JOSEPH KOENIG VS. HOFFMAN DIMUZIO (L-5180-13, CAMDEN COUNTY AND STATEWIDE) ( 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NOT FOR PUBLICATION WITHOUT THE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 NO. A-5389-16T2
JOSEPH KOENIG and
LAURIE KOENIG,
Plaintiffs-Respondents,
v.
HOFFMAN DIMUZIO, JOSEPH
SLACHETKA, and JAMES
CARTER,
Defendants.
_____________________________
CADLES OF GRASSY
MEADOWS II, LLC,
Appellant.
______________________________
Submitted September 20, 2018 – Decided January 4, 2019
Before Judges Accurso and Vernoia.
On appeal from Superior Court of New Jersey, Law
Division, Camden County, Docket No. L-5180-13.
Schumann Hanlon, LLC, attorneys for appellant (David
K. DeLonge, on the briefs).
Helmer, Conley & Kasselman, PA, attorneys for
respondents (Alexander J. Wazeter, of counsel and on
the brief).
PER CURIAM
Appellant Cadles of Grassy Meadows II, LLC (Cadles), is a judgment
creditor of plaintiff Joseph Koenig. Cadles levied on Joseph Koenig's interest
in a legal malpractice case that he and his wife, plaintiff Laurie Koenig, brought
against defendants Hoffman DiMuzio, Joseph Slachetka and James Carter
(collectively "defendants"). Plaintiffs settled the malpractice case for $450,000
and sought an order apportioning fifty percent of the settlement amount to each
plaintiff. Cadles cross-moved for an apportionment of the settlement based on
the relative damages suffered by each plaintiff resulting from the alleged
malpractice. The court granted plaintiff's motion and denied Cadles's cross-
motion. Because we are convinced the court erred by applying the wrong legal
standard to determine the apportionment, we reverse and remand for further
proceedings.
The pertinent facts are not in dispute. Joseph Koenig was in the trucking
business for many years and at various times owned three trucking companies,
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J.K. Enterprises, Koenig Incorporated 1 and Joseph F. Koenig, Inc. Confronted
with financial difficulties in 2007, Joseph Koenig sought to sell eleven trucks to
raise capital, but he could not do so because he did not have the titles to the
trucks. He retained defendants to obtain the titles from the financial institution
that he believed possessed them, but defendants allegedly failed to take any
action on his behalf. He alleged in the malpractice case that defendants' failure
prevented him from selling the trucks and continuing to obtain the credit
required to profitably operate his businesses. He also claimed defendants
permitted several default judgments to be entered against him and his companies
in cases filed by creditors by failing to file answers.
Joseph Koenig and Laurie Koenig married in 2007. The following year,
Joseph Koenig transferred his interests in their marital home and two rental
properties to Laurie Koenig. One of Joseph Koenig's judgment creditors filed
suit, claiming the transfers were made to avoid his creditors. The court
appointed a receiver for the properties who was charged with collecting the
rental income. Joseph Koenig and Laurie Koenig later alleged that they retained
defendants to represent them in the matter, defendants failed to adequately do
1
Koenig Incorporated is also referred to as Koenig Inc. in the papers submitted
to the motion court.
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so and that, as a result, they lost rental income and suffered other damages due
to defendants' alleged malfeasance.
In 2009, a Joseph Koenig creditor, The Bank, obtained an $816,109.23
judgment against Joseph Koenig, a $657,247.21 judgment against Koenig
Incorporated and a $158,862.02 judgment against J.K. Enterprises. The
judgment was entered in Atlantic County and subsequently assigned to Cadles.
In December 2013, Joseph Koenig and Laurie Koenig filed a legal
malpractice action against defendants in Camden County. Eleven months later,
Cadles levied on Joseph Koenig, Koenig Incorporated and J.K. Enterprises's
interests in the claims and causes of action in the legal malpractice case. The
case was subsequently settled for $450,000 and structured to separately allocate
$225,000 each to Joseph Koenig and Laurie Koenig. They executed separate
general releases in favor of defendants in exchange for receiving $225,000 each.
Cadles filed a motion in the Atlantic County matter requesting a turnover
of the $450,000 settlement from the Camden County legal malpractice action.
The court entered an order denying the motion without prejudice.
Joseph Koenig and Laurie Koenig filed a motion in Camden County
requesting a plenary hearing to apportion the settlement proceeds. In support of
the motion, their counsel explained that Cadles served a writ of execution
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against Joseph Koenig during the malpractice action and following the
settlement took the position that Laurie Koenig was not entitled to any of the
settlement proceeds. Counsel certified that Cadles demanded all of the
settlement proceeds be placed in escrow and requested a plenary hearing "for
the court to apportion the net proceeds." Cadles filed a cross-motion to limit
the plenary hearing, arguing it was entitled to levy on the settlement proceeds
apportioned to Joseph Koenig because it had a judgment against him and that a
plenary hearing was required only to apportion the proceeds that were to be paid
to Laurie Koenig under the settlement.
The court held a hearing, but the parties did not call any witnesses. The
parties agreed Cadles was entitled to the net proceeds from the $225,000 paid to
Joseph Koenig and that the only issue presented was whether the remaining
settlement proceeds should be apportioned to Laurie Koenig.2 The parties
stipulated to certain facts and subsequently made written submissions supported
by exhibits.
2
Following deductions for counsel fees and costs, Joseph Koenig was entitled
to $137,943.10 as the net proceeds from the $225,000 apportioned to him under
the settlement. The proceeds due to Laurie Koenig from the $225,000
apportioned to her under the settlement is $131,276.42. The difference between
the two amounts is attributable to fees and costs Laurie Koenig directly paid
during the litigation.
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The court held a second hearing and heard oral argument. Cadles agreed
that its writ of execution "does not purport or intend to reach the rightful
property of Laurie Koenig." Laurie Koenig argued the equal apportionment of
the settlement proceeds was appropriate because the proceeds were for lost
marital income that she and Joseph Koenig would have otherwise received, and
she shared equally in the loss of the income as Joseph Koenig's spouse.
Cadles asserted that the losses claimed in the malpractice action were
primarily attributable to losses suffered by Joseph Koenig's businesses. Cadles
argued that the settlement's equal apportionment of the proceeds was contrived
to limit Cadles' recovery under its writ of execution on Joseph Koenig's
malpractice claims against defendant. Cadles further argued that all but
$68,443.50 3 of the over $1.5 million in damages claimed in the malpractice case
were attributable to defendants' alleged malpractice in representing Joseph
Koenig and his companies, and that the settlement proceeds should be
proportionately allocated on that basis.
3
Approximately $70,000 of the damages claimed were for defendants' alleged
malpractice in representing Joseph Koenig and Laurie Koenig in the litigation
involving the rental properties that Joseph Koenig transferred to Laurie Koenig
in 2008 and the appointment of the receiver.
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In an oral opinion, the court determined the settlement proceeds
constituted the recovery of lost marital income that was subject to an equal
allocation between Joseph Koenig and Laurie Koenig based on the principles of
equitable distribution. The court relied on our Supreme Court's decision in
Landwehr v. Landwehr, 111 N.J. 491, 502 (1988), where it was held that monies
recovered for lost income in a personal injury action by one spouse constituted
marital income subject to equitable distribution in the couple's divorce
proceeding. Here, the court relied on the holding in Landwehr, reasoned that
the settlement proceeds represented a recovery of lost marital income and
concluded that application of equitable distribution principles required an equal
allocation of the settlement monies between Joseph Koenig and Laurie. The
court held the $225,000 due to Laurie Koenig under the settlement was properly
apportioned to her.
The court entered a June 23, 2017 order apportioning fifty percent of the
settlement proceeds to Laurie Koenig and fifty percent to Joseph Koenig, and
directing that Laurie Koenig's share of the settlement proceeds was not subject
to Cadles's writ of execution. This appeal followed.
We review a trial court's interpretation of the law de novo. Serico v.
Rothberg, 234 N.J. 168, 175 (2018). "A trial court's interpretation of the law
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and the legal consequences that flow from established facts are not entitled to
any special deference." Manalapan Realty, L.P. v. Twp. Comm. of Manalapan,
140 N.J. 366, 378 (1995).
Cadles argues the court erred as a matter of law by deciding the
apportionment of the settlement proceeds based on principles of equitable
distribution. Cadles claims the settlement proceeds should be apportioned on a
pro rata basis consistent with Joseph and Laurie Koenig's respective damages in
the malpractice action. More particularly, Cadles argues that because the
alleged losses suffered directly by the judgement debtor, Joseph Koenig,
constituted 95.83 percent of the damages claimed in the malpractice case, and
Laurie Koenig's alleged damages comprised only 4.17 percent of the damages
claimed, only 4.17 percent of the $450,000 settlement should be apportioned to
Laurie Koenig.4
Based on our review of the record, we agree the court erred by relying on
equitable distribution principles in its effort to apportion the proceeds of the
settlement. "The equitable distribution statute authorizes the Family Part to
distribute assets 'in all actions where a judgment of divorce, dissolution of civil
4
Cadles's calculations are based on its assertion that Joseph Koenig's damage
claims in the legal malpractice action totaled $1,573,868.50, and Laurie
Koenig's damage claims totaled $68,443.50.
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union, divorce from bed and board or legal separation from a partner in a civil
union couple is entered.'" Thieme v. Aucoin-Thieme, 227 N.J. 269, 283 (2016)
(quoting N.J.S.A. 2A:34-23(h)). The statute's application is limited to disputes
between married and civil union couples and does not apply where, as here, the
dispute over property is between a married couple and a third-party judgment
creditor of one the spouses. Ibid.; see also Kozlowski v. Kozlowski, 80 N.J.
378, 383 (1979) (explaining that the equitable distribution statute then in effect
permitted an award "only in actions for divorce").
Moreover, although "[t]he equitable distribution statute 'reflects a public
policy that is "at least in part an acknowledgment that marriage is a shared
enterprise, a joint undertaking, that in many ways [ ] is akin to a partnership,"'"
Slutsky v. Slutsky, 451 N.J. Super. 332, 358 (App. Div. 2017) (alteration in
original) (quoting Thieme, 227 N.J. at 284), "equitable [distribution] is not
synonymous with equal," ibid. A court's determination of the equitable
distribution of marital or civil union property "requires [an] evaluation of unique
facts attached to each asset" in accordance with the criteria established in
N.J.S.A. 2A:34-23.1. Ibid. Thus, even if we were to assume the principles of
equitable distribution controlled the requested allocation of the settlement
proceeds at issue here, which they do not, those principles would not require an
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equal apportionment of the settlement proceeds between Joseph Koenig and
Laurie Koenig. See, e.g., Rothman v. Rothman, 65 N.J. 219, 232 n.6 (1974)
(rejecting the notion that, in determining the equitable distribution of marital
assets, a trial court should presumptively assign each spouse fifty percent of
eligible assets); Clementi v. Clementi, 434 N.J. Super. 529, 539 (Ch. Div. 2013)
(noting that "it has long been established that neither party is automatically
entitled to fifty percent of any specific asset" in an equitable distribution award).
We are therefore constrained to vacate the court's determination that
Laurie Koenig's fifty percent share of the settlement proceeds is beyond the
reach of Cadles's writ of execution because it is based on the incorrect legal
conclusion that equitable distribution principles governed the allocation of the
proceeds to Laurie Koenig. The court erred as a matter of law, and its reliance
on Landwehr was misplaced.
We remand the case for further proceedings and do not offer any opinion
as to the merits of the parties' requests for apportionment. In doing so, we
observe that, as a matter of fact, the settlement proceeds have already b een
apportioned by the Koenigs—they each received $225,000 in exchange for their
release of all claims against defendants. Yet the Koenigs and Cadles moved
before the court for an apportionment of the settlement proceeds. The parties'
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submissions to the motion court and on appeal, however, are bereft of citation
to a court rule, statute or case law authorizing the requested apportionment and
are untethered to any identified legal standard against which their requests for
apportionment may be measured.
Although we review orders and not a motion court's reasoning, Do-Wop
Corp. v. City of Rahway, 168 N.J. 191, 199 (2001), we may properly do so only
where the record allows an understanding of the legal authority relied upon for
the relief sought. Other than the Koenigs' erroneous claim that equitable
distribution principles were determinative of their request for apportionment,
the parties do not cite to any authority allowing the court to grant such a request.
Cadles's argument that it is entitled to a pro rata share of the settlement proceeds
based on the Koenigs' respective damages claims in the malpractice action is
unencumbered by any legal authority that it is entitled to set aside the Koenigs'
agreed upon apportionment of the settlement proceeds. It is not the
responsibility of this court to conjure up sources of legal support authorizing a
party's requests for relief and then determine whether they support the court's
order. The parties' failure to identify the legal authority authorizing the court to
grant the requested apportionment deprived the motion court and this court of a
legal standard against which the validity of the motions can be measured.
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We do not suggest there is no legal authority supporting a claim to
apportion the settlement proceeds or to set aside the apportionment agreed upon
by the Koenigs in the settlement. We simply note that neither party identified
the legal authority upon which their motions were founded and decide only that
the court's application of equitable distribution principles does not support its
findings and order. On remand, the parties may pursue their respective claims,
but must identify the legal authority supporting their claims and the court's
authority to grant their requests for relief, as well as the legal standard by which
the claims should be measured.
Vacated and remanded for further proceedings consistent with this
opinion. We do not retain jurisdiction.
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