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Nicholas and Dana Brown v. William C. Martucci


March 12, 2012


On appeal from the Superior Court of New Jersey, Law Division, Special Civil Part, Union County, Docket No. DC-017451-10.

Per curiam.


Submitted February 29, 2012

Before Judges Sapp-Peterson and Ostrer.

William Martucci appeals from the final decision of the Special Civil Part, after a bench trial, awarding $10,000 to plaintiffs. The Browns claimed that Martucci fraudulently induced them to purchase shares in a company that they claimed became worthless. Rather than decide the merits of plaintiffs' fraud claim, the court sua sponte determined that plaintiffs' investment was a loan and required Martucci to repay it with costs, but no interest. We are compelled to reverse, based on the court's failure to allow cross-examination and to otherwise observe the formalities of a trial, and the lack of any evidential support in the record for the court's finding that the $10,000 payment was a loan.


Plaintiffs filed a complaint in Special Civil Part on September 3, 2010. The complaint alleged,*fn1

Defendant fraudulently induced Plaintiff to enter into a $10,000 investment contract, where the "investment" had no real value. Defendant, and other parties presently unknown, did not provide any required investment documentation whatsoever and have retained Plaintiff's investment after numerous demands for return of same.

The matter was tried on February 24, 2011. Plaintiffs were represented by counsel. Martucci appeared pro se.

We glean the following from the trial record. According to Nicholas Brown (Brown), the sole witness for plaintiffs, Martucci was a family friend. Martucci allegedly induced plaintiffs to invest $10,000 in a company called First Unity, Inc., which purportedly was engaged in a business involving automatic teller machines. Admitted into evidence was a January 21, 2005 check in the amount of $10,000 drawn on plaintiffs' joint checking account by Dana Brown, payable to First Unity, which plaintiffs delivered to Martucci. However, sometime in 2006, plaintiffs received a certificate indicating they owned 10,000 shares in a different company, Ammpro. The stock certificate was not placed in evidence.

Brown testified that he registered the shares with E-Trade, which valued his shares at $800, according to an E-Trade document that the court reviewed, but was not admitted into evidence. Brown alleged that Martucci promised substantial returns on his investment. "We were told we would make, you know, [$]20 to 30,000 which was still, you know an acceptable return." Brown claimed that Martucci told him that he was an owner of Ammpro.

Martucci admitted that he proposed to plaintiffs that they invest in First Unity; he stated he was an investor himself; and he forwarded to them an investor questionnaire.

So when I was speaking to her [Dana Brown], and I had told her that there was an opportunity that I thought might be good because they - to make a few dollars, that I, my family and friends were investing in it. And along with myself being part of the investment group, I asked her if she would be interested and she said she would. I said, well, I said if you want to, I'll send you out this paperwork and because they're requiring this questionnaire to show that you're either accredited or non-accredited investor. And I sent her the paperwork.

They filled it out, sent the check back with the $10,000 and I passed that on to the people who own the company.

Martucci admitted that he personally received plaintiffs' $10,000 check and alleged he passed it on to the owners of First Unity. Martucci claimed that First Unity then merged into Ammpro. He denied receiving any remuneration in connection with plaintiffs' investment. He also testified that he told plaintiffs the investment was a gamble. He asserted that plaintiffs completed an investor questionnaire that disclosed investment risks. He later testified that he did not personally invest in First Unity or Ammpro, but his daughters did.

The court actively participated in the examination of witnesses. The court interrupted plaintiffs' counsel's opening statement and engaged in a colloquy with him about plaintiffs' position on issues in the case. At various points, the court allowed plaintiffs' counsel to clarify the witness's responses to questions.

During his examination of the witness, the judge expressed his view of the evidence. For example, when Brown testified that he could not trade his stock, plaintiffs' counsel, although not a sworn witness, repeated Brown's testimony, eliciting agreement from the court, and sparking an informal discussion among Brown, his attorney, and the court about the value of plaintiffs' stock. When Brown testified that there was no market for his stock, the court responded, "Well, I wouldn't buy it."

As plaintiffs' counsel began to elicit testimony from Brown regarding the investor questionnaire, the court suggested that plaintiffs' counsel call Martucci as a witness to explain the document. Brown then left the stand without any opportunity by Martucci to cross-examine him.

Plaintiffs' counsel questioned Martucci about how he solicited plaintiffs' investment, eliciting the explanation we have quoted above. Counsel's questioning consumed two pages of transcript. Then, the court interceded, and conducted virtually the balance of the examination of Martucci.

During his examination of Martucci, the judge indicated that he was already convinced that plaintiffs' stock was worthless. He did so by stating to Martucci: "But its stock is worthless," "If I had five shares today, how much would I get for it? . . . You get nothing for them[,]" and "Would it surprise you to tell you that there's no value?"

The court also disclosed that it had drawn conclusions about whether Martucci had made false misrepresentations, and the nature of plaintiffs' reliance.

THE COURT: Right. You see the problem here, sir, is you were dealing with something that you don't have a firm knowledge of. That's the problem.

MR. MARTUCCI: Correct.

THE COURT: You should have never done what you did.

MR. MARTUCCI: But I did it as a -

THE COURT: I know you were trying to be a nice guy.

MR. MARTUCCI: And then but -

THE COURT: But what you did was completely misleading. You told that gentleman and your daughter that this was going to be a good investment and you had no right to do that because you just don't have the knowledge.

Q [BY THE COURT]: That's - you gamble.

A [MARTUCCI]: It could be wrong - absolutely.

Q [BY THE COURT]: Yeah, but they thought that you knew what you were doing.

A [MARTUCCI]: I don't think they knew that. I explained to them that it's a gamble.

Q [BY THE COURT]: Well, I don't think - A [MARTUCCI]: That's what I told them.

Q [BY THE COURT]: I think they had a lot of respect for you for no good reason and they were foolish too, to be perfectly blunt with you.

A [MARTUCCI]: But all these are not - all these things are not - have nothing to do with me. I don't own these companies. I have - I don't - I never benefited from any of this.

Q [BY THE COURT]: You may not have benefited but what you did was very wrong. You don't talk about things that you don't understand.

In attempting to determine whether plaintiffs signed the investor questionnaire, the court engaged in factual inquiries of plaintiffs' counsel, instead of fact witnesses. In the midst of the court's examination of Martucci, Brown interrupted without a question posed to him, at which point the court began directing questions to Brown.

After the court and plaintiffs' counsel had concluded questioning Martucci, plaintiffs did not formally rest. Nor did the court expressly advise Martucci that he was entitled to present a defense - as he had been called to the stand by the court during plaintiffs' case and questioned by the court and plaintiffs' counsel. Rather, the court simply asked Martucci, "All right, what else?" Martucci then addressed an aspect of the questionnaire and stated he was as much a victim as plaintiffs. When he began to refer to settlement discussions, plaintiffs' counsel objected.

The court then interrupted plaintiffs' counsel's objection and, apparently unexpectedly, announced its decision.

THE COURT: This is what I'm going to do because this is a situation where maybe the plaintiff learned something. But you should have learned something too.


THE COURT: Never talk about things that you really don't understand, you understand? And never tell anybody to invest in something that you have no idea how it works because you don't.

An IPO is like gambling. It's the same thing like a Hedge Fund where what you're doing is you're gambling. You're saying that a certain asset is going to gain in value because of certain situations which are complex situations.

You had no right to do that because you're not a licensed broker; nothing. You're just an ordinary guy thinking that you're Santa Claus, but you're not.

So what I am going to find is that this $10,000.00 was given to you as a loan and that you have to return it to him. And so he's going to get a judgment against you for $10,000.00, with costs of -

THE COURT: $57.00. Now the reason I'm doing that is I want you to learn a lesson, that you shouldn't be doing this kind of stuff. This is wrong. You got to get a license and other things about stock market to understand it. You got to get degrees. Even [Geithner] doesn't understand all of this stuff and maybe you know who he is. He's Secretary of [the] Treasury of the United States of America. It's complex.

So good luck and have a nice day all of you.

Martucci appeals the court's decision.*fn2 He argues the court's conduct during the trial denied him due process, as he was deprived the opportunity to cross examine plaintiff, and, at the court's direction, compelled to testify as part of plaintiffs' case in chief. He also argues there was no basis for the court's finding that the transaction between plaintiff and Martucci was a loan. Lastly, he argues that plaintiffs' complaint should have been dismissed on statute of limitations grounds.*fn3


We exercise a limited scope of review of a court's determinations in a non-jury trial. Seidman v. Clifton Sav. Bank, S.L.A., 205 N.J. 150, 169 (2011). We may disturb the trial judge's factual findings and legal conclusions only if they are "so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice[.]" Ibid. (internal quotations and citations omitted). Put another way, we inquire whether substantial evidence supports the trial judge's findings and conclusions. Ibid.

Applying that standard, we are compelled to reverse, as there is no evidence in the record to support the court's finding that plaintiffs loaned Martucci $10,000. Moreover, the trial court cites none. Cf. R. 1:7-4 (requiring findings of fact). Plaintiffs claimed they were victims of fraud.*fn4 The court made no clear findings and legal conclusions regarding that claim.

However, we are also obliged to address the irregular manner in which the trial was conducted, which denied Martucci due process and provides an independent basis for reversing the judgment and remanding for a new trial. We begin with the court's role in examining witnesses.

A judge is authorized to ask questions of witnesses. N.J.R.E. 614. We review the court's decision to examine witnesses under an abuse of discretion standard. State v. Medina, 349 N.J. 108, 130-31 (App. Div.), certif. denied, 174 N.J. 193 (2002) (bench trial). A court may examine witnesses to clarify testimony, aid the court's understanding, elicit material facts, and assure the orderly and expeditious conduct of the trial. Ibid. Concerns about the impact of the judge as questioner also "are less acute in the context of a bench trial, where judges serve as fact finders and have more latitude in questioning witnesses." State v. Taffaro, 195 N.J. 442, 451 (2008).

Nonetheless, even in a bench trial, "a trial judge must take special care to craft questions in such a manner to avoid being perceived as an advocate." L.M.F. v. J.A.F., 421 N.J. Super. 523, 537 (App. Div. 2011) (referring to court's questioning in a non-jury domestic violence trial). "There is a point at which the judge may cross that fine line that separates advocacy from impartiality. When that occurs there may be substantial prejudice to the rights of one of the litigants." Ridgewood v. Srell Inv. Corp., 28 N.J. 121, 132 (1958) (jury trial).

We have no doubt that the trial judge was engaged in a good faith search for the truth. We also recognize that in cases involving pro se parties, the court's involvement as questioner is often required, to assist parties in presenting essential facts in support, or in defense of a claim. Cf. J.D. v. M.D.F., 207 N.J. 458, 481 (2011) (referring to judge's obligation in a domestic violence case involving unrepresented parties to "sift[] through their testimony"). However, in this case, plaintiffs were represented by counsel. Yet, even before plaintiffs' counsel had the opportunity to present his case, the court prematurely and unnecessarily intervened and dominated the examination of Brown and Martucci. As the court began to form conclusions about the facts, the court assumed the role of advocate in his questioning. In so doing, the court deprived Martucci of a fair trial.

Also, a court may not, in the interests of expedition or because it believes sufficient facts have been elicited, deny a party the opportunity to cross-examine a witness. Ibid.; Peterson v. Peterson, 374 N.J. Super. 116, 124-25 (App. Div. 2005). The error is particularly harmful when the denial pertains to the principal witness against the party. Thus, the court's denial here of any opportunity by Martucci to cross-examine Brown was error.

Other procedural errors were committed. It was inappropriate for the court to make findings of fact before the trial was complete. The court should not have considered plaintiffs' E-Trade statement without plaintiffs offering it and the court admitting it into evidence. The court's question to Martucci, "All right, what else?" did not adequately inform Martucci of his opportunity to present his defense case. It is also unclear that either party had completed the presentation of their case when the court decided to render its decision.

We also address Martucci's argument that plaintiffs' complaint should have been dismissed on statute of limitations grounds. The record does not reflect Martucci asserted this affirmative defense before the trial court, in which case it would have been waived. Williams v. Bell Tel. Lab. Inc., 132 N.J. 109, 118-19 (1993). However, as it is unclear from the record that either side had completed its presentation when the court delivered its decision, Martucci on remand shall be permitted to raise the defense, and the court shall determine the applicable limitations period. Compare N.J.S.A. 49:3-71 (action for deceit under Uniform Securities Law shall be brought within two years after "the contract of sale or the rendering of the investment advice, or more than two years after the time when the person aggrieved knew or should have known of the existence of a cause of action, whichever is later"), with N.J.S.A. 2A:14-1 (six year statute of limitations for common law fraud action).

Finally, because the original judge accorded weight to the testimony and may be committed to his findings, upon remand the matter should be assigned to a different judge. J.L. v. J.F., 317 N.J. Super. 418, 438 (App. Div. 1999).

Reversed and remanded. We do not retain jurisdiction.

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