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Kartzman v. Newark Community Health Centers

July 25, 2007

STEVEN P. KARTZMAN, ESQ., CHAPTER 7 TRUSTEE OF THE ESTATE OF O.K. TOILET & TOWEL SUPPLY, INC., PLAINTIFF-RESPONDENT,
v.
NEWARK COMMUNITY HEALTH CENTERS, INC., DEFENDANT-APPELLANT.



On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-006523-00.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued June 6, 2007

Before Judges A. A. Rodríguez and Sabatino.

Defendant, Newark Community Health Centers, Inc. ("NCHC"), appeals a $67,371.48 money judgment entered by the Law Division on April 28, 2006 in favor of plaintiff, Steven P. Kartzman, Chapter 7 Trustee of the Estate of O.K. Toilet & Towel Supply, Inc. ("OK Towel"). The judgment was predicated on alleged sums contractually owed by NCHC for certain goods and services that OK Towel had provided to NCHC more than a decade earlier. We reverse.

The procedural history of this matter is extraordinarily complicated, spanning more than ten years and involving two separate lawsuits and a bankruptcy proceeding. Although we have considered the intricate and contentious record in its entirety, we only discuss in this opinion the events and circumstances that are most germane to our analysis.

Prior to going out of business in 2003, OK Towel rented and cleaned towels, uniforms and linen items for institutional customers. NCHC is a not-for-profit corporation that operates a community health care facility in Newark. In 1994, OK Towel entered into four related contracts with NCHC to supply it with an ongoing supply of clean towels, linens and uniforms. The contracts, which had a term of five years, were form agreements drafted by OK Towel.

Over time NCHC apparently became dissatisfied with OK Towel's services, and found a different vendor. OK Towel determined that NCHC still owed it $16,249.19 in unpaid invoices, plus additional sums for liquidated damages and counsel fees. This led OK Towel to sue NCHC in the Law Division in a book account action. The complaint (Docket No. ESX-L-6584-96) was filed on June 7, 1996, and sought recovery of $55,297.50, plus interest and costs.

In August 1996, the clerk entered default judgment of $57,509.40 in OK Towel's favor. That judgment was entered in spite of an apparently-improper certification of the sums due by OK Towel's collection attorney, which was not based upon personal knowledge as required by R. 1:6-6.*fn1

In December 1996 OK Towel moved for leave to file an amended complaint, seeking an additional $12,000 in damages. The Law Division granted that motion, despite the existence of a final judgment in favor of OK Towel on the original complaint. In December 1997 NCHC was granted leave to answer the amended complaint out of time. Although it is not documented to us, the amended complaint was dismissed for lack of prosecution in either 1998 or 1999.*fn2 Nonetheless, the 1996 default judgment somehow remained on the court's docket.

Notwithstanding the continued existence of the first judgment, in July 2000 OK Towel filed a second book account action against NCHC in the Law Division (Docket No. ESX-L-6523-00). The second lawsuit alleged the same underlying facts as the previously-dismissed amended complaint, but this time sought a slightly different sum, $69,982.40, in damages.

NCHC timely answered the second complaint, denying the allegations and reciting various affirmative defenses. NCHC included with its answer a R. 4:5-1 certification, which incorrectly stated that the matter was not the subject of any other action.

In March 2001, the clerk dismissed OK Towel's second lawsuit for lack of prosecution, pursuant to R. 1:13-7. OK Towel subsequently moved to restore its complaint under R. 4:50-1(d). Notably, OK Towel did not advise the motion judge that it continued to have a docketed judgment against NCHC based on the same facts. The motion to restore was granted in June 2001. However, OK Towel's second lawsuit was again dismissed for lack of prosecution in August 2001.*fn3 This time, OK Towel did not file a motion to restore the second action.

In November 2001, OK Towel filed a bankruptcy petition under Chapter 11 of the Bankruptcy Code. The bankruptcy case was converted to a Chapter 7 liquidation in January 2003, and plaintiff's ...


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