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Block v. Diana

Decided: January 7, 1992.


On appeal from the Superior Court of New Jersey, Law Division, Middlesex County.

King, Dreier and Brochin. The opinion of the court was delivered by Dreier, J.A.D.


The parties have cross-appealed from orders of two Judges who have heard portions of this matter. Defendants, Frank E. Diana, Delores Diana and Michael Pizio, appeal from the judgment in favor of plaintiffs, Louis Block and Edward Block, in the amount of $19,336.26. Plaintiffs cross-appeal, contending that an earlier judgment entered in their favor in this case by a different Judge in the amount of $57,931.23 (plus $35,482.26 interest) should not have been vacated and a new trial ordered. While plaintiffs press their cross-appeal, they state that defendant's notice of appeal was untimely and the matter is therefore not properly before us. We will discuss that issue; but to put it into context, we must first outline the tortuous procedural route this case has taken.

The transaction giving rise to the parties' claims is simple to explain. Plaintiffs sold to defendants their liquor store, Blocks Market, located at 336 South Second Street in Dunellen, New

Jersey for $100,000.*fn1 Included in the sale was a liquor license owned by the sellers. The purchasers paid $29,000 down and executed a promissory note for the balance of $71,000. While the purchasers signed the notes individually, the actual purchaser was listed as "Blocks Liquor Market Ltd.," a New Jersey corporation. The note was secured by a security agreement on all of the physical assets, and a transfer in escrow of the stock in the corporation owning the physical assets and the liquor license. The purchasers also agreed to lease the liquor store premises on a renewable one-year lease for $550 per month. The stock escrow agreement required the stock of the corporation to be held by the sellers' law firm until the note was satisfied. The agreement contained the following terms:

In the event the Purchasers are unable to pay the Sellers off, then the Sellers shall be entitled to force a sale or to exercise their rights by way of repossession under the terms of the escrow agreement. However, it is expressly understood that the Purchasers shall have the opportunity as outlined to pay off the Sellers in order to avoid the loss of their investment.

From 1976 until the early 1980's defendants ran the business and made the required payments under the note. When they sensed that the business was no longer profitable, they attempted to find potential buyers, dealing at all times with plaintiffs' attorney. Tentative arrangements were made under which defendants would bring the arrearages up to date; interest on the loan would continue as 8 1/4% (it was later amended to increase the interest to 13 3/4%); the amount on the lease would increase from $550 to $650 per month; the new buyers would help defendants run the store and produce capital as needed to run the business; and once the store was "made whole," plaintiffs and the new buyers would negotiate concerning the buyers taking over the business.

These terms obviously were not agreeable to plaintiffs, since on May 20, 1982 they notified defendants that they were in default. They demanded that the stock certificates be endorsed

to them (thus effecting a retransfer of the liquor license) and possession of the business in their building returned to the sellers. Defendants complied with this demand in all respects. The sellers, however, did not physically reenter and take over the business. The market was merely closed.

Over four and one-half years later, on December 19, 1986, plaintiffs filed a complaint against the individual defendants demanding the balance due on the note plus interest from the date of the last payment. Two years later on October 18, 1988 when the matter was approaching trial, plaintiffs moved to amend their complaint to add a demand for $14,602.52 which plaintiffs allegedly were compelled to pay as "indebtedness attached to that license which had been incurred by the defendants as a result of their nonpayment of suppliers' bills." In an accompanying certification they stated that these monies "were expended by plaintiffs to 'clear' the liquor license of the obligations which attached to it as a result of the indebtedness of the defendants." These obligations were asserted to have "resulted from [defendants'] non-payment of suppliers' bills, and as a result thereof the liquor license could not be sold until these matters were disposed of."*fn2

Plaintiffs decided to pay off the "lien" to the suppliers in August 1983 even though they did not then have a buyer for the license or the business. The Assignment Judge determined that plaintiffs' motion to amend the complaint had been made too late, and the request was denied on November 15, 1988.

The first of the trials of this matter was held before the initial trial Judge on December 9, 1988. On December 23, 1988 in his oral decision he stated that plaintiffs had a right to full payment on the note from the individuals who guaranteed it, and that plaintiffs had no legal duty to cooperate in the buy-out of the business by the potential purchasers whom defendants had introduced to them. ...

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