On appeal from Superior Court of New Jersey, Law Division, Sussex County, Docket No. L-484-05.
Submitted: March 14, 2011
Before Judges A.A. Rodriguez, C.L. Miniman and LeWinn
Intervenor Scott Harris, by his guardian ad prosequendum, Betty Harris (Harris), appeals from the denial of his application to modify or vacate a judgment approving the settlement of this action, instituted by plaintiff James Stabile against defendants Mary Stabile Benson (Mary), Michael Stabile (Michael), Edward Stabile (Edward), Sharon Adelman (Sharon), Carol Stabile (Carol) (collectively, the Stabile defendants), Western World, Inc. (Western), Cheyenne Corp. (Cheyenne), Pink Elephant, Inc. (Pink Elephant), and Cayuse, LLC (Cayuse) (collectively, the corporate defendants).*fn1 Harris also appeals the denial of his subsequent motion for reconsideration. We now reverse and remand.
Plaintiff and his five siblings, the Stabile defendants, are all equal shareholders as well as directors of Western, Cheyenne, and Pink Elephant. Cheyenne is a land-holding company which owned two parcels of real estate in Byram Township commonly known as Block 34, Lot 16, containing ten acres,*fn2 and Lot 17, containing ninety-two acres.*fn3 The two lots are separated by Route 206. Western operates a business on Lot 17 known as Wild West City and owns a lot that is contiguous to Lot 17. Pink Elephant owns the liquor license that permits Western to serve alcohol to its customers. Cayuse is the lessee of Lot 17 and pays the carrying charges for it.
On September 2, 2005, plaintiff filed a complaint against the Stabile defendants alone alleging various breaches of their directors' duties to shareholders, minority-shareholder oppression, corporate waste, negligent misrepresentation, fraud, breach of fiduciary duty, and conversion. On June 23, 2006, plaintiff secured an order providing in pertinent part that the Stabile defendants were to purchase plaintiff's "interests at a price and [in a] manner to be determined." The corporate defendants were added to the action by order entered on July 10, 2006.
Three days earlier, on July 7, Harris had been employed as an actor by Western and was participating in the reenactment of a gunfight at Wild West City. A fellow employee actor used a gun that did not contain blanks but rather live ammunition that had been brought to work by another employee sometime prior to the gunfight skit. Harris was shot in the head during the skit, suffered a catastrophic brain injury, and was severely and permanently disabled as a result.
Harris instituted a personal injury action in 2008 that assert strict-liability claims.*fn4 The defendants at that time were Cheyenne, Western, Pink Elephant, Cayuse, Michael, Mary, and various fellow employees. Harris sought to intervene in this action and was permitted to do so by order of September 5, 2008. His participation was limited to receipt of notice of all proceedings and orders entered in the action, notice to his counsel of the sale of any real property, and inclusion of his counsel on the counsel list. His request for the appointment of a fiscal agent was denied as premature and he was not permitted to participate in depositions. Both actions proceeded in tandem for some period of time, although they were not consolidated.
Trial commenced in the shareholders' action in 2009 and on October 30 the parties reported to the trial judge that the matter had settled. It was not until January 18, 2010, that Harris was apprised of the settlement by copy of a letter from counsel for Western, Cheyenne, and Pink Elephant to the judge submitting a proposed form of consent judgment approving the attached settlement and dismissing the action.
The settlement provided for the transfer to Cheyenne of plaintiff's shares in Cheyenne in exchange for title to Lot 16 and some additional property. The settlement agreement also provided that, in the event the proposed conveyance was void or voidable, all parties would return to the status quo prior to the settlement. The judge entered the consent judgment on January 21, 2010.
Harris objected to the judgment by letter dated January 26, 2010, and three days later filed an application pursuant to Rule 4:50 to modify or vacate it. He asserted that the judgment did not protect his rights; he had not consented to it; and Cheyenne received no value in exchange for its land, diminishing the value of Cheyenne's assets. He argued that he was a creditor with an interest in the assets of the Stabile companies under the Uniform Fraudulent Transfer Act, N.J.S.A. 25:2-20 to -33 (UFTA), and that the assets were being dissipated in derogation of his rights under the UFTA. He sought an order restoring his rights to execute against the real estate in the event he obtained a personal-injury judgment enforceable against Cheyenne.
Western, Cheyenne, and Pink Elephant opposed Harris's application on February 23, 2010. Plaintiff also opposed Harris's application. The Stabile defendants and Cayuse apparently did not file any opposition.
The judge concluded that there were no grounds justifying relief under
Rule 4:50 because the intervention was limited in scope; was only
intended to give Harris notice of the sale of assets to a third party;
the law did not prohibit the shareholders from settling this
litigation without notice to Harris; Harris's claim had not been
reduced to judgment; and the workers' compensation bar*fn5
was "at play." He found no violation of the intervention
order; the corporations were not insolvent; and nothing in the record
implicated a fraudulent transfer because everything was "done above
board." Finally, the judge found "that there was no intent to hinder,
delay, or defraud . . . Harris." As such, the public policy favoring
settlements pre-cluded any relief from the judgment. In denying Harris's motion, the
judge did not make any fact-findings regarding the value of Lots 16
and 17. An order giving effect to this decision was entered on March
Harris sought reconsideration of the March 5 order pursuant to Rule 4:49-2. He attached a valuation analysis of Lots 16 and 17 prepared by Integra Realty Resources*fn6 (IRR) opining that the property had a highest-and-best-use value of $1,060,000 as of August 1, 2006, because much of the land could not be developed due to wetlands and because it was in the Highlands Preservation Area.*fn7 Harris argued that the total of $11 million estimated by Blau was based on development rights that did not exist and the Blau appraisals were bogus. He also submitted a February 8, 2010, life-care plan and a March 29, 2010, economic report opining that the present value of the cost of medical care for ...