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CIT Technology Financing Services, Inc. v. Starnet Design and Lithograph, Inc.

Superior Court of New Jersey, Appellate Division

June 21, 2013



Submitted February 26, 2013

On appeal from the Superior Court of New Jersey, Law Division, Burlington County, Docket No. L-1417-10.

Saldutti, LLC, attorneys for appellant (Thomas B. O'Connell, on the brief).

Kaps & Barto, attorneys for respondent Starnet Design and Lithograph, Inc. (Raymond Barto, on the brief).

Law Offices of Thomas W. Williams, attorney for Peter DiPaola, joins in the brief of respondent Starnet Design and Lithograph, Inc.

Before Judges Messano and Ostrer.


Plaintiff, CIT Technology Financing Services, Inc. (CIT), filed a complaint alleging, among other causes of action, that defendant, Starnet Design and Lithograph, Inc. (SDL), defaulted on three leases with plaintiff for various business equipment. Peter DiPaola, Tom Ranno, Alex Blackwell and Peter Mancinelli were also named as defendants (the individual defendants), it being alleged that they executed personal guaranties of payment as to one of the leases (the first action).

The Law Division subsequently entered judgment in favor of plaintiff against SDL in the amount of $289, 894.18, plus attorney's fees of $30, 000, for a total of $319, 894.18. Judgment was entered against the individual defendants in the amount of $224, 977.74, plus attorney's fees of $25, 000, for a total of $249, 977.74.

In supplementary proceedings, see R. 4:59-1(f), plaintiff deposed SDL's designee, Douglas Arbolino. Arbolino testified that he formed StarNet Business Solutions (SBS) and acquired all the shares of stock issued by SDL. Plaintiff then filed a subsequent action naming as defendants: SBS, Starnet Graphix Inc. (Graphix), Starnet Media Group, Inc., SDL, Arbolino, and the individual defendants. In this second action, plaintiff alleged legal and equitable fraud and violation of the Uniform Fraudulent Transfer Act (UFTA), N.J.S.A. 25:2-20 to -34. In a third count, plaintiff alleged SBS and Graphix were liable as "successors-in-interest" of SDL.

The individual defendants moved for summary judgment. In support of the motion, they attached a statement of material facts, DiPaola's certification, the "Stock Purchase Agreement" (the Purchase Agreement) between SDL and SBS, and the unconditional guaranty of Arbolino and SBS to indemnify and guaranty certain obligations of SDL and the individual defendants. The record does not reveal what, if any, action was taken on defendants' motion.

CIT then filed a motion in the first action seeking "an accounts receivable levy on any pending payments to [SDL] pursuant to the [Purchase Agreement] under N.J.S.A. 2A:17-63, " and "an assignment of [SDL's] rights and credits under the [Purchase Agreement] pursuant to N.J.S.A. 2A:17-59." In support, CIT attached portions of Arbolino's deposition testimony and the documents filed by the individual defendants in support of their summary judgment motion. The individual defendants' statement of material facts claimed that SBS purchased all the stock of SDL and assumed all its debts, including the lease with CIT for one of the printers, an "Indigo 6 color digital press." That machine was listed on a schedule in the Purchase Agreement for which Arbolino and SBS executed guarantees of payment. The Purchase Agreement also provided for the retention of the individual defendants, except Blackwell, "under the terms of separate employment agreements to be executed at or before closing."

CIT requested oral argument if opposition was filed. See R. 1:6-2(d) ("A party requesting oral argument may . . . condition the request on the motion being contested."). No opposition was filed. Without granting oral argument, the Law Division judge entered an order dated April 27, 2012, denying CIT's motion. The order simply stated, "[p]laintiff seeks to obtain a private levy for which there is no provision in the statutes referenced by counsel." The judge placed no findings or conclusions on the record, nor did she enter any written statement of reasons.

CIT filed a motion for reconsideration on May 7, 2012. SDL filed opposition, including a certification from Arbolino with supporting documents. Arbolino claimed the Purchase Agreement included only one machine financed by CIT, a "6 color Heidelberg 40, " and he also asserted that CIT was not listed as a creditor of SDL anywhere in the Purchase Agreement. Before the motion was heard, CIT withdrew its motion for reconsideration and filed its notice of appeal. SDL's request of the motion judge to supplement her order with a statement of reasons pursuant to Rule 2:5-1(b) went unheeded.

On July 20, 2012, SDL moved before this court for an order supplementing the record on appeal to include CIT's motion for reconsideration and SDL's opposition. A panel of our colleagues granted the motion but concluded the relevancy of any documents supporting SDL's motion should be decided by the "merits panel."

Before us, CIT argues that the judge "overlooked plaintiff's rights to levy and execute on defendants' debts and choses in action." It also contends that the judge erred "by failing to make sufficiently clear and complete findings of fact." SDL argues that the judge did not err by denying CIT's motion "under N.J.S.A. 2A:17-59."

We have considered the arguments in light of the record and applicable legal standards. We reverse and remand for further proceedings consistent with this opinion.

We first consider CIT's argument that it "[was] entitled to a factual finding that defendants' rights against Arbolino and [SBS] are subject to execution." It is axiomatic that pursuant to Rule 1:7-4(a), the judge was required to "find the facts and state [her] conclusions of law thereon . . . ." The "rule has been interpreted as requiring a trial court sitting without a jury to 'state clearly its factual findings and correlate them with the relevant legal conclusions.'" State v. Locurto, 157 N.J. 463, 470 (1999) (quoting Curtis v. Finneran, 83 N.J. 563, 570 (1980)). As the Court explained:

Failure to perform that duty constitutes a disservice to the litigants, the attorneys and the appellate court. . . . Naked conclusions do not satisfy the purpose of R. 1:7-4. Rather, the trial court must state clearly its factual findings and correlate them with the relevant legal conclusions.
[Curtis, supra, 83 N.J. at 569-70 (citations omitted) (emphasis added).]

We agree with CIT that the judge failed to comply with Rule 1:7-4(a). Because the motion was unopposed, the judge was required to accept the documents CIT furnished in support of the motion. These included the Purchase Agreement and SBS's and Arbolino's guaranty. Her conclusory statement that CIT was not entitled to relief because "no provision in the statutes" cited permitted the relief fails to explain her legal reasoning. Thereafter, because the motion for reconsideration was withdrawn, defendants' opposition was never considered, and the judge was denied an opportunity to evaluate the apparent factual disputes.

We recognize the decision in Sears, Roebuck & Co. v. Romano, 196 N.J.Super. 229 (Law Div. 1984). There, in a collection proceeding, the Law Division concluded it could decide a purely legal question, i.e., whether "the right sought to be levied upon is not subject to seizure under [N.J.S.A. 2A:17-57 to -64], " because "it require[d] no factual determinations beyond those stipulated by the parties." Id. at 233 (emphasis added). As the court explained,

The parties admit the underlying contractual relation and only differ on the legal implication that the contract creates in terms of garnishment of the judgment-debtor's rights. A summary proceeding, so constrained, nevertheless assures the rights of the garnishee to protection which the admission requirement implicitly endorses.
[Id. at 233-34 (citations omitted).]

See also id. at 232-33 ("Case law suggests that absent a specific admission of the right or credit a summary order may not be entered by the court.") (citing Beninati v. Hinchliffe, 126 N.J.L. 587, 489-90 (E. & A. 1941)).

In this case, we gather that the factual circumstances and legal implications surrounding the prior debts at issue in the first action, the purchase agreement and the guarantees, are contested. Indeed, as noted, CIT argues that the judge failed to make the necessary factual findings upon which its rights are allegedly premised. Thus, we are compelled to conclude that the initial failure to resolve these factual disputes, to the extent they exist, hamper our review of the issues presented on appeal.

We therefore reverse the order under review. The judge shall permit SDL to file opposition to CIT's motion, and, in her discretion shall permit CIT to reply as necessary Thereafter the judge shall entertain oral argument on the motion make the requisite findings of fact and draw the necessary legal conclusions therefrom We express no particular view on the merits of CIT's request

Reversed and remanded We do not retain jurisdiction

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