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Banco Popular North America v. Gandi

April 29, 2003

BANCO POPULAR NORTH AMERICA, PLAINTIFF-APPELLANT,
v.
SURESH GANDI A/K/A SURESH GANDHI, MADHU S. GANDI A/K/A MADHU S. GANDHI, AND RICHARD P. FREEDMAN, ESQ., DEFENDANTS-RESPONDENTS, AND ANGELINI, VINIAR & FREEDMAN, A NEW JERSEY GENERAL PARTNERSHIP; MICHAEL A. ANGELINI, ESQ., A PARTNER; AND CARL B. VINIAR, ESQ., A PARTNER, DEFENDANTS.



On appeal from Superior Court of New Jersey, Law Division, Camden County, CAM-L-7063-01.

Before Judges Wefing, Lisa and Fuentes.

The opinion of the court was delivered by: Wefing, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted February 26, 2003

Defendant, Suresh Gandi ("Suresh"), operated several fast-food restaurants. He is married to defendant, Madhu Gandi ("Madhu"). Defendant, Richard P. Freedman, Esq. ("Freedman"), is an attorney who represented Suresh in connection with several matters. Suresh held franchises from Arby's and Burger King and ran at least three restaurants, each through a separate corporation. Echelon Fast Food Inc. ("Echelon") ran the Arby's while Priya Fast Foods, Inc. ("Priya") and Priya Fast Foods II, Inc. ("Priya II") each operated a Burger King in New York City.

Suresh had assets in addition to these businesses. He and Madhu jointly owned two homes, one in Voorhees, in which they lived, and a two-family house in Mount Laurel, which they rented out. They also owned securities in the form of a mutual fund.

At some point (it is not immediately clear from the record precisely when), Suresh was engaged in a dispute with Arby's. Plaintiff, Banco Popular North America ("Banco Popular"), alleges that Suresh consulted Freedman in connection with that dispute and Freedman advised him to transfer the two houses and the mutual fund into Madhu's name. Banco Popular provided loans to Priya and Priya II in connection with the two Burger King restaurants and Suresh personally guaranteed the notes. The restaurants were not successful and Suresh defaulted on these loans. Banco Popular obtained a judgment in New York against Suresh for $1,251,574.58 and had the judgment docketed in New Jersey.

It then began this action, which has had a tortured procedural history, to collect on that judgment. The original defendants were Suresh and Madhu, to whom Suresh had made the transfers. Plaintiff alleged in its complaint that the transfers were fraudulent under the Uniform Fraudulent Transfer Act, ("UFTA"), N.J.S.A. 25:2-27. After Suresh was deposed and testified that Freedman had advised him to make the transfers, Banco Popular joined Freedman as a defendant. Madhu filed an answer in which she denied that the transfers were fraudulent. She alleged that the Mount Laurel property had been sold in an arm's length transaction and the proceeds used to satisfy the mortgage on that property, which was held by Commerce Bank. She also alleged that a certificate of deposit, which held the balance of the proceeds of sale of the Mt. Laurel house and the liquidation of the mutual fund, had been used to satisfy a debt to Commerce Bank that pre-dated Suresh's debt to Banco Popular.

Freedman was first named as a defendant in what plaintiff referred to as its Second Amended Complaint. The fourth and fifth counts of that complaint were directed to Freedman. The fourth count alleged that Freedman owed a duty to Banco Popular which he breached by negligently advising Suresh to transfer assets, making him unable to fulfill his financial obligations to Banco Popular. The fifth count alleged that Freedman conspired with Suresh and Madhu to defraud Suresh's creditors.

Freedman did not file an answer to the Second Amended Complaint. Rather, he filed a motion under R. 4:6-2 to dismiss for failure to state a claim. During oral argument on the motion, Banco Popular pointed to the Rules of Professional Conduct ("RPCs"), specifically RPC 1.2(d), as the source of the duty it alleged Freedman owed to it as one of Suresh's creditors. The trial court granted Freedman's motion and entered an order dismissing both counts without prejudice. *fn1

Thereafter, Banco Popular filed both what it termed an "Amendment to the Second Amended Complaint" and a motion for leave to file a third amended complaint. After this motion was granted, it filed the Third Amended Complaint on January 31, 2002, of which counts four through seven were directed to Freedman. Freedman again filed a motion to dismiss for failure to state a claim, which the trial court granted by order entered on March 18, 2002.

Several weeks later, the trial court entered another order, granting Banco Popular summary judgment against Madhu and a default judgment against Suresh. That order directed Madhu to convey to Suresh and herself a one-half interest in the Voorhees property and to pay to Banco Popular half of the imputed rental value of the Voorhees property, commencing from entry of the judgment. It gave Banco Popular a lien on her interest in the Voorhees property and entered a judgment against her in the sum of $83,507.51. *fn2 Banco Popular now appeals from the dismissal of its claims against Freedman. After a careful review of the record in light of the contentions advanced on appeal, we affirm in part and reverse in part.

I.

In its brief on appeal, Banco Popular makes the following arguments: that its Third Amended Complaint stated claims of common law fraud and creditor fraud, conspiracy and negligence against Freedman, as well as against his firm and his partners and that both its Second and Third Amended Complaints stated claims of negligence. We consider it necessary to address only the claims pleaded in the Third Amended Complaint, which is far more detailed and specific than the conclusory allegations contained in the Second Amended Complaint. If the claims asserted in the Third ...


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