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1099, L.L.C. v. Recreational Health Care Concepts

December 30, 2009

1099, L.L.C., PLAINTIFF-RESPONDENT,
v.
RECREATIONAL HEALTH CARE CONCEPTS, INC., FITNESS FACTORY, L.L.C., ANTHONY R. SCARPELLO, AN INDIVIDUAL, JAMES QUINN, AN INDIVIDUAL AND ALBERT CATTAFI, AN INDIVIDUAL, DEFENDANTS-APPELLANTS.



On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-11065-01.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued November 18, 2009

Before Judges Sabatino and Lyons.

This case requires us to determine the efficacy of a judgment creditor's post-judgment levy on monies owed to a judgment debtor for the use of an office condominium which is titled in the name of the judgment debtor and his wife, as tenants by the entirety. Defendant Albert Cattafi appeals two post-judgment orders. The first denied a motion to quash a levy by plaintiff, 1099, L.L.C. (1099 LLC), on monies to be paid to Cattafi by two doctors who utilize, from time to time, some of the space in the office condominium maintained by Cattafi for his chiropractic practice. The other order denied Cattafi's motion to fix plaintiff's rights to rents and defendant's rights to receive credits for expenses against those rents, as well as to fix an equitable amount to be paid by Cattafi to 1099 LLC out of his income. The following factual and procedural history is relevant to our consideration of the issues advanced on appeal.

On September 25, 1992, Cattafi and his wife took title to a condominium unit, Unit 2B, at 312 Belleville Turnpike, North Arlington, New Jersey, as tenants by the entirety. On March 31, 2003, 1099 LLC obtained a judgment for $289,898.18 against Cattafi and others. The judgment was docketed on May 2, 2003, under Judgment No. J-103620-03. On July 19, 2007, a writ of execution was entered directing the Sheriff of Bergen County to satisfy the judgment against Albert Cattafi out of the personal property of Cattafi within Bergen County. On December 21, 2007, the Sheriff levied "upon [the] business assets of... Albert Cattafi, found at" Unit 2B.

Among the business assets found were monies to be paid by two doctors who had entered into an agreement, directly with Cattafi, to utilize his professional suite from time to time for patient examinations and consultations. Dr. Andrew Leyble had an agreement to pay Cattafi $1,000 a month for the use of part of his office, and Dr. Leonard Savino agreed to pay $550 per month to Cattafi for the use of part of his office, as well. Neither entered into a written agreement with Cattafi for the use of his space. Dr. Leyble, at a deposition, testified that he had been leasing space in Unit 2B from Cattafi since November of 2005 and, since then, he has been and remains listed on the entrance of the building as occupying Unit 2B. The doctor further testified that he had no business dealings with Cattafi's wife and that Cattafi acted at all times as the landlord, such as by directly accepting the payments.

Dr. Savino did not appear himself at his deposition, but his office manager appeared and testified that Dr. Savino leases space on a month-to-month basis pursuant to an oral lease with Cattafi. She also testified that Dr. Savino's name is listed on the entrance of the building and that he has been occupying the space at issue for the past five years. She further stated that, like Dr. Leyble, Dr. Savino has had no business dealings with Mrs. Cattafi and that all of the dealings he had concerning this space were had with Cattafi.

On January 17, 2008, Cattafi executed an Assignment of Rents. This document, signed only by Cattafi, assigned "all rents and sums due and to become due under a certain verbal lease agreement[s]... entered into between Assignor [Cattafi] and Lessors [Drs. Leyble and Savino]...." The assignment was to Bayview Loan Servicing, LLC (Bayview), the holder of a mortgage given to the Cattafis on the condominium unit.

On April 25, 2008, Cattafi filed a motion to quash the levy the Bergen County Sheriff served on the rents due Cattafi from Drs. Leyble and Savino. Oral argument was heard on that motion on June 4, 2008, and the court issued an order on July 14, 2008, with respect to it. The July 14, 2008 order found that the assignment of rents made by Cattafi to Bayview was ineffective as to 1099 LLC's levy, and the court ordered, therefore, that the $1,550 per month to be paid by the doctors to Cattafi should be paid directly to 1099 LLC. Cattafi was further ordered to provide plaintiff with a full accounting of the expenses and income derived from Unit 2B. The court provided in its order that 1099 LLC was entitled to one-half of the fair market rental value of Unit 2B, less one-half of the carrying costs of Unit 2B, and the order provided that 1099 LLC shall only receive this sum if it makes application for it to the court, but in no event would it be liable for the carrying costs unless it makes such application. To date, 1099 LLC has not chosen to do so. In the July 14, 2008 order, 1099 LLC was also permitted to conduct its own accounting and appraisal with respect to Unit 2B.

In its comments following argument, the court concluded that the Sheriff's levy on December 21, 2007, pre-dated the assignment of rents of January 17, 2008, and because the rents were levied on first, Cattafi no longer had a right to assign them. Specifically, the court stated, "the right to receive [the rent] is an asset, the receipt of the money changes it from a potential asset, but the right to get [the rent] is an asset." Furthermore, the court found that even though the doctors paid Cattafi rent as they used the premises on an as needed basis, the rents were an asset of Cattafi. In response to Cattafi's argument, the court stated, "[b]ut that's an asset, the ability to get it. And, clearly, at some point he knew it was an asset because [Cattafi] assigned it." Moreover, the court pointed out that the levy had priority over the assignment of rents, "[b]ut if it's levied on, he no longer has a right to assign it. It's then levied. It then becomes held by the Sheriff to determine what should be done to it. [Cattafi] doesn't have a right to assign it. If the levy beats the assignment he's out of luck." The court further stated, "[b]ut [Cattafi] doesn't have [the rents] to give the lender. It's encumbered. Once it's levied on, it's encumbered and he doesn't have a right to give [the rents]."

The court acknowledged that while there was no written lease, there was an understanding that the doctors were going to use the property and a monthly charge was agreed to for that use.

During the motion hearing, 1099 LLC also asked the court to partition Unit 2B. The trial court, however, denied that application on equitable grounds. After Cattafi's motion to quash the levy was denied, he filed a notice of appeal with respect to the July 14, 2008 order. That appeal, however, was voluntarily dismissed as interlocutory.

On July 24, 2008, Cattafi completed an accounting of Unit 2B, together with an appraisal setting forth the total rental value of the unit. The accounting claims that, after establishing a fair market monthly rental of $2,800 per month and subtracting the total monthly carrying charges of $4,238, there is a $1,438 monthly deficit with respect to the premises. This accounting would indicate that Cattafi's one-half interest would ...


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