On appeal from the Superior Court of New Jersey, Chancery Division, Hudson County, Docket No. C-82-07.
The opinion of the court was delivered by: Yannotti, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Parker, Yannotti and LeWinn.
Charles I. Epstein (Epstein) appeals and defendant Zan Associates, L.L.C. (Zan) cross-appeals from an order entered by the trial court on July 17, 2008, which imposed sanctions upon Epstein pursuant to Rule 1:4-8(d). For the reasons that follow, we reverse the trial court's order and dismiss the cross-appeal.
This appeal arises from the following facts. On May 4, 2005, plaintiff United Hearts, L.L.C. (United) filed an action in the trial court against defendant Mozafar Zahabian (Zahabian) seeking damages arising from the ownership of certain property located at 341 Grove Street in Jersey City, New Jersey. On November 17, 2005, following a proof hearing, the court entered a default judgment against Zahabian in the amount of $603,437.50.
On May 8, 2007, Epstein filed a complaint on behalf of plaintiff and named Zahabian and Zan as defendants. In its complaint, plaintiff alleged that, on or about September 30, 2005, Zahabian had executed a deed transferring to Zan title to certain property at 26 Cornelison Avenue in Jersey City.
Plaintiff alleged that Zahabian was one of Zan's officers, directors and members. Plaintiff claimed that it had attempted to collect and enforce its default judgment against Zahabian in the underlying action but had been unable to do so because Zahabian had transferred the Cornelison Avenue property to Zan for $1.00.
In counts one and two of the complaint, plaintiff asserted claims under the Uniform Fraudulent Transfer Act (UFTA), N.J.S.A. 25:2-20 to -34. Plaintiff alleged in count one that Zahabian transferred the property without fair and adequate consideration and that the conveyance of the property to Zan was made with the actual "intent to hinder, delay and defraud" Zahabian's creditors, including plaintiff, and therefore constituted a fraudulent transfer under N.J.S.A. 25:2-25a. In count two, plaintiff alleged that the conveyance was a fraudulent transfer under N.J.S.A. 25:2-27b because the property had been conveyed to an "insider". In count three, plaintiff alleged that Zahabian and Zan had been unjustly enriched by the transfer of the property. Plaintiff sought, among other things, a judgment setting aside the conveyance.
On the date that it filed its complaint, plaintiff also filed and recorded a notice of lis pendens regarding the Cornelison Avenue property in the Register of Deeds for the County of Hudson. The notice referred to plaintiff's lawsuit against Zahabian and Zan.
On June 1, 2007, Zan's counsel served upon Epstein a notice pursuant to Rule 1:4-8(b), demanding that the complaint be withdrawn. The notice stated that "[t]he uncontroverted documentary evidence which has been submitted to you demonstrates that there is no factual or legal basis for a claim against [Zan]." The notice also stated that failure to withdraw the "[o]bjectionable [p]leading" may subject plaintiff to sanctions pursuant to the rule.
Because plaintiff did not withdraw its complaint, Zan filed an answer on July 5, 2007, in which it denied plaintiff's allegations. Zan also filed a counterclaim seeking a judgment discharging the notice of lis pendens.
On July 5, 2007, Zan also filed a motion for discharge of the notice of lis pendens. Zan argued, among other things, that the notice should be set aside because plaintiff could not establish that there is a probability that a final judgment would be entered in its favor on its claims. Plaintiff opposed the motion.
The trial court considered Zan's motion on August 3, 2007, and placed its decision on the record on that date. The court concluded that plaintiff had not shown a probability of success on its claims, which is required by N.J.S.A. 2A:15-7b for the filing of the notice of lis pendens. The court accordingly entered an order dated August 3, 2007, granting Zan's motion and discharging the notice.
On September 18, 2007, Zan's counsel sent Epstein another notice pursuant to Rule 1:4-8(b), again demanding that the complaint be dismissed. In the notice, Zan's counsel stated that plaintiff's claims failed for all of the reasons Zan had advanced in its motion for discharge of the notice of lis pendens.
Zan's counsel additionally stated that dismissal of the claims was required because plaintiff had not conducted "even the most basic investigation into the veracity or falsity of its claim, either prior to filing same or upon receipt of the information tending to disprove" that claim. Plaintiff did not withdraw its complaint.
On February 28, 2008, Zan filed a motion for summary judgment. On March 14, 2008, Zahabian filed a cross-motion seeking the same relief. On March 17, 2008, plaintiff filed papers opposing ...