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Miriam Lugo and Gerardo Lugo v. Marieco

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


December 11, 2012

MIRIAM LUGO AND GERARDO LUGO, PLAINTIFFS,
v.
MARIECO, LLC, CITY FIRE EQUIPMENT CO., COMMUNITY AUTO, INC., AND MICHAEL MARCHITELLO, DEFENDANTS, AND CARMEN MARCHITELLO, DEFENDANT/THIRD-PARTY PLAINTIFF-APPELLANT, AND CITIZENS UNITED RECIPROCAL EXCHANGE, INTERVENOR,
v.
TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, THIRD-PARTY DEFENDANT-RESPONDENT, AND CITY FIRE EQUIPMENT, THIRD-PARTY DEFENDANT.

On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-7337-09.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued September 25, 2012

Before Judges Alvarez and St. John.

Carmen Marchitello,*fn1 defendant and third-party plaintiff, appeals the denial of his application pursuant to Rule 4:42-9(a)(6) for an award of counsel fees from third-party defendant Travelers Property Casualty Company of America (Travelers). For the reasons that follow, we affirm.

Rule 4:42-9(a)(6) authorizes payment of counsel fees "[i]n an action upon a liability or indemnity policy of insurance, in favor of a successful claimant." Asserting that Travelers' settlement with plaintiffs Miriam Lugo and Gerardo Lugo makes him a successful claimant, Carmen now seeks reimbursement of $22,928.29 in counsel fees.

Carmen and his son, Michael Marchitello, routinely bought and sold used vehicles, even though Carmen's license to sell used cars had been revoked and Michael was not licensed. By statute, a license is required to transfer title to more than three vehicles a year. See N.J.A.C. 13:45A-26F.2. So long as Carmen sidestepped placing title in his or Michael's name, as he did in this instance, New Jersey's statutory scheme involving ownership, registration, reporting, and dealer licensing requirements, was thereby avoided. See N.J.S.A. 39:10-6, -11(A)-(B), -19(b). This practice is known as "title jumping," and is apparently not uncommon in the used car industry. See Aldridge v. Billips, 656 F. Supp. 975, 980 (W.D. Va. 1987); State v. Aderholdt, 545 N.W. 2d 559, 562 (Iowa 1996).

A friend of Carmen, who owned a used car business, defendant Community Auto, Inc. (Community Auto), allowed Carmen to use that company as a surrogate. Carmen maintained a separate bank account under Community Auto's name into which he would deposit and withdraw income earned from surrogate sales. Community Auto received a percentage fee for the use of its name and license.

In August or September 2007, Paul McGrath, of City Fire Equipment Company, sold a 2000 Ford Focus, leased by defendant Marieco, LLC to City Fire, to Michael for around $400. McGrath arranged for his father-in-law, William Bretzger, the vice-president of Marieco, to sign the title. McGrath and Michael agreed, however, that Michael would take the vehicle still bearing the plates issued to Marieco. The plates would be returned upon Michael's resale of the car. The Focus was driven to CMJ Auto Body, Inc. (CMJ), a company owned by Carmen's wife, Joyce Marchitello; Carmen was the general manager.

While test-driving the Focus on October 2, 2007, Carmen was involved in an accident with plaintiff Miriam Lugo, who suffered injuries as a result and sued. On February 20, 2008, title to the Focus passed from Marieco to Community Auto, and on February 22, 2008, from Community Auto to a third party, the ultimate buyer. CMJ's insurer, Penn-America Insurance Company, defended Lugo's personal injury lawsuit against Carmen. Marieco's insurer, Travelers, eventually paid the $30,000 settlement to the Lugos.*fn2

Because of legitimate questions regarding ownership of the Focus, the trial judge denied Carmen's claim for counsel fees. The "confusing nature" of the status of the title was the sole cause of the insurance company's initial denial of coverage; litigation ensued in order for the true owner of the vehicle to be identified. Since the Marchitellos' conduct "contributed substantially to the necessity for the litigation," the judge denied counsel fees. See Pressler & Verniero, Current N.J. Court Rules, comment 2.6 on R. 4:42-9 (2012).

We review the decision employing an abuse of discretion standard. Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 25 (2004); Rendine v. Pantzer, 141 N.J. 292, 317 (1995); see Felicetta v. Commercial Union Ins. Co., 117 N.J. Super. 524, 527-28 (App. Div. 1971) (interpreting Rule 4:42-9 "to repose in the trial court a discretion as to when and under what circumstances an allowance [of counsel fees] would be proper"). An abuse of discretion is found only when the result is "'manifestly unjust' under the circumstances. '[I]t is not the appellate function to decide whether the trial court took the wisest course, or even the better course' as we do not substitute our judgment for that of the trial court." Newark Morning Ledger Co. v. N.J. Sports & Exposition Auth., 423 N.J. Super. 140, 174-75 (App. Div. 2011) (alteration in original) (citation omitted) (quoting Gittleman v. Cent. Jersey Bank & Trust Co., 103 N.J. Super. 175, 179 (App. Div. 1967), rev'd on other grounds, 52 N.J. 503 (1968)).

As we have said, the judge based his original decision on the Marchitellos' conduct. He reiterated the analysis on reconsideration. It cannot be disputed that there can be more than one equitable owner of a vehicle. See Verriest v. INA Underwriters Ins. Co., 142 N.J. 401, 408 (1995). Thus where the Marchitellos' course of conduct resulted in a genuine dispute as to the true owner of the Focus, they cannot recover the cost of the litigation their business practice engendered.

Furthermore, as our Supreme Court recently explained,

The award of counsel fees [under Rule 4:42-9(a)(6)], . . . is not mandatory, "but rather the trial judge has broad discretion as to when, where, and under what circumstances counsel fees may be proper and the amount to be awarded." Iafelice ex rel. Wright v. Arpino, 319 N.J. Super. 581, 590 (App. Div. 1999); see also N.J. Mfrs. Ins. Co. v. Consol. Mut. Ins. Co., 124 N.J. Super. 598, 600 (Law Div. 1973) (stating that rule grants discretion to award costs "where the assured may have acted in bad faith and contributed substantially to the necessity for the litigation by reason of misrepresentations"). "Since equitable principles govern the trial court's decision, the court should consider the totality of the circumstances in awarding counsel fees." Iafelice, supra, 319 N.J. Super. at 591; see also Enright v. Lubow, 215 N.J. Super. 306, 313 (App. Div.) (stating that "equitable principles must govern" the application of the Rule 4:42-9(a)(6)), certif. denied, 108 N.J. 193 (1987). [Passaic Valley Sewerage Comm'rs v. St. Paul Fire & Marine Ins. Co., 206 N.J. 596, 619 (2011).]

In this case the confusion stemmed entirely from the Marchitellos' ambiguous practices. Denial of counsel fees, given this scenario, seems reasonable. Therefore, because we find no abuse of discretion occurred, we affirm.

Affirmed.


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