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Wolfson v. Bonello

Decided: February 3, 1994.


On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County.

Brody, Stern and Keefe. The opinion of the court was delivered by Keefe, J.A.D.


[270 NJSuper Page 279] The appeal requires us to address the authority of a court of equity to establish priorities among judgment creditors where all but one of the judgments resulted from the same litigation against the judgment debtor. In an order dated January 11, 1992, the trial Judge directed that a court appointed accountant, Robert J. Olejar, and a court appointed attorney, Robert A. Vort, receive a priority in the distribution of funds resulting from the sale of the judgment debtor's New Jersey real estate, while other judgment creditors would be paid on a pro rata basis in proportion to the amount of their judgments, without regard to the date of entry of their respective judgments or the date of execution. One of the general creditors, Robert J. Lenrow, Esq., appeals from that judgment. For the reasons stated herein, we affirm in part and reverse in part.

Plaintiff Marie Wolfson (Wolfson),*fn1 both individually and on behalf of Information Systems, Inc. (Information), instituted suit against Kathleen Bonello (Bonello) and Inventory Systems, Inc. (Inventory), a company formed by Bonello and over which she had full control. Wolfson alleged that Bonello diverted business from Information, the company in which they were both principals and sole shareholders, to Inventory.

The general equity Judge determined that Wolfson was the owner of 50% of the stock of Information, and that a second trial was necessary to determine the value of that interest in light of the business that had been wrongfully diverted from Information to Inventory. Defendant Inventory was represented in the litigation by Robert J. Lenrow, Esq. (Lenrow), the appellant in this matter, until May 24, 1989, at which time he withdrew as counsel pursuant to R. 1:11-2. Lenrow was then replaced by the firm of respondent Goldberg, Mufson & Spar (Goldberg), who represented Inventory thereafter.*fn2 Bonello participated pro se after her attorney, Alice Meyer, Esq., withdrew at the same time Lenrow withdrew. To assist the court with its task, Robert J. Olejar, an attorney and certified public accountant, was appointed by the court on October 24, 1989 to provide accounting services.

After fee arbitration was declined,*fn3 Lenrow instituted suit against Bonello, alleging that Bonello failed to pay Lenrow's counsel fees. On February 2, 1990, a jury returned a verdict in favor of Lenrow and against Bonello. On March 8, 1990, judgment was entered against Bonello for $62,121 in favor of Lenrow. The judgment was filed in Bergen County on March 8, 1990, and was recorded in Trenton on March 28, 1990.

On March 27, 1990, over two years after the case had commenced, and before completion of the second phase, Wolfson, as plaintiff in the case against Bonello, and Goldberg, in an effort to secure legal fees from Bonello, obtained a writ of attachment on all of Bonello's property located in Bergen County. The writ was issued pursuant to an order signed by the general equity Judge on March 26, 1990. That order also stated that Wolfson and Bonello would each be responsible for one-half of Olejar's fees as the court appointed accountant.

On April 18, 1990, Lenrow obtained a writ of execution in Bergen County. Bonello's property in Bergen County included an ownership interest in real estate located in Teaneck.

On March 18, 1991, Lenrow filed his judgment in the Supreme Court of New York, apparently because Bonello possessed an ownership interest in a cooperative apartment located in New York City.*fn4 On April 3, 1991 and June 7, 1991, Lenrow issued executions in New York, which resulted in a levy by the Sheriff of New York upon Bonello's interest in the cooperative apartment.*fn5

On March 21, 1991, Lenrow submitted an Order to Show Cause with Temporary Restraints in order to resolve the issue of priority between the executed judgment held by Lenrow and the writ of attachment held by Wolfson and Goldberg which, to that point, had not been reduced to judgment. The Order to Show Cause was not issued and no hearing was granted.

On March 26, 1991, the general equity Judge ordered that Bonello's Teaneck property be sold as a means of compelling Bonello to satisfy one-half of Olejar's accounting fees, as she was

required to do pursuant to the March 26, 1990 Order.*fn6 More specifically, the order provided:

[T]his Court is satisfied that a sale of Kathleen Bonello's interest in the Teaneck real property represents the most expeditious and only reasonable method of ensuring reasonably prompt compliance with the orders of this Court directing payments of the fees of its appointed expert, Robert J. Olejar.

Citing the claim of Goldberg for counsel fees, the judgment obtained by Lenrow, and the possible claim of Wolfson relating to the portion of the underlying litigation which had not yet been decided, the order acknowledged that other claims against the assets of Bonello existed, but that

all such additional claims can best be resolved, and the priority and amount thereof determined, following payment of the amounts due to Robert J. Olejar from the proceeds of the sale of the aforesaid Teaneck property, with the said proceeds to be held pending further order of this Court.

The order also appointed Robert A. Vort, Esq. (Vort), a member of the Goldberg firm, as its agent for purposes of selling the Teaneck property. Finally, the order stated:

The proceeds of the sale of the [Teaneck] property shall be applied first to the payment of the expenses of sale, including brokerage commission and closing expenses; next to the payment of any liens pre-dating the issuance of this order and thereafter to the payment of the aforesaid fees of Robert J. Olejar. The remaining proceeds of sale shall be held by [Vort], to be paid and disbursed as directed by the Court . . . .

By order dated July 8, 1991, the general equity Judge appointed Lenrow's attorney, Ivy Paige Urdang (Urdang), to have the New York cooperative apartment appraised and listed for sale. The sale would include the stock held by Bonello in the cooperative association and the proprietary lease to that apartment. The order stated that the proceeds of any sale of the apartment should be held by Urdang, then distributed in accordance with directions given by the court. The order also stated that if no contract was made for sale of the apartment within 90 days of its listing, then a sale by the Sheriff of New York could proceed in accordance with

New York law. The order further stated that the proceeds of any sale should be applied as follows: 1) to expenses of sale, 2) to the fees of Urdang associated with the sale of the property, 3) to payment of the appraiser, and 4) "[t]o the payment of any liens on the property in accordance with their priorities under the law of the State of New York where the property is located[.]"*fn7 The Judge further ordered that any remaining proceeds of the sale be held by Urdang and that those proceeds would be distributed as directed by the court.

On July 18, 1991, the Judge entered judgment in favor of Wolfson and against Bonello in the amount of $302,966. Moreover, a separate supplemental judgment was entered in favor of Wolfson and against Bonello for $136,539, which represented reimbursement from Bonello to Wolfson for two-thirds of Wolfson's attorney fees and costs. The court also entered a supplemental judgment in favor of Goldberg and against Bonello for attorney fees and costs totalling $53,765. The record does not contain any notification to Bonello of her right to fee arbitration, or a complaint by Goldberg against Bonello in support of the counsel fee award. See R. 1:20A-6.

Next, judgment was entered in favor of Olejar and against Bonello. The court ordered that Bonello pay the sum of $15,764, which represented one-half of Olejar's total costs, and also determined that Bonello should reimburse Wolfson for any amounts paid by Wolfson to Olejar above 20% of Olejar's total fees.*fn8 The

amount of this additional reimbursement was $9,459, and its payment from Bonello to Wolfson was ordered on August 2, 1991.

On September 4, 1991, a writ of execution was issued on Wolfson's judgment, and this writ was received by the Bergen County Sheriff's office on September 23, 1991. There is nothing in the record indicating that either Olejar or Goldberg have executed on their judgments.

On December 11, 1992, the general equity Judge issued a decision regarding the distribution of the proceeds derived from the sale of the Teaneck residence, including the priorities of each party regarding that distribution.*fn9 The court initially determined that Vort and Olejar should be paid first, noting that those two parties

stand on a different footing from those of the other judgment creditors. Each represents services performed pursuant to the request and direction of the court. Each played a substantial part in producing the fund presently on hand and available for distribution.

0 after stating that the equitable treatment of all claims required that any payment of pre- or post-judgment interest be eliminated, the Judge determined that the amount paid to Olejar should be $10,000. While he recognized that the judgment entered on July 18, 1991 called for a larger payment to Olejar, he decided that a reduction had to be made "because of the impossibility of paying all creditors the full amount to which they should be entitled."

Next, the court determined that Vort was entitled to payment of $6,000 for his part in the sale of the Teaneck residence. Moreover, the court determined that the bills submitted by Vort for services in connection with the maintenance and sale of the Teaneck home were appropriate and ...

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