September 29, 2010
CENTRAL JERSEY AIRPORT AND JOSEPH HORNER, PLAINTIFFS-RESPONDENTS,
JOHN JONES AND BENJAMIN JONES, DEFENDANTS, AND STEPHEN C. RICHARD, DEFENDANT-APPELLANT.
AIRCRAFT SUPPORT SERVICES, PLAINTIFF,
JOSEPH HORNER, DEFENDANT.
On appeal from Superior Court of New Jersey, Law Division, Somerset County, Docket Nos. L-1827-04 and DC-3935-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued telephonically: June 2, 2010
Before Judges C.L. Miniman and Waugh.
Defendant Stephen C. Richard (Richard) appeals from two orders entered on July 10, 2009, for post-judgment relief. The first order in relevant part granted the application of plaintiffs Central Jersey Airport, Inc. (Central Jersey), and Joseph Horner (Horner) (collectively, plaintiffs) to evict Aircraft Support Services, Inc. (Aircraft Support), from Central Jersey's premises. The other order denied Richard's application to compel Horner to purchase Richard's interest in Central Jersey without prejudice. Finding no error in either post-judgment order, we affirm.
On December 8, 2004, plaintiffs filed a complaint in the Superior Court of New Jersey, Law Division, Somerset County, under docket number L-1827-04, against Richard and John Jones, but not Benjamin Jones, who was joined later.*fn1 Plaintiffs sought to recover rent that Jones failed to pay for his lease of Hangar C at Central Jersey. Plaintiffs asserted that they had been unaware of an alleged side deal between Jones and Richard pursuant to which Richard was permitted to use Jones's fuel storage tanker as a setoff against rent due and owing Central Jersey. Plaintiffs further alleged that Richard violated his fiduciary duties to Central Jersey and sought judgment against Richard and Jones for rent due and owing. Plaintiffs also sought punitive damages from Richard based on this conduct, which plaintiffs characterized as fraudulent, and sought removal of Richard as a member of Central Jersey, which at the time was an LLC.
On or about March 9, 2005, Richard filed an answer, admitting some of the allegations and denying others. He also asserted counterclaims against Horner, seeking an order compelling Horner to produce certain Central Jersey financial information and compelling Horner to purchase Richard's interest in Central Jersey at its fair market value. The complaint was amended on two occasions thereafter, with Richard filing answers to each amended complaint. Plaintiffs answered the counterclaim on or shortly after June 7, 2005.
Aircraft Support, a corporation owned by Richard, filed a separate complaint*fn2 against Horner in the Superior Court of New Jersey, Law Division, Special Civil Part, Somerset County, under docket number DC-3935-06, for breach of contract. The two actions were consolidated for trial by order dated September 22, 2006.
The facts giving rise to these two complaints began in 1996 when Horner and Richard purchased Kupper Airport in Hillsborough at an auction sale. Horner and Richard then formed a limited liability company known as Central Jersey Airport, LLC, to own, operate, and manage the airport. Horner owned eighty percent of the company; Richard owned the remaining twenty percent. Pursuant to the operating agreement, Horner and Richard were the managing members of the company.
Richard was also the sole shareholder of Aircraft Support, a fixed-base operation which maintained and repaired aircraft. Aircraft Support conducted its business on Central Jersey's premises. After Horner and Richard acquired Kupper Airport, Richard's daughter and son-in-law formed Millstone Valley Flight School, Inc. (Millstone), which operated a flight school on Central Jersey's premises. Subsequently, Central Jersey purchased Millstone in 1997.
In 2001, Richard agreed that Aircraft Support and Millstone would each pay $1000 per month in rent for use of Central Jersey's facilities. The companies began paying rent in July 2001. Also around this time, Richard entered into an agreement with John Jones, another tenant at the airport, pursuant to which Richard would have use of Jones's fuel storage tank at the airport and Jones's rent payment would be waived. Jones accordingly did not make any further rent payments.
Central Jersey filed a Chapter 11 bankruptcy petition in March 2002. After the filing of the bankruptcy petition, Richard caused Aircraft Support and Millstone to stop paying rent. Pursuant to a provision of the reorganization plan, Central Jersey was ultimately converted from a limited liability company to a corporation in September 2004. Richard did not object to the reorganization plan but did object to Central Jersey's incorporation. Horner retained seventy percent of the shares, Richard retained twenty percent, and a third party retained ten percent. Central Jersey continued to manage and operate the airport. Horner and Richard's relationship thereafter broke down, and Richard made no attempt to participate in running the affairs of Central Jersey.
The deterioration of the relationship culminated in the filing of the instant lawsuit. In the First Count of their second amended complaint, plaintiffs alleged that James and Benjamin Jones were in possession of Hangar C after their written lease had expired and a Notice to Quit had been served upon them. Also, at that time they were indebted to Central Jersey for $11,606.48 in unpaid rent. Horner alleged that he was not aware of any side deal respecting payment of rent Richard made with the Joneses in breach of his fiduciary duty to Central Jersey. In the Second Count, plaintiffs alleged that Horner and Richard were equal shareholders in Millstone. They further alleged that Richard handled its day-to-day operations and had refused to allow it to pay rent to Central Jersey in breach of his fiduciary duty to Central Jersey. In the Third Count, plaintiffs alleged that Richard used space at the airport and refused to pay rent for it, again in breach of his fiduciary duty to Central Jersey. In their Fourth Count, plaintiffs alleged that Richard had previously operated a company known as Taft Air at Central Jersey, again without paying rent in breach of his fiduciary duties to Central Jersey. In the Fifth Count, plaintiffs alleged that Richard failed to pay Kerry Kilpatrick for leased planes, causing Kilpatrick to refuse to pay its rent to Central Jersey. Finally, plaintiffs sought removal of Richard as a shareholder of Central Jersey.
In the counterclaim filed in response to the original complaint, Richard alleged that he was an oppressed minority shareholder, sought access to financial information, and requested an order compelling Horner to purchase his interest in the corporation. A Special Civil Part case in which Aircraft Support sought payment of $10,209.40 from Horner for past-due repair and maintenance costs was consolidated with this case.
A bench trial was conducted from April 9 to April 12, 2007. The judge placed an oral decision on the record on April 12, 2007. In ruling on the complaints and counterclaim, the judge first found that Richard was not an oppressed minority shareholder. He then denied Richard's request for an accounting but ordered that an independent appraisal of the value of Central Jersey and the airport real property be conducted. The judge next concluded that Richard violated his fiduciary duty to Central Jersey when he caused Aircraft Support and Millstone to stop paying rent. He found that Central Jersey was entitled to $86,000 from Richard. The judge refused to remove Richard as a shareholder and denied without prejudice plaintiffs' request for ejectment of Aircraft Support and Millstone. Finally, the judge found that Horner owed Aircraft Support $10,209.40 for repair and maintenance costs.
In a May 4, 2007, final judgment memorializing his oral decision, the judge entered judgment in favor of Central Jersey and against Richard in the amount of $86,000 and a second judgment in favor of Aircraft Support and against Horner in the amount of $10,209.40. The judge also ordered appraisals of Central Jersey, Central Jersey's real property, and Millstone to be conducted within ninety days. The judge made provision in the judgment for any potential disagreement over whom to select as the appraisers and required Central Jersey to pay for all such appraisals. He stayed execution on the money judgments until the appraisals had been completed. The judge ordered that the cross-applications to evict Millstone*fn3 and Aircraft Support were denied pending receipt of the appraisals. He denied all claims for punitive damages, denied all other remedies sought in the two actions, and denied all claims for counsel fees and costs. Finally, he noted on the judgment that no one had objected to its form. No appeal was taken from this judgment.
Two years later, on May 13, 2009, plaintiffs filed a motion for post-judgment relief seeking (1) an amended judgment against Richard fixing his financial obligations at $131,800; (2) the ejectment of Aircraft Support; (3) an order compelling Richard to bear full responsibility for preparing the 2007 tax returns for Millstone and paying all penalties and interest which may be due thereon; and (4) an award of counsel fees and costs. Plaintiffs' counsel submitted a supporting certification in which he alleged, largely through hearsay, that Richard had refused to make any payments to Central Jersey on behalf of Aircraft Support while Millstone had been closed by agreement on May 31, 2007. Plaintiffs' counsel alleged that Richard had thereafter sold the school while Horner was out of town and never accounted for the proceeds, preventing Horner from preparing the tax returns.
Plaintiffs' counsel further alleged that Richard had not made any payments to Central Jersey and continued to breach his fiduciary duties to it. He informed the court that the appraisal of Central Jersey had not been completed because it was without funds to pay the balance due on the appraisal and also owed money to a paving contractor, causing the Federal Aviation Administration to suspend Central Jersey's letter of credit. In all, Central Jersey's financial obligations substantially exceeded $500,000. Its monthly expenditures exceeded its rental income, with Aircraft Support owing Central Jersey $131,800. Another of Richard's companies, Somerset Spring & Alignment, Inc., owed Central Jersey $24,750 in back rent.
Richard filed a cross-motion on June 18, 2009, seeking an order directing Horner to purchase Richard's interest in Central Jersey for a price equal to twenty percent of the appraised value of the real property less the principal amount due on any mortgages. Richard filed a certification in which he averred that the real property had been appraised on May 2, 2008, at seven million dollars, although his attorney did not receive the full report until August 7, 2008. He then offered to sell his interest in Central Jersey for $1,120,000 on December 8, 2008. Plaintiffs rejected that offer on December 22, 2008, without making any counteroffer. Richard then alleged nine instances of inappropriate conduct by Horner.
Richard further alleged that Aircraft Support only agreed to pay $1000 per month as rent, which included six tie downs for aircraft for which plaintiffs were now claiming additional rent. He urged that these claims were denied by the May 4, 2007, order. He pointed out that Horner personally made use of Central Jersey facilities for his other businesses without paying rent to it. Finally, he contended that Horner had all of the financial records of Millstone and there was no reason why Horner could not file the tax return at issue.
A hearing on the motions was held on July 10, 2009, before the trial judge, after which he entered two orders. In the first order, the judge denied without prejudice plaintiffs' motion for an amended judgment against Richard but granted their request for an order of ejectment against Aircraft Support. In the second order, the judge denied without prejudice Richard's cross-motion for an order compelling Horner to purchase Richard's interest in Central Jersey.
The judge explained his reasons in his oral decision placed on the record that day:
This matter arises from the dispute between plaintiff Central Jersey Airport which has Joseph Horner as 80 percent owner, and Stephen Richard as 20 percent owner with respect to the operations of the corporation and its primary asset which is an airport located in Hillsborough, New Jersey.
There was a bench trial conducted here in April of 2007 regarding issues that had been raised and consolidated through several different lawsuits, and following that trial there was a decision placed on the record by me, of which we have a transcript here that Mr. Levinson has made reference to, essentially granting a judgment in favor of Central Jersey Airport and against Mr. Richard for $86,000 for rent owed at that time to the airport by two business entities that Mr. Richard either owned or controlled, one Aircraft Support Services, Incorporated and the other one Millstone Valley Flight School. The total of $86,000 was divided [$]57,000 as rent owed by Aircraft Support Services and [$]29,000 as rent owed by Millstone Valley Flight School.
At the same time there was a judgment against Mr. Horner for $10,209.40 for repair and maintenance of his aircraft by Aircraft Support Services, and the judgment that was entered was the difference between those two.
Although there was a request for ejectment of these business entities at the time of the original trial, this Court denied those requests without prejudice with the intention that if an appraisal was conducted, maybe the parties would be able to come to an agreement based on that appraisal that would take care of money owed by one side to the other and allow them to either move on or continue in business without the need to eject one of the companies.
The Court gave the parties 90 days to have an appraisal conducted, but it took much longer than that, close to two years, to get the appraisal completed. The appraisal was done by BRB Valuation and Consulting Services. Maybe two years was not a correct understanding of how long it took. It took about nine months to get the appraisal of the land, $7 million.
Horner, Mr. Horner now says that Aircraft Support Services still has not paid rent to the airport and is seeking total rent due as of May 1, 2009, of $131,800. This would be the prior rent owed plus additional rent at $4,500 per month which plaintiff says is a reasonable rent and equating to $1.11 per square foot for the space that Aircraft Support Services is using when same space would rent on the market for close to $5.00 per square foot.
But because there has never been an agreement between the parties other than the $1,000 per month for rent, this Court would not allow plaintiff unilaterally to increase the rent retrospectively to $4,500 per month, and will assess rent arrearages at the prior agreed rate of $1,000 per month. Without adding any late fees or anything else, that would add up to $81,000 at this stage.
Because there is no dispute that Aircraft Support Services is $81,000 in arrears in rent owed to the plaintiff[,] because Aircraft Support Services was a party to the original litigation, because rent arrears were present at the time of trial over two years ago and that remedy was denied without prejudice for the reasons stated, but those reasons have not borne fruit through this time, there is no longer any reason for me to deny the remedy of ejectment to the plaintiff.
Accordingly, the plaintiff is entitled to a post[-]judgment Order ejecting Aircraft Support Services from further occupancy of its space at Central Jersey Airport because of the rent arrearages.
Aircraft Support Services will be given an opportunity to come up with the rent that is owed, and if it's able to do that, then it can continue in operation.
Richard filed a notice of appeal on August 24, 2009, in which he challenges ejectment of Aircraft Support and the denial of his cross-motion to compel Horner to buy out his interest in Central Jersey.
First, Richard contends that the judge erred in failing to follow the law of the case in ruling on the post-judgment motions. Richard urges that the judge ruled in 2007 that plaintiffs must pursue "other remedies" before seeking ejectment. He urges that the judge contravened this "law of the case" when he granted the motion for ejectment because plaintiffs never pursued "other remedies." Second, Richard claims that the judge erred in denying his motion to compel Horner to purchase his interest because Richard had previously presented the applicable law on the issue to the court, contrary to the judge's statements at the hearing on the post-judgment motions.
Plaintiffs first respond that the judge did not err in ordering the ejectment of Aircraft Support because the judge never intended to compel any affirmative action to secure rent from Richard. Instead, the judge "wanted to give the parties time to resolve their differences." Plaintiffs further argue that Richard's claims regarding the law of the case should not be entertained because the arguments were not raised below. In response to Richard's second point, plaintiffs, citing Rule 2:2-3(a)(1), first assert that since the judge denied Richard's motion without prejudice, the accompanying order is not a final ruling from which an appeal may be taken. They further allege that even if it is a final ruling, the judge did not err in denying the motion because Richard failed to demonstrate that a forced purchase was his last resort.
Richard's appeal from the denial of his cross-motion is readily resolved by the procedural posture of the case. The final judgment entered on May 4, 2007, denied Richard's counterclaim alleging that he was an oppressed shareholder. After reviewing the evidence before him bearing on the counterclaim, the trial judge ruled:
I conclude that Mr. Richard is not an oppressed minority shareholder in this corporation. It is not a situation where he has been totally frozen out by Mr. Horner or other shareholders of participation and there is no indication that his interests in this corporation are somehow being compromised. It is simply a matter of Mr.
Horner being the majority shareholder and Mr. Richard being a minority shareholder and the manner of operating the business.
Nonetheless, the judge did afford Richard some equitable remedies in view of the extent to which Richard was excluded from many corporate decisions. He found that there was no need for an accounting but did order independent appraisals, required the parties to consult with each other with respect to the appointment of a neutral appraiser, failing which the court would appoint someone, and required Central Jersey to pay for the appraisals.
Richard did not appeal the judgment dismissing his counterclaim; he did not file a motion to alter or amend the judgment pursuant to Rule 4:49-2, Cummings v. Bahr, 295 N.J. Super. 374, 384 (App. Div. 1996) (finding that a motion for reconsideration is appropriate if the court's reasoning is "palpably incorrect or irrational"; the court failed to consider "probative, competent evidence"; or the litigant is offering new or additional information for the court's consideration (citation omitted)); he did not file a motion for relief from the judgment within one year of the judgment under Rule 4:50-1(a), (b), and (c) and Rule 4:50-2; and he did not file a motion alleging any of the grounds for relief from the judgment under Rule 4:50-1(d)-(f). T.W. v. A.W., 224 N.J. Super. 675, 683 n.9 (App. Div. 1988) ("If the judgment is erroneous, the unsuccessful party's remedy is to have it set aside or reversed in the original proceeding." (quotation omitted)), certif. denied, 117 N.J. 44 (1989). He also never filed a motion in aid of litigants' rights to compel Central Jersey to secure all of the required appraisals, which would have enabled the parties to discuss a method to resolve the outstanding judgments without execution and levy, such as by an adjustment in the percentage interest of the parties in Central Jersey. In re N.J. State Bd. of Dentistry, 84 N.J. 582, 586 n.1 (1980) ("A motion in aid of litigants' rights is normally reserved as a means to compel compliance with a judicial order.").
Instead, Richard returned to court on a post-judgment motion again seeking a determination that he was an oppressed shareholder and an award of the panoply of remedies available to such a shareholder. However, that issue had already been decided against him by a final judgment dismissing all of his claims with prejudice. He was and remains bound by the determination with respect to the conduct of Horner prior to May 4, 2007. See Velasquez v. Franz, 123 N.J. 498, 507 (1991) (finding that "a dismissal with prejudice constitutes an adjudication on the merits 'as fully and completely as if the order had been entered after trial'" and precludes a later suit on the same issue (citation omitted)). To the extent that he was attempting to allege oppression thereafter, he was required to make such a claim in a second lawsuit, not on post-judgment relief.
We also find no merit in Richard's claim that the judge failed to follow the law of the case with respect to ejectment of Aircraft Support. The judge denied the request for eviction of Aircraft Support and Millstone "without prejudice to any post-trial motions seeking that remedy because of inability of the parties to resolve the case otherwise." When plaintiffs returned to the court on May 13, 2009, which was two years after the judgment, their counsel alleged that Central Jersey was not financially able to pay the appraisers' fees. Richard has not pointed to any evidence raising a fact dispute in this respect, although of course the attorney's affidavit contravened Rule 1:6-6.
Because Central Jersey was not able to secure appraisals, it was not able to resolve the case without the remedy of ejectment. The doctrine of law of the case simply has no application here. As we stated in State v. Hale, 127 N.J. Super. 407 (App. Div. 1974):
It has been generally stated that the "law of the case" doctrine "applies to the principle that where there is an unreversed decision of a question of law or fact made during the course of litigation, such decision settles that question for all subsequent stages of the suit." Wilson v. Ohio River Company, 236 F. Supp. 96, 98 (S.D.W.Va. 1964), aff'd 375 F.2d 775 (4 Cir. 1967). This rule is based upon the sound policy that when an issue is once litigated and decided during the course of a particular case, that decision should be the end of the matter. United States v. U.S. Smelting Refin. & M. Co., 339 U.S. 186, 198, 70 S.Ct. 537, 94 L.Ed. 750 (1950). "Law of the case" most commonly applies to the binding nature of appellate decisions upon a trial court if the matter is remanded for further proceedings, or upon a different appellate panel which may be asked to reconsider the same issue in a subsequent appeal. 5 Am. Jur. 2d, Appeal and Error, § 744 at 188-189 (1962); Scamahorne v. Commonwealth, 376 S.W.2d 686 (Ky. Ct. App. 1964). A final judgment is required in order to sustain an application of the rule, just as it is for the kindred rule of res judicata. United States v. U.S. Smelting Refin. & M. Co., supra, 339 U.S. at 199, 70 S.Ct. at 544.
The doctrine of "law of the case" is also applied to the question of whether or not a decision made by a trial court during one stage of the litigation is binding throughout the course of the action. 5 Am. Jur. 2d, supra at 189. The use of the doctrine in this situation avoids repetitious litigation of the same issue during the course of a single trial. With respect to this aspect of "law of the case" it has been generally stated that "the 'law of the case' concept is merely a non-binding decisional guide addressed to the good sense of the court in the form of 'a cautionary admonition' against relitigation 'when the occasion demands it.'" Ross Products, Inc. v. N.Y. Merchandise Co., 242 F. Supp. 878, 879 (S.D.N.Y. 1965). [Id. at 410-11.]
Here, the judge did not initially rule that ejectment was not an available remedy for failure to pay rent. In fact, he acknowledged that it was such and contemplated that ejectment might well have to be ordered if Aircraft Support continued to withhold rent and the parties were unable, with the aid of the ordered appraisals, to resolve the cross-judgments for unpaid rent and unpaid services. Because both events occurred, the judge properly granted the remedy he had, hopefully, withheld initially.