Putnam at Tinton Falls, LLC v. Richard Annuziata ( 2024 )

NOT FOR PUBLICATION WITHOUT THE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-2605-22
PUTNAM AT TINTON FALLS,
LLC,
Plaintiff-Respondent,
v.
RICHARD ANNUZIATA,
DEBORAH ANNUZIATA,
DAVID GERMAIN, NICHOLAS
KHOUDARY, ESQ., YFM TINTON,
LLC, GARRY SCHECHER,
BOULDER DEVELOPMENT, LLC,
MICHAEL MOLOTCHKO, LMOLO,
LLC, LYDIA MOLOTCHKO,
BERNADETTE REUGG, STEVE
KALEBIC, JAMES LICATA,
BRUCE J. DUKE, VICTORIA
GENTILE, PUTNAM
CONSTRUCTION, LLC, MMR,
LLC, and DAVID CARLEBACH,
Defendants,
and
MICHAEL ANNUNZIATA,
Defendant-Appellant.
______________________________
Submitted June 18, 2024 – Decided July 25, 2024
Before Judges Currier and Berdote Byrne.
On appeal from the Superior Court of New Jersey, Law
Division, Monmouth County, Docket No. L-1900-12.
Michael Annunziata, appellant pro se.
Abilheira & Associates, PC, attorneys for respondent
(Elias Abilheira, on the brief).
PER CURIAM
Defendant, Michael Annunziata, appeals from the trial court's entry of
default judgment in favor of plaintiff, Putnam at Tinton Falls, LLC (Putnam) in
the amount of $1,500,000, jointly and severally, for a claim of civil conspiracy
with other named defendants, and $980,000 against him individually on a claim
of conversion. Michael1 asserts: 1) he was not properly served with the Seventh
Amended Complaint; 2) plaintiff failed to establish prima facie claims against
him for civil conspiracy and conversion; 3) the trial court erred in allowing the
proof hearing to proceed after the conclusion of his brother's bankruptcy
proceeding that resolved all claims against Michael; and 4) the court improperly
1
Because some parties share a common surname, we refer to them by their first
name, intending no disrespect.
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2
allowed plaintiff to pierce the corporate veil.2 Having reviewed the record
before us in light of all applicable legal principles, we are constrained to vacate
the judgments entered by the trial court and remand for further proceedings
consistent with this opinion. Defendant remains in default.
I.
An understanding of the tortured litigation history of this matter is
necessary. We discern the following facts from the limited record before us. In
2009, Richard Annunziata, defendant's brother, entered into an agreement with
another party to own and operate Putnam. The agreement was later modified to
include two additional parties, which reduced Richard's percentage of ownership
but provided him with an option to buy out the other members of Putnam.
Litigation ensued in 2010, which was sent to arbitration in accordance with
Putnam's operating agreement. Richard agreed to a settlement of $900,000. In
2011, however, Richard disclaimed the settlement agreement and the parties
returned to arbitration.
The arbitrator determined in December 2011 that Richard had "no further
membership interest in [Putnam] and no further interest in the assets of [Putnam]
2
Because Michael's corporate veil argument lacks merit as he was not a member
of the LLC, we decline to address it in this opinion. R. 2:11-3(e)(1)(E).
A-2605-22
3
and no further claim to any of the property of [Putnam]." The trial court
confirmed the arbitrator's award in early 2012. Nevertheless, Richard continued
to disclaim any settlement and disputed his loss of ownership interest in Putnam.
Shortly after the trial court's entry of the arbitration award, in April 2012,
Richard mortgaged six of Putnam's townhouses to secure a $1,500,000 loan from
YFM Tinton, LLC (YFM). Richard and several other individuals, including his
attorney, conspired to give Richard the appearance of owning Putnam and the
six townhouses through various acts. Relying on those representations, YFM
provided Richard a $1,500,000 loan and obtained mortgages on the six
townhouses. Richard spent the loan proceeds personally and distributed the
money to his family and co-conspirators. He also took several steps to conceal
the loan proceeds, including moving the funds amongst several business entities,
a custodial account established for his then-six-year-old son, and an irrevocable
trust established for his family's benefit.
YFM foreclosed on the six townhouses when Richard defaulted on the
loan, causing Putnam to first learn about the loan and mortgages. Putnam sued
Richard, YFM, and a variety of other individuals for, among other things, fraud.
On January 23, 2013, the trial court granted partial summary judgment to
Putnam against Richard in the amount of $1,500,000 and summary judgment
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against Richard's attorney "for [his] fraudulent acts in relation to the mortgage
transaction with [YFM] . . . ." The trial court's summary judgment order against
Richard does not state which cause of action it granted summary judgment on ,
or the extent of its partial award. The order merely states the court granted
summary judgment "for the reasons set forth on the record." Although we do
not have the transcript of those proceedings, according to the United States
Bankruptcy Court for the District of New Jersey, the summary judgment order
against Richard "did not make any findings as to fraud."
Eventually, Putnam and YFM mutually resolved the foreclosure
proceedings. Putnam paid YFM $1,300,000 to resolve the mortgage, and YFM
assigned to Putnam any remaining claims stemming from the fraudulent loan.
Throughout the subsequent litigation, Putnam repeatedly amended its
complaint and added additional defendants as details of the scheme came to
light. Putnam amended its complaint for a fifth time on April 1, 2014 (the "Fifth
Amended Complaint" or "Complaint"), to include Michael, a resident of New
York. The Complaint alleges Michael aided in the fraud after the fact by
"receiving the payments of misappropriated funds" but does not allege Michael
conspired in the initial fraud that led to the mortgage loan.
A-2605-22
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The Complaint mistakenly alleged Michael was resident of New Jersey.
Michael does not dispute he was personally served with the Fifth Amended
Complaint and failed to file a responsive pleading. The trial court entered
default against Michael on October 16, 2014 for the claims alleged in the Fifth
Amended Complaint, but reserved entering a default judgment until the claims
against the non-defaulting parties in the complaint were fully adjudicated.
In the interim, Richard filed for bankruptcy on February 5, 2015. A
Chapter 11 Trustee was appointed, and the Trustee subsequently retained David
Bruck to act as her attorney in Richard's bankruptcy. Bruck, acting on behalf of
the Trustee, filed an adversarial proceeding naming, among others, Richard and
Michael, seeking to avoid certain transactions and recover those funds on behalf
of the bankruptcy estate. Relevant here, the second amended adversary
complaint Bruck filed on October 17, 2017 in the bankruptcy court lists the
Fraudulent Conveyances Act, N.J.S.A. 25:2-1 to -6, the Uniform Fraudulent
Conveyance Act (the UFCA), N.J.S.A. 25:2-7 to -19, and the Uniform Voidable
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Transfer Act (the UFTA), N.J.S.A. 25:2-20 to -36,3 as grounds for avoiding the
challenged transaction between Richard and Michael.4
In October 2016, David Carlebach, one of the named defendants in this
matter, removed this case to the bankruptcy court "on the basis that the
fraudulent transfer claims asserted by [Putnam] in Count 2 of the Sixth Amended
Complaint in the . . . State Court Litigation properly belong to the Trustee."
Later that month, the Trustee "filed a [m]otion to remand the . . . [case] back to
the Superior Court of New Jersey, on condition that [Putnam] not be permitted
to pursue the fraudulent transfer claims it asserted, including the claims now
asserted in [the bankruptcy case] . . . , because such claims . . . belong to the
Trustee." According to Bruck's Second Amended Complaint in the bankruptcy
case, Putnam "through counsel has agreed to dismiss Count 2 of the . . . State
Court Litigation so that the Trustee may pursue the fraudulent transfer claims
against" the several named defendants, including Richard and Michael.
3
The Legislature renamed the UFTA the "Uniform Voidable Transactions Act"
in 2021. L.2021, c. 92, § 28. We use the acronym "UFTA" to for consistency
and to avoid confusion with prior decisions.
4
The UFTA repealed and replaced the Uniform Fraudulent Conveyance Act ,
see Banco Popular N. Am. v. Gandi, 184 N.J. 161, 175 (2005), which supersedes
the Fraudulent Conveyances Act to the extent they are inconsistent. Trus Joist
Corp. v. Treetop Assocs., Inc., 97 N.J. 22, 29-30 (1984).
A-2605-22
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On December 6, 2017, Bruck, acting on behalf of the Trustee, entered into
a "Mediation Settlement Agreement" (MSA) with several parties to the
bankruptcy, including Richard and Michael. The MSA states it intends to "serve
as a full and final resolution of the Adversary Proceedings . . . as to the Plaintiff,
Nancy Isaacson, Chapter 11 Trustee . . . and the settling Defendants . . . ." It
states the Trustee "and the settling Defendants have agreed to resolve all claims
they may have between them, including, but not limited to, those arising from
the Adversary Proceeding in the Richard Annunziata Chapter 11 Case after
conclusion of the mediation on December 4, and December 6, 2017." The MSA
states it "applies only to the Settling Parties," defined as the Trustee and "the
Settling Defendants . . . ."
Michael was one of the settling defendants. Pursuant to the MSA, Michael
was to convey property in Connecticut to the Trustee. He and Richard agreed
to "the entry of a non-dischargeable judgment against them all, jointly and
severally, in the liquidated amount of two hundred and fifty thousand dollars
. . . ." The MSA adds "[t]here shall be an exchange of full mutual and general
releases between the Trustee and the Settling Defendants."
Having obtained partial summary judgment against Richard and his
attorney, Putnam continued to litigate against the answering defendants in this
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case and on March 3, 2022, obtained a judgment against defendants Bernadette
Ruegg and David Germain, "jointly and severally, on the Count of Civil
Conspiracy in the amount of $1,500,000.00 . . . ." The judgment also found in
plaintiff's favor on its conversion claim against Bernadette Ruegg and David
Germain in the amounts of $42,500 and $11,250, respectively. These judgments
were based upon allegations made in the Seventh Amended Complaint.
The trial court then scheduled a proof hearing on Michael's default.
Michael opposed plaintiff's motion, alleging he was not served with plaintiff's
Seventh Amended Complaint and the entire controversy doctrine precluded any
award against him. The trial court rejected both arguments and held a proof
hearing on January 9, 2023.
At the proof hearing Putnam presented the testimony of Richard's
estranged wife, Deborah Annunziata, and Bruck to establish its prima facie
claims against Michael and damages.
Putnam admitted, in its opening statement, the Fifth Amended Complaint
alleged $200,000 on the conversion claim and did not allege Michael was
involved in the initial fraud. Instead, Putnam claimed "Michael . . . participated
in the civil conspiracy by laundering the funds that have been established as
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being misappropriated by Richard . . ., and preventing plaintiff from being able
to recover those funds. . . ."
Deborah admitted she had no first-hand knowledge of any of Putnam's
claims against Michael and her testimony consisted solely of "secondhand
knowledge from the . . . bankruptcy court." She was aware of two accounts, the
Family Trust Account wherein her three children were beneficiaries, and a
Unified Trust for Minors Account (UTMA) for her son Vincent. She stated she
learned, solely from the bankruptcy court documents, Richard transferred
$980,000 from the UTMA account where he was trustee into the Family Trust
Account, where Michael was trustee. With respect to her knowledge of any use
of the funds once they were transferred into the Family Trust Account, Deborah
stated: "[Richard and Michael] bought property. Like, this was all in the
bankruptcy case I'm aware of. . . . So, they bought property in Connecticut."
She did not testify as to a specific amount of $980,000 and she testified
the funds transferred from the UTMA to the Family Trust Fund were not from
Putnam but from another real estate transaction. When specifically asked
whether she knew if Michael was involved with the UTMA account, she testified
"I don't know if Michael was on it or not." When asked if Michael directed any
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of the funds be placed in the Family Trust Account she stated: "No, no. . . . I
don't have the answer. I don't know what they talked about."
Bruck also testified and admitted it had been five years since he reviewed
the records of the bankruptcy. He testified, after having his recollection
refreshed, that Richard transferred $749,000 from the UTMA account to the
Family Trust Account. He did not have a recollection of any specific act by
Michael and testified only as to his conclusion "Michael . . . did whatever his
brother Richard . . . told him to do." He testified $500,000 was transferred from
the UTMA for the purchase of the Groton, Connecticut property and testified a
total of $1,013,142 was transferred out of the UTMA. Asked if Michael had
knowledge that funds entrusted to his control in the Family Trust Account were
part of the fraudulent mortgage taken by Richard, he responded "I don't have
any recollection of that." When pressed, he stated his belief in Michael's
culpability was based on nothing "other than that they were brothers and they
obviously conspired with each other to basically defraud Richard's creditors."
Despite repeated attempts to refresh his recollection with the bankruptcy
documents, Bruck was unable to identify any action Michael took with respect
to the Family Trust Account or any fact that would enable a court to find Michael
participated in the conspiracy.
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At the hearing's conclusion, the trial court observed the case before it was
"a case for conspiracy and a case for conversion." It made the following
statement regarding the claim for civil conspiracy:
Michael . . . , in essence, argues [he] wasn’t involved in
the underlying fraud against [plaintiff]. Maybe true.
But [Michael was involved in] everything else
thereafter . . . [,] the shell game of hiding that money
from [plaintiff]."
....
So, the underlying conspiracy doesn't end when
Richard gets [plaintiff's] check. And maybe Michael
didn’t know what Richard was doing to get that $1.5
million dollars, but Michael was all in on hiding it,
moving it from trust account to trust account, and then
out the door. And he's the one that's responsible for it.
The trial court then held Michael jointly and severally liable for civil conspiracy
as a co-conspirator "based on what was alleged in the complaint, based on what
[Deborah] testified to and the review of the documents submitted here . . . and
. . . is fully responsible for the [$]1.5 million."
Regarding conversion, the trial court observed Bruck was unable to testify
as to any specific quantum of damages for which Michael was responsible.
Nevertheless, it found Michael converted $980,000 based on paragraph five of
Count 2 of the complaint. The trial court entered a judgment against Michael
jointly and severally for the $1.5 million and individually for $980,000.
A-2605-22
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Michael then filed a motion for reconsideration, which was denied. This
appeal followed.
II.
Where a defendant has defaulted, a court must nevertheless hold a proof
hearing and a plaintiff must establish its claims. R. 4:43-2; see also Chakravarti
v. Pegasus Consulting Grp., Inc., 393 N.J. Super. 203, 210 (App. Div. 2007)
("Judgment should not be entered without a proof hearing . . . although the
question of what proofs are necessary is inherently within the judge’s
discretion."). Generally, the court need only determine the sufficiency of the
allegations. Kolczycki v. City of E. Orange, 317 N.J. Super. 505, 514 (App.
Div. 1999). In the context of a proof hearing "trial courts have been directed to
view a plaintiff’s proofs 'indulgently' . . . and the general practice of our cou rts
has been to require only a prima facie case . . . ." Heimbach v. Mueller, 229
N.J. Super. 17, 20 (App. Div. 1988); see also Pressler & Verniero, Current N.J.
Court Rules, cmt. 2.2.2 on R. 4:43-2 (2024) (stating "unless there is intervening
consideration of public policy or other requirement of fundamental justice, the
judge should ordinarily apply to plaintiff's proofs the prima facie case standard
of R. 4:37-2(b) and R. 4:40-1, thus not weighing evidence or finding facts but
only determining bare sufficiency"); Kolczycki, 317 N.J. Super. at 514.
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Nevertheless, plaintiff may be held to the burden of establishing liability
as well as damages, despite a defendant's default. See Johnson v. Johnson, 92
N.J. Super. 457, 465 (App. Div. 1966) ("Even though a defendant’s answer is
stricken for failure to make discovery, the plaintiff may be . . . precluded from
recovery where the proof which he offers in support of his own case reveals a
legal defense to his claim."). Although the assertions made in a complaint are
deemed true where a defendant is in default, a court may nonetheless require a
plaintiff to furnish proof on the issue of liability, as well as damages. Ibid.When a trial court holds a Rule 4:43-2(b) proof hearing, we defer to the
trial court's factual findings and legal conclusions. See Romero v. Gold Star
Distrib., LLC, 468 N.J. Super. 274, 302 (App. Div. 2021); Chakravarti, 393 N.J.
Super. at 210 (holding "the question of what proofs are necessary" to establish
the plaintiff's claim "is inherently within the judge's discretion"). Nevertheless,
the "[f]actual findings must establish the entitlement to relief." EnviroFinance
Grp., LLC v. Env't Barrier Co., 440 N.J. Super. 325, 343 (App. Div. 2015). We
inquire as to whether there is substantial evidence in the record to support the
trial court's factual findings and legal conclusions. Romero, 468 N.J. Super. at
302. Legal determinations are not afforded such discretion, and instead are
reviewed de novo. See Heimbach, 229 N.J. Super. at 24-26.
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A. Jurisdiction
Michael first argues the court lacks jurisdiction over him because he was
a New York resident. However, Michael has waived any jurisdictional
argument. He was personally served with the Fifth Amendment Complaint, took
no steps to dismiss the Complaint or otherwise preserve lack of jurisdiction as a
defense, and, in the intervening nine years since default was entered against him,
did not move to vacate default. Moreover, he fully participated, with the benefit
of counsel, at the proof hearing. His arguments regarding jurisdiction lack
sufficient merit to warrant further discussion in a written opinion. R. 2:11-
3(e)(1)(E).
B. The Civil Conspiracy Claim
Initially, we note default was entered against Michael as to the Fifth
Amended Complaint, not the Seventh Amended Complaint, and all parties
concede he was not served with the Seventh Amended Complaint. The Fifth
Amendment Complaint does not name Michael in the initial civil conspiracy.
To the extent the trial court relied upon the partial summary judgment entered
by another judge, and upon the jury's findings after the trial against the
answering defendants involving the Seventh Amended Complaint, those
findings were in error and cannot serve as the basis for finding Michael
A-2605-22
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participated in a civil conspiracy. The court did not compare the Fifth Amended
Complaint with the versions of the complaint upon which partial summary
judgment was granted, or the complaint the jury relied upon, in its findings at
the proof hearing. It did not address the allegations specific to Michael in the
Fifth Amended Complaint.
Regardless, we agree with Michael that plaintiff failed to prove a prima
facie case for civil conspiracy at the proof hearing. 5 A claim for civil conspiracy
requires "two or more persons acting in concert to commit an unlawful act, or to
commit a lawful act by unlawful means, the principal element of which is an
agreement between the parties to inflict a wrong against or injury upo n another,
and an overt act that results in damages." Main St. at Woolwich, LLC v.
Ammons Supermarket, Inc., 451 N.J. Super. 135, 152 (App. Div. 2017) (quoting
Morgan v. U. Cnty. Bd. of Chosen Freeholders, 268 N.J. Super. 337, 364 (App.
5
Michael's pro se appellate brief concedes this issue was not raised before the
trial court and Putnam relies on this concession to assert that we should disregard
Michael's argument on appeal. During the proof hearing, however, Michael's
cross-examination of plaintiff's witnesses was directed at this point and in
closing specifically asserted the evidence did not present a prima facie case.
Due to the nature of a Rule 4:43-2(b) proof hearing, the issues of establishing a
prima facie case and damages were the only arguments before the trial court and
are properly before us on appeal. See Regan v. City of New Brunswick, 305
N.J. Super. 342, 355 (App. Div. 1997), overruled on other grounds by Dzwonar
v. McDevitt, 177 N.J. 451 (2003).
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Div. 1993)). There must be an "underlying wrong, which absent conspiracy,
would give a right of action." J-M Mfg. Co. v. Phillips & Cohen, LLP, 443 N.J.
Super. 447, 457 (App. Div. 2015) (quoting Banco Popular N. Am. v. Gandi, 184
N.J. 161, 177-78 (2005)).
There was no evidence produced at the proof hearing to establish Michael
knew of Richard's efforts to defraud YFM. Plaintiff failed to trace any of the
funds Richard placed in the Family Trust Account as received from or
originating from the fraudulent mortgage, rather than other assets obtained prior
to Richard's fraud. Bruck's unsupported conclusory statements at the proof
hearing cannot establish the requisite facts to support a finding that Michael
engaged in a civil conspiracy to defraud Putnam.
Plaintiff's complaint alleges two separate but closely related instances of
fraud and conspiracy. Plaintiff's first claim alleges fraud in procuring the $1.5
million loan. The Fifth Amended Complaint does not assert Michael
participated in this initial fraud and is consistent with the testimony of Deborah
and Bruck at the proof hearing. Michael is alleged only to have received the
proceeds of Richard's fraud upon Putnam after the fact. The Complaint does not
allege Michael agreed or did anything to assist Richard in fraudulently obtaining
the $1.5 million loan. None of the testimony adduced at the proof hearing cured
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this deficiency; neither Bruck nor Deborah testified to anything Michael did or
agreed to do to enable the fraud. Despite this, and the fact Michael was not
named as a defendant in the count of the Fifth Amended Complaint alleging the
initial civil conspiracy, the trial court found Putnam had proven a case for civil
conspiracy and was liable for the entire $1.5 million loan amount. This finding
is not based on substantial, credible evidence in the record.
C. The Fraudulent Transfer Claims
Putnam secondly claims a separate "conspiracy to defraud" based on
fraudulent transfers Richard made to Michael in an effort to thwart his creditors.
The evidence at the proof hearing did not demonstrate Michael knew the source
of the funds were from Putnam; Deborah's testimony was, in fact, contradictory.
Moreover, our review of the limited record before us regarding the bankruptcy
case signals Putnam's intention to dismiss this count against Michael.
The record shows Richard transferred assets to the Family Trust Account
or his businesses beyond Putnam's reach to avoid collection. Although those
funds were not traced to the initial mortgage loan, the complaint may allege a
mutual intent by Richard and Michael to defraud and hinder plaintiff's recovery
efforts. See Jecker v. Hidden Valley, Inc., 422 N.J. Super. 155, 163-64 (App.
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Div. 2011); see also N.J.S.A. 25:2-26. The transfers were made after the debt
was incurred and shortly after plaintiff sued Richard. N.J.S.A. 25:2-26.
However, in Bruck's second amended complaint, filed in the bankruptcy
proceeding, Putnam agreed to dismiss its claims regarding the fraudulent
transfers. According to that complaint, plaintiff agreed those claims belonged
to the Trustee in bankruptcy. The subsequent settlement among the Trustee,
Richard, and Michael appears to resolve them. We conclude the record before
us is insufficient to determine whether the fraudulent claims were wholly
severed and resolved by the bankruptcy settlement.
D. Conversion
Conversion is the "[(1)] wrongful exercise of dominion and control over
property [(2)] owned by another [(3)] inconsistent with the owners' rights." Sun
Coast Merch. Corp. v. Myron Corp., 393 N.J. Super. 55, 84 (App. Div. 2007)
(quoting Port-O-San Corp. v. Teamsters Loc. U. No. 863 Welfare & Pension
Funds, 363 N.J. Super. 431, 440 (App. Div. 2003)). While the tort traditionally
applies to chattels, money may be converted if the funds are identifiable and
belong to the plaintiff. Meisels v. Fox Rothschild LLP, 240 N.J. 286, 304
(2020). A defendant may be liable even if he or she acts in good faith and is
ignorant of the owner's rights. Ibid.A-2605-22
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Putnam's Fifth Amended Complaint alleges in several paragraphs that
Michael knowingly received funds originating from the fraudulently obtained
loan. The Complaint further alleges Michael transferred those funds to prevent
Putnam from recovering the money owed. Paragraph six of Count 2 states
Michael "received payments from the misappropriated funds in the amount [] of
approximately and likely more than . . . $200,000.00 . . . ."
Ordinarily, a defaulting defendant is deemed to have admitted each factual
allegation in a complaint. Heimbach, 229 N.J. Super. at 22. This general rule,
however, is inapplicable when "(1) [the] allegations . . . [are] made indefinite or
erroneous by other allegations in the complaint [;] (2) [the] allegations . . . [are]
contrary to facts of which the court would take judicial notice [;] or (3) [the]
allegations . . . [are] contrary to the uncontroverted material in the file of the
case." Heimbach, 229 N.J. Super. at 22-23 (quoting Trans World Airlines v.
Hughes, 449 F.2d 51, 63 (2d Cir. 1971)).
In its opening statement at the start of the proof hearing, Putnam stated
the complaint alleged Michael converted $200,000, which is consistent with the
sixth paragraph of the second count. Despite this, the trial court inexplicably
awarded plaintiff $980,000 on its conversion claim based on an allegation
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claiming Richard, not Michael, transferred $980,000 to Richard's son's UTMA
account located in fifth paragraph of the same count.
The court based its finding on Bruck's testimony that Michael was the
trustee of the Family Trust Fund. That trust, however, is distinct from the
UTMA account, where Richard was the trustee. Neither Bruck's testimony, nor
that of Deborah, established Michael exercised any control over the UTMA
account. There was no testimony as to any funds converted by Michael in the
Family Trust Account that were traced to Putnam.
In fact, the quantum of damages awarded by the trial court against Michael
is not supported by any findings or the record at the proof hearing. In the default
judgment, Putnam obtained two judgments totaling in excess of $2.4 million
dollars against Michael personally for the assignment of claims involving a $1.5
million fraudulently obtained loan. The goal of compensatory, or actual,
damages "is to restore the plaintiff to the extent possible to the same position he
or she was in prior to the occurrence of the wrong." Maul v. Kirkman, 270 N.J.
Super. 596, 618 (App. Div. 1994). When actual damages are readily calculable
and "the award goes beyond the goal of restoration . . . the award is excessive."
Ibid.A-2605-22
21
In sum, we conclude the trial court failed to make sufficient findings as to
Michael's liability pursuant to the claims directed against him in the Fifth
Amended Complaint and the quantum of damages attributable to Michael, if
any. A trial court must make specific findings with respect to liability and
damages. EnviroFinance, 440 N.J. Super. at 343. A proof hearing is not a rubber
stamp. See Heimbach, 229 N.J. Super. at 24 n.3 (recognizing that "evidence at
a proof hearing may be so inherently incredible that the trial judge is justified in
refusing to believe it"); Rosenberg v. Bunce, 214 N.J. Super. 300, 305 (App.
Div. 1986) (concluding vacatur was appropriate because of "the uncertainty
regarding the merits of [the] plaintiff's claim generated by the vagueness of his
complaint").
We affirm the trial court's finding that Michael was properly served with
the Fifth Amended Complaint and default was properly entered against him. We
vacate the judgments awarding damages against Michael and remand for a new
proof hearing before a different judge because the trial judge may be committed
to its prior findings. See Freedman v. Freedman, 474 N.J. Super. 291, 308 (App.
Div. 2023). Michael remains in default and his participation at the new proof
hearing is limited to challenging the evidence presented by plaintiff through
cross-examination and opening and closing statements.
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On remand, the trial court must determine whether Putnam has provided
sufficient evidence of its claims directed specifically against Michael in the Fifth
Amended Complaint. If it determines Putnam has proven its claims against
Michael, the trial court must determine whether Putnam's claims are barred, in
whole or in part, by the bankruptcy settlement. Finally, if the trial court finds
the claims are not barred by the bankruptcy settlement, it must make specific
findings with respect to the quantum of damages Putnam is entitled to recover
from Michael. We take no position regarding the outcome of the proof hearing.
Affirmed in part, reversed in part, and remanded for a new proof hearing
before a different judge. We do not retain jurisdiction.
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