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Belding & Bernhard, Inc. v. Advokat


April 16, 2007


On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. MRS-L-3263-02.

Per curiam.


Telephonically Argued February 22, 2007

Before Judges Kestin, Weissbard and Payne.

Plaintiff, Belding & Bernhard, Inc., appeals from a summary judgment dismissing its complaint against defendants Jeffrey Advokat, Esq. and Hillary Rosenberg, Esq. and their law firm, Advokat & Rosenberg. We reverse and remand.

The present suit arises out of a judgment entered on October 14, 1998, following a bench trial, in favor of plaintiff and against Thomas Capone (Thomas) and Ultracom Technologies, Inc. (Ultracom), in the amount of $41,402.59, "jointly and severally." Defendants represented Thomas and Ultracom in that trial.

On November 2, 2001, Thomas filed for bankruptcy. On October 15, 2002, plaintiff filed the present suit against Advokat, Rosenberg, the law firm, and Diane Capone (Diane), alleging, in pertinent part as follows:

6. Beginning on October 15, 1998 and thereafter, Defendants conspired with one another, and with Thomas Capone, and took affirmative steps to obstruct justice, interfere with, and attempt to destroy plaintiff's rights as a judgment creditor.

7. On October 15, 1998, and again on November 17, 1998, defendants, acting in concert with Thomas Capone, caused a deed to be drawn, executed and filed with the Clerk of Morris County transferring the legal ownership of property at 39 Oak Road, Boonton Township, New Jersey ("The Property") from the joint names of Thomas A. Capone and Diane Capone, tenants by the entirety, into the name of Diane Capone as sole owner of The Property.

8. Although subject to a mortgage, there was equity in The Property and its transfer to the name of Diane Capone was made without adequate consideration and with the intent of defrauding Plaintiff BBI and interfering with or destroying its rights as judgment creditor.

9. Thereafter, defendants took other steps to frustrate and destroy BBI's rights as a judgment creditor.

10. Subsequent to the entry of judgment, BBI caused to be served writs of execution on defendants, among others, but the defendants ignored the writs and helped to secrete property owned by the judgment debtors, Ultracom and Capone.

11. Upon information and belief, Advokat & Rosenberg acted as a front for Ultracom and Thomas Capone to obstruct and interfere with Plaintiff's rights as a Judgment Creditor (as well as other creditors) by holding property, owned by Thomas Capone and Ultracom, including personal property and monies, on its premises or in its bank accounts.

12. The aforesaid actions by defendants were done wantonly, intentionally, willfully and wrongfully frustrating and destroying, in part, BBI's rights as a judgment creditor.

13. To date, BBI, has recovered only $2,446 of the judgment, and has incurred damages and attorneys' fees and costs as a proximate result of said wrongful acts.

Plaintiff asserted the following causes of action: violation of the Uniform Fraudulent Transfer Act (UFTA), N.J.S.A. 25:2-20 to -33 (count one); violation of the Fraudulent Transfer Act (FTA), N.J.S.A. 25:2-1 to -6 (count three);*fn1 fraud (count four); unjust enrichment (count five); aiding and abetting the commission of a tort (count six); and prima facie tort (count seven).

On February 7, 2003, an order was entered staying discovery and the filing of responsive pleadings, pending a decision by the Bankruptcy Court on plaintiff's application to deny the Bankruptcy Trustee's petition for approval of a proposed plan under Chapter 13 of the Bankruptcy Code. The order provided that counsel were to contact the court upon receiving a decision from the Bankruptcy Court, in order to schedule a case management conference. On March 7, 2003, plaintiff's complaint was dismissed without prejudice due to the automatic stay resulting from the bankruptcy proceedings. The order provided that at the conclusion of the bankruptcy proceedings, the complaint could be "reinstated at the request of any party as to any matters not discharged in bankruptcy." However, on May 1, 2003, Judge Cramp vacated his March 7, 2002 order and on July 14, 2003, vacated the February 7, 2003 order, as well, and directed that responsive pleadings be filed and discovery commence. The court had at some point been made aware of the fact that the Capone marital residence was not part of the bankruptcy estate and none of the named defendants in the State case were in bankruptcy.

On September 8, 2003, the bankruptcy proceedings were resolved by settlement. The part of the settlement relevant to the present matter provided for the payment of $48,500 by Diane to plaintiff to satisfy the judgment against Thomas and Ultracom. That payment would constitute full satisfaction of plaintiff's claims against Diane and Thomas, but only partial satisfaction of plaintiff's claims against the remaining defendants since it was provided that plaintiff's rights against the attorney defendants in the pending state court action were preserved. The stay of the state court action was lifted, so that the case could proceed against the attorneys.

On March 26, 2004, acting on defendant's motion, and after oral argument, the Law Division ordered that count one of the complaint be dismissed as moot due to the settlement "except as to [the] counsel fee claim for aiding and abetting a fraud," and ordered counts three and five dismissed with prejudice for reasons placed on the record at the time of oral argument. Defendants' motion to dismiss was denied as to the remaining counts, four (fraud), six (aiding and abetting), and seven (prima facie tort). Defendants sought leave to appeal, which was denied.

Discovery ensued and on December 21, 2004, Judge David Rand denied a motion by defendants to dismiss the complaint due to non-responsive interrogatory answers by plaintiff, and denied as well defendants' motion to place a monetary limit on plaintiff's damages. It should be noted that once plaintiff's judgment was paid and Diane Capone was dismissed from the suit, plaintiff's theory was that the law firm's unlawful actions caused plaintiff to expend litigation costs in an effort to undo the alleged fraudulent transfer of Thomas's property. In any event, more motions followed.

On February 2, 2005, plaintiff filed a motion seeking to compel defendants to produce documents responsive to its "Request for Production of Documents dated March 24, 2004." On February 25, 2005, the motion was denied based on the fact that "discovery ended September 13, 2003. . . ." On October 7, 2005, Judge Stephen Smith denied defendants' motion for summary judgment, ruling that "[a]ll issues raised are the subject of disputed facts." On December 6, 2005, Judge Smith denied defendants' motion in limine that "certain items of evidence [be] barred[,]" explaining that the "[m]otions [were] too nonspecific to be resolved." He noted that "[s]ummary [j]udgment ha[d] already been denied [and] evidential issues will be dealt with in the context of the trial."

Eventually, the case was called for trial on January 3, 2006, and assigned to a judge on the following day, January 4. The trial judge convened a conference to discuss settlement and requested that plaintiff present a certification attesting to its alleged damages in the form of attorneys' fees. The matter was adjourned to the following day, January 5, for that purpose. The certification of counsel provided by plaintiff, was as follows:


1. I am an attorney at law admitted to practice in the State of New Jersey and have been a partner in Zeichner Ellman & Krause LLP, attorneys for plaintiffs Belding & Bernhard, Inc. ("BBI"), since October 1999.

2. I have been admitted to the practice of law since 1972, when I was admitted before the Courts of the State of New York for which I am an attorney in good standing. I was admitted to the Bar of the State of New Jersey in 1987. I am also admitted to practice in the United States district courts for the Southern District of New York, the Eastern District of New York and the District of New Jersey. I also have admissions to the Second and Third Circuit U.S. Courts of Appeal and the Supreme Court of the United States.

3. I submit this Certification in support of a claim for damages by my client Belding & Bernhard, Inc. ("BBI") against Advokat & Rosenberg, Esqs., Jeffrey Advokat and Hilary Rosenberg (hereinafter referred to as "defendants").

4. The damages consist of billed and incurred, but not yet billed, legal fees owed by Belding & Bernhard, Inc. to my prior firm, Sullivan & Marshall, and my present firm, Zeichner Ellman & Krause LLP, resulting from necessary attorneys' fees and expenses arising out of tortious acts committed by the aforementioned defendants both as a prima facie tort and aiding and abetting and conspiracy to violate New Jersey's Fraudulent Transfers Act N.J.S.A. 25:2-20 through 25:2-34.

5. Annexed hereto are a series of invoices and a memorandum of fees incurred from the period May 19, 2000 through September 2, 2003, a cutoff date measured by the entry of a stipulation and settlement order in a bankruptcy case involving the Estate of Debtor, Thomas A. Capone. The bills are stamped "REDACTED" to reflect the removal of time and changes unrelated to the tortious conduct alleged in the complaint.

6. The attached redacted bills and memorandum of services include time for me totaling at least 63.20 hours during that period and at least 34.30 hours for Philip S. Rosen, who is Of Counsel to our firm. Mr. Rosen has been admitted to practice before the courts in this state since December 1992 and is also admitted to practice before the courts of the State of New York. He is admitted, as well, to the U.S. District Courts for the Southern and Eastern Districts of New York and the District of New Jersey in addition to the U.S. Courts of Appeal for the Second and Third Circuits.

7. The bills are calculated for me at the rate of $325.00 per hour and for Mr. Rosen $225.00 per hour.

8. In addition to the foregoing, there are 1.8 hours for Peter Janovsky, a partner in our New York office with whom I consulted as to matters in bankruptcy and a total of at least 32.20 hours for the services of Saidell Jimenez, then a paralegal in our office, whom we billed at the rate of $75.00 per hour. Ms. Jimenez was employed at our firm for approximately seven years and handled paralegal matters relating to litigation and real estate during her tenure at this firm.

9. The attached bills total $35,970.14 which includes attorneys' fees and costs.

10. In addition to the foregoing, my client incurred fees totaling $2,797.50 during 1999 when I was a partner at the firm of Sullivan & Marshall as a result of having to make a motion before Judge Catherine Langlois as a result of the alleged fraudulent transfer and prima facie tort committed by the aforementioned defendants. The time related to this consisted of the research and writing of the motion before Judge Langlois, review of answering papers, and preparation of reply papers, plus an appearance before Judge Catherine Langlois on May 14, 1999. My services were billed at the rate of $150.00 per hour for a total of 18.65 hours.

11. Consequently, the damages incurred by Belding & Bernhard, Inc. directly resulted from the alleged tortious conduct by the aforementioned is $38,767.64.

12. The aforementioned services, I submit, were necessary and reasonable in light of the consequences which would have resulted to my client had not improper action been taken. That is to say, my client, who was a judgment creditor with a lien on certain property of Thomas A. Capone, would have been reduced to an unsecured general creditor and lost its status as a judgment lien creditor. I submit that the charges are also reasonable considering the complexity of the legal and factual issues presented in this case.

I hereby certify that the foregoing statements made by me are true to the best of my knowledge, information and belief, and my information and belief is based upon available billing records kept contemporaneously with the work performed.

I am aware that if any of the foregoing statements made by me are willfully false, I am subject to punishment.

When counsel reassembled on January 5, the judge indicated that her review of the case file led her to believe that a trial was not necessary and that the case could be resolved on the papers, specifically referring to defendants' in limine motions. Indeed, the judge was of the view that she could rule on the matter that day. Plaintiff's attorney sought to argue that the in limine motions had been denied by Judge Smith in his order of December 6, 2005, but defendants disagreed. In any event, the judge indicated that she had the right to reconsider the motions and intended to do so. Plaintiff's counsel requested time to submit a supplemental response and the judge allowed until the following Monday, January 9, 2006, at 9:00 a.m. Plaintiff met that deadline. At 10:35 that morning, the judge began to dictate her decision on the record.

The judge identified the "main issue" as "whether or not a conveyance by a judgment debtor of his interest in a marital home, held with his wife [in] tenancy by the entirety, to his wife constituted a fraudulent conveyance." If not, "then the defendants didn't do anything wrong, there was no aiding and abetting, there was no prima facie tort, there was no fraudulent transfer." More specifically, the issue was whether one spouse's interest in a tenancy by the entirety constituted an "asset" within the ambit of the UFTA, N.J.S.A. 25:2-21. Counsel for plaintiff interrupted the judge's decision to complain that he had thought the judge was going to entertain oral argument, but the judge responded that, having read all of the papers, the cases cited by the parties, and having conducted her own research, there was no need for additional argument. Continuing, the judge ruled that a tenancy by the entirety is outside the ambit of the UFTA. As a result, the case was dismissed.

On appeal, plaintiff argues that summary judgment was improper on both procedural and substantive grounds. It also contends that the order of February 25, 2005, denying plaintiff additional discovery, on the ground that the discovery period had expired, was in error. We first address plaintiff's claim that the manner in which the judge proceeded was improper. We agree.

Although the present case is distinguishable in some respects from Klier v. Sordoni Skanska Const., 337 N.J. Super. 76 (App. Div. 2001), the principles that formed the basis of that decision are fully applicable here. There, as here, plaintiff argued "that the trial judge erred in sua sponte instituting the summary procedure and dismissing their complaint." Id. at 83. In Skanska, the judge assigned to preside over the trial invoked a "shortcut" to resolve perceived concerns about plaintiff's cause of action. Id. at 81-82. He required plaintiff to place on record "the best case" that it expected to prove at trial after which the judge, applying the standard for deciding a motion to dismiss at the end of plaintiff's case, would decide if the claim was sustainable. Ibid. After granting plaintiff's counsel some additional time to obtain his file and his expert's report, and after hearing argument, the judge dismissed the complaint. Id. at 82. A motion for reconsideration, supported by a supplemental engineering report was denied. Ibid. The judge adopted the chosen procedure as a means of saving judicial time and sparing the parties the expense of a long trial. Ibid. We reversed, stating:

Our rules of court must be "construed to secure a just determination, simplicity in procedure, fairness in administration and the elimination of unjustifiable expense and delay." R. 1:1-2. The cornerstone of our judicial system is that justice is the polestar and the procedures utilized by the courts must "be moulded and applied with that in mind." N.J. Highway Authority v. Renner, 18 N.J. 485, 495 (1955). Our ultimate goal is not, and should not be, swift disposition of cases at the expense of fairness and justice. Rather, our ultimate goal is the fair resolution of controversies and disputes. R. H. Lytle Co. v. Swing-Rite Door Co., Inc., 287 N.J. Super. 510, 513 (App. Div. 1996). Eagerness to move cases must defer to our paramount duty to administer justice in the individual case. Audubon Volunteer Fire Co. No. 1 v. Church Constr. Co., 206 N.J. Super. 405, 406 (App. Div. 1986). Stated another way, while the concepts of "judicial administration" and fairness are not necessarily incompatible, the desire to facilitate judicial administration must take a back seat to our primary goal which is to adjudicate cases fairly and impartially. Shortcuts should not be utilized at the expense of justice.

The minimum requirements of due process of law are notice and an opportunity to be heard. Doe v. Poritz, 142 N.J. 1, 106 (1995). The opportunity to be heard contemplated by the concept of due process means an opportunity to be heard at a meaningful time and in a meaningful manner. Ibid. Indeed, our rules of court contemplate that motions be made in writing.

R. 1:6-2(a). Moreover, ordinarily, motions must be filed and served not later than sixteen days before a specified return date.

R. 1:6-3(a). Our summary judgment rule requires a motion seeking that relief to be filed not later than twenty-eight days before the time specified for the return date. R. 4:46-1. In addition, a party seeking summary judgment must file a brief and, at the very minimum, a statement of material facts in support of the motion. R. 4:46-2(a). The purpose of these rules is obvious, that is, to afford the party against whom relief is sought notice of the application, together with a meaningful opportunity to respond. The procedure resorted to by the trial judge in this case defeated those purposes. For example, had defendants filed a motion, plaintiffs would have had the opportunity to respond to the objection to their expert's opinion. Instead, plaintiff came to court prepared to pick a jury, but rather, was required to defend a motion, brought by the court sua sponte, to dismiss his complaint. [Id. at 83-84.]

We stated that the time given to plaintiff's counsel to respond did not cure the fundamental defect in the proceedings, concluding that "[w]e cannot condone a procedure whereby a judge sua sponte, without notice to a party, resorts to a 'shortcut' for the purposes of 'good administration' and circumvents the basic requirements of notice and opportunity to be heard." Id. at 84-85.

In the present matter, the trial judge, in her zeal to dispose of a case she deemed to be without merit, likewise circumvented the court rules and denied plaintiff the full opportunity to be heard that the rules are designed to guarantee. And while the judge had the power to reconsider earlier pre-trial rulings, that power should be exercised with caution, Slowinski v. Valley Nat'l Bank, 264 N.J. Super. 172, 179-80 (App. Div. 1993) (quoting State v. Hale, 127 N.J. Super. 407, 410-11 (App. Div. 1974)), particularly where, as here, defendants' motion to dismiss had been denied several times by different judges. In any event, even if the judge determined that reconsideration was appropriate, that constituted no basis to dispense with procedural regularities.

In any event, we are satisfied that the judge erred in her substantive ruling as well.

Whether there was a fraudulent transfer of Thomas's interest in the marital home depends, as all parties agree, on whether his interest could be deemed an "asset" as that term is defined in the UFTA. The statute excludes certain property from the definition of asset including the following:

c. An interest in property held in tenancy by the entireties to the extent it is not subject to process by a creditor holding a claim against only one tenant. [N.J.S.A. 25:2-21.]

As plaintiff points out, the Commentary to the UFTA makes clear that whether a tenancy by the entirety is "subject to process by a creditor holding a claim against only one tenant" will vary with the law of a particular state on that subject. In New Jersey, the law is clear and well-settled. The interest of a debtor-spouse is subject to levy by that spouse's judgment-creditor. The judgment creditor "may levy on and sell that spouse's right of survivorship as well as his or her undivided one-half interest in the life estate for the joint lives of the tenants." Freda v. Commercial Trust Co., 118 N.J. 36, 45 (1990) (citing King v. Greene, 30 N.J. 395, 412-13 (1959)). Nevertheless, a court of equity may deny a creditor's demand for partition of the marital home under circumstances demonstrating undue hardship to the debtor's family. Newman v. Chase, 70 N.J. 254, 265-66 (1976). No such circumstances are apparent here.

Defendant's reliance on Barsotti v. Merced, 346 N.J. Super. 504 (App. Div. 2002), is misplaced, inasmuch as we saw no need to address the argument in question because we were satisfied that "plaintiff did not present a prima facie case of a fraudulent transfer to survive a R. 4:37-2(b) motion." Id. at 516. Of course, here the case did not proceed to trial at all. The trial judge opined that the statute was clear on its face but came to the opposite conclusion from that which we reach. In the view of the judge, the absence of any cases on point suggested that plaintiff's position was untenable. We suggest that the absence of pertinent case law reflects the clarity of the UFTA definition of asset as including one spouse's interest in a tenancy by the entirety, which is subject to process under New Jersey law.

Having found that Thomas's interest in the marital home was not an asset whose transfer was prohibited by the UFTA, the judge found no basis for the complaint. As a result, she did not rule on other issues presented. However, the judge did suggest that to the extent that plaintiff's theory of aiding and abetting a fraudulent transfer rested on Banco Popular N. Am. v. Gandi, 184 N.J. 161 (2005), the claim was infirm because Banco Popular was decided many years after the transfer in question. Such a conclusion would only flow if it were clear that the case established an entirely new and unanticipated rule of law. We do not read the case as having done so. While that may have been the first time the Court had occasion to consider the viability of a claim against an attorney assisting in a fraudulent transfer, a review of the pertinent portion of the decision reveals that it rested on well-established principles of civil conspiracy. Id. at 177-78. Thus, plaintiff properly invoked Banco Popular in support of its claim against the attorney defendants.

Of course, the judge did not address, nor do we, whether defendants' actions were culpable. That determination remains for trial, as does the troublesome issue of plaintiff's damages and their causal relation to any possibly improper actions by the attorneys. Nor do we, in light of our ruling, see any need to address plaintiffs' prima facie tort theory. If plaintiff has a remedy for defendants' actions, as we have held, there would be no need to invoke the prima facie tort doctrine. See Taylor v. Metzger, 152 N.J. 490, 522-23 (1998).

Defendants raise numerous arguments which, they contend, support the judge's action in dismissing the complaint. None of these, however, were the basis of the dismissal. While we are certainly free to uphold the order under review on some basis other than the one employed by the judge, we see no reason to do so here. On remand, plaintiff should be accorded a limited period of time for additional discovery which, it claims, was erroneously denied. Once discovery is completed, either side may, on appropriate motion, file any dispositive motions on issues we have declined to address. In light of the adverse perception that may follow from the trial judge's manner of proceeding, the case should be assigned to a different judge. See Penbara v. Straczynski, 347 N.J. Super. 155, 163 (App. Div. 2002).

Reversed and remanded.

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