December 17, 2010
GARY FLEISCHHAUER, PLAINTIFF-RESPONDENT,
NICOLA PENGUE, A/K/A NICK PENGUE; FANTINO PAPALEO; CASTLE HILL BUILDERS; T.G.N., INC.; T.G.N. SOUTH, INC.; P.P.F., L.L.C., DEFENDANTS-APPELLANTS.
On appeal from the Superior Court of New Jersey, Chancery Division, General Equity Part, Middlesex County, Docket No. C-271-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued November 17, 2010
Before Judges Simonelli and Fasciale.
Defendants appeal from the July 10, 2009 Chancery Division order, which granted the motion of plaintiff Gary Fleischhauer for a turnover of funds, and denied defendants' cross-motion to vacate the final judgment entered on July 12, 2007. We affirm.
Plaintiff and defendants are former partners in a real estate development business, each owning a one-third interest. The dispute in this case involves plaintiff's interest in the project known as "Kings Estates." On February 18, 2003, plaintiff entered into a contract to purchase the Kings Estates property on behalf of the partnership. The contract provided for a closing date two years and ninety days from February 18, 2003.
Plaintiff commenced this action against defendants seeking payment of his one-third interest in the partnership's assets. Following a bench trial, Judge Travis Francis delineated the partnership assets and determined the worth of plaintiff's interest therein. The judge entered a final judgment on July 12, 2007, awarding plaintiff $242,666 for his one-third interest in Kings Estates, among other things, and requiring defendant Nicola Pengue to "diligently pursue the consum[m]ation of [the] closing of title on [the Kings Estates] property." Defendants did not seek a stay of the final judgment, and Pengue did not diligently pursue the closing of title on the Kings Estates property.
Defendants appealed, contending, in part, that the judge erred in making an award to plaintiff for his interest in Kings Estates because the partnership did not yet own the property, and thus, this asset was "a theoretical and hypothetical non-asset." We rejected that contention in an unpublished opinion rendered on March 12, 2009, and affirmed the judgment, concluding that:
The record demonstrates that defendant Pengue had entered into a contract for the purchase of Kings Estate[s] and that he did so on behalf of the partnership. That there may have been title problems or other difficulties in developing this property does not render the partnership's interest in the property immune from distribution. [Fleischhauer v. Pengue, No. A-6624-06 (App. Div. March 12, 2009) (slip op. at 3).]
Plaintiff filed a motion for a turnover of funds. Because the seller had subsequently terminated the contract in April 2009, defendants filed a cross-motion to vacate that part of the final judgment relating to Kings Estates pursuant to Rule 4:50-1(b), (e) and (f). Defendants argued that (1) the seller's termination of the contract constituted newly discovered evidence which defendants could not have discovered by due diligence; (2) enforcement of the judgment is inequitable under the circumstances and should not have prospective application; and (3) the judgment will result in a hardship to defendants because they do not have the Kings Estates property to develop, and plaintiff would be unjustly enriched. Prior to oral argument of the motions, the seller of the Kings Estates property indicated a willingness to revive the contract at the original purchase price.
Judge Travis Francis granted plaintiff's turnover motion and denied defendants' cross-motion to vacate, finding that the termination of the contract did not constitute newly discovered evidence and that defendants could have closed on the property pending the appeal but made a business decision not to do so. This second appeal followed.
A decision to vacate a judgment lies within the sound discretion of the trial judge, guided by principles of equity. Hous. Auth. of Morristown v. Little, 135 N.J. 274, 283 (1994). We will reverse the trial court's decision on a motion to vacate where there is an abuse of discretion. Ibid.; see also Mancini v. E.D.S. ex rel. N.J. Auto. Full Ins. Underwriting, Ass'n, 132 N.J. 330, 334 (1993). An "'abuse of discretion only arises on demonstration of manifest error or injustice,'" Hisenaj v. Kuehner, 194 N.J. 6, 20 (2008) (quoting State v. Torres, 183 N.J. 554, 572 (2005)), and occurs when the trial judge's "'decision [was] made without a rational explanation, inexplicably departed from, established policies, or rested on an impermissible basis,'" United States ex rel. U.S. Dep't of Agric. v. Scurry, 193 N.J. 492, 504 (2008) (alteration in original) (quoting Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561, 571 (2002)). Applying these standards, we discern no abuse of discretion in the denial of defendants' cross-motion to vacate the judgment.
To obtain relief pursuant to Rule 4:50-1(c) based on newly discovered evidence, the movant "must demonstrate 'that the evidence would probably have changed the result, that [the evidence] was unobtainable by the exercise of due diligence for use at the trial, and that the evidence was not merely cumulative.'" DEG, LLC v. Twp. of Fairfield, 198 N.J. 242, 264 (2009) (quoting Quick Chek Food Stores v. Twp. of Springfield, 83 N.J. 438, 445 (1980)).
"Rule 4:50-1(e) provides for relief from judgment where . . . 'it is no longer equitable that the judgment or order should have prospective application.'" Id. at 265 (quoting R. 4:50-1(e)). Our Supreme Court relied on federal precedent in enunciating a stringent standard: a motion under subsection (e) 'must be supported by evidence of changed circumstances,' . . . and '[t]he party seeking relief bears the burden of proving that events have occurred subsequent to the entry of a judgment that, absent the relief requested, will result in extreme and unexpected hardship.' [Id. at 266 (alteration in original) (quoting Little, supra, 135 N.J. at 285).]
However, the Court observed that subsequent to Little, the United States Supreme Court "moved towards a more flexible standard," that is, one "that does not require the additional showing of grievous hardship evoked by new and unforeseen conditions." Id. at 267 (citing Rufo v. Inmates of the Suffolk Cnty. Jail, 502 U.S. 367, 379-80, 112 S. Ct. 748, 757-58, 116 L. Ed. 2d 867, 883-84 (1992); Bd. of Educ. Of Okla. City Pub. Sch. v. Dowell, 498 U.S. 237, 246-48, 111 S. Ct. 630, 636-37, 112 L. Ed. 2d 715, 727-28 (1991)). Nonetheless, even with the more flexible standard, modification of a judgment is not appropriate in every instance, and it would not be appropriate simply "because 'it is no longer convenient to live with the terms of [the] decree.'" Ibid. (quoting Rufo, supra, 502 U.S. at 383, 112 S. Ct. at 760, 116 L. Ed. 2d at 886).
Under the flexible Rufo standard, "'[a] party seeking modification . . . may meet its initial burden by showing a significant change either in factual conditions or in law.'" Ibid. (quoting Rufo, supra, 502 U.S. at 384, 112 S. Ct. at 760, 116 L. Ed. 2d at 886). Under either the Little standard or the Rufo standard, "relief from judgment should ordinarily not be granted where the so-called changed circumstances were actually anticipated [at the time of the decree]. In such a case, a party seeking relief has the 'heavy' burden of establishing that it agreed to the decree in good faith and that it made a reasonable effort to comply with the judgment." Id. at 268 (citing Rufo, supra, 502 U.S. at 385, 112 S. Ct. at 761, 116 L. Ed. 2d at 887).
Finally, relief pursuant to Rule 4:50-1(f), "is available only when 'truly exceptional circumstances are present.'" Little, supra, 135 N.J. at 286 (quoting Baumann v. Marinaro, 95 N.J. 380, 395 (1984)). "[I]n order to obtain relief under this subsection, the movant must ordinarily show that the circumstances are exceptional and that enforcement of the order or judgment would be unjust, oppressive or inequitable." Pressler & Verniero, Current N.J. Court Rules, comment 5.6.1 on R. 4:50-1 (2011). "'No categorization can be made of the situations which would warrant redress under subsection (f) . . . . [T]he very essence of (f) is its capacity for relief in exceptional situations. And in such exceptional cases its boundaries are as expansive as the need to achieve equity and justice.'" DEG, supra, 198 N.J. at 269-70 (alteration in original) (quoting Court Inv. Co. v. Perillo, 48 N.J. 334, 341 (1966)).
Defendants cannot satisfy the standard to obtain relief pursuant to Rule 4:50-1(c) because the seller's post-judgment termination of the contract was not newly discovered evidence.
The contract required the closing to occur two years and ninety days from February 18, 2003. Accordingly, if the closing did not occur, either party could have terminated the contract. The seller's right to terminate, therefore, existed at the time of trial in 2007.
Defendants also cannot satisfy the standard to obtain relief pursuant to Rule 4:50-1(e) because the changed circumstance -- the seller's termination of the contract -- was actually anticipated and defendants made no effort whatsoever to comply with the judgment. Further, defendants created the changed circumstance by their intentional failure to comply with the judgment, close title, and pay plaintiff, or proceed with the purchase after the seller indicated a willingness to revive the contract. Thus, there are no exceptional circumstances or other reasons warranting relief pursuant to Rule 4:50-1(f) either.
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