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Anthony Degonge v. John J. Schultz


July 30, 2012


On appeal from the Superior Court of New Jersey, Chancery Division, Atlantic County, Docket No. C-14-11.

Per curiam.


Submitted July 17, 2012

Before Judges Sabatino and Kennedy.

Anthony DeGonge appeals from an August 12, 2011 order of the Chancery Division granting summary judgment in favor of defendant John J. Schultz and dismissing plaintiff's complaint.*fn1

We affirm.

On May 15, 2005, plaintiff was assaulted and injured by several individuals while in the parking lot of a nightclub in Atlantic City. The nightclub and parking lot were operated by Ottheck Group, Ltd. (Ottheck), a corporation whose sole shareholder was Schultz. Schultz owned the real estate upon which the nightclub and adjacent parking lot were situated and Ottheck leased the real estate from Schultz pursuant to a written lease.

On February 5, 2007, plaintiff filed a complaint in the Law Division against Schultz, Ottheck, and others, alleging that their negligence and "wanton and willful" misconduct proximately caused his injuries. On July 25, 2008, Schultz and Ottheck filed an amended answer and third party complaint against Carman Corporation (Carman). The third party complaint asserted that Ottheck "was dissolved pursuant to the statutes of New Jersey" on June 19, 2006, and alleged that prior to plaintiff's injuries, Carman had been retained to procure insurance coverage for Schultz and Ottheck but had negligently failed to obtain insurance or, alternatively, allowed coverage to lapse. Consequently, according to the third party complaint, Schultz and Ottheck "had no insurance coverage" on the date plaintiff was injured.

On March 9, 2009, Carman filed a motion for summary judgment, on notice to all counsel, seeking to dismiss the third-party complaint. In its statement of material facts submitted pursuant to Rule 4:46-2(a), Carman asserted that Ottheck and Schultz had been notified in 2003 that their insurance coverage would expire on December 29, 2003, and their policy of insurance "will not be renewed." Counsel for Ottheck and Schultz on April 14, 2009, executed a stipulation dismissing the third party complaint with prejudice.

Thereafter, Schultz moved to dismiss the complaint against him "individually" and to dismiss the second count of the complaint which sought punitive damages. On November 19, 2009, the motion judge denied summary judgment dismissing the complaint against Schultz individually, but granted summary judgment dismissing the second count of the complaint for punitive damages.

Plaintiff had opposed Schultz's summary judgment seeking to dismiss the complaint against him in his individual capacity.

Plaintiff asserted that there was sufficient evidence in the record to establish that Schultz "actually operated" the nightclub in his individual capacity, and also to "pierce the corporate veil." The motion judge observed that he would not deny the motion on the "piercing the corporate veil" theory because the facts pertaining to that issue were not sufficient at that point to warrant submitting it to a jury. He did, however, rule that there was sufficient evidence for a jury determination on whether Schultz "was, actually, in his individual capacity, an operator of the club" and, consequently, denied Schultz's motion.

On January 13, 2010, on application of the plaintiff, the trial court entered an order dismissing the complaint with prejudice against Schultz. The order of dismissal recited that it was "without prejudice to plaintiff's right on appeal" with respect to an order entered on November 19, 2009, "granting judgment to [d]efendant Schultz on [p]laintiff's application to pierce the corporate veil[.]" Ottheck subsequently failed to appear for trial and, following a proof hearing, the court entered judgment against Ottheck on February 22, 2010, for $2,114,162.24. Plaintiff did not thereafter appeal from the "judgment" referenced in the stipulation of dismissal.*fn2

On February 4, 2011, plaintiff filed a second action against Schultz and Ottheck. The complaint, which was filed in the Chancery Division, asserted that Ottheck "sold all or substantially all of its assets" on September 27, 2005, for $7 million and thereafter filed a certificate of dissolution on June 19, 2006, but "did not make adequate provision for payment of creditors such as plaintiff" pursuant to statute. The complaint averred that Schultz "as sole shareholder of Ottheck received assets" exceeding plaintiff's personal injury judgment against Ottheck and sought judgment against Schultz "individually" for that amount. The second count of the complaint sought relief "as necessary" pertaining to Ottheck.

Schultz thereafter moved for summary judgment dismissing the second complaint on various grounds, including a claim that it was barred by the entire controversy doctrine under Rule 4:30A. The motion was heard on August 12, 2011.

Judge William C. Todd, III, after considering the arguments and submissions of the parties, dismissed the complaint. Judge Todd explained that the first complaint "did assert claims against [] Schultz individually" and that, prior to dismissal of that action, "plaintiff did receive information that the sale and dissolution [of Ottheck] had occurred." He noted further that as a consequence of the order of January 13, 2010, "all claims against Schultz ha[d] been dismissed with prejudice" and that no appeal was ever filed following the entry of judgment against Ottheck on February 22, 2010.

Judge Todd stated that Rule 4:30A "requires the joinder of all transactionally-related claims that one party is asserting against the other" and he held that the claims asserted against Schultz in the Chancery Division complaint are, in fact, transactionally-related in that the chancery complaint merely sought to advance another theory of personal liability against Schultz. The judge rejected plaintiff's argument that he could not have asserted the claim until after the February 22, 2010 judgment, explaining that there was no basis "for concluding that the ability to pursue the claim that's at issue here is dependent upon a judgment being entered against the corporation."

This appeal followed.

Plaintiff contends on appeal that Judge Todd abused his discretion in applying the entire controversy doctrine because plaintiff had relied upon the deposition testimony of Schultz "that there was indeed a policy of liability insurance in effect on the date of the [underlying incident.]" We reject this argument and affirm essentially for the reasons expressed by Judge Todd in his opinion from the bench. We determine that plaintiff's arguments are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). We add only the following.

Schultz was deposed on February 8, 2008, and his testimony respecting insurance was equivocal in most material respects. However, plaintiff certainly knew as of April 2009 that defendants' insurance agent had moved for summary judgment on the ground that the general liability insurance carrier for defendants had cancelled coverage as of December 2003. Finally, on November 19, 2009, the motion judge stated on the record that "it's undisputed on this motion record that no . . . policy [of insurance] was in place on the date of the incident." Consequently, we perceive no equitable claim in favor of plaintiff on this basis that would defeat application of the entire controversy doctrine.

The entire controversy doctrine is an equitable preclusionary principle intended to discourage fragmentation of litigation and to encourage the joinder of related claims in a single suit. K-Land Corp. No. 28 v. Landis Sewerage Auth., 173 N.J. 59, 70 (2002). Its guiding principle is judicial fairness, id. at 74; see also Continental Ins. Co. v. Honeywell Int'l, Inc., 406 N.J. Super. 156, 184 n.19 (App. Div. 2009); Jersey City Police Officers Benevolent Assoc. v. City of Jersey City, 257 N.J. Super. 6, 13 (App. Div. 1992), thereby imposing an obligation on litigants to bring additional claims to the court's attention where they might be sensibly managed. Judge Todd appropriately applied this principle in granting summary judgment dismissing plaintiff's second complaint against Schultz.


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