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

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


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NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION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 yield a monthly net loss of $719, without regard to the monies to be received in rents from Drs. Leyble and Savino.

On January 20, 2009, Cattafi filed a motion to establish 1099 LLC's rights to rents and fixing defendant's right to set off expenses owed by defendant and his wife as tenants by the entirety on Unit 2B; to fix an equitable amount for Cattafi to pay out of income to 1099 LLC; and to order the return of all rents collected by 1099 LLC from the tenants of Unit 2B from July 14, 2008, to the present.

That motion was heard on March 6, 2009. During the hearing, the court again found that rents from Drs. Leyble and Savino were an asset of Cattafi and the judgment creditor had the ability to collect them. The court recognized that, while Cattafi's wife held an interest in Unit 2B as a tenant by the entirety, the question posed to the court was "who had... the right to collect the rent and use this money and to run this property." The court concluded that the asset was Cattafi's alone: all the court has in front of it are the following things. That there are leases with two doctors negotiated only by Dr. Cattafi. That Dr. Cattafi only collected the rents. That Dr. Cattafi set up what the rent was, that neither of the tenants has any contact with Mrs. Cattafi. That Dr. Cattafi first made a decision to assign all of the rents by himself and signed the assignment by himself, without Dr. Cattafi signature. That when that didn't work, that Dr. Cattafi made the decision -- at least nothing in front of me now that Mrs. Cattafi played a role in the decision of telling them they didn't have to pay rent, at all.

So the picture that I have at this point is, not withstanding Mrs. Cattafi theoretical entitlement as a tenancy by the entirety, that this is property and rents that were solely in the control of Dr. Cattafi, that all decisions were made by Dr. Cattafi solely.

The trial court, therefore, denied Cattafi's application to vitiate the levy and held the assignment of rents superior to the levy.

The court also heard arguments regarding Cattafi's application to fix an order to pay out of income. The court denied the application because it was uncertain of the income which Cattafi argued he was receiving. A notice of appeal with respect to this matter was filed on March 24, 2009.

Cattafi now presents the following points for our consideration on appeal:

POINT I

THE COURT BELOW ERRED IN FAILING TO RECOGNIZE THE LEGALITY OF CATTAFI'S ASSIGNMENT OF RENTS TO BAYVIEW.

POINT II

THE LAW DIVISION ERRED IN ALLOWING PLAINTIFF TO EXECUTE ON $1,550 RENTALS RECEIVED WITHOUT CONDUCTING AN ANALYSIS OF THE EXPENSE AND DETERMINING ONE-HALF OF THE NET RENTAL VALUE OF UNIT 2-B UNDER THE LAW OF TENANCY-BY-THE-ENTIRETIES.

POINT III

THE COURT BELOW ERRED IN FAILING TO ESTABLISH AN EQUITABLE ORDER TO PAY OUT OF INCOME BASED ON DEFENDANT'S NET INCOME FROM HIS CHIROPRACTIC PRACTICE AND FAILING TO GRANT DEFENDANT CREDITS FROM RENTALS UNLAWFULLY RECEIVED BY PLAINTIFF.

We note at the outset that throughout this matter neither Bayview nor Mrs. Cattafi were ever parties to the litigation. They were neither named as parties nor did they attempt to intervene as such.*fn1

In Cattafi's first point, he argues that the assignment of rents to Bayview was effective and has priority over the Sheriff's levy on those rents. Cattafi argues that, on the one hand, the payments made by Drs. Leyble and Savino are not rental payments, for there is no enforceable lease. As such, Cattafi argues that this asset is uncertain or not presently due as a debt and therefore cannot be levied on. See Sears, Roebuck & Co. v. Romano, 196 N.J. Super. 229, 236 (Law Div. 1984). Cattafi argues further that what he assigned to Bayview was "rents" which may arise in the future and as they do, the assignment of rents would apply and supersede the levy. In Cattafi's January 20, 2009 motion though, he argued for a return of the "rents collected" by 1099 LLC from the "tenants" of Unit 2B. Cattafi, in essence, argues that as to 1099 LLC, the payments made by Drs. Leyble and Savino to Cattafi were not rents but as to Bayview they would be.

The general rule in determining whether a right may be levied upon is to determine "whether the right or credit is assignable by the judgment debtor." Sears, Roebuck & Co., supra, 196 N.J. Super. at 235. Here, Cattafi has conceded this by his execution of an assignment of rents. Moreover, the trial court found that this asset is one owned by Cattafi and not by both Dr. and Mrs. Cattafi. The court based its factual conclusions on the testimony of Dr. Leyble and Savino. We agree with the trial court's conclusion that the payments are an asset of Cattafi - rents due under an oral month-to-month lease.

Our review of a trial court's fact finding is limited. We are only to decide whether the court's findings made could reasonably have been reached on sufficient or substantial credible evidence in the record considering the proofs as a whole. Close v. Kordulak Bros., 44 N.J. 589, 599 (1965). In this case the record clearly supports the trial court's findings that the rental payments made by the doctors were the sole property of Cattafi. The Sheriff appropriately levied upon the rents due from Drs. Leyble and Savino as "rights" belonging solely to Cattafi, pursuant to N.J.S.A. 2A:17-57. Because this levy was prior in time to the assignment of rents, the levy is superior to the assignment of rents. See Zane v. Brown, 126 N.J. Eq. 200, 203-05 (Ch. 1939); cf. Vineland Sav. & Loan Assn. v. Felmey, 12 N.J. Super. 384, 393-95 (Ch. 1950).

Cattafi next argues that, in entering its order, the court ignored Cattafi's wife's undivided one-half interest in Unit 2B as a tenant by the entirety. Cattafi's argument appears to be that under the law of tenancy by entirety, Mrs. Cattafi is entitled to one-half of the rents received and/or imputed with respect to Unit 2B after deduction of one-half of the carrying costs, and that the trial court did not recognize that, particularly with respect to the rents paid by Drs. Leyble and Savino. Cattafi points to Capital Finance Co. of Delaware Valley, Inc. v. Asterbadi, 398 N.J. Super. 299 (App. Div.), certif. denied, 195 N.J. 521 (2008).

We find Cattafi's arguments on this point to be without merit. First of all, Cattafi is ignoring the finding that the rents are his asset alone. Secondly, he is arguing on his wife's behalf, and he does not and cannot represent her. She is not a party to this action. There is, of course, a serious question as to whether Cattafi's counsel himself can represent her since there may well be a dispute between the Cattafis as to whom is entitled to what, particularly in light of the court's findings that the rents from Drs. Leyble and Savino belong solely to Cattafi.

It appears from the record that Cattafi controls the entire space at Unit 2B as part of his chiropractic practice and Mrs. Cattafi has no presence at this site. While co-tenants out of possession are entitled to an accounting for their share of the rents, issues, and profits, that question is not before us. Lohmann v. Lohmann, 50 N.J. Super. 37 (App. Div. 1958). The dispute here is between Cattafi, as judgment debtor, and 1099 LLC, as judgment creditor. Unlike Capital Finance Co. of Delaware Valley, this is not a situation in which the debtor's co-tenant's interest has been purchased at a Sheriff's sale. Partition here was denied and is not at issue.

The sole question at issue in this case was whether the rents payable by Drs. Leyble and Savino are payable to Cattafi alone or to him and his wife, as tenants by the entirety. Cattafi's suggested analysis under the principle of tenancy by the entirety is not ripe at this time. 1099 LLC has not sought one-half of the rent, actual or imputed, from Cattafi. While the trial court recognized that Mrs. Cattafi is a tenant by the entirety, it noted correctly that the situation here is "a little bit different" than Capital Finance Co. of Delaware Valley. In that case, such an analysis had to be performed because a debtor co-tenant's interest was purchased at an execution sale. Capital Fin. Co. of Del. Valley, supra, 398 N.J. Super. at 305. That was not the case here. Moreover, 1099 LLC did not seek to levy on Cattafi's one-half interest in Unit 2B.

Lastly, Cattafi argues that the court erred in denying his request for an order to pay out of income monies owed to 1099 LLC. Under N.J.S.A. 2A:17-50(a), an application for monies to be paid from wages is made on the application of the judgment creditor. It is the prerogative of the judgment creditor as to which permissible form of collection remedy it wishes to pursue. In this case, the judgment-creditor did not pursue a wage execution and the trial court did not grant such a remedy in proceedings in the face of the judgment creditor's objections. We see no misuse of the court's discretion in this regard.

Based on our analysis, we therefore affirm the trial court's orders. We note, however, that as neither Mrs. Cattafi nor Bayview has ever been party to the action, it is without prejudice to either or both parties filing a separate action to determine what rights, if any, they may have to the monies paid to 1099 LLC.

After oral argument, we received a motion from Cattafi to temporarily remand the matter to the Law Division "to allow defendant's wife 30 days to file a motion to intervene and retain jurisdiction." We deny the application. First of all, once again, Cattafi himself has no standing to advance the interest of Mrs. Cattafi. Secondly, Cattafi's attorney may well have a positional if not a real conflict of interest, if the matter is pursued between them as to what is owed to whom with respect to the condominium property. Thirdly, it may well be necessary for a court to permit discovery and/or a plenary hearing to resolve any claims for monies levied upon and to consider, among other issues, the provisions of N.J.S.A. 2A:17-29 with respect to claims of property levied upon as well as N.J.S.A. 2A:14-9, the statute of limitations for such actions. While this opinion is without prejudice to Mrs. Cattafi and Bayview filing a separate action for relief for monies wrongfully levied upon, we deny the motion to remand.

The trial court's orders of July 14, 2008, and March 6, 2009, are affirmed.

Affirmed.


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