000 and thus, whether he owns
twelve-and-a-half percent of the shares of MII.
Defendant owned M.L. Energia, Inc. (Energia). He alleges he paid
Witonsky the additional $15,000 by entering into a sham "consulting
agreement" with Witonsky through Energia. MII contends the consulting
agreement was a valid agreement and that the $15,000 payment to Witonsky
was for consulting services he performed and not for additional shares.
The Consulting Agreement, dated October 1, 1987, was signed by
Witonsky as "consultant" and by defendant for Energia. Under the Consulting
Agreement, Witonsky agreed to provide the services of a consultant in certain
specialized areas, which were handwritten into the Consulting Agreement.
A-0656-19
5
The term of the Consulting Agreement was October 1, 1987 to September 30,
1988. Under it, Witonsky would be paid at a rate of $62.50 per hour. He was
to provide Energia with an invoice of the work he performed, and Energia
would compensate Witonsky within sixty days after receipt of the invoice.
The Consulting Agreement "constitute[d] the entire understanding between the
parties" and was not to be modified unless in writing "executed by both
parties."
In a "Consulting Retainer," which was not dated, but was signed by
Witonsky and by defendant for Energia, Energia retained Witonsky as an
independent contractor for a total of fifty days from October 1, 1987, to
September 30, 1988, for $500 per day. Witonsky was to provide written
reports when requested. The parties' signatures reflected this was the parties'
"total understanding of this Retainer."
In an invoice to Energia dated May 16, 1988, Witonsky requested
compensation for his consulting services from "Oct. 1, 1987 through May 15,
1988" for a total of thirty consulting days at the rate of $500 per day, totaling
$15,000. Energia paid this invoice by a check dated July 1, 1988, to
Witonsky, who deposited it in his personal bank account.
A-0656-19
6
Defendant argues the Consulting Agreement was a sham and that the
$15,000 paid was really the second installment under the Shares Agreement.
He testified the Consulting Agreement was intentionally structured "to match
the same amount of money that was supposed to be under the share
agreement": $500 per day for fifty days or $25,000. Defendant testified he
regularly engaged in this form of accounting practice, was convicted in federal
court for tax evasion and mail fraud for these practices and was sentenced to
one-year probation and fined $1.4 million.
Defendant claimed he paid the first $10,000 under the Shares Agreement
from personal funds of he and his wife. He testified the May 16, 1988 invoice
from Witonsky for $15,000 was for the second payment under the Shares
Agreement and not for consulting services. He testified this was an
"accounting device" that would give a tax benefit to defendant because he
could deduct the payment as an expense for his business instead of the
payment later being taxable as a capital investment. Defendant testified
Witonsky did not provide consulting services, there were no records to say he
did, and in fact, the Consulting Agreement was back dated because one of the
A-0656-19
7
entries in Witonsky's business journal indicated it still was in draft form as of
June 3, 1988.2
Defendant sent Witonsky a second check for $15,000 on November 1,
1988, although he requested Witonsky not to deposit it until November 4,
1988. Defendant testified he provided this check because Witonsky requested
a check made out to MII to replace the one written in July 1988 written to him.
Defendant argues on appeal that the November 1988 check constituted
payment under the Shares Agreement and although somewhat late, it should
have been treated as a payment because the Shares Agreement lacked a "time
of the essence" clause. MII did not deposit the check.
Witonsky's business journal entry for November 16, 1988, noted that
instead of cashing the November 1, 1988 check, he mailed defendant a "notice
of default on [the] June Agreement" ("Notice of Default"), and enclosed
defendant's undeposited, undated check for $15,000. Defendant acknowledged
he retained an attorney in November 1988 although he claimed this had to do
with small business innovation research programs.
2
The June 3, 1988 business journal entry stated: "Sent copies (hand delivered)
of Drafts of MII-Lavid, RJW-Energia and MII-Lavid Agreements to Moshe
Lavid."
A-0656-19
8
Witonsky's January 12, 1989 business journal entry noted that defendant
wanted 170,000 shares in MII but that he was not entitled to "anything more
than 100,000 [shares]." Then in a letter dated February 22, 1989, to defendant,
Witonsky contended the July 1988 check for $15,000 was for consulting
services and that defendant owed him another $10,000 under the Consulting
Agreement. The letter did not indicate the check was a payment under the
Shares Agreement.
Roger Bailey, MII's secretary and treasurer, testified that MII's business
records from 1988 showed defendant owned 100,000 shares of stock. On
February 28, 2000, defendant emailed John Estill, the Vice-President of
Operations and Administration of MII, requesting a stock certificate, reflecting
his shares in MII. Mr. Estill sent defendant an application to replace his lost
stock certificate, but defendant never returned it.
In 2016, Bailey contacted defendant and other shareholders about the
potential sale of MII. In his conversation with defendant, Bailey told
defendant he owned 100,000 shares of MII but defendant disagreed saying he
owned more. Defendant responded by sending Bailey a copy of the Shares
Agreement and a copy of the $10,000 check from June 13, 1988, and the
$15,000 check dated July 1, 1988, from Energia to Witonsky.
A-0656-19
9
C.
The trial court determined defendant's stock ownership in MII was
limited to 100,000 shares. It admitted fourteen business journal entries of
Witonsky's from 1988 and 1989 into evidence under N.J.R.E. 804(b)(6) as an
exception to hearsay from a deceased declarant. The court reviewed all the
testimony of the witnesses and the documentary evidence, finding defendant
was not a credible witness, and noting inconsistencies between his trial
testimony and his deposition testimony. It found that "[MII] has proven by a
preponderance of the evidence that defendant failed to make the payment of
the $15,000 in satisfaction of the Shares Agreement." "According to the clear
and unequivocal terms of the agreement, defendant's failure to make the
payment rendered the agreement null and void." The court also found
defendant's counterclaims were filed outside the six-year statute of limitations
and that they were barred by the doctrine of laches.
On appeal, defendant raises the following arguments:
I. THE TRIAL COURT ERRED AS A MATTER
OF LAW AND/OR ABUSED ITS
DISCRETION IN ADMITTING WITONSKY’S
LOG ENTRIES INTO EVIDENCE UNDER
RULE 804 AS STATEMENTS OF A
DECEASED DECLARANT.
A-0656-19
10
II. THE TRIAL COURT’S FINDING THAT
WITONSKY’S COMMUNICATIONS WERE
SUFFICIENT TO TRIGGER THE STATUTE
OF LIMITATIONS IS NOT SUPPORTED BY
THE RECORD.
III. EQUITABLE CONSIDERATIONS SHOULD
BAR APPLICATION OF THE STATUTE OF
LIMITATIONS WHERE MII HAD THE SAME
OR SIMILAR KNOWLEDGE AS TO LAVID’S
CLAIMS BUT EQUALLY FAILED TO
COMMENCE ANY ACTION TO SETTLE THE
ISSUE OF HIS SHARE OWNERSHIP.
IV. LAVID HAD NO DUTY TO BRING AN
ACTION TO VALIDATE HIS SHARE
OWNERSHIP BECAUSE THE JUNE 7, 1988
AGREEMENT ITSELF CONVEYED
OWNERSHIP OF AT LEAST [TEN
PERCENT] OF THE COMPANY’S STOCK.
V. AS TO THE MERITS, THE SUBSTANTIVE
RECORD DOES NOT SUPPORT THE TRIAL
JUDGE’S CONCLUSION THAT LAVID
FAILED TO PAY FOR THE SECOND $15,000
INSTALLMENT TO COMPLETE HIS STOCK
PURCHASE.
VI. IN THE ALTERNATIVE, TIME WAS NOT OF
THE ESSENCE IN THE JUNE 1988
AGREEMENT AND LAVID’s SECOND
TENDER OF $15,000 FOR THE STOCK
PURCHASE ON NOVEMBER 1, 1988
SECURED HIS [TWELVE-AND-A-HALF
PERCENT] INTEREST.
A-0656-19
11
VII. THE TRIAL COURT ERRED AS A MATTER
OF LAW IN FINDING LACHES BASED ON
WITONSKY’S DEATH.
II.
A.
"[O]rdinarily, an evidentiary determination made during trial is entitled
to deference and is to be reversed only on a finding of an abuse of discretion
. . . ." Est. of Hanges v. Metro. Prop. & Cas. Ins. Co., 202 N.J. 369, 374
(2010). Rulings on evidence "must stand unless it can be shown that the trial
court palpably abused its discretion." State v. Carter, 91 N.J. 86, 106 (1982).
Under the abuse of discretion standard of review, reversal is only appropriate
in cases where the trial court's finding was "so wide of the mark that a
manifest denial of justice resulted." Ibid.Defendant contends the trial court erred by admitting Witonsky's
business journals into evidence under N.J.R.E. 804(b)(6). Although hearsay
generally is inadmissible, an exception in civil proceedings is the admission of
a statement by a deceased declarant where the statement is "made in good faith
upon declarant's personal knowledge in circumstances indicating that it is
trustworthy." N.J.R.E. 804(b)(6).
A-0656-19
12
There are four conditions for admissibility under N.J.R.E. 804(b)(6), 3
which requires that: (1) the declarant is deceased; (2) the statement is made in
good faith; (3) the statement is made on the declarant’s own personal
knowledge; and (4) there is probability from the circumstances that the
statement is trustworthy. Est. of Hanges, 202 N.J. at 385. The trial court is to
make a "particularized" finding pertaining to good faith, personal knowledge,
and the trustworthiness of the statement. DeVito v. Sheeran, 165 N.J. 167, 194
(2000).
No one disputed that Witonsky passed away or the business journal
entries were made by him based on his personal knowledge. The court found
the entries were made in good faith.
The good faith is that Dr. Witonsky, from all the
testimony that’s been presented, was religious about
keeping a journal. He was putting in the journal
information . . . to be able to use at a future time. He
wanted to try to prepare a record that as far as he was
concerned was accurate so that if he needed to rely
upon his journal, he would be able to do so.
3
We have no occasion to determine the admissibility of the business journal
entries under the business records exception. N.J.R.E. 803(c)(6). The trial
court found the business records exception did not apply because Witonsky
had "absolutely no duty . . . to keep these books the way he kept them." MII
did not file a cross-appeal of the September 5, 2019 order.
A-0656-19
13
The court also found the entries met the required element of
trustworthiness. The court found Witonsky was a credible declarant, and that
the entries in the business diaries were made "at or about" the time of the
events described based on Witonsky’s own firsthand knowledge. Multiple
witnesses testified about "Witonsky’s character for trustworthiness."
We find no abuse of discretion in the trial court's ruling. The court made
a specific finding of good faith. See Est. of Hanges, 202 N.J. at 386 (requiring
a finding of good faith not just the absence of bad faith). There was ample
evidence from the witnesses that Witonsky was meticulous in keeping these
business journals, recording the information contemporaneously with events.
This was for his use, and he relied on it in his business. There was no
evidence the business journals were inaccurate, created after the fact or made
in contemplation of litigation. In fact, the circumstances testified to by the
witnesses about Witonsky's notetaking were such that the statements in the
business journals probably were trustworthy as they were corroborated by the
dates and events recorded in other documents.
It was defendant's testimony that the trial court found lacked credibility.
As the trial court observed, defendant testified Witonsky did not provide
consulting services, but the record disputed this, showing a payment in July
A-0656-19
14
1988 for consulting. Defendant testified the July 1, 1988 check was from his
personal account, but the check stock said it was from Energia. At trial,
defendant testified he could not recall certain information, but in his
deposition, he had recalled it. Defendant testified at trial about a conversation
with Witonsky about shares, but he did not relate this in his earlier
certification or deposition. Defendant's testimony was not consistent with the
dates on the checks and documents, or with the February 1989 letter from
Witonsky to defendant.
The trial court did not find credible defendant's claim that although he
retained an attorney in November 1988, he did not want the attorney to discuss
the issue about shares. The court noted defendant pleaded guilty to crimes
involving "dishonesty and false statements, including false statements to a
government agency. . . . These crimes involved the manner in which he
conducted his business affairs for a substantial period of time, from 1985 -
2000." The trial court found the conviction was "clear evidence of defendant's
lack of credibility." There was no testimony from any of the other witnesses
that Witonsky was part of this sort of scheme.
Because defendant's testimony was not credible, there were no facts to
dispute — what the Shares Agreement, the Consulting Agreement and other
A-0656-19
15
documents showed — which then supported the trustworthiness of the business
journals.
B.
Defendant argues the trial court lacked substantial credible evidence to
support its finding that defendant failed to pay the second installment of
$15,000. Defendant contends he paid this on November 1, 1988, at the latest.
Because the Shares Agreement did not include a time of the essence clause,
defendant argues this payment secured his additional two-and-a-half percent
interest in MII.
We afford a deferential standard of review to the factual findings of the
trial court on appeal from a bench trial. Rova Farms Resort v. Invs. Ins. Co.,
65 N.J. 474, 483-84 (1974). A trial judge's findings are binding on appeal
when supported by adequate, substantial, and credible evidence. Id. at 484.
These findings will not be disturbed unless "they are so manifestly
unsupported by or inconsistent with the competent, relevant and reasonably
credible evidence as to offend the interests of justice." Ibid. (quoting
Fagliarone v. Twp. of N. Bergen, 78 N.J. Super. 154, 155 (App. Div. 1963)).
However, our review of a trial court's legal determination is plenary,
A-0656-19
16
D'Agostino v. Maldonado, 216 N.J. 168, 182 (2013) (citing Manalapan Realty,
L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).
Our review of the record shows the trial court's findings were supported
by substantial, credible evidence. Defendant's version of events rested on his
testimony. It was not corroborated by the documentary evidence. The July
1988 check was made by Energia to Witonsky personally and not to MII, and
then was deposited in Witonsky's personal account. The timing suggested this
was for consulting services not for shares. Witonsky's business journal entries
reflected the second payment for shares was never made.
Defendant then inconsistently argued that he paid another $15,000 for
the shares in November 1988. There was no reason to do so if — as he argued
— he had paid for this in July. When that check was issued, Witonsky sent it
back along with a default notice. Defendant retained an attorney shortly after
the November 1988 check was returned, and documents after that date noted
the parties' disagreement about defendant's shares. Thus, the trial court had
ample evidence to reject defendant's argument that he paid $15,000 in July
1988 for additional shares.
A-0656-19
17
Defendant relies on a business journal entry from June 3, 1988, 4 and
testimony about it to argue the Consulting Agreement was backdated.
However, both the language of the entry and testimony showed the entry was
unclear at best. In questioning Bailey about the business journal entry,
defendant's counsel asked:
Question: And this refers to an agreement between
RJW and Energia, in draft form, hand delivered to
Energia, to Moshe Lavid, on Friday, June 3rd, 1988,
doesn't it?
Answer: I can't be sure that that's correct.
Bailey also testified there were three other documents "that were signed on
June 7th" and that he "could make an equally good case that those three drafts
were the ones that were sent."
Defendant argues the Shares Agreement was satisfied by his payment in
November 1988 because that agreement did not include a time of the essence
clause. This argument overlooks the plain language of the Shares Agreement
that it would be "null and void" if the second payment were not made. It also
is inconsistent with the null and void provision. There is no evidence the
parties intended something different than what the document said. Witonsky's
actions were consistent with the null and void provision by sending back the
4
See footnote two.
A-0656-19
18
check and by issuing a notice of default. These facts support the trial judge's
findings on the merits and its dismissal of the counterclaims.
C.
We also find no error in the trial court's order that defendant's
counterclaims were barred by the six-year statute of limitations for contracts.
"In New Jersey, causes of action based on contractual claims must be brought
within six years 'after the cause of any such action shall have accrued.'" Crest-
Foam Corp. v. Aetna Ins. Co., 320 N.J. Super. 509, 517 (App. Div. 1999)
(quoting N.J.S.A. 2A:14-1). The statutory period begins to run when the cause
of action accrues, which, for contract claims, occurs at the time of the alleged
breach. 31 Williston on Contracts § 79:14 at 303-04 (Lord ed., 4th ed. 2004).
The Shares Agreement was executed on or about June 7, 1988.
Defendant retained an attorney in November 1988 to meet with Witonsky to
discuss issues he was having with MII. By January 12, 1989, Witonsky
included a business journal entry that defendant wanted 170,000 shares and
that he saw no basis for that. We agree with the trial court that by that time
"defendant knew that [MII] had rejected his claim for more than 100,000
shares." Defendant was in default of the Shares Agreement in mid-November
A-0656-19
19
1988. Defendant's counterclaims were not filed until August 1, 2016. This
was well beyond the six-year statute of limitations. 5
After carefully reviewing the record and applicable legal principles, we
conclude defendant's further arguments are without sufficient merit to warrant
discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed.
5
We also agree the trial court did not err in finding defendant's claims would
be barred by laches because of the length of the delay, the inadequacy of the
explanation and the prejudice to MII in light of Witonsky's death in 2002. See
Knorr v. Smeal, 178 N.J. 169, 181 (2003) (providing that "[t]he 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.'") (quoting Lavin v. Bd. of Educ., 90 N.J. 145, 152
(1982)).
A-0656-19
20