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Betty Simon, Trustee LLC v. Israel

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


February 13, 2009

BETTY SIMON, TRUSTEE LLC, PLAINTIFF-RESPONDENT,
v.
ROCHELLE B. ISRAEL, TRUSTEE OF THE HERMAN MILLER TESTAMENTARY TRUST, ROCHELLE B. ISRAEL, INDIVIDUALLY, AND THOMAS ISRAEL, HER HUSBAND; MARTIN "MARTY" MILLER; MRS. MARTIN "MARTY" MILLER, DEFENDANTS-APPELLANTS.

On appeal from Superior Court of New Jersey, Chancery Division, Atlantic County, Docket No. F-1802-06.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued September 16, 2008

Before Judges Graves and Grall.

Following a bench trial, the court entered a judgment in favor of plaintiff, Betty Simon, Trustee LLC (Simon or plaintiff), and against defendant Rochelle B. Israel, Trustee of the Herman Miller Testamentary Trust (the Miller Trust).*fn1 The Miller Trust appeals from the judgment and an order denying its motion for a new trial or, in the alternative, an amended judgment.

On appeal, the Miller Trust presents the following arguments:

POINT I.

THE TRIAL JUDGE IMPROPERLY INTERJECTED HIMSELF INTO THE CASE AND EXHIBITED DISTINCT PARTIALITY.

POINT II.

THE TRIAL COURT'S CONCLUSION THAT THE TRUSTEE, ROCHELLE ISRAEL, AUTHORIZED THE RELOADING OF $100,000 ONTO THE THEN $130,000 OBLIGATION WAS MANIFESTLY UNSUPPORTED BY THE EVIDENCE SO AS TO OFFEND THE INTEREST OF JUSTICE.

A. THE TRIAL COURT'S CONCLUSION THAT WOLFSON'S TESTIMONY WAS INTERNALLY CONSISTENT AND THEREFORE RELIABLE WAS MANIFESTLY UNSUPPORTED BY THE EVIDENCE SO AS TO OFFEND THE INTERESTS OF JUSTICE.

B. THE TESTIMONY OF PLAINTIFF'S PRIMARY WITNESS, FAWZY WAS UNRELIABLE, CONTRADICTORY AND NOT CREDIBLE.

POINT III.

THE TRIAL COURT FAILED TO ARTICULATE A RULING CONCERNING THE LEGAL EFFECT OF THE LETTER AGREEMENT SIGNED BY THE PARTIES DATED DECEMBER 16, 2004.

POINT IV.

THE TRIAL COURT'S CONCLUSION THAT MILLER HOMES WAS NOT AN OBLIGOR WITH RESPECT TO THE ENTIRE DEBT OF $650,000 WAS MANIFESTLY UNSUPPORTED BY THE EVIDENCE SO AS TO OFFEND THE INTERESTS OF JUSTICE.

A. THE TRIAL COURT'S CONCLUSION THAT NO PART OF THE $680,000 PROCEEDS FROM THE SALE OF THE FOUR NORTHFIELD LOTS SHOULD HAVE BEEN ALLOCATED TO THE PORTION OF THE DEBT SECURED BY THE PROPERTY OWNED BY THE MILLER TRUST WAS MANIFESTLY UNSUPPORTED BY THE EVIDENCE SO AS TO OFFEND THE INTEREST OF JUSTICE.

POINT V.

THE TRIAL COURT ERRED IN DENYING DEFENDANTS' MOTION TO AMEND JUDGMENT AND/OR FOR A NEW TRIAL.

After considering these arguments in light of the record and the applicable law, we have determined they do not warrant extended discussion in a written opinion. R. 2:11-3(e)(1)(E). Nevertheless, we add the following comments.

On May 19, 2004, Rochelle Israel, as Trustee of the Miller Trust, borrowed the sum of $230,000 from plaintiff because Miller Homes, LLC (Miller Homes), a real estate development business operated by her brother, Martin Miller (Miller) and Albert Fawzy (Fawzy), needed additional business capital. The loan was secured by a mortgage on the only asset in the Miller Trust----a residence in Margate, New Jersey. The mortgage note and mortgage signed by Rochelle Israel, as Trustee of the Miller Trust, provided that "all amounts owed" to Simon would be paid within a year----by May 19, 2005. Rochelle Israel anticipated the loan would be satisfied by Miller Homes as "lots were sold."

After selling two lots, Miller Homes made two $50,000 payments. The first payment was made on July 1, 2004, and the second payment was made on August 5, 2004. As a result of these payments, the principal due and owing Simon was paid down to $130,000.

Simon's representative, Joseph Wolfson, testified that after the two payments were made, Fawzy and Miller asked him if Simon would loan Miller Homes the sum of $520,000, which would be secured by a mortgage on four vacant lots owned by Miller Homes, located in Northfield, New Jersey. Based on a "drive by appraisal" of the four lots, Wolfson advised them that Simon would require a $420,000 mortgage on the four lots, and it would also require the Miller Trust to agree that the outstanding balance of its loan would be increased from $130,000 to $230,000----the original amount of the loan. Wolfson testified that Simon initially wanted to increase the mortgage on the Margate property beyond $230,000, however, Miller told him that his sister was unwilling to do so because she "had just settled in May on the $230,000."

The loan from Simon to Miller Homes in the amount of $520,000 was finalized on December 16, 2004. In return for the money it received, Miller Homes gave Simon a mortgage note in the amount of $420,000 and a mortgage on its four Northfield lots. The note and mortgage both required Miller Homes to repay the sum of $420,000 to Simon, together with interest at an annual rate of ten percent by no later than December 16, 2005. On the same day that the loan was finalized, December 16, 2004, Wolfson prepared a letter to Miller and Fawzy confirming that Simon held a mortgage on the Margate property in the amount of $230,000, and a mortgage on the four Northfield lots in the amount of $420,000. On the second page of the letter, Wolfson asked Miller and Fawzy to "acknowledge the accuracy of the above amounts in accordance with the mortgages given," and, according to Wolfson, both Miller and Fawzy signed the letter.

On November 2, 2005, Rochelle Israel filed a bankruptcy petition on behalf of Miller Homes. In the bankruptcy petition, the Miller Trust was listed as a forty-one percent shareholder of Miller Homes. Included in the list of real property owned by Miller Homes were three of the Northfield lots, which were valued at $510,000. The bankruptcy petition listed Simon as a secured creditor with a claim of $430,000, and it also listed the Miller Trust as a secured creditor with a claim in the amount of $230,000.

When the bankruptcy trustee sold the Northfield lots, Simon received the sum of $420,000 through the bankruptcy court. Because the Margate property was owned by the Miller Trust, it was not part of the bankruptcy estate. After the Miller Trust failed to pay off the Margate mortgage, Simon filed the present foreclosure action.

The central issue at trial was whether Rochelle Israel had, on behalf of the Miller Trust, authorized the "reloading"*fn2 of the Margate Mortgage from $130,000 to $230,000. During the bench trial, the court heard conflicting testimony from four witnesses. Plaintiff presented testimony from Joseph Wolfson and Albert Fawzy, and Martin Miller and Rochelle Israel testified for defendant. Thus, credibility was a pivotal factor and the court found that Wolfson was a "credible and reliable" witness and that Fawzy was a "reasonably credible witness":

Again the basic question is did Ms. Israel agree to the reloading of the debt? . . . Both Wolfson and Fawzy say that Miller said that Israel agreed to the debt. Miller himself denies that. Israel denies it. . . . I thought that Mr. Wolfson was credible and reliable. I don't have any reason to question anything he said. He was a bit argumentative at points, but he seemed to be fairly confident, credible and clear in the way he related things. His testimony was internally consistent, it was consistent with the documents that were presented. His manner seemed to be entirely appropriate. . . . Mr. Fawzy obviously made some errors in how he recalled things.

There was some suggestion of bias on his part. But considering everything I thought he was a reasonably credible witness. He seemed to be fairly open and appropriate in the manner in which he addressed the questions that were proposed to him.

On the other hand, the court concluded that Martin Miller "was not a credible witness":

Martin Miller was not a credible witness. I think that would be fairly obvious to anyone who observed or even just heard his testimony. He was at the very least obviously confused about some things. He seemed to lack an understanding of some of the circumstances. He has apparently some physical problems and may have some cognitive problems that weren't explored as much as they could have been. It was in the end very difficult to understand many of the things that he was saying. And in the end I did not find his testimony to be particularly credible or reliable. It is clear that the plaintiff did provide the $520,000 that forms at least in part the basis for this dispute. It's clear that $420,000 of that amount was secured by a mortgage with Miller Homes. It's clear that the plaintiff is a fairly sophisticated and experienced investor that acts for its own self interest. Mr. Wolfson's testimony provides an explanation for how the plaintiff would have approached the need for some security with respect to that additional $100,000 in debt through the reloading that's claimed. . . . There is just no adequate explanation for why Simon would have done what Simon obviously did if Mr. Miller himself at the very least didn't indicate that the debt could be reloaded. So his testimony on that issue makes no sense. I didn't find him to be credible or reliable.

Additionally, the court concluded "it was difficult to accept" Rochelle Israel's testimony:

Ms. Israel was the last of the four witnesses to testify. And I am hesitant to rely on her testimony as well. She evidenced an extraordinary lack of information with respect to what was occurring, particularly for an individual who was acting in a fiduciary capacity and an individual who from at least much of the testimony was often resistant to her brother's efforts to obtain funds from the trust. It's hard to imagine that someone who was as resistant to her brother obtaining funds from the trust would not have concerned herself at least in some respect to what was occurring. It's hard to imagine that someone who would permit the trust for which she was the trustee to assume in some fashion ownership of her brother's interest apparently in a reaction to a pending divorce proceeding would not concern herself with the details of what was occurring. . . . Her manner during the proceeding would suggest that she's not particularly bright, but there was certainly enough in the record to suggest that she's fairly well educated and has been entrusted with some fairly substantial responsibilities involving financial matters. In the end I found it difficult to accept her testimony as credible and reliable.

The court also found that plaintiff's "version of the events" was "fairly well documented," and it concluded that plaintiff had established by a preponderance of the evidence "that Ms. Israel did in fact know of and agree to the reloading of the $100,000 which means that the balance that's due on the [Margate] mortgage is the amount that has been claimed." On September 21, 2007, the court entered a judgment in the total amount of $280,312.50, representing principle in the amount of $230,000, together with interest and late fees. Defendant's motion for a new trial or alternatively, to amend the judgment, was denied on October 26, 2007.

Our scope of review is limited. "[W]e 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). This is not such a case.

We are convinced there is nothing in the record to support a claim of either improper involvement or partiality on the part of the trial court; the court's findings, including its credibility assessments, are adequately supported by substantial credible evidence, Rule 2:11-3(e)(1)(A); and the denial of the motion for a new trial or to amend the judgment did not constitute a manifest denial of justice. R. 2:11-3(e)(1)(C). Accordingly, we affirm substantially for the reasons stated by Judge William C. Todd, III, in his comprehensive oral decisions on September 21, 2007, and October 26, 2007.

Affirmed.


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