On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-8499-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Coburn and Gilroy.
Plaintiffs, the Therese Yacenda Educational Trust, the Jaclyn Yacenda Educational Trust, and Bernice Yacenda, Trustee, appeal from the June 8, 2006, order of the Law Division granting summary judgment, dismissing their complaint as barred by the Entire Controversy Doctrine (ECD). We reverse.
James and Charles Yacenda were brothers who engaged in various business enterprises. Sometime in the early 1990s, the brothers created educational trusts for their children. Charles created the plaintiff trusts: the Therese Yacenda Education Trust and the Jacklyn Yacenda Education Trust, with Bernice Yacenda, Charles' wife, serving as trustee on behalf of his two daughters, Therese and Jacklyn. Collectively, these two trusts are referred to as the Bernice Trust. James created the Jeanine Yacenda Educational Trust and the Gabrielle Yacenda Education Trust, with Maureen Yacenda, his wife, serving as trustee on behalf of his two daughters, Jeanine and Gabrielle.
Collectively, these two trusts are referred to as the Maureen Trust.
James; Charles; Life Faith, Inc.; Life Charity, Inc.; Maureen, individually, and as trustee of the Maureen Trust; and Bernice, individually, and as trustee of the Bernice Trust (collectively, the parties); together with Brookdale Mortgage Investors, Inc. (Brookdale), and Barry R. Mandelbaum, Esq. (the escrow agent), entered into an escrow and authorization for disbursement agreement dated December 30, 1993,*fn1 (escrow agreement). The escrow agreement was created to manage the disbursement of certain assets, including the purchase of a note and mortgage held by Midlantic National Bank as mortgagee and YTwo, Inc., as mortgagor. Mandelbaum, as escrow agent, was to hold the issued and outstanding shares of Brookdale, subject to the direction of James and Charles. The purpose of the escrow agreement was to allow the parties to appoint an arbitrator to determine the parties' stock ownership of Brookdale.
After entering into the escrow agreement, the parties created the Y-Two escrow account to facilitate the disposition of funds emanating from the bankruptcy sale of Y-Two, Inc.'s corporate assets. The escrow account's funding came from the proceeds from the sale of a restaurant and the monthly payments on a purchase money mortgage held by Y-Two, as a result of the sale of a marina in Brielle. Pursuant to the arbitration proceeding under the escrow agreement, Y-Two, Inc., is owned 50% by the Bernice Trust and 50% by the Maureen Trust. Brookdale is owned 62% by the Maureen Trust and 38% by the Bernice Trust. In the Spring of 1995, Brookdale acquired the Midlantic note and mortgage. A separate escrow account, the Brookdale escrow account, was created to hold payments that were to be made from Y-Two to Brookdale on the acquired Midlantic mortgage.
In 1993 and 1995, the Maureen Trust executed four promissory notes in favor of either Charles or the Bernice Trust. The notes, naming Charles as payee, were subsequently assigned by Charles to the Bernice Trust.
In the interim, Charles became ill in 1994. At about that time, the brothers, their wives, and the Maureen and Bernice Trusts were defending claims by Chemical Bank, a judgment creditor who alleged that the brothers and wives had transferred assets to the trusts in order to defraud the bank. On December 30, 1994, the two trusts entered into an agreement (the 1994 agreement) that allocated the ownership of certain properties and other debts and assets between the trusts. Under this agreement the two trusts agreed that to the "extent that any assets are recovered by Chemical . . . from either or both [of] . . . the trust[s], that each party shall reimburse the other party to the extent of fifty (50%) percent of the asset or assets recovered by Chemical . . . from either the assets shown on Schedule B or Schedule C [of this agreement]." In addition, the 1994 agreement provided that the trusts would "equally pay Mandelbaum, Salsburg, Gold, Lazris, Discenza and Steinberg, P.C. (the Mandelbaum Salsburg firm) legal fees and costs incurred in defending the action instituted by Chemical Bank, seeking to prove a fraudulent conveyance." After both trusts settled with Chemical Bank, the trusts disagreed on whether: 1) the 1994 agreement covered the settlement payments each trust had made to the bank; and 2) whether the agreement required the Maureen Trust to pay one-half of the legal fees of a law firm, other than the Mandelbaum Salsburg firm, for services rendered in defending the bank's action, after Charles died in 1996.
In March 2000, the Bernice Trust instituted suit against the Maureen Trust (the "2000 action") to recover monies under the four promissory notes, as well as a fifth note held by the Bernice Trust. The Maureen Trust counterclaimed, demanding payment to even up the trusts' contributions to the settlement of the Chemical Bank action and for one-half of the legal fees paid to the Mandelbaum Salsburg firm for services in defending against the bank's lawsuit.
Following a series of cross-motions for summary judgment, orders were entered in the Law Division that collectively: 1) entered judgment in favor of the Bernice Trust on the five promissory notes; 2) entered judgment on the counterclaim in favor of the Maureen Trust, directing that it be paid a sum sufficient to even up the payments made to settle the Chemical bank action, and that it be reimbursed for one-half of the Mandelbaum Salsburg firm's fees that the trust incurred in defending against the bank's lawsuit; and 3) that the Bernice Trust was entitled to one-half of the legal fees paid to the second law firm it engaged to defend its interest in the bank's action. The two trusts cross-appealed.
On appeal, we affirmed in part, reversed in part, and remanded the matter to the trial court. The Therese Yacenda Educational Trust v. The Maureen Yacenda Educational Trust, No. A-5036-01T2 (App. Div. October 15, 2003). Specifically, we affirmed the order directing that the amounts due the Bernice Trust on the promissory notes be placed in escrow; we affirmed the order that the Bernice Trust contribute funds in order to even up the Chemical Bank settlement; we affirmed the order that the Bernice Trust contribute to the Mandelbaum Salsburg firm's legal fees incurred by the Maureen Trust in defending the Chemical Bank action; we reversed the order that the Maureen Trust was obligated to reimburse the Bernice Trust for fees paid to the second law firm in defending the Chemical Bank action; and lastly, we remanded the matter to the trial court to recalculate the amounts due, consistent with the opinion, and to reconsider the issue of ...