On appeal from Superior Court of New Jersey, Chancery Division, Morris County, Docket No. C-179-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted December 3, 2008
Before Judges Rodríguez and Waugh.
Plaintiffs Al and Wanda Castelo appeal from the dismissal of their complaint seeking counsel fees from defendants Maria and Wolfgang Winter. We affirm.
On January 14, 1993, the Castelos and the Winters jointly purchased a seventy-two acre parcel of land in West Milford. Each party contributed fifty percent of the purchase price and paid fifty percent of the carrying costs associated with the property. In 1996, the parties formed Boulder Pond, LLC (Boulder Pond) and transferred ownership of the property to Boulder Pond. The West Milford property was Boulder Pond's only asset.
In September 1999, Boulder Pond entered into contract to sell the property to K. Hovnanian North Central Acquisition, LLC (Hovnanian).*fn1 In 2000, Hovnanian made a down payment of $125,000. Maria Winter divided those funds 52.5 percent to herself and her husband and 47.5 percent to the Castelos. She stated that the "differential was intended to both recognize [her and her husband's] majority ownership and interest in the Property and to partially reimburse [her] for expenses [she] had incurred and management fees [she] had earned over the preceding eight years."
Taking issue with the distribution formula used by Maria Winter, the Castelos filed a complaint seeking the dissolution of Boulder Pond and a determination that each party was to share equally in the distribution of its assets.*fn2 On December 2, 2003, the Winters filed an answer and counterclaim, in which they alleged that an oral agreement existed between the parties that called for the Winters to retain majority ownership of Boulder Pond and for Maria Winter to receive a management fee for her work in managing the property.
On May 12, 2005, the Castelos served a frivolous litigation notice pursuant to Rule 1:4-8, contending that the Winters' counterclaim was without merit in the absence of an operating agreement for Boulder Pond. The notice cited, among other cases, Kuhn v. Tumminelli, 366 N.J. Super. 431 (App. Div.), certif. denied, 180 N.J. 354 (2004). The Winters did not withdraw the counterclaim in response to the notice.
The litigation continued through 2005 and 2006. On October 14, 2005, the then General Equity judge entered partial summary judgment in favor of the Castelos, dismissing those parts of the counterclaim that claimed: (1) majority ownership on the part of the Winters; and (2) a management fee for work done by Maria Winter for Boulder Pond. However, the motion judge denied summary judgment with respect to the claim for a management fee prior to the creation of Boulder Pond. He stated his reasons as follows:
In light of the decision in Kuhn [v. Tumminelli, 366 N.J. Super. 431 (App. Div.), certif. denied, 180 N.J. 354 (2004)] and the requirements that an Operating Agreement be in writing as per N.J.S.A. 42:2B-2 it is apparent that Boulder Pond is governed by the "Default Provisions" of the LLC Act. As relevant records indicate that Plaintiffs and Defendants each contributed 50% to the purchase of the Property, under N.J.S.A. 42:2B-27 and N.J.S.A. 42:2B-34 each party is entitled to receive 50% of the company's profits. As such, the Court will grant Plaintiffs' motion for Summary Judgment as to this issue.
The Court does find, however, that material facts remain in dispute as to whether an oral agreement existed prior to the formation of Boulder Pond in 1996. A finding that material facts are in dispute precludes the grant of summary judgment. As such, the Court will deny Plaintiffs' Motion for Summary Judgment as to this issue.
Following that decision, the Castelos were granted leave to amend their answer to the counterclaim to raise the statute of limitations as a defense to the narrowed counterclaim, inasmuch as it was now limited to the period prior to the formation of Boulder Pond.
On May 1, 2006, the then General Equity judge again entered partial summary judgment in favor of the Castelos, finding that the Winters' claim sounding in quantum meruit for the pre-Boulder-Pond period was time barred. However, he denied the motion as to the claim for breach of the alleged oral management contract for the pre-Boulder-Pond period, finding that the claim would not have accrued until 2000 and was, consequently, not time barred. He found that "genuine issues of material fact, ...