Judges Dreier, Brochin and Kleiner
The opinion of the court was delivered by: Brochin, J.A.D.
On appeal from the Superior Court of New Jersey, Chancery Division, Middlesex County
No other parties participated in this appeal.
In September 1984, plaintiff John Jugan commenced an action against defendant Stuart Friedman, M.D., to recover damages for personal injuries which resulted from medical malpractice committed by Dr. Friedman in the fall of 1982. In March 1988, the jury awarded Mr. Jugan compensatory damages of $10,000 and punitive damages of $150,000. No appeal was taken from the judgment entered on that verdict, and Dr. Friedman has not attempted to impugn its validity. The present suit deals with plaintiff's attempt to collect on his judgment.
The trial record in this suit does not disclose the facts on which the verdict for medical malpractice was based. However, a published decision rendered by this court in a related case, Jugan v. Pollen, 253 N.J. Super. 123, 127, 601 A.2d 235 (App. Div. 1992), summarizes the facts as follows:
Mr. Jugan was put in traction, operated upon unnecessarily by both defendant Dr. Pollen and then-defendant Stuart Friedman, M.D., for a laminectomy (disc removal and spinal fusion surgery). He was then post-operatively mistreated. Not only did the mistreatment cause severe pain, but Dr. Friedman, an addict, appropriated for himself the pain medication (Demerol) intended for the patient, leaving Mr. Jugan to suffer with little or no pain medication following the back surgery. . .
The history of Dr. Friedman's drug abuse and the consequent criminal convictions, disciplinary proceedings, and malpractice actions forms the background of the present suit. His medical license was suspended from November 1976 to July 1977 as the result of his arrest for unlawful possession and use of a controlled dangerous substance. In 1977, he pleaded guilty to obtaining a controlled dangerous substance by fraud. His license was suspended again in January 1978 for drug abuse and was conditionally reinstated in February 1978; his privilege to prescribe narcotic drugs was reinstated in October 1978. In the late fall of 1982, he was hospitalized for drug rehabilitation. In March 1983, he pleaded no contest to charges of writing prescriptions for a controlled dangerous substance for his own use and his license was suspended for three years; however, the suspension was stayed pending his compliance with certain restrictions and conditions relating to controlled dangerous substances. In March 1983, he was arrested on drug charges. In March 1984, he was convicted of drug charges after a guilty plea. His medical license was suspended for sixty days beginning September 1, 1984 for failure to comply with the conditions and restrictions imposed at the time of his 1983 license suspension. His New Jersey medical license was suspended in August 1986 and subsequently revoked. His New York license was revoked in January 1987, and his Florida license, in August 1988.
Mr. Jugan and his wife filed their malpractice action against Dr. Friedman on September 28, 1984. Dr. Friedman's malpractice coverage was canceled on October 1, 1984. Six other malpractice actions were filed against him between June 27, 1983, and September 24, 1987.
Dr. Friedman's malpractice insurer paid the compensatory damages awarded to Mr. Jugan, but not the punitive damages. Efforts to collect the punitive damages disclosed that there were no assets in Dr. Friedman's name except for disability policies and a Florida marital residence which, the parties agree, are immune from levy.
The present suit is an effort to recover the punitive damages awarded in the prior action and the expense of collecting them. Mr. Jugan's complaint alleges that Dr. Friedman has conveyed all of his assets to his wife, Dorothy Friedman, and to his adult sons, Seth, Sander, and Stephen Friedman, "for the purpose of defrauding his creditors, including the plaintiff, and hindering and delaying the collection of the money due to the plaintiff." The complaint seeks, among other things, discovery of the nature and location of Dr. Friedman's assets, payment of the unpaid balance of the malpractice judgment out of property which Dr. Friedman has fraudulently conveyed, and a judgment for compensatory and punitive damages, interest, and costs.
After numerous discovery motions and extensive discovery, the case was tried to the court for ten days. The evidence introduced at trial identified two principal assets, besides a Florida residence and Dr. Friedman's disability insurance policies, into which he had converted his accumulated capital. These assets are a $1,600,000 life insurance policy on Dr. Friedman's life issued by Pacific Mutual Life Insurance Company and a $500,000, twenty-year, purchase money, second mortgage representing part of the price received from the 1985 sale of property known as 799 Inman Avenue, Woodbridge, New Jersey.
As of August 1992, the Pacific Mutual Life Insurance Company policy had a cash surrender value of $542,316.39. Mrs. Friedman is its sole primary beneficiary and its nominal owner. The trial court found that Dr. Friedman was the source of the assets used to acquire the life insurance policy and that he had fraudulently transferred those assets to his wife.
The 799 Inman Avenue property had been purchased in Mrs. Friedman's name and she was the mortgagee. The court found that Mr. Jugan did not disprove defendants' claim that Mrs. Friedman had purchased the 799 Inman Avenue property principally with her own funds.
The court determined that, beginning some time during the 1980's, Dr. Friedman had transferred his assets to his wife and children with a "fraudulent intent." According to the court's findings, "at least one of the motivating factors" for those transfers was Dr. Friedman's concern that punitive damages from which he was not protected by malpractice insurance would be awarded against him in threatened or pending medical malpractice suits. The court found specifically that when Dr. Friedman purchased the life insurance policy in Mrs. Friedman's name, his purpose included "attempt[ing] to give preference to his family in derogation of the debt owed to Mr. Jugan."
The trial judge's findings as to Dr. Friedman's intent were based in part on the trial testimony of a former investigator for the Department of Law and Safety, Consumer Affairs, Enforcement Bureau. He told the court that his report to the ...