February 17, 2011
ARCO CONSTRUCTION GROUP, INC., PLAINTIFF-APPELLANT,
SINOWEST FINANCIAL SERVICES AND CFC ASSOCIATES, L.L.C., DEFENDANTS-RESPONDENTS.
On appeal from the Superior Court of New Jersey, Law Division, Somerset County, Docket No. L-1955-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Telephonically argued January 19, 2011
Before Judges Baxter and Koblitz.
At the conclusion of an arbitration proceeding, an arbitrator entered judgment against defendant Sinowest Financial Services (Sinowest). The sole issue on appeal is whether the trial judge erred when she confirmed the arbitration award, and entered judgment, solely against Sinowest, thereby rejecting the motion of plaintiff Arco Construction Group, Inc. (Arco) to also enter judgment against defendant CFC Associates, L.L.C. (CFC). Although plaintiff maintained CFC was the "same entity" as Sinowest, and Sinowest was merely the trade name under which defendant CFC operated, plaintiff had not named CFC as a respondent in the arbitration.
We conclude the trial judge's reasons for declining to also enter judgment against CFC did not address the central issue raised, namely, whether the two entities are the same, and whether the arbitration award should therefore have been amended so as to also enter judgment against CFC even though plaintiff failed to name CFC in its arbitration demand. We therefore reverse the June 25, 2010 order, and the subsequent July 23, 2010 order denying plaintiff's motion for reconsideration, and remand for further proceedings.
On June 3, 2008, Arco entered into a contract with Sinowest, pursuant to which Arco was to provide labor and materials for renovations to the Tusk Restaurant located at 1736 Route 206 in Montgomery Township. The contract between the parties contained a mandatory arbitration clause. The contract identified Sinowest, John Cheng and Jimmy Vastardis as the "Owner[s]" of the property. Cheng and Vastardis signed the contract "personally" and as "Owner[s]," and Angel Cabrera signed the contract on behalf of Arco. Although the agreed-upon price set forth in the contract was $700,000, numerous change orders were executed during the course of construction. Before the work was complete, the restaurant was destroyed by a fire on March 15, 2009.
As a result of a dispute between Arco and Sinowest over how much money Sinowest still owed to Arco, on September 4, 2009, Arco filed a construction lien claim with the Somerset County Clerk. The construction lien claim was filed against the "real property owned by CFC Associates, L.L.C.[,] 36 Bridge Street, Metuchen, New Jersey" in the amount of $138,000 for the value of the work, services, materials or equipment provided in accordance with a contract with Sinowest Financial Services.
In response to Arco's lien, and as required by N.J.S.A. 2A:44A-14(a)(2), CFC, as the owner of the property against which the lien was filed, served a written demand for Arco to commence an action to establish its lien claim.*fn1 On October 26, 2009, in response to CFC's demand, Arco filed a complaint in the Law Division to foreclose on its lien and to stay the proceedings pending arbitration between Arco and Sinowest. The complaint filed by Arco named both Sinowest and CFC as defendants.*fn2
Notably, the complaint described each one as a separate corporation, and, in particular, the complaint specified that Sinowest was itself a corporation. The complaint alleged:
2. Upon information and belief, defendant, Sinowest Financial Services (hereinafter "Sinowest"), is a corporation with offices at 36 Bridge Street, Metuchen, New Jersey and is the business entity with whom Arco entered into a contract for the construction of a project known to Arco as "Construction of Tusk Restaurant, Montgomery Township, New Jersey" (hereinafter the "Project").
3. Upon information and belief, defendant, CFC Associates L.L.C. (hereinafter "CFC"), is a corporation with offices at 36 Bridge Street, Metuchen, New Jersey and is the owner of certain real estate property at 1736 Route 206, Montgomery Township, New Jersey, which is further identified as Lot 8; Block 20001, on the Tax Map of the Township of Montgomery, New Jersey (hereinafter the "Property").
Sinowest and CFC filed a joint answer to Arco's complaint. In their answer, they admitted the allegations of paragraphs 2 and 3, thereby acknowledging that Sinowest was a corporation.
The answer filed by Sinowest and CFC did not state that Sinowest was not a corporation and was merely the name under which CFC was authorized to do business.*fn3
On December 1, 2009, Arco filed its arbitration demand with the American Arbitration Association (AAA), naming only Sinowest as the respondent. Arco later explained that at the time it filed its arbitration demand, it did not know Sinowest was merely a registered trade name of CFC.
As required by the AAA rules, Sinowest submitted a witness list in which it identified John Cheng as a potential witness and as the owner of Sinowest Financial Services, with an address of 36 Bridge Street in Metuchen. A week later, Sinowest filed an answer and counterclaim, in which it asserted that no monies were due and owing under the contract, and alleging in its counterclaim that Arco owed Sinowest $50,000 due to Sinowest's overpayment. During the four days of hearings before the arbitrator, each side presented testimony and dozens of documents. Sinowest also argued that no award should be entered against Sinowest as Sinowest was not a party to the contract, which had been signed only by Cheng and Vastardis. The arbitrator rejected that argument, and issued an interim award on April 29, 2010, awarding Arco $120,449 in damages against Sinowest. The interim award denied Sinowest's counterclaim in its entirety. Thereafter, on June 2, 2010, the arbitrator issued a final award, which consisted of the original amount plus $20,500 in attorney's fees and $5,775 in AAA administrative fees, for a total of $147,724.
On June 9, 2010, Arco filed a motion to confirm the June 2, 2010 arbitration award and to enter judgment against "defendant, CFC Associates L.L.C. and CFC Associates, L.L.C. d/b/a Sinowest Financial Services."
In its reply to Arco's June 9, 2010 motion to confirm the arbitration award against both defendants, CFC and Sinowest, the attorney representing them advised the judge that:
There is no objection to the Arbitration awards being confirmed against Sinowest Financial Services, ONLY. However, [Arco] is attempting to have this award confirmed, and judgment entered, against CFC Associates, L.L.C., which is not nor was ever a party to the Arbitration. CFC Associates, L.L.C. was never named in the Arbitration as a Defendant. The only party that was named as a Defendant in the Arbitration submission by [Arco's] counsel was Sinowest Financial Services.
[T]he Final Award Of Arbitrator . . . clearly sets forth that the only Respondent in this case was Sinowest Financial Services and that that entity is the only entity which an award has been entered against.
[Arco] is attempting to enter an Arbitration award in the Superior Court, as a judgment, against a totally separate entity, specifically CFC Associates, L.L.C. This is set forth throughout the certification of [Arco's counsel] in support of [Arco's] motion to confirm the Arbitration award. [Arco's counsel] attaches deeds to the property, internet searches which are complete hearsay, and other miscellaneous documentation he [argues] would support a judgment against an entity that was never named in the Arbitration proceeding and which said entity [sic] CFC Associates, L.L.C., has never had an Arbitration award entered against it.
CFC Associates, L.L.C. never had an opportunity to file an answering statement to the arbitration demand . . . [or] present a defense[.]
There is no legal authority for . . . an award to be entered against CFC Associates, L.L.C.
In response to CFC's argument, Arco pointed during the motion hearing to the records on file with the Secretary of State to establish that Sinowest was merely the "associated name" or "fictitious name" of CFC. The two were, according to Arco, "one and the same entity." Therefore, "the fact that the arbitration demand did not list CFC Associates and the arbitration award is [only] against Sinowest is belying New Jersey law and it's belying . . . N.J.S.A. 44:2B-4, which allows an alter[nate] name." Arco argued that because Sinowest and CFC "are one and the same entity," judgment should be entered against both because Sinowest "does not exist on its own." Arco also observed that CFC and Sinowest have the same business address and that John Cheng, who signed the construction contract on behalf of Sinowest, is the owner of CFC.
The judge accepted defendants' argument that the judgment should be entered only against Sinowest. She reasoned:
The dispute here is whether a judgment against Sinowest is automatically also a judgment against CFC. [Arco] . . . cites many cases on how corporate entities incur liability under a fictitious name.
However, that is a defect in the pleadings. I'm not sure why the pleadings were not amended at some time, but the failure to put CFC as a party in the arbitration [demand] . . . seems to preclude any judgment against them and, therefore, I am going to deny the motion and, therefore, also deny the request for attorney's fees.
The judge signed an order on June 25, 2010 confirming the arbitration award, and entering judgment against Sinowest only.
On July 7, 2010, Arco moved for reconsideration, renewing the same arguments it had advanced during the June 25, 2010 motion hearing, but also asserting that: 1) the answer filed by Sinowest and CFC admitted that Sinowest was a corporation, even though, according to Arco, "[t]his was not true insofar as Sinowest has no formal corporate existence and was (and is) merely a d/b/a of CFC Associates"; 2) Arco had relied on defendants' answer in which they admitted that Sinowest was a separate corporation; 3) corporate records on file with the Office of the New Jersey Secretary of State establish that Sinowest Financial Services is "an associated name" for CFC, which Arco verified by providing a copy of the documents on file with the Secretary of State; 4) Sinowest "has no independent, formal existence as a business entity" because a "business entity name search" for Sinowest Financial Services through the Office of the Secretary of State indicates "there were no records found that meet your search criteria"; and 5) defendants' argument at the June 25, 2010 motion hearing that Sinowest and CFC were "totally separate entities" is unsupported by any legal authority and "is contrary" to N.J.S.A. 42:2B-4.
Arco's reconsideration motion was decided without oral argument. The judge denied the motion, reasoning:
I'm going to deny the motion. There's nothing new in the order [sic]. Nothing new in the papers that have been submitted. And the plaintiff cannot distinguish this matter between -- involving a default judgment in the present case. Nor did the plaintiff offer any argument by count [sic], the court's reasoning should apply.
In sum, the plaintiff re-argues the previously denied motion. I have not overlooked any facts or law; and, therefore, it's denied.
On appeal, plaintiff raises the same arguments presented in the Law Division, although Arco adds a separate argument: CFC should be equitably estopped from objecting to confirmation of the arbitration award and entry of judgment against CFC because its answer to plaintiff's complaint falsely, and improperly, admitted that Sinowest was a corporation, when in fact it was not, and defendant knew that Arco would rely to its detriment on the misleading information contained in defendants' answer.
Because CFC is a limited liability company, we begin our review of the parties' claims with a brief discussion of the circumstances under which such a company is permitted to use an "alternate name." The New Jersey Limited Liability Company Act, N.J.S.A. 42:2B-1 to -70, enacted in 1993, prohibits a Limited Liability Company (LLC) from conducting activities in this State under an "alternate name" unless:
(1) it also uses its actual name in the transaction of any of its activities in a manner that is not deceptive as to its actual identity; or
(2) it has first registered the alternate name as provided in subsection b. of this section. [N.J.S.A. 42:2B-4(a).]
The certification of registration of an alternate name must provide the date of establishment of the LLC, the alternate name intended to be used, and "a brief statement of character or nature of the particular activities to be conducted using the alternate name." N.J.S.A. 42:2B-4(b).
We turn to Point I, in which Arco argues that the trial court "erred in refusing to confirm the arbitration award and enter judgment against CFC Associates, L.L.C., d/b/a Sinowest Financial Services because a business operating under a trade name is not a separate and distinct entity, but [is] one and the same as the formal business entity which adopted the trade name." The judge never reached the issue of whether Sinowest and CFC were, as Arco claims, "one and the same." Instead, she merely concluded in her June 25, 2010 oral opinion that because Arco had not named CFC in its arbitration demand, and had confined its arbitration demand to Sinowest, there was a "defect" in the arbitration demand that prevented her from entering judgment against CFC.
The judge's reasoning was incorrect. As N.J.S.A. 2A:23B-22 makes clear, upon motion of a party, the court shall confirm an arbitration award, unless within thirty days of the arbitration decision, one of the parties petitions the court for modification of the award for any of the reasons set forth in N.J.S.A. 2A:24-9. Thus, as is evident, the judge was not without authority to at least consider Arco's request that the arbitration award be modified and that judgment be entered against CFC.
We turn to an analysis of the circumstances under which an arbitration award may be modified. N.J.S.A. 2A:24-9 provides:
The court shall modify or correct the award in any of the following cases:
a. Where there was an evident miscalculation of figures or an evident mistake in the description of a person, thing or property referred to therein;
c. Where the award is imperfect in a matter of form not affecting the merits of the controversy.
The court shall modify and correct the award, to effect the intent thereof and promote justice between the parties.
Subsection (a) of N.J.S.A. 2A:24-9 is inapplicable because it is limited to the correction of "simple arithmetical errors, such as 2=5, or obvious mistakes in identification, 14 Hill Street instead of 41 Hill Street." Tretina Printing, Inc., v. Fitzpatrick & Assocs., 135 N.J. 349, 359 (1994).
Subsection (c), in contrast, was potentially a viable mechanism to modify the arbitration award to add CFC as an entity against whom the award was made. The court did not, however, consider whether N.J.S.A. 2A:24-9(c) authorized a modification of the arbitration award. In particular, the judge did not consider Arco's contention, which it supported by numerous documents from the Office of the Secretary of State, that Sinowest was nothing more than a fictitious name used by CFC and that judgment should therefore be entered against the latter. Nor did the judge consider Arco's argument that because CFC had been named as a defendant along with Sinowest in Arco's October 26, 2009 complaint, CFC was, at a minimum, on notice of Arco's arbitration demand and of the ensuing arbitration proceedings. The judge made no findings of fact on whether, as Arco claimed, Sinowest was nothing more than a registered trade name of CFC, even though the documents presented to her by Arco enabled her, and in fact required her, to make a finding, one way or the other, on that issue. See R. 1:7-4.
We therefore remand for further proceedings during which the judge shall determine: 1) whether CFC is a limited liability company organized pursuant to the New Jersey Limited Liability Company Act; 2) if so, whether Sinowest is an "alternate name" properly registered pursuant to N.J.S.A. 42:2B-4; 3) whether Sinowest is the "same entity" as CFC, either because it is merely a trade name or "alternate name" of CFC, or for any other reason; 4) why Arco did not name CFC as a party to the arbitration proceeding; 5) whether, if CFC had been a party to the arbitration proceeding, it would have defended against Arco's monetary claims any differently from the way in which Sinowest did so;*fn4 6) whether Arco exercised reasonable diligence in ascertaining what it now claims is the actual relationship between Sinowest and CFC, and if it did not, what impact, if any, such omission should have on its claims for relief against CFC; and 7) whether CFC will suffer any prejudice by the entry of judgment against it that it could, or would, have avoided had it been named by Arco as a party to the arbitration proceeding. Once the judge has addressed these issues, and any others she deems appropriate, she shall determine whether a modification of the arbitration award to add CFC is required by N.J.S.A. 2A:24-9(c) because the award is "imperfect in a matter of form not affecting the merits of the controversy."
Reversed and remanded.