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LPD, Inc. v. Palace Diamond Center


February 19, 2009


On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-133-05.

Per curiam.


Submitted November 13, 2008

Before Judges Parrillo, Lihotz and Messano.

Following a non-jury trial, judgment was entered in favor of plaintiff, LPD Inc., against defendants Palace Diamond Center, Inc. (Palace), Jewel Source, Inc. (Jewel), Robil Akdemir, and Yetkin Pashalian, "jointly and severally," in the amount of $44,557.50. Defendants' counterclaims were dismissed.

On appeal, defendants challenge various procedural and evidential rulings made by the trial judge, and further contend that the judge's factual findings, legal conclusions, and award of damages were unsupported by the credible evidence in the record. Palace and Akdemir additionally argue that there was no evidence that they were liable to plaintiff, and thus, their motion for judgment following the close of all evidence was wrongfully denied.

We have considered these arguments in light of the record and applicable legal standards. We reverse the judgment with respect to Palace and Akdemir and remand the matter to the trial judge for the entry of an amended judgment dismissing plaintiff's claims against those two defendants. In all other respects, we affirm.


In its verified complaint, plaintiff, a New York corporation, alleged that it sold Palace and Jewel $77,836 worth of jewelry and that they had failed to pay the "outstanding invoice."*fn1 Attached to its complaint was a "signed debt memorandum, the use of which [wa]s typical in the industry[,]" reflecting defendant's obligation. Plaintiff further alleged that Palace and Jewel, as well as their respective "principals," Akdemir and Pashalian, remitted checks in payment, but these checks were subsequently dishonored. Plaintiff sought 1) the appointment of a statutory receiver for Palace and Jewel because both were "insolvent"; 2) judgment on its open book account with Palace and Jewel; 3) punitive damages against Palace based upon fraud; 4) punitive damages or "treble damages for each dishonored check" against Jewel, Pashalian, and Akdemir based upon fraud.*fn2 Defendants filed a single answer with counterclaims against plaintiff alleging conversion, fraud, and promissory estoppel.*fn3

It is unclear from the record how much discovery ensued, though it was apparently limited in scope. Trial commenced with plaintiff's president, Manny Pollak, as its first witness. He testified that plaintiff was a wholesale jewelry company that both sold and bought diamonds, precious stones and jewelry. He knew defendants, also in the wholesale jewelry industry, and had business dealings with them for several years. As of April 23, 2003, Jewel owed plaintiff $77,836 on an outstanding book account. Pollak claimed Pashalian signed a memo that day (the April memo) reflecting the amount due as the result of a "conglomeration" of transactions that had taken place between plaintiff and Jewel. Pollak also claimed that the parties continued to transact business after April 2003, and that defendants owed more money to plaintiff as a result. He identified a series of subsequent memos detailing these transactions that continued throughout the balance of 2003. In some cases, Pollak identified credits that were given to Jewel because various items were returned or because Jewel had performed "labor," such as the polishing, cleaning or setting of specific stones. In each case, however, Pollak dealt only with Jewel and Pashalian, or on limited occasions, someone he knew represented Jewel. Pollak also identified a series of checks he claimed were payments forwarded by Jewel, or on its behalf, by Palace or Akdemir. All of these were returned because of insufficient funds.

On cross-examination, Pollak denied that he ever supplied Jewel with stones on consignment, insisting instead that Pashalian always "bought [the] merchandise," with "[c]ash, check, [] labor, or exchange of goods." Referencing the April memo, the following exchange took place between defense counsel and Pollak:

Q: And what proof do you have, what documentation do you have that came to that amount of money [that Pashalian] owed you?

A: Memos. We destroyed all the memos. We made the memo for this amount.

Q: You destroyed all the memos?

A: Or [I] might have copies. I have no idea.

Q: You might have copies?

A: Yes.

Q: And where are those copies []?

A: Maybe they're in my office.

Defense counsel then asked Pollak if he "could bring the memos into court" next week as the trial continued. Regarding the $77,836 figure contained in the April memo, defense counsel continued, "[Y]ou have nothing to back that up, do you?" Pollak indicated that "[t]here was no need to" provide back-up documentation to the April memo because Pashalian "never denied it."*fn4 During cross-examination, defense counsel specifically asked the judge to require plaintiff's counsel to produce the documents to which Pollak had referred. Plaintiff's counsel agreed, noting, however, that discovery had closed and that his requests for discovery had never been answered by defendants.

With respect to Akdemir, Pollak claimed that "[Pashalian] and h[e] supposedly are partners and work together," thus explaining the checks from Palace and Akdemir that Pashalian delivered to plaintiff. However, Pollak acknowledged that he never had dealings with Akdemir, never "signed papers" with him, and never entered into any contracts with him.

On re-direct, plaintiff sought to admit several memos that pre-dated the April memo and served as a basis to justify the $77,836 contained therein. Defendant objected, noting the documents had never been supplied in discovery and should have been introduced during Pollak's direct testimony. Plaintiff countered by noting Pashalian and Jewel had admitted the existence of the April memo in their answer to the complaint, and only defendants' cross-examination made it necessary to recreate the process leading to the April memo. The trial judge permitted Pollak to testify about the memos which reflected a series of transactions between plaintiff and Jewel and which plaintiff contended formed the basis of the dollar amount contained in the April memo.

Miriam Mazzola, plaintiff's secretary and bookkeeper of twenty-two years, also testified. Mazzola confirmed much of Pollak's testimony regarding the antiquated recordkeeping employed by plaintiff. Whenever a contractor performing work for plaintiff was given a stone to set or polish, a memo was prepared and the value of the stone or jewelry was included. As those items were returned to plaintiff, they would be crossed off the memo. Once all the items on a particular memo were returned, the entire document was discarded. Plaintiff maintained all its records manually.

Plaintiff rested, and defendants' motion to dismiss was denied by the judge. Defendants' first witness was Darian Ara Minasyan (Ara) who owned his own jewelry business and would purchase items wholesale from both plaintiff and Pashalian. Ara testified that he would pay Pollak for merchandise using cash and checks, sometimes with a post-dated check. He also testified that Pollak would on occasion give him merchandise to sell on consignment, and that whenever he picked up merchandise, he would always sign a memo indicating what items he had taken. If an item was not yet paid for, it remained on the memo until he paid for it, at which point it would be "crossed off." Ara also testified that he would sometimes pick up merchandise for Pashalian, signing the memo after reviewing it with Pollak or Mazzolla.

Pashalian testified that he was no longer in the jewelry business, but that he first met Pollak in 1999 when he was fabricating jewelry for plaintiff and others using stones they supplied. In the spring of 2002, Pashalian incorporated Jewel and rented space in a flea market in Edgewater where, in addition to continuing to make finished jewelry, he also displayed various jewelry pieces for retail sale. During this time, Pollak gave Jewel merchandise to showcase at the flea market, while continuing to give him stones to work on. Pashalian estimated that at any given time, he would display approximately $150,000 worth of plaintiff's merchandise at his store.

Pashalian testified that custom and practice in the jewelry trade permitted retailers to purchase stones at discount prices if they paid cash. Alternatively, they would take stones or finished jewelry on consignment, which in the industry was referred to as "memoing." They could then sell the finished product for a profit. Pashalian testified that he had such a relationship with plaintiff and that merchandise was frequently going back and forth between his store and plaintiff's business.

As to payment, he and Pollak "had an understanding." Pashalian claimed that Pollak knew that he had no money and had filed bankruptcy in the past. Pollak would let him purchase various items by giving him cash credits for the work he performed, or by allowing him to market the jewelry on consignment. Pashalian would sign a memo when he left plaintiff's business with merchandise, and he would leave Pollak blank, undated, signed checks as collateral. Sometimes, Pashalian would borrow checks from the account of his friend, Akdemir, or his friend's business, Palace, and give them to Pollak as collateral with the understanding that he would not deposit them until told to do so by Pashalian. Pashalian had assured Akdemir that any checks he borrowed would not be deposited. Pashalian claimed that he did not sign the April memo and did not recall whether he owed any money or merchandise to plaintiff at that time.

Pashalian identified a number of documents dated subsequent to the April memo indicating that he made various payments to plaintiff, and that he performed various polishing and cleaning services for which payment was due. He also claimed that he had consigned a number of "high-end watches" to plaintiff for which he never received payment. Pashalian identified a letter from Pollak, dated May 31, 2004, in which plaintiff claimed it was owed $57,186 for various merchandise supplied to Jewel.*fn5

Pashalian noted, "I never claimed that I did not owe him the money . . . [.] I claimed that I had the merchandise [but] [i]t was never intended for me to purchase it." Pollak refused to take the merchandise back and insisted on cashing more of Jewel's blank checks. Pashalian acknowledged that he lacked the funds to cover the checks.

The final witness at trial was Akdemir who owned Palace, a small retail jewelry business which he operated himself. He met Pashalian in 2002 when they rented space in the same jewelry exchange. Pashalian was not an employee or principal of Palace, and Akdemir had no interest in Jewel. Akdemir had never met Pollak prior to trial. Although he acknowledged "lending" blank checks to Pashalian, Akdemir did so with the understanding that Jewel needed the checks as collateral. Akdemir claimed that this practice was commonplace in the industry, however, it was an uncommon practice to have someone actually attempt to cash the checks. Thus, he was surprised when the few blank checks he had given Pashalian came back months later, returned for insufficient funds.

After the conclusion of the testimony, Akdemir and Palace moved for judgment dismissing plaintiff's claims as to them. Defense counsel argued there was not a "scintilla of evidence . . . to link Palace and [Akdemir] []to this dispute between Pashalian and [] Pollak." Plaintiff's counsel argued that "there's four checks from either [] Akdemir or Palace [] which were returned unpaid." He called Akdemir's conduct in supplying blank checks to Pashalian "reckless," noting that "he's opening himself for something he should expect if something goes wrong."

The judge denied the motion, noting the testimony revealed a "very unusual way of dealing with people." Acknowledging that Akdemir "did not have eye-to-eye contact or speak to [] Pollak," he noted this "d[id]n't change the fact that his checks . . . were returned[.]" He concluded, "I'm not going to say I'm going to find [them] liable for anything, but I'm denying the motion based upon what I see at this point in time."

In a brief written opinion issued several months after the completion of testimony, the judge concluded that plaintiff had contracted with "defendant" for services and labor; that "[it] would send the merchandise to the [d]efendants with a memo listing the items to be serviced[,]" which both parties agreed was customary in an industry where minimal records are maintained. He also found that "[t]he parties came to an agreement" that as of April 23, 2003, plaintiff was due $77,836, and that "[Pashalian and Jewel] admit there was the debt memorandum on April 23, 2003." The judge also found that the defendants were entitled to credits for payments made and services performed after the April memo, noting that plaintiff "acknowledged $33,278.50 worth of credits owed to [d]efendants." He concluded there was a debt balance of $44,557.50.

Regarding the bounced checks and plaintiff's claim for additional damages based upon merchandise defendants never returned, the judge concluded that these allegations were "not sufficiently supported by the evidence[,]" and that plaintiff "has not provided a reasonable explanation for continuing to accept the checks, which kept bouncing." He rejected plaintiff's claims for fraud. He also dismissed all of defendants' counterclaims, noting they were not supported by the evidence. Without making any specific findings as to each individual defendant, the judge concluded they were all jointly and severally liable for the debt balance and entered judgment accordingly. This appeal ensued.*fn6


We will not disturb the findings and conclusions of the judge following a non-jury trial if they are supported by substantial, credible evidence in the record. Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 483-84 (1974). An appellate court is "obliged to accord deference to the trial court's credibility determination and the judge's 'feel of the case' based upon his or her opportunity to see and hear the witnesses." Div. of Youth and Family Services v. R.L., 388 N.J. Super. 81, 88 (App. Div. 2006)(quoting Cesare v. Cesare, 154 N.J. 394, 411-13, (1998)) certif. denied, 90 N.J. 257 (2007). However, "[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Manalapan Realty v. Manalapan Tp. Comm., 140 N.J. 366, 378 (1995).

Defendants first contend that the judge erred in admitting plaintiff's documentary evidence consisting of the memos predating the April memo because they were not supplied in discovery. They further argue that the judge should have granted an adjournment request they made during the trial, permitting them time to examine their own records to see if they had documents that might have been used in rebuttal. Neither argument is persuasive.

We "normally defer to a trial court's disposition of discovery matters" unless there has been an abuse of discretion. Connolly v. Burger King Corp., 306 N.J. Super. 344, 349 (App. Div. 1997). Here, defendants Pashalian and Jewel admitted the existence of the April memo in their answer, only contesting whether it represented a debt for jewelry they purchased, or whether it represented jewelry taken on consignment. There is nothing in the record to suggest that defendants ever served any discovery demands. Moreover, defense counsel is the one who challenged Pollak's assertion that the April memo contained an agreed-upon amount, further challenging the witness to supply proof that substantiated the calculations leading to the figure. Defense counsel requested that Pollak bring the proof to court when trial resumed, which is precisely what he did. The judge did not mistakenly exercise his discretion by admitting the additional memos into evidence.

Whether an adjournment should be granted is a decision "'peculiarly within the sound discretion of the trial court[.]'" Abtrax Pharms. v. Elkins-Sinn, 139 N.J. 499, 513 (1995)(quoting Allegro v. Afton Village Corp. 9 N.J. 156, 161 (1952)). We will "not interfere unless an injustice has been done." Allegro, supra, 19 N.J. at 161. Having admitted the existence of the April memo in their answer to the complaint, we assume that well in advance of trial Pashalian and Jewel would have reviewed their records to support their claim that the April memo did not accurately reflect merchandise they had purchased from plaintiff. Moreover, since these records would have been peculiarly within defendants' possession, we fail to see the need for any adjournment of the trial, especially since it continued for several more days after the issue arose. Even now, defendants have failed to reveal any material evidence that actually existed and which they could not produce because their request was denied.

Defendants next contend that the judge erred in concluding the April memo actually memorialized a debt owed to plaintiff because there was not substantial, credible evidence to support plaintiff's claim, and the judge failed to consider defendant's contrary evidence. We view this contention to lack sufficient merit to warrant extensive discussion in this opinion. R. 2:11-3(e)(1)(E). It suffices to say that Pollak testified to the course of dealings leading up to the April memo, and that it reflected an agreement reached with Pashalian as to the then-current debt Jewel owed plaintiff. Pollak supplied some other documentary evidence to support his claim. The judge implicitly found this testimony to be credible. Moreover, Pashalian's own testimony acknowledged the existence of the memo and the fact that he owed plaintiff money. The judge was certainly free to discredit Pashalian's testimony that he obtained the jewelry only on a consignment basis, and that he attempted to return the jewelry to plaintiff, rather than pay for it. While Pashalian contested the signature on the April memo as being his, Pollak claimed it was, and the judge was free to decide the factual dispute, which he implicitly did. We concede that the judge's written decision lacked the specificity we would usually prefer and which is required by Rule 1:7-4, but we believe the conclusions he reached implicitly reflect the factual determinations he otherwise made.

We do find merit, however, in the arguments raised separately by Akdemir and Palace and conclude that the judge wrongfully denied their motion for judgment made at the close of the evidence. In his written opinion, the judge referred to defendants collectively, and never explained the basis for his legal conclusion that Akdemir and Palace were "jointly and severally" liable, along with Pashalian and Jewel, for plaintiff's damages.

A motion for judgment, R. 4:40-1, requires the judge to consider whether [I]f, accepting as true all the evidence which supports the position of the party defending against the motion and according him the benefit of all inferences which can reasonably and legitimately be deduced therefrom reasonable minds could differ[.]

[Potente v. County of Hudson, 187 N.J. 103, 111 (2006)(citing Monaco v. Hartz Mt. Corp., 178 N.J. 401, 413 (2004).]

If so, the motion must be denied. Ibid.; see Pressler, Current N.J. Court Rules, comment 1 on R. 4:40 (2009)(collecting cases).

Here, plaintiff adduced no proof that Akdemir and Palace were in anyway affiliated with Pashalian and Jewel. Pollak acknowledged that he never dealt with Akdemir and did not know him, and that all his dealings were with Pashalian or someone who specifically claimed to be authorized by Pashalian. There was no proof that Palace ever obtained any of the merchandise that plaintiff delivered to Jewel and it was undisputed that the April memo, the touchstone of plaintiff's claim, memorialized a debt owed to plaintiff only by Pashalian and Jewel. The judge denied the motion based upon the existence of four checks drawn on Akdemir's or Palace's accounts that were delivered by Pashalian. However, there was no evidence to support the conclusion that the four checks, all dated well after the April memo, had any relation to the debt between plaintiff and Jewel that was reflected in the memo.

Moreover, although defendants Akdemir and Palace did not renew their motion after the judge's decision was issued, see R. 4:40-2 (permitting a motion for judgment notwithstanding the verdict to be made within twenty days), or move for a new trial, R. 4:49-1, it is clear from the judge's written decision that he rejected any basis for Akdemir's or Palace's liability based solely upon the checks themselves. The judge specifically concluded that plaintiff had failed to meet its burden of proof regarding any claims related to the checks, and, furthermore, that plaintiff "ha[d] not provided a reasonable explanation for continuing to accept the checks, which kept bouncing." Thus, the interests of justice require the judgment against Akdemir and Palace be reversed, and the matter be remanded for the entry of an amended judgment reflecting that plaintiff's complaint as to those two defendants is dismissed with prejudice.

Affirmed in part, reversed in part, and remanded for entry of a modified judgment. We do not retain jurisdiction.

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