March 15, 2011
A-PAC GLOBAL, INC., PLAINTIFF-APPELLANT,
FUTURE WORKS UNLIMITED, INC., ADVANCED DIGITAL REPLICATION, INC., DEFENDANTS, AND JONATHAN RESNICK, DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-2798-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted October 6, 2010
Before Judges Sapp-Peterson and Fasciale.
Following a bench trial, the trial judge awarded damages to plaintiff, A-PAC Global, Inc. (A-PAC), in the amount of $136,160 against two now defunct companies, defendants Future Works Unlimited, Inc. (Future Works) and Advanced Digital Replication, Inc. (ADR). The court entered an order memorializing the judgment on October 22, 2009. Plaintiff appeals from that portion of the order dismissing plaintiff's claims against defendant, Jonathan Resnick (Resnick), the former sole shareholder of Future Works and ADR. Because we conclude the trial court mistakenly exercised its discretion in excluding certain evidence proffered by plaintiff, we reverse and remand for further proceedings.
A-PAC manufactured and sold wholesale CD and DVD cases. APAC's claim against Resnick stemmed from a guaranty he executed in January 2008. A-PAC had been ADR's supplier for its DVD cases for approximately three to four years, shipping one-half to one million cases per month at a cost of $50,000 to $100,000 per month. When A-PAC learned, through industry chatter, that ADR was having financial problems, its president, Ho Wang (Wang),*fn1 contacted Resnick to discuss the matter. Resnick told Wang that ADR needed A-PAC to ship three or four final shipments of cases so that it could finish packaging the remaining million disks in its warehouse. Those disks were to be liquidated in accordance with a settlement agreement ADR had reached in anunrelated royalties litigation. A-PAC and Resnick reached a verbal agreement on the pricing for the shipments.
On January 17, 2008, A-PAC's general manager, Kay Chow, faxed to Greg Thurik, ADR's operations manager, a guaranty for Resnick's signature. Thurik told Resnick that A-PAC wanted his personal guaranty before it would send any shipments. Resnick signed the guaranty on January 17, and faxed the document back on January 18. On January 21, a shipment from A-PAC arrived. According to both Resnick and Thurik, A-PAC's shipments had always been transported via carrier, and because the shipments originated out of California, it usually took one or two weeks for the shipment to arrive. Therefore, both Resnick and Thurick took the position that A-PAC shipped those goods prior to Resnick's execution of the guaranty. According to Resnick, after receiving the January 21 shipment, no other shipments were received from A-PAC.
On the first day of trial, the court considered defendants' motion to exclude documents that plaintiff intended to introduce. Defendants claimed the documents had not been provided to them until two days prior to trial. Defendants argued that the documents were provided outside the discovery period and they questioned whether the documents could be properly authenticated as business records.
In response, plaintiff's counsel represented to the court that the parties had not engaged in pre-trial discovery for two reasons. First, he had been relieved as counsel in March 2009 but then reinstated, and at no time after his reinstatement had defense counsel requested the production of any documents. Counsel argued further that there was no prejudice to defendants because the documents were packing slips, delivery receipts showing "when goods were actually signed [for] and delivered . . . ." Additionally, counsel argued that he was unaware "that [defendants] disputed receiving any of these goods. . . . I have not heard that come forth at all during this case and these packing slips do nothing but confirm [the] fact that [on] certain days goods were sent out and delivered and signed for." Finally, plaintiff's counsel argued that defendants never sought a court order compelling discovery or other relief.
The trial court granted defendants' motion, ruling:
So based on my reading of . . . Rule 4:14-2[(d)] and 4:18-1[(b)], these documents marked Plaintiff['s] Exhibit 7 just served on defense on June 23 are barred. They were not served promptly. They were served two days before trial and it completely puts defendant in a disarray with respect to the proofs that they anticipated encountering at the time of trial. So P-7 out.
Rule 4:14-2(d) addresses the production of documents and tangible things where a party has been noticed for depositions.
The rule permits the party noticing the deposition to require the deponent to produce "documents and tangible things at the taking of the deposition." Here, the deposition notice was served upon plaintiff on February 5, 2009. The notice scheduled the deposition for February 26, 2009, and included a demand that the noticed parties produce "[a]ll purchase orders, invoices, shipping records, bills of lading . . . concerning the balances alleged to be due in the Complaint[.]" There is no dispute that the deposition did not take place. Nor did defendants reschedule the deposition or file a motion to compel the parties to attend the deposition or for sanctions. See R. 4:23-4.
We disagree with the trial court's reasoning that the proffered documents were subject to exclusion pursuant to Rule 4:14-2(d) and Rule 4:18-1. Rather, Rule 4:23-4 sets forth the court's authority to impose sanctions for failure to attend a deposition, and this rule requires a motion as a condition precedent to granting relief. It is undisputed that defendants made no such motion during the discovery period. Further, any motion filed pursuant to Rule 4:23-4 must be filed during the discovery period, not at the time of trial. See R. 4:24-2 (providing that "[u]nless the court otherwise permits for good cause shown, motions to compel discovery and to impose or enforce sanctions for failure to provide discovery must be made returnable prior to the expiration of the discovery period").
Likewise, because defendants never separately served a notice to produce upon plaintiff pursuant to Rule 4:18-1, or assuming, as defendants argued before the trial court, the notice to produce pursuant to Rule 4:18-1 was incorporated into the notice to take depositions, defendants were nonetheless precluded, at the time of trial, from seeking sanctions for non-compliance for two reasons. First, Rule 4:18-1(b)(4) expressly provides that the remedy available to a party aggrieved by a failure to produce documents is a motion pursuant to Rule 4:23-5, which governs sanctions for failure to provide certain discovery, including documents sought pursuant to Rule 4:18-1. Rule 4:23-5 not only requires a formal motion for such relief, but also imposes a two-step procedure before relief may be granted against a delinquent party. Second, and most important, relief under Rule 4:23-5 is also subject to the requirement set forth in Rule 4:24-2, that such motions be filed prior to the discovery end date, which clearly did not occur here since defendants did not seek relief until the time of trial.
At trial, Resnick argued that it received no further shipments after executing the guaranty. The court credited this testimony and found that plaintiff failed to prove the exchange of valid consideration, resulting in "an unenforceable gratuitous promise." Additionally, the court found that plaintiff failed to prove "that it did ship all the goods ordered after Resnick signed the guaranty . . . and that as a result of non-payment[,] it was the defendants who . . . breached." Plaintiff's argument that the documents, if admitted, would show that shipments were made after Resnick executed the guaranty, are material to the question of whether adequate consideration existed for Resnick's personal guaranty. Shebar v. Sanyo Bus. Sys. Corp., 111 N.J. 276, 289 (1988). Therefore, in ruling that the proffered documents were excluded based upon a discovery violation, plaintiff's ability to prove there was valid consideration exchanged for the guaranty and that goods were shipped after Resnick executed the warranty was materially hampered.*fn2 We are therefore constrained to reverse.
In concluding that the trial court mistakenly exercised its discretion to exclude the proffered documents, we make no findings as to whether the documents are admissible as business records, as argued by plaintiff's counsel at trial. The court did not address this issue once it excluded the documents as a sanction for non-compliance with defendants' discovery demands. Because the parties do not dispute the existence of the guaranty, if the documents are admitted, retrial shall be limited to the court's determination whether the documents and any testimony or other competent evidence related to the documents establishes that there was sufficient consideration to enforce the guaranty and whether additional goods were shipped after the guaranty was executed.
Reversed and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction.