August 6, 2007
THE ESTATE OF NICHOLAS PITTAS, JR., BY ITS EXECUTOR ROBERT TREPEDINO, PLAINTIFF-APPELLANT,
JOSEPH SCUGOZA, JR., THE ESTATE OF JOSEPH SCUGOZA, SR., DEFENDANTS-RESPONDENTS/ THIRD-PARTY PLAINTIFFS, AND GOLDEN GATE CARTING CORP., THIRD-PARTY DEFENDANT.
On appeal from the Superior Court of New Jersey, Chancery Division, Hudson County, Docket No. C-58-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued May 8, 2007
Before Judges Weissbard and Lihotz.
The parties represent the estates of two long-time business associates, who failed to quantify the nature of their financial relationship prior to their deaths. Plaintiff appeals from the final judgment, entered on May 1, 2006, dismissing its complaint with prejudice. We affirm.
Nicolas Pittas and Joseph Scugoza each ran companies involved in the waste disposal business. In November 1984, their respective companies entered into a joint business project to haul debris from the renovation of the Statute of Liberty on Ellis Island. Following the completion of the Statute of Liberty Project, Pittas, Scugoza, and Chris Yonclas became principals of Accent Investments, Inc. (Accent), a company seeking to invest in landfills.
Yonclas located a landfill investment site in Steubenville, Ohio, called Crossridge. To the best of Yonclas's recollection, Crossridge was purchased for $500,000 in December 1986. Yonclas recalled a conversation with Scugoza from which he understood that the initial capital contribution of $250,000 was to be made equally by Pittas and Scugoza. The balance of the purchase price was financed by Scugoza, and the Crossridge corporate stock was titled solely to Scugoza. Yonclas described Pittas's role immediately after Crossridge was acquired as an "interested investor." He also stated that money towards all capital improvements was provided by Scugoza.
Scugoza's attorney, Mr. Pribish, testified that although discussions were held to make Pittas an equal owner, a fifty- percent purchase transaction had never been consummated. Pribish was not aware of any ownership interest held by Pittas in Crossridge.
Trial testimony from Pittas's brother supported the conclusion that Pittas provided his equal contribution of $125,000 to purchase a one-half interest in Crossridge. At trial, he discussed various checks and money transfers from Pittas to Scugoza, totaling $925,000, made during the period December 29, 1986 to June 10, 1988, which plaintiff asserted were "conclusive proof that [Pittas's] payments were intended and used for the initial and ongoing operating expenses of Crossridge."
In November 1990, Crossridge was closed under a cease and desist order issued by the State of Ohio because Scugoza failed the required landfill owner background check when his past felony convictions were discovered. A decision issued by the Ohio Environmental Board of Review, which was affirmed on appeal, found that based on testimony offered on behalf of Crossridge, "[o]n November 2, 1990, the time the orders were issued, the common stock of Crossridge, Inc. was owned solely by Mr. Joseph M. Scugoza." Negotiations began to effectuate the sale of Crossridge. Various documents reflecting sale proposals were presented at trial. Attempts to sell Crossridge to Mingo Junction; Yonclas and his partner, Kurt Anderson; and TransAmerica, Inc., proved unsuccessful.
Plaintiff asserted the transactions to sell Crossridge were structured specifically to repay Pittas his ownership interest in Crossridge. Defendant argued that the evidence contained proofs militating against that conclusion. For example, in 1995, it was proposed that Crossridge be sold to Olympic Enterprises, LLC (Olympic), which was owned by Pittas and his brother. The Pittases signed documents accompanying Olympic's application for approval of the transaction, which were submitted to the Ohio regulatory authorities. These affidavits represented to the state authorities that Scugoza was the sole owner of Crossridge. The Pittases each disavowed any current or prior ownership interest in Crossridge or other landfills.
After reviewing the application, the Ohio Attorney General issued a forty-three page investigative report outlining Pittas's past dealings with Scugoza, detailing numerous financial and business ties between the two, which had been omitted in the prior disclosure. Pittas responded with a thirty-one-page rebuttal, identifying areas of disagreement with the Attorney General's findings, and exhaustively detailing his past business dealings with Scugoza. In that rebuttal, Pittas did not challenge the finding that Scugoza was the sole owner of Crossridge, made no assertion of an equitable ownership in Crossridge, or claim that Pittas loaned $925,000 to either Scugoza or Crossridge.
Scugoza died in February 2001. Although, shortly after his death, Pittas claimed for the first time that he was an equal owner of Crossridge, he filed no claim against Scugoza's estate during the six-month period after the receipt of notice to file claims. See N.J.S.A. 3B:22-4. Pittas died in August 2002. The Chancery Division action was filed by Pittas's estate in March 2004. A seven-day bench trial before Judge Olivieri resulted in judgment for defendant on May 1, 2006. Judge Olivieri thoroughly analyzed the record in his 108-page oral bench decision and concluded that plaintiff had failed to meet its burden to prove the existence of either a legal or equitable interest in Crossridge or a debt owed by Scugoza to Pittas.
After summarizing the testimony of each witness, and making both factual findings and credibility determinations, Judge Olivieri summarized his findings and conclusions as follows:
The plaintiff ha[s] failed to demonstrate that there was an agreement between Pittas and Scugoza or what that agreement may have consisted of. The shareholders agreement, that reflects a date in the late 1980s, reflects a transaction that was never finalized . . . .
Other evidence which buttresses this court's decision regarding the lack of agreement between the two parties is demonstrated by the various sales of Scugoza's ownership interest [in Crossridge], not only to Messrs. Yonclas and Anderson in 1990, but also to Olympic Enterprises and to TransAmerica. All of the paperwork that reflects those transactions indicates that Mr. Scugoza is the sole owner of Crossridge.
The aforementioned Olympic transaction in 1996 reflects that not only was Pittas not already a half-owner [of Crossridge], but there were numerous documents in the record that were signed by him that reflected and acknowledged that Scugoza was the sole owner of Crossridge. Plaintiff claims to have an equitable title in this transaction and puts before the court the testimony of [Pittas's attorney] Mr. Ambrosio, which reflects that Pittas had acquired an equitable interest because of the substantial payments that were allegedly made to Mr. Scugoza.
Plaintiff also puts forth the testimony of Christopher Pittas, who went over in some detail . . . P-1A being a handwritten ledger sheet which was prepared by him from P-1B, which was an original list of checks, if you will, that were made by his brother. It was clear to me, and in fact I have made the observation[,] that the document that was prepared by [Chris] Pittas was prepared as one project, at one sitting.
Also, and most importantly for this court, as I indicated numerous times during the analysis of the findings of facts in this matter and analyzing all of the testimony that was given in this case, Mr. Ambrosio confirmed, [Scugoza'a attorney] Mr. Pribish confirmed, and [Pittas's accountant] Mr. [Robert] Tepedino . . . confirmed in his own way that Scugoza and Pittas had a number of other business dealings of which Ambrosio was unaware, and Robert Tepedino by his own admission regarding the note, the $888,000 dollar note, testified that he was unaware of that, and that Pribish was unaware. And honestly, some of these payments that are reflected in P-1A and P-1B could have been, and this really becomes a proof problem for the plaintiff, may have been related specifically to other business ventures rather than to Crossridge.
Also, Pittas represented numerous times to Ohio authorities and regulatory agencies that Scugoza was the sole owner of Crossridge. He represented it in connection with the litigation in Ohio in the early 1990s which sought to overturn the EPA's order, that is the Ohio EPA's order, closing the landfill. He also represented that fact during the course of an administrative investigation by the Ohio EPA, he represented that Mr. Scugoza was the sole owner of Crossridge.
Christopher Pittas testified, and it happened to be on cross-examination, regarding the Olympic transaction, and that was something that this court reflected on a little while ago, that why would Olympic be contracted to purchase all of the shares of Crossridge from Scugoza if Nicholas Pittas, his brother, already was part owner? And [Christopher Pittas] really had no idea what that may have been. That aforementioned 1996 transaction enclosed a stock purchase agreement which indicated that Scugoza was the sole owner of Crossridge, and Mr. Chris Pittas really didn't have a response as to why that may have been.
He was also questioned about his brother's financial disclosure statement to the Ohio authorities requiring him to list, as I indicated earlier, under equity interest any business concern in which he has control or owns more than five percent interest, of the outstanding equity of any publicly traded corporation or more than 25 percent of any other business concern, and of course[,] his testimony was that he did not.
Regarding D-15, which was Christopher Pittas'[s] own disclosure statement, he admits that he did not disclose any ownership interest in Crossridge, even though he claimed to have been a half-partner, if you will, by his brother.
And as I noted earlier in the testimony of . . . Christopher Pittas, since he would have claimed to have owned 22-and-a-half percent in any asset, why wasn't he a party plaintiff in this matter? He really couldn't understand why and really didn't know why, except to say that his brother was the only one that was involved, with no mention of his name, although he claimed, by inference, he would have claimed a 22-and-a-half percent ownership interest as partner of his brother's.
Christopher Pittas was also questioned about his brother's affidavit, I believe it is D-16, that was submitted to the Ohio authorities in connection with the application purporting to disclose the entirety of his business dealings with Scugoza in which he claimed that the current owner of the stock of Crossridge was Joseph Scugoza, and in testifying about that he admitted that evidently his brother had felt there had been no acquisition at that point.
So the gravem[a]n, the linchpin of plaintiff's claim here that he has some legal or equitable interest in Crossridge has very little support, and has very little support because admittedly, and when I say admittedly I mean admitted really by Mr. Christopher Pittas, by Mr. Yonclas, in no small measure, by Mr. Tepedino, and corroborated by Pribish, no documents were ever finalized that would have reflected some ownership interest by Mr. Pittas in Crossridge.
Secondly, Mr. Pittas and Mr. Scugoza had a number of business relationships, as evidence by the testimony that I won't repeat again, some of which were known to the aforementioned individuals and some of which were not. And it is really very difficult for this court to understand why or how these individuals conducted themselves over the course of several decades regarding their financial transactions, some of which were intertwined, I'm sure, and it is very difficult for this court to indicate how any of the checks that are now being relied upon by plaintiff in this matter, whether or not they were for the ownership interest in Crossridge, whether or not they reflected debt, was there some other debt that Pittas owed Scugoza that cancelled out the money that Mr. Pittas may have forwarded to Mr. Scugoza for some business transaction, or it may have even been for Crossridge in some way, shape or form.
But I am most taken by Pribish's testimony regarding the conversation he had with Pittas and Scugoza toward the end of their respective lives regarding getting their financial houses in order, wherein Pittas made no mention of Crossridge, and it was Pribish's understanding after he had had a subsequent conversation with members of . . . the Pittas family, that he himself believed that there was no claim being made by the Pittas family against the Scugoza family for Crossridge.
Continuing, as the witnesses testified, Pittas and Scugoza conducted their business dealings in secret. Some of those dealings involved false representations to government agencies and to the courts, and it is very difficult, sitting in this court of equity, to try to figure out where in the scheme of these financial dealings in various checks that were sent by Mr. Pittas, admittedly to Mr. Scugoza, how they fit into their financial relationship. I am quite sure, and do so find, that there was certainly no agreement legally between the two and there was no documents executed which would legally convey to Mr. Pittas an ownership interest in Crossridge, for the reasons that I've already indicated.
Regarding an equitable interest, because of their secret financial dealings, not only involving Crossridge but other business transactions, and I think it is D-4 which reflects one of those secretive financial transactions, that's a note for almost $900,000 that neither . . . [Robert] Tepedino nor Pribish knew about at the time it was executed, it only came to light after the fact, and it perfectly reflects and symbolizes the level of secrecy regarding the transactions between the two.
The estate can point to no outward indicia of ownership during all the years between the alleged ownership interest in Crossridge, . . . and the time that this litigation was commenced, there is no outward indicia of ownership by Mr. Pittas. There was no conduct by Mr. Pittas during those years, and what I mean by that is his execution of documents to regulatory authorities and other governmental agencies, in fact, do not support his claim or the estate's claim that he had an ownership interest in Crossridge. His conduct both publicly and privately would reflect that Scugoza was the sole owner of Crossridge during this time period.
And . . . which is also very important to the court, in December of 2001[,] there was an order that had been issued establishing a six[-]month deadline for creditors to assert claims against Mr. Scugoza's estate, and notice to that order was served on Pittas and his attorney in December of 2001. And although Pittas had a meeting with the Scugoza family several months after Mr. Scugoza's death[,] wherein he asserted an interest in Crossridge, no claim was ever made against the estate
The tax returns that were filed by the Pittas estate do not reflect any ownership interest or debt that was owned to Mr. Pittas. There's just an absolute lack of proof from which this court can make a determination that Mr. Pittas had either a legal or equitable or beneficial interest, either through a straight ownership interest or even that a debt was owed, . . . for monies lent to Scugoza for Crossridge. The court cannot make that determination and will not, for the reasons I think I've put on the record in great detail.
Plaintiff's post-trial motion for a new trial, asserting that the trial court's determination was against the weight of the evidence, was denied.
In its trial presentation, plaintiff asserted Pittas held an ownership interest in Crossridge. On appeal, plaintiff's argument has been focused solely on the assertion that sufficient evidence was presented to support a claim that the monies transferred from Pittas represented a loan to Scugoza or Crossridge. Plaintiff argues the trial court erred in failing to sustain plaintiff's claim for repayment of $925,000, which Pittas allegedly loaned to Scugoza, the recovery of which was not barred, or alternatively, that Pittas loaned to Crossridge.
"[O]ur appellate function is a limited one: we do not disturb the factual findings and legal conclusions of the trial judge unless we are convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice." Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484, (1974)(quoting Fagliarone v. Twp. of No. Bergen, 78 N.J. Super. 154, 155 (App. Div. 1963)). Where a judge articulates sufficient reasons justifying his determinations, those findings should not be disturbed on appeal, as we do not engage in an independent review of the evidence. State v. Locurto, 157 N.J. 463, 471-73 (1999).
We have reviewed the record and we find that a sufficient factual basis existed to support the trial court's findings and conclusions that Pittas was not an equitable owner of Crossridge. We are also unpersuaded by the argument of error in the trial court's denial of plaintiff's claim that the monies transferred from Pittas to Scugoza represented a loan now due from Scugoza's estate. Plaintiff's proofs did not rebut the "legal presumption arising from the transfer of money from one person to another, either by cash or check, where the parties stand upon an equal footing, [which] is, that it was in payment of a debt . . . ." Sterry v. Fitz-Gerald, 95 N.J.L. 51, 54 (Sup. Ct. 1920); see also Schloss v. Trounstine, 135 N.J.L. 11, 15 (Sup. Ct. 1946). At trial defendant successfully showed evidence that Pittas borrowed money from Scugoza, which included a promissory note executed by Pittas on February 9, 1990; however, the credible evidence did not support that Scugoza borrowed money from Pittas that remained due and owing. In fact, Pittas by his affidavits to numerous governmental agencies denounced any obligation due from Scugoza.
Plaintiff's suggestion that although there were frauds perpetrated on the government agencies, the frauds were designed to maintain the parties' financial and business relationship, is specious. In his credibility findings, Judge Olivieri addressed the maxim of unclean hands, i.e., a court should not grant relief to one who is a wrongdoer with respect to the subject matter in suit. See Faustin v. Lewis, 85 N.J. 507, 511 (1981).
[T]he problem is that you can't submit a fraudulent document to government authorities that sa[id] one thing . . . 16 years ago[,] . . . and then come into my court in 2005 and  2006[,] and ask me to infer something totally different. . . .
[Y]ou're not supposed to be entering into transactions to make things 'look good.' They're supposed to actually reflect what the interests are in the respective parties.
Credibility is always for the factfinder to determine. Ferdinand v. Agric. Ins. Co. of Watertown, N.Y., 22 N.J. 482, 492 (1956). While there may have been evidence of monies paid to Scugoza by Pittas throughout the years, we find no error in Judge Olivieri's determination that although "these gentlemen were involved in all sorts of financial transactions, the plaintiff has failed to demonstrate there was an agreement between Pittas and Scugoza or what that agreement may have consisted of." R. 2:11-3(e)(1)(A).
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