On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, L-1249-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges A. A. Rodríguez, Collester and Lyons.
In 2003, plaintiff Lawrence P. Thees, an attorney, discovered fortuitously a stock certificate evidencing his one third ownership in a closely-held corporation, Freight Force, Inc. (FFI). However, defendant Paul Serra alleges that seventeen years earlier, Thees had transferred this stock to him and Robert Etelson, now deceased, in exchange for all stock in a newly created corporation, In-Fleet I. Thees sued Serra and FFI (collectively "defendants") for breach of a fiduciary duty and sought damages and an appointment of a receiver of FFI and an accounting. He now appeals from the February 17, 2007 orders:
(1) granting summary judgment and dismissing his complaint against defendants; and (2) denying his cross-motion for partial summary judgment and to amend his complaint. Defendants appeal from the denial of their motion for counsel fees. We affirm on the appeal and cross-appeal.
We note at the outset that the judge dismissed Thees's complaint based on the equitable doctrines of judicial estoppel and laches. The judge did not address the merits of the complaint, nor decided issues of credibility.
The factual setting of this case is lengthy and complicated. This is an abbreviated version. Thees and Serra worked for Etelson and his company Special Service Freight Company (SSF), a trucking business. Thees worked as vice president and general counsel for the company. In 1983, the three men went into business together. Etelson created FFI, which was originally called Theesa Management Corporation,*fn1 and eventually transferred one-third of the shares each to Thees and Serra, and retained one-third for himself. SSF continued to operate.
In 1986, In-Fleet, an unincorporated division of SSF, was created. At this point, Etelson decided to retire. He put his daughter Tracey, who had no experience, in charge of SSF. Because of a personality conflict between Thees and Tracey, the parties decided that Thees would run In-Fleet, as a "semi-autonomous division of SSF." Eventually, In-Fleet separated from SSF altogether. The facts regarding that transaction are disputed and murky. According to Thees, "we were never able to come to terms contractually to memorialize what had, in fact, transpired." Thees's "stock percentage ownership of the In-Fleet business" was never determined. There were thirteen drafts of a Shareholder's Agreement prepared by Thees or Richard Mitchell, SSF's new general counsel. However, no agreement was ever signed.
According to Serra, as of June 30, 1986, Thees exchanged his stock in FFI for "all assets and liabilities pertaining to [the] In-Fleet Division" and "was no longer a shareholder" in FFI. Serra testified in a deposition that when Thees "took the In-Fleet business" in 1986, he "was supposed to return the [FFI] certificate." However, Thees told Serra that "he had lost his certificate and would return it as soon as he could find it." In June 1986, Etelson transferred his shares in FFI to Serra, in exchange for five percent of the company's gross revenues for one year. Thus, according to Serra, he became the sole owner of FFI.
Thees disagrees with Serra's allegation. He denied that the acquisition of his interest in In-Fleet was in exchange for his FFI shares. He alleged that In-Fleet "paid Etelson/SSF substantial royalties" and he paid "$76,500 in loans and capital" to In-Fleet between July 1986 and April 1987. Serra and Etelson contributed nothing.
By April 1987, Thees "could no longer take dealing with Tracey Etelson" and "decided to sell [his] interest in In-Fleet. According to him, on April 16, 1987, a Letter of Agreement followed this decision. Thees, Robert and Tracey Etelson, Serra and their five related corporations divided their business, corporate ownership, assets and debts in order "to formally sever the relationship of [Thees] and In-Fleet from all other parties. . . ." The April 16, 1987 agreement provided that In-Fleet would be split in two, In-Fleet I and II. Thees would retain In-Fleet I, a New Jersey corporation, and specified business accounts, but In-Fleet II, a Florida corporation owned by Tracey, would service the other business accounts. The Letter of Agreement provided in pertinent part:
With respect to FFI, the parties hereto acknowledge that as of June 30, 1986 Thees exchanged his stockholdings in FFI for all assets and liabilities pertaining to the In-Fleet Division, as same were reflected on the books of FFI as of June 30, 1986.
Thus, according to the Letter of Agreement, after June 30, 1986, Thees owned no shares in FFI, although he still had possession of the stock certificate. In exchange, he was the sole shareholder of In-Fleet I. Thees disputes this, alleging that after June 30, 1986, he still owned one-third of the FFI stock because the April 16, 1987 Letter of Agreement was never effectuated. He alleges that on June 9, 1987, he sent a memorandum rejecting the Letter of Agreement. The memorandum alleged several breaches by the other parties. Serra certified that he had no memory of such rejection.
Subsequently, SSF, In-Fleet II and Etelson went into bankruptcy. Thees alleged that Etelson and Serra "conspired to transfer SSF operations" to FFI in order to avoid SSF's creditors. Thees "was a creditor of both SSF and Etelson and received nothing from the[ir] bankruptcies."
In December 1990, Serra merged FFI into a California corporation with the same name and moved it to California. From 1992 to 1997, Thees lived in the Caribbean area. Between 1988 and 1990, he moved three times and lost the files containing his FFI stock shares. In short, "over time, I forgot about them." In July 1999, Thees filed a voluntary bankruptcy petition under Chapter 7. In his Schedule of Assets and Personal Property, Thees represented that he had no "[s]tock and interests in incorporated and unincorporated businesses," and no other claims. The only assets that Thees listed were a checking account, a vehicle, household furnishings and clothing. In November 1999, the bankruptcy court released Thees from all dischargeable debts.
In late 2003, following the death of Thees's mother, his stepfather found some boxes belonging to Thees, stored at the mother's and stepfather's house. Thees retrieved them and discovered the FFI stock certificate. Thees wrote to Serra, sending a copy of the stock certificate and asked whether Serra was interested in purchasing them. Serra declined. This litigation followed.
Thees filed this action in the Chancery Division. It was transferred to the Law Division. Thees alleged that he was the record owner of one-third of the outstanding shares of FFI, which had merged into a California corporation of the same name. Thees asserted that he had "ceased active management of and participat[ion] in [FFI]" and complained that defendants should have informed him of the merger and afforded him an opportunity to dissent or sell his shares at fair market value.
Defendants answered the complaint, denying its material allegations and asserting that laches and estoppel barred Thees's claim. Defendants moved for summary judgment. Thees opposed the motion. Judge John Mullaney heard oral arguments and ...