January 24, 2007
IN RE THE PETITION OF WOODBRIDGE ASSET INVESTMENT CORP.,*FN1 FOR AN ORDER ALLOWING A TURNOVER OF A PORTION OF THE LOTTERY WINNINGS OF CHIN KOON FAH PURSUANT TO N.J.S.A. 5:9-13
On appeal from Superior Court, Law Division, Civil Part, Mercer County, L-3321-00.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted December 12, 2006
Before Judges Weissbard and Lihotz.
Foong Ying Chan (Chan) appeals from an order denying her application, pursuant to R. 4:50-1, to set aside a judgment of November 3, 2000, which had granted the co-petition of Chan's late husband, Chin Koon Fah (Fah) and Woodbridge Asset Investment Corporation (Woodbridge), allowing Fah to assign to Woodbridge, for a consideration of $322,000, Fah's winnings from the New Jersey Lottery. We affirm.
The facts are relatively uncomplicated. Chan and her now deceased husband Fah were married on January 11, 1993. On or about December 10, 1997, unbeknownst to his wife, Fah won the New Jersey Lottery's "Win for Life" contest, entitling him to $1000 per week for life, with a minimum payout of $1,000,000 in the event of his death. The lottery prize was broken down into quarterly gross payments of $13,000 lasting through December 10, 2016.
In 2000, Fah agreed to assign his lottery prize payments to Woodbridge for a lump sum payment of cash. Fah and Woodbridge entered into a Lottery Prize Assignment Agreement dated September 7, 2000, according to which Fah agreed to assign Woodbridge fifty-seven quarterly lottery prize payments, each in the amount of $13,000 before taxes in exchange for a lump sum payment of $335,000. The Agreement also required Woodbridge and Fah to file a joint petition for approval of the assignment, in accordance with N.J.S.A. 5:9-13. In connection with the joint petition, Fah represented in a signed "Certificate of Marital Status," which was attached to the Agreement, that he had never been married. Fah also stated that he resided at an address in Brooklyn, New York.
Pursuant to a Receivable Purchase & Sale Agreement dated September 12, 2000, Comet Financial Corporation purchased Woodbridge's rights and obligations under the Assignment Agreement. The following day, by another Receivable Purchase & Sale Agreement, dated September 13, 2000, Comet Financial Corporation assigned its rights to Great-West Life & Annuity Insurance Company (Great-West), such that Great-West became responsible for making Woodbridge's lump sum payment to Fah, and for making Comet's payment to Woodbridge for the assignment.
Due to a delay in seeking court approval, on October 25, 2000, Woodbridge and Fah executed an Addendum to the Lottery Prize Assignment Agreement, which reduced the lump sum payment to $322,000, and reduced the number of payments to fifty-six quarterly payments of $13,000.
In accordance with the original Assignment Agreement, on October 31, 2000, Woodbridge and Fah filed a petition in the Law Division, Mercer County, for an Order allowing the matter to proceed summarily pursuant to R. 4:67-1 and R. 4:67-2(b), and for immediate entry of an Order pursuant to N.J.S.A. 5:9-13. Fah submitted an affidavit to the court in which he represented that he was not married; that he had entered into the assignment voluntarily; that he was represented by independent legal counsel; and that he had retained and consulted with an independent financial and tax advisor concerning the agreement with Woodbridge.
Judge Shuster granted the co-petition by an order dated November 3, 2000. The Assignment Order contained all the various findings required by N.J.S.A. 5:9-13(d), and expressly acknowledged that Great-West was the ultimate beneficiary of the assignment. On November 9, 2000, the New Jersey Division of State Lottery acknowledged the receipt of Judge Shuster's Order and advised that it intended to comply with the provisions of the Order.
Fah died in February 2003. Chan claims that in mid-2005 she began receiving audit and deficiency notices from the IRS and the New York State Department of Finance regarding the under-payment of taxes. After investigation, Chan learned for the first time that her husband had won the lottery and had received a lump sum payment from Woodbridge in the amount of approximately $300,000. Chan claims that before this time she had no knowledge of her husband's lottery winnings or the lump sum payment, and that the payment was never reported on their joint income tax return.
Chan thereafter applied for, and was granted, innocent spouse relief by both taxing agencies. On December 28, 2005, she filed a "Motion for Relief from Judgment Pursuant to R. 4:50-1," stating that the basis for the motion was fraud upon the court, and that she had an interest in the original assignment proceedings pursuant to N.J.S.A. 5:9-13. Specifically, Chan alleged that her husband's failure to note his marital status, his use of an address in Brooklyn, and Woodbridge's failure to conduct even minimal due diligence, demonstrated a fraud upon the court, requiring relief from the order in the interests of justice.
Responsive papers were filed by Great-West, the ultimate assignee of the lottery payments, asserting that Chan had no standing to bring the motion, that the motion was untimely, and that she was not entitled to any relief. On February 16, 2006, Judge Koenig denied Chan's application, holding that she had no standing because she was not a party to the original action.
On appeal, Chan argues that she did have standing and, further, that she was entitled to the relief sought, i.e., to have the November 3, 2000 judgment vacated. We disagree with both contentions.
Rule 4:50-1 provides in part:
On motion, with briefs, and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment or order for the following reasons: . . . (c) fraud . . . misrepresentation, or other misconduct of an adverse party . . . or (f) any other reason justifying relief from the operation of the judgment or order [Emphasis added].
"A motion under Rule 4:50-1 is addressed to the sound discretion of the trial court, which should be guided by equitable principles in determining whether relief should be granted or denied." Hous. Auth. of Morristown v. Little, 135 N.J. 274, 283 (1994). Furthermore, "[t]he decision granting or denying an application to open a judgment will be left undisturbed unless it represents a clear abuse of discretion." Ibid.
In the present case, Chan's motion under R. 4:50-1 was denied primarily based upon her lack of standing. Judge Koenig's decision on this issue stated:
I'm troubled by the issue of standing, the standing of the moving party. Even assuming that she's [appellant] a representative of her late husband, she had no standing under the rule. She wasn't a party to the underlying order. Since she's not a party to the underlying order, she can only assert rights belonging to [her husband] Koon Fah or seek relief from obligations owed by Koon Fah. She hasn't presented any evidence that would entitle Koon Fah to relief from obligations owed by Koon Fah . . . she has to proceed under a different theory, she can't set aside the judgment.
Chan argues, however, that she had a "sufficient stake" in the underlying Lottery Assignment to have standing under R. 4:50-1, noting that her rights were substantially affected by her husband's wholesale assignment of a significant marital asset. Furthermore, she claims that she was denied an opportunity to be heard in the 2000 proceedings due to the fraud perpetrated by her husband, as well as the lack of due diligence on the part of the original assignee, Woodbridge. Chan argues that, under these facts, it would be inequitable to allow the Assignment Order, which drastically affected her property rights, to stand. Vacating the Assignment Order would allow her a chance to intervene as an indispensable party in the subsequent proceedings and assert her interests in the lottery winnings.
Standing "involves a threshold determination which governs the ability of a party to initiate and maintain an action before the court." Triffin v. Somerset Valley Bank, 343 N.J. Super. 73, 80 (App. Div. 2001). Our courts confer standing in those cases where the party's concern with the subject matter of litigation evidences "a sufficient stake and real adverseness."
Crescent Park Tenants Ass'n v. Realty Equities Corp., 58 N.J. 98, 107 (1971). In making that determination, we give "due weight to the interests of individual justice, along with the public interest, always bearing in mind that throughout our law we have been sweepingly rejecting procedural frustrations in favor of 'just and expeditious determinations on the ultimate merits.'" Id. at 107-108 (quoting Tumarkin v. Friedman, 17 N.J. Super. 20, 21 (App. Div. 1951), certif. denied, 9 N.J. 287 (1952)).
While our threshold for standing is "fairly low," and our courts have traditionally taken a more liberal approach to standing than their federal counterparts, James v. Arms Tech., Inc., 359 N.J. Super. 291, 320 (App. Div. 2003), "[a] substantial likelihood of some harm visited upon the plaintiff in the event of an unfavorable decision" is still required before standing will be conferred. In re Adoption of Baby T., 160 N.J. 332, 340 (1999). We have held that "[a] financial interest in the outcome of litigation is ordinarily sufficient to confer standing." Assocs. Commercial Corp. v. Langston, 236 N.J. Super. 236, 242 (App. Div.), certif. denied, 118 N.J. 229 (1989). However, "[a] lack of standing by a plaintiff precludes a court from entertaining any of the substantive issues presented for determination." In re Adoption of Baby T., supra, 160 N.J. at 340.
While this case law seems to favor Chan, Great-West points out that Chan provides no legal authority to support her argument that the principles of standing to prosecute an action, referenced above, should be extended to the issue of whether a litigant has standing to seek relief from an order under R. 4:50-1. In this respect, Great-West points out that the decisions relied on by Chan, which are mainly ability-to-prosecute cases, are factually inapposite to the R. 4:50-1 motion at issue here.
Indeed, our case law has clearly stated that R. 4:50-1, by its plain terms, confers standing on two classes of litigants:
(1) a litigant who was a party to an order, and (2) a litigant who is a legal representative of an individual who was a party to an order. See In re Adoption of Baby T., supra, 160 N.J. at 341 (holding that a physician did not have standing to collaterally attack a judgment of adoption because the physician was neither a party to the final judgment nor a legal representative of a party to the final judgment of adoption). It is in this respect that Chan's argument concerning standing fails.
As correctly noted by the motion judge, Chan is attempting to enforce her own personal rights to the lottery winnings, not the rights of her husband. She clearly was not a party to the original order. However, even if she is seen as the legal representative of her husband, Chan "steps into his shoes" and must, therefore, present evidence that would entitle her husband to relief from his obligations under the Assignment Order. As a non-party under R. 4:50-1, Chan's own personal interest is of no consequence.
Accordingly, Great-West points out that the original parties to the order (Fah and Woodbridge) fulfilled their obligations in full, and Chan has presented no evidence that would entitle her husband to relief, i.e. accusations of fraudulent inducement by Woodbridge or inadequate consideration at the formation of the Assignment. Indeed, the only evidence of fraud presented by Chan relates to the actions of her husband. Therefore, Great-West argues that Chan, as legal representative of her husband, cannot be entitled to any greater relief under R. 4:50-1 than her husband, and thus may not present her own claims under such a motion. We agree.
In sum, while it is clear that Chan has a significant stake in the lottery proceeds, this does not entitle her to move to vacate the Assignment Order under R. 4:50-1. That rule is expressly limited to parties and legal representatives of parties. Since Chan seeks to enforce her own rights to the lottery proceeds, she has no standing due to her designation as a non-party to the order.
In the alternative, Chan argues that because the statute enabling Lottery Assignment, N.J.S.A. 5:9-13(d)(8), specifically requires that a spouse's interest be included in any application and subsequent order, she was an "indispensable party" to the original order and, therefore, should have standing to assert her own rights as a party under R. 4:50-1. An indispensable party has been defined as a party having "an interest inevitably involved in the subject matter before the court and a judgment cannot justly be made between the litigants without either adjudging or necessarily affecting the absentee's interest." Allen B. DuMont Labs., Inc. v. Marcalus Mfg. Co., 30 N.J. 290, 298 (1959); See also R. 4:28-1.
Since Chan apparently had an interest in the lottery winnings of her husband, she argues that if the original motion court had known of her existence, it would have been required to join her as a party, thus giving her standing to move for relief from the Judgment. In support of this proposition, Chan cites Ross v. Ross, 308 N.J. Super. 132 (App. Div. 1998), and Raynor v. Raynor, 319 N.J. Super. 591 (App. Div. 1999), for the proposition that non-parties can intervene in an action when their financial interests are implicated and when the parties did not have an initial opportunity to be heard. However, Ross, supra, 308 N.J. Super. at 144 (quoting Pressler, Current N.J. Court Rules comment 1 on R. 4:28-1 (2007)(quoting Fed. R. Civ. P. 19 introductory comment of advisory committee's note)), goes on to hold that:
Even if the court is mistaken in its decision to proceed in the absence of an interested person, it does not by that token deprive itself of the power to adjudicate as between the parties already before it through proper service of process. But the court can make a legally binding adjudication only between the parties actually joined in the action. It is true that an adjudication between the parties before the court may on occasion adversely affect the absent person as a practical matter, or leave a party exposed to a later inconsistent recovery by the absent person.
These are factors which should be considered in deciding whether the action should proceed, or should rather be dismissed; but they do not themselves negate the court's power to adjudicate as between the parties who have been joined.
Thus, Chan's argument misconstrues the holdings of both Ross and Raynor. As the above quote makes clear, the order is valid as between the original parties and the avenue of recourse for Chan, as suggested by Judge Koenig, lies in a different procedural route than one pursuant to R. 4:50-1. While Chan claims that she would be "completely barred from any sort of recovery while the original judgment remains in place," Great-West correctly notes that Chan is fully able to recover her portion of the lump sum payment from her husband's estate. Thus, the argument that she is left with no avenue to recover her property rights is incorrect.
Finally, Great-West also argues that Chan's "indispensable party" argument is based on the erroneous belief that Woodbridge (or any of the other assignees) had a duty under N.J.S.A. 5:9-13 to ascertain the veracity of Fah's affidavit concerning his marital status. As Judge Koenig noted in his opinion below: "The statute doesn't impose a duty to investigate or confirm the truth of his sworn representation on the assignee, and they have the right to rely on his sworn affidavit." We agree with this reading of the statute.
Assuming that she has standing, Chan next argues that she is entitled to relief on the merits under either of two provisions of R. 4:50-1.
A. Rule 4:50-1(c)
In her original motion, Chan sought relief under subsection (c) of R. 4:50-1, which provides relief where there is a demonstration of "fraud . . . misrepresentation, or other misconduct of an adverse party." R. 4:50-1(c) (emphasis added).
Great-West correctly notes that there is no evidence of fraud by any party that was adverse to Fah. Since Fah is Chan's predecessor in interest, her claims under R. 4:50-1(c) fail in the absence of allegations of fraud on the part of Woodbridge or its subsequent assignees.
Chan does not claim that Woodbridge fraudulently induced Fah into the assignment and there is no evidence that the subsequent assignees engaged in any fraud. Indeed, the only real allegation of fraud centers on Fah and his affirmative misrepresentation to Woodbridge and the court concerning his marital status. However, we agree with the motion judge that there was no obligation on the part of Woodbridge or the subsequent assignees to investigate Fah's sworn statements. As a result, Chan's claims do not fit under the rubric of R. 4:50-1(c).
Additionally, Great-West notes that R. 4:50-2 restricts the time period for seeking relief under R. 4:50-1. While such motions must generally be made "within a reasonable time," if fraud, misrepresentation, or other misconduct of an adverse party is alleged, a motion must be filed "not more than one year after the judgment, order, or proceeding was entered and taken."
The Assignment Order was entered on November 3, 2000, meaning Fah or his legal representative had until November 2, 2001, in which to move for relief. Chan filed the instant action more than five years after the Order was entered. She argues that her motion was timely because the fraud perpetrated upon the court made it impossible for her to discover her interest in the proceedings. However, as discussed earlier, Chan has merely "stepped into the shoes" of her husband as his "legal representative" for purposes of R. 4:50-1. Thus, she may not enforce rights that would be time-barred as to her husband. The fact that Chan did not learn of the order until years after its entry does not toll the one-year filing requirement, making her motion under R. 4:50-1(c) time-barred as well.
B. Rule 4:50-1(f)
Chan next argues that she is entitled to relief pursuant to R. 4:50-1(f), the elusive "catchall" provision that grants relief "when truly exceptional circumstances are present and when no other subsection of the rule applies." C.R. v. J.G., 306 N.J. Super. 214, 241 (Ch. Div. 1997). The Court has said of this provision:
[A] motion under [subsection] (f) is addressed to the discretion of the trial court. That discretion is a broad one to be exercised according to equitable principles, and the decision reached by the trial court will be accepted by an appellate tribunal in the absence of an abuse of its discretion. No categorization can be made of the situations which would warrant redress under subsection (f) . . . the very essence of (f) is its capacity for relief in exceptional situations. And in such exceptional cases its boundaries are as expansive as the need to achieve equity and justice. [Court Invest. Co. v. Perillo, 48 N.J. 334, 341 (1966).]
See also Pressler, Current N.J. Court Rules, comment 5.6 on R. 4:50-1 (2007).
The purpose of subsection (f) is "to afford relief when enforcement of a judgment would be unjust, oppressive, or inequitable." C.R. v. J.G., supra, 306 N.J. Super. at 241. It enables the "court to consider whether values of equity and fairness may, in a given circumstance, supersede the finality of the prior adjudication." In the Matter of Wehrhane's Estate, 149 N.J. Super. 41, 58 (Ch. Div. 1977).
The factors to be considered in deciding whether relief from final judgments should be granted under R. 4:50-1(f) include the extent of the delay in making the application for relief, the underlying reason or cause, fault or blamelessness of the litigant, and any prejudice that would accrue to the other party. [C.R. v. J.G., supra, 306 N.J. Super. at 241.]
Chan argues that the Assignment Order was unjust and inequitable because she was deprived of an opportunity to have her interests heard. She submits that this is precisely the type of "exceptional circumstance" that entitles a movant to relief under R. 4:50-1(f). Chan argues that her real interest in the lottery funds was greatly compromised by the original Assignment Order, and that this result is unfair, considering that the proceeding took place without her knowledge due to a willful concealment by the participating parties.
Finally, Chan argues that her motion under R. 4:50-1(f) is not time-barred. We have noted that under subsection (f), "whether relief should be granted depends upon the date when the applicant discovered the facts underlying its claim, so that it may be determined if the claim was made within a reasonable time." C.R. v. J.G., supra, 306 N.J. Super. at 242. Since Chan proceeded with the present suit within a year after discovering the existence of the lottery winnings, she submits that her motion under R. 4:50-1(f) was made within a "reasonable time" and is thus timely. Great-West argues that "exceptional circumstances" are simply not present in this case and that Chan's circumstances are not as dire as she argues in her brief. Great-West notes that Chan has already been granted relief from any adverse tax consequences that related to her husband's failure to inform her of the lump sum payment of cash. Additionally, she still has a viable claim against her husband's estate for this money. Thus, it is argued that the Assignment Order, which was fully performed by both sides, did not serve to prejudice Chan to the level required under R. 4:50-1(f). In this sense, the order cannot be seen to be "unjust, oppressive, or inequitable." C.R. v. J.G., supra, 306 N.J. Super. at 241.
On the other hand, Great-West argues that it would be severely prejudiced if the court vacated the Assignment Order. It notes that it took the assignment in good faith, pursuant to a court order, and paid $322,000 for such rights. Thus, vacating the otherwise fulfilled assignment would in fact be the most inequitable result for the parties.
As noted earlier, a motion under R. 4:50-1(f) is addressed to the discretion of the trial court and will be affirmed in the absence of an abuse of its discretion. Hous. Auth. of Morristown v. Little, supra, 135 N.J. at 283. Additionally, we have noted that R. 4:50-1 should be used "sparingly" and only "in situations in which, were it not applied, a grave injustice would occur." Id. at 289. While the situation encountered by Chan is certainly unfortunate, it also appears that vacating the Assignment Order would work an injustice upon Great-West, while Chan seemingly has an avenue of recovery from her husband's estate. Thus, the inequities presented here do not fall under the extraordinary purview of R. 4:50-1(f). While the motion judge never reached the merits on this issue due to the finding of a lack of standing, he would have been well within his discretion to deny Chan's motion under R. 4:50-1(f).