ALLIANCE SHIPPERS, INC. VS. JOHN J. GARCIA (L-6000-12, MIDDLESEX COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE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-1046-17T1
ALLIANCE SHIPPERS, INC.,
Plaintiff-Appellant,
v.
JOHN J. GARCIA,
Defendant,
and
CARLOS O. GARCIA,
Defendant-Respondent.
________________________________
Argued October 29, 2018 – Decided January 29, 2019
Before Judges Haas and Sumners.
On appeal from Superior Court of New Jersey, Law
Division, Middlesex County, Docket No. L-6000-12.
Alan M. Lebensfeld argued the cause for appellant
(Lebensfeld Sharon & Schwartz, PC, attorneys;
Ronald Horowitz, on the brief).
David W. Fassett argued the cause for respondent
(Arseneault & Fassett, LLP, attorneys; David W.
Fassett, on the brief).
PER CURIAM
Plaintiff Alliance Shippers, Inc. appeals the October 13, 2017 order
granting defendant Carlos Garcia's reconsideration motion to vacate the Law
Division's prior order to reinstate the complaint against defendant. We affirm.
In 2012, plaintiff, a New Jersey corporation, filed suit in the Law Division
against Krisp-Pak Sales Corp., a wholesale produce business incorporated in
New York State and based in the Bronx. Several months after Krisp-Pak closed
its operations, plaintiff obtained a default judgment in June 2012 against the
business totaling $369,700.68 plus prejudgment interest in the amount of
$1,067.68, counsel fees, and costs to be determined.
Facing difficulty collecting on its judgment, plaintiff sued Krisp-Pak's
officers and shareholders, Carlos Garcia and John Garcia1 (collectively referred
to as defendants or the Garcias), two months later, alleging they were personally
liable for the judgment against Krisp-Pak. Plaintiff specifically alleged
defendants were liable under the theories of fraudulent transfer (transferring
1
John Garcia is not a party to this appeal.
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Krisp-Pak's assets to avoid judgment collection) and failure to comply with a
post-judgment notice of demand under N.J.S.A. 2A:17-74.2
On February 8, 2013, the motion judge entered an order (February 2013
order) granting defendants' motion to dismiss the complaint for lack of personal
jurisdiction. In pertinent part, as to Carlos,3 the judge relied upon his
certification in which he asserted that he was a citizen and domiciliary of
Florida, without any personal or business contacts with New Jersey.
Plaintiff did not appeal the order. Instead, in July 2013, plaintiff filed a
complaint, which was later amended, in the United States District Court,
Southern District of New York, against defendants alleging claims of fraudulent
2
N.J.S.A. 2A:17-74 provides:
Every agent or person having charge or control of any
property of a corporation shall, upon request therefor
by any officer having for service a writ of execution
against it, furnish to such officer the names of the
directors and officers of the corporation, and a schedule
of all its property, including debts due or to become due
to it so far as he has knowledge thereof.
Any such agent or person who shall neglect or refuse to
comply with the provisions of this section shall himself
be liable to pay to the execution creditor the amount due
on the execution, with costs.
3
Intending no disrespect, we use first names for ease of reference because
defendants share a last name.
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3
transfer, recharacterization, equitable subordination, breach of fiduciary duties
and punitive damages. Plaintiff did not assert the claim of failure to comply
with a post-judgment notice of demand as it alleged in the dismissed Law
Division action.
In an April 17, 2015 order and opinion, the federal district court granted
defendants' Rule 12(b)(6) motion to dismiss the complaint with prejudice. The
court found there was "not a single factual allegation supportive of any
fraudulent intent by defendants" to support a claim of fraudulent transfer. The
allegations of recharacterization and equitable subordination were dismissed
because they involved bankruptcy claims, which were not properly before the
court. The breach of fiduciary duties claim, as set forth in plaintiff's amended
complaint, was determined to be conclusory and threadbare. And as to the
punitive damages claim, the court found that it was a remedy not a claim, and,
moreover, the complaint's allegations of defendants' misconduct did not satisfy
the high standard needed to award such damages. The dismissal order was
unanimously affirmed for the same reasons by the Second Circuit Court of
Appeals in a summary order dated October 14, 2016.
Less than a year later, plaintiff returned to the Law Division to continue
pursuit of its claims against Carlos by filing a Rule 4:50-1 motion to vacate the
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February 2013 order of dismissal. On September 15, 2017, a different motion
judge entered an order (September 2017 order) vacating the February 2013
order.
In an oral decision, the judge stated that relief was appropriate because
plaintiff discovered new evidence, which established that Carlos had sufficient
contacts in New Jersey to warrant personal jurisdiction over him. In a separate
Law Division action to collect on the Krisp-Pak judgment, plaintiff sought
orders of execution against delinquent receivables owed by Krisp-Pak's former
customers. One such customer, Xenofon Gialias, stated in a November 2016
deposition that between 2008 and 2011, he had rented a house he owned in
Leonia to Carlos. In a subsequent December 2016 response to a production of
documentation request that was made at the deposition, Gialias' counsel advised
plaintiff's counsel that Gialias had no written lease agreement or any other
documentation evidencing the rental to Carlos other than a hand-written letter
dated December 12, 2011, purportedly signed by Carlos. The letter stated that
he (Carlos) was terminating his lease to the house. Below Carlos' alleged
signature, was the handwritten notation purportedly signed by a Tara Glass,
stating "I, Tara Glass will leave Wed. Jan. 18, 2012." The judge determined the
rental established that Carlos had contacts with New Jersey during the time in
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question, which was a material contradiction of Carlos' certification that was
provided to and relied upon by the prior motion judge to support the February
2013 order of dismissal in Carlos' favor.
Claiming the judge failed to consider applicable law asserted in his
opposition to plaintiff's motion, Carlos moved for reconsideration. Applying
Rule 4:49-2, the judge agreed by entering an order on October 13, 2017, vacating
the September 2017 order and, in turn reinstating the February 2013 order of
dismissal.
In his oral decision, the judge rejected Carlos' argument that plaintiff's
motion to vacate the February 2013 order of dismissal (as to him) based upon
newly discovered evidence was untimely. The judge determined that Rule 4:50-
2 – which affords a one-year period to file a Rule 4:50-1(b) motion to vacate an
order based upon newly discovered evidence – did not apply. The judge granted
plaintiff's motion to vacate the February 2013 order under the lens of Rule 4:50-
1(f), which is a catch-all provision that authorizes relief for a party from an order
for "any other reason justifying relief from the operation of the . . . order." See
A.B. v. S.E.W., 175 N.J. 588, 593 (2003). Rule 4:50-2 provides that a Rule
4:50-1(f) motion must be filed within a reasonable time after entry of the order
ought to be vacated instead of the limited one-year period for filing a Rule 4:50-
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1(b) motion. The judge reasoned that since plaintiff filed its motion to vacate
in August 2017, about six months after it received the alleged lease termination
letter written by Carlos, the motion was filed within a reasonable time.
Nonetheless, the judge granted reconsideration and reinstated the
February 2013 dismissal of the complaint as to Carlos because the judge
recognized that he overlooked the res judicata argument raised by Carlos to
oppose the plaintiff's motion to vacate the dismissal. Relying upon Velasquez
v. Franz, 123 N.J. 498, 505-07, 510 (1991), the judge determined that because
plaintiff's Law Division claims against Carlos arising from the judgment against
Krisp-Pak were similar to the federal court claims dismissed with prejudice, res
judicata barred plaintiff from further re-litigating the Law Division claims. The
judge stated that in Velasquez, our Supreme "Court held that under both federal
and New Jersey law[, the d]istrict [c]ourt judgment was an adjudication on the
merits, which precluded re-litigation in New Jersey [s]tate [c]ourt even though
the federal judgment dismissed the plaintiff's claims prior to trial and without
any fact[-]finding." See 123 N.J. at 507.
Before us, plaintiff argues the statutory notice of demand claim remains
viable because the federal court did not dismiss the claim, and that equitable
estoppel bars Carlos' ability to apply res judicata to preclude collection of the
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state judgment debt based on to the federal court's order of dismissal. We find
insufficient merit in these arguments to warrant extensive discussion in a written
opinion, Rule 2:11-3(e)(1)(E), and affirm primarily based on the trial judge's
oral decision. We add the following brief remarks.
The fact that plaintiff's dismissed federal complaint did not include a
notice of demand claim does not prevent application of res judicata to bar
plaintiff from pursing the claim against Carlos in the Law Division. Plaintiff
cites no valid reason why it could not have raised the claim in the federal action.
"The principle of res judicata applies not only to 'all matters litigated and
determined by such judgment but also as to all relevant issues which could have
been presented, but were not.'" Culver v. Ins. Co. of N. Am., 115 N.J. 451, 463
(1989) (quoting Anselmo v. Hardin, 253 F.2d 165, 168 (3d Cir. 1958)).
Moreover, the notice of demand claim should be precluded because it relies upon
the same theory of recovery, the same witnesses and documents, and the same
material facts as the claims that were included in the federal action. See Wadeer
v. N.J. Mfrs. Ins. Co., 220 N.J. 591, 606-08 (2015) (citing Culver, 115 N.J. at
461-62). That being, Carlos diverted Krisp-Pak's assets to prevent plaintiff from
collecting on the judgment against Krisp-Pak.
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As for equitable estoppel, it does not apply to allow plaintiff to prosecute
its fraud claims against Carlos. As explained by the Court in Knorr v. Smeal,
178 N.J. 169, 178 (2003), the doctrine is:
"founded in the fundamental duty of fair dealing
imposed by law." [It] is designed to prevent injustice
by not permitting a party to repudiate a course of action
on which another party has relied to his [or her]
detriment. . . . Estoppel, unlike waiver, requires the
reliance of one party on another. In short, to establish
equitable estoppel, plaintiffs must show that defendant
engaged in conduct, either intentionally or under
circumstances that induced reliance, and that plaintiffs
acted or changed their position to their detriment.
[Id. at 178 (citations omitted).]
Carlos did nothing to mislead plaintiff to believe something that he later
sought to repudiate in order to defend against plaintiff's claims. His initial
defense to the complaint was that the Law Division lacked personal jurisdiction
over him, which he still maintains.4 Plaintiff, however, never relied upon Carlos'
contention that he had no New Jersey contacts to its detriment in pursuing
collection against Krisp-Pak. Plaintiff filed this action on the belief that our
courts had jurisdiction over Carlos. Plaintiff's attempt to sue Carlos in New
York federal court was dismissed on its merits, due to the failure to state a claim,
4
He certified that he never rented a house in New Jersey and denied writing the
December 12, 2011 lease termination letter.
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and had nothing to do with Carlos' assertion that he did not live or do business
in New Jersey. Lastly, the motion judge granted Carlos' reconsideration motion
to vacate the September 2017 order based upon res judicata, which thereby
reinstated the February 2013 order dismissing the Law Division lawsuit
irrespective of the lack of personal jurisdiction concern that formed the basis for
the initial dismissal.
Affirmed.
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