July 19, 2013
AMERICAN IMAGING OF JERSEY CITY, INC. and BERGEN OPEN MRI & DIAGNOSTIC CENTER, INC., Plaintiffs-Respondents,
RICARDO T. BALDONADO, M.D., Defendant/Third-Party Plaintiff-Appellant,
ALAN WASSERMAN, Third-Party Defendant-Respondent.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued February 4, 2013
On appeal from Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-6561-10.
James J. Shrager argued the cause for appellant (Norris McLaughlin & Marcus, P.A., attorneys; Mr. Shrager, of counsel and on the briefs; Bradford W. Muller, on the briefs).
William C. Mead, Jr. argued the cause for respondents American Imaging of Jersey City, Inc. and Bergen Open MRI & Diagnostic Center, Inc. (Litchfield Cavo, LLP, attorneys; Adrienne C. Rogove and Bruce M. Gorman, Jr., on the brief).
Bob Kasolas argued the cause for respondent Alan Wasserman (Brach Eichler, L.L.C., attorneys; Mr. Kasolas, of counsel and on the brief).
Before Judges Graves, Ashrafi and Espinosa.
This is the second action arising from the demise of a professional relationship. Defendant Ricardo T. Baldonado, M.D., a radiologist, was an equal partner with third-party defendant Alan Wasserman in a diagnostic and radiology company, DIA of Jersey City (DIA). He appeals from two orders: one granting summary judgment to plaintiffs and entering judgment against him personally for a judgment against DIA, and the second, which dismissed his complaint against Wasserman for contribution. For the reasons that follow, we affirm the entry of summary judgment to plaintiffs and reverse the dismissal of Baldonado's third-party complaint against Wasserman.
In 1992, Baldonado began a business relationship with Dr. Robert A. Fogari (Fogari). Baldonado provided Fogari with the financial assistance and support he needed to acquire or establish various medical imaging centers, including American Imaging of Jersey City, Inc. (AIJC), Bergen Open MRI & Diagnostic Center, Inc. (Bergen), and Hackettstown Open MRI, Inc. (Hackettstown). Baldonado also advanced funds to Fogari, guaranteed equipment leases for the businesses, and made payments on the businesses' behalf. Baldonado and DIA provided radiology reading services at the facilities. In 1997, Fogari terminated the agreement and DIA ceased doing business.
The first action was initiated in June 2001, when Baldonado, individually and on behalf of DIA, filed a complaint against Fogari, Fogari's wife, AIJC, Bergen, Hackettstown, and other entities with which Fogari was affiliated (the Fogari defendants), seeking recovery of payments he and DIA were allegedly owed for their services, as well as repayment of the loans made to Fogari and the various businesses. The Fogari defendants filed an amended answer and counterclaims against both Baldonado and DIA. This dispute proceeded to arbitration pursuant to the New Jersey Alternative Procedure for Dispute Resolution Act, N.J.S.A. 2A:23A-1 to -19. Both sides appealed from the resulting decision, which was affirmed by the trial court. After both sides appealed to this court, we remanded for consideration of two issues the umpire failed to address: the claims of Baldonado and DIA to be compensated for reading services provided before being terminated and the Fogari defendants' counterclaim theory of tortious interference.
On remand, these issues were decided. In July 2010, final judgment was entered in favor of AIJC for $274, 049 against DIA for excess fees that AIJC paid to DIA for services. Judgments were entered in favor of Baldonado against Hackettstown for fees owed to him of $25, 945; and against Bergen for fees owed to him of $391, 317. A judgment was entered in favor of Bergen against DIA in the amount of $143, 977. The judgment included the following handwritten addendum:
Counsel for the defendants . . . argues that the judgments [against DIA] should be against BALDONADO also -- pursuant to N.J.S.A. 42:1A-19(d)(4). . . .
To be clear, the entry of this order is not a substantive ruling on the merits as to whether BALDONADO is personally liable for the claim against DIA if there are no partnership assets to satisfy the judgment against DIA.
That determination . . . should be litigated, if necessary, as part of the collection process.
It is undisputed that DIA lacks sufficient funds to satisfy the judgment. The second action was commenced in November 2010, with the filing of a complaint by AIJC and Bergen (plaintiffs), seeking to hold Baldonado jointly and severally liable for the July 2010 judgments against DIA. Baldonado filed an answer and third-party complaint, in which he sought contribution from Wasserman in the event that he was held liable. Wasserman filed an answer denying liability.
Plaintiffs moved for summary judgment, seeking the entry of a judgment in favor of AIJC for $274, 049, and in favor of Bergen for $143, 977. Baldonado cross-moved for summary judgment dismissing plaintiffs' complaint against him. Wasserman thereafter filed a motion to dismiss Baldonado's third-party complaint against him for failure to state a cause of action.
Plaintiffs' summary judgment motion
In an opinion issued June 17, 2011, the motion judge granted summary judgment in favor of plaintiffs and held Baldonado personally liable for the judgments that AIJC and Bergen obtained against DIA in July 2010.
Baldonado argued that plaintiffs could not collect the judgment against him personally because they had failed to name him in the initial law suit. He relied upon Seventy-Three Land, Inc. v. Maxlar Partners, 270 N.J.Super. 332 (App. Div. 1994), which applied the entire controversy doctrine to such cases as follows:
The single controversy doctrine requires that a creditor who intends to look to partners for payment of a partnership contract debt initially sue not only the partnership but also all the partners. The creditor should assert in the complaint the claims against the partners that would accrue if the partnership is unable to discharge the debt. Judgment may then be entered against the partnership in the amount due, which shall be deemed a final judgment, see R. 4:42-2, and entered against the partners as to liability only. That would protect the partners from having the judgment executed against their assets and at the same time protect the creditor by establishing the liability of the partners.
[Id. at 337-38 (internal citation omitted).]
However, Maxlar did not preclude a judgment creditor from subsequently pursuing collection against a partner who was not initially joined in the action. As the motion judge observed, Maxlar went on to say, "If necessary the court could later amend the judgment against the partners to a final judgment for a sum certain upon proof that the partnership cannot satisfy the judgment against it." Id . at 338. Accordingly, the motion judge found no impediment to plaintiffs amending the judgment against DIA to be against Baldonado personally. The motion judge viewed her interpretation of Maxlar as consistent with the Uniform Partnership Act (UPA), N.J.S.A. 42:1A-1 to -56. The motion judge rejected Baldonado's argument that the statute of limitations barred the complaint against him, finding that the action was "based on an amendment of the judgment in accordance with N.J.S.A. 42:1A-19(d)(4), and not an independent breach of contract claim." Given the undisputed fact that DIA could not satisfy the judgment against it, there was no genuine issue of fact as to the partnership's inability to satisfy the judgment against it.
The judge then reviewed the judgments to determine appropriate setoffs. As to Bergen, Baldonado had a judgment against it for $391, 317 and Bergen had a judgment against DIA for $143, 977. Therefore, the court extinguished Baldonado's judgment to Bergen, and stated that Bergen owed Baldonado the balance: $247, 340. With respect to AIJC, the court found that Baldonado owed the full amount of $274, 029, "as there [was] no set-off to be had on that amount." Summary judgment was entered in plaintiffs' favor accordingly.
Wasserman's motion to dismiss
A different judge decided Wasserman's motion to dismiss Baldonado's claim against him pursuant to Rule 4:6-2(e). In an oral decision, the motion judge dismissed Baldonado's third-party complaint against Wasserman, finding that Baldonado's failure to join Wasserman in the first action or at any time over the course of the ten years of litigation, significantly prejudiced Wasserman's ability to defend himself against Baldonado's contribution claim.
The judge relied on Rule 4:5-1(b)(2), which requires each party to certify whether there are any non-parties who should be joined in the action pursuant to Rule 4:28, or who are subject to joinder under Rule 4:29-1(b) because of potential liability to any existing party based on the same transactional facts. The judge found that Wasserman was a party subject to joinder under Rule 4:29-1(b) and therefore should have been disclosed to the court. Thus, since Baldonado never alerted the court to Wasserman's existence and interest in the case, the judge found that Baldonado failed to comply with Rule 4:5-1(b)(2).
The judge noted that if a party fails to comply with this rule, "the Court may impose sanctions, including dismissal of a successive action against the party whose existence was not disclosed[, ]" if "the failure of compliance was inexcusable and the right of the undisclosed party to defend the successive action has been substantially prejudiced by not having been identified in the prior action."
The judge rejected Baldonado's claims that he did not foresee his potential liability for the judgment against DIA. Noting that Baldonado had knowledge of DIA's financial condition and was represented by counsel, the judge concluded that he "must have been fully aware that he could potentially be held personally responsible to collection efforts in the event a judgment was entered against . . . DIA[.]"
The judge found that Baldonado's failure to comply with Rule 4:5-1(b)(2) was "inexcusable." The judge also found this failure deprived Wasserman of "his right to a fair opportunity to present his case as the rules require[, ]" and was thus "prejudicial to Wasserman." Determining that dismissal was an appropriate sanction, the judge granted Wasserman's motion to dismiss the third-party complaint.
In his appeal from the orders granting summary judgment to plaintiffs and dismissing his third-party complaint against Wasserman, Baldonado presents the following issues for our consideration:
THE ENTIRE CONTROVERSY DOCTRINE BARS RESPONDENTS' CLAIMS.
A. STANDARD OF REVIEW.
B. THE CLAIM THAT BALDONADO WAS RESPONSIBLE FOR THE PARTNERSHIP'S DEBT SHOULD HAVE BEEN BROUGHT IN THE FIRST ACTION.
C. THE TRIAL COURT MISREADS MAXLAR.
D. MAXLAR REMAINS THE GOVERNING LAW DESPITE THE UNIFORM PARTNERSHIP LAW'S SUBSEQUENT AMENDMENT.
THE APPLICABLE STATUTE OF LIMITATIONS ALSO BARS RESPONDENTS' CLAIMS.
IF THE TRIAL COURT'S GRANT OF JUDGMENT TO AIJC AND BERGEN IS UPHELD, THEN THE TRIAL COURT'S DISMISSAL OF BALDONADO'S THIRD-PARTY COMPLAINT AGAINST WASSERMAN SHOULD BE REVERSED.
A. STANDARD OF REVIEW.
B. BALDONADO HAS A VALID CLAIM FOR CONTRIBUTION UNDER NEW JERSEY'S PARTNERSHIP LAW.
C. THE DISMISSAL OF BALDONADO'S THIRD-PARTY COMPLAINT WAS IN ERROR.
After reviewing Baldonado's arguments regarding the summary judgment order entered in plaintiffs' favor in light of the record and applicable legal principles, we are satisfied that none have any merit.
Our review of an order granting summary judgment is subject to the same standard employed by the trial court. Bauer v. Nesbitt, 198 N.J. 601, 605 n.1 (2009) (citing R. 4:46-2(c); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995)). Summary judgment is proper if the record demonstrates that "there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." Burnett v. Gloucester Cnty. Bd. of Chosen Freeholders, 409 N.J.Super. 219, 228 (App. Div. 2009). Issues of law are subject to the de novo standard of review, and the trial court's determination of such issues is accorded no deference. Selective Ins. Co. of Am. v. Hudson E. Pain Mgmt., 210 N.J. 597, 605 (2012), (citing Zabilowicz v. Kelsey, 200 N.J. 507, 512-13 (2009)).
Baldonado argues that, pursuant to Maxlar, plaintiffs' failure to name him individually in the initial action precludes the second action and summary judgment here. Baldonado's reliance upon Maxlar is misplaced. At the time Maxlar was decided, the version of the UPA in effect was that adopted in 1919 and revised in 1992. Consistent with § 307(d) of the 1992 revision of the UPA, Maxlar provides that when partners are named as defendants along with the partnership in the initial action, "[j]udgment [is to] be entered against the partnership in the amount due . . . and entered against the partners as to liability only." Maxlar, supra, 270 N.J.Super. at 338. The court may then amend this judgment against the partners to "a final judgment for a sum certain" if the partnership is ultimately unable to satisfy the judgment. Ibid. Although this language is amenable to the interpretation that naming the individual partners in the initial suit may be a pre-requisite to the judgment creditor later seeking personal liability for partnership debt, any question on the issue was resolved by the repeal of the 1992 version of the UPA and the adoption of the present UPA in 2000. The present version of the UPA includes N.J.S.A. 42:1A-19(b), which states:
An action may be brought against the partnership and, to the extent not inconsistent with section 18 of this act [C.42:1A-18], any or all of the partners in the same action or in separate actions.
Thus, the pertinent part of the statute in effect at the time plaintiffs' summary judgment motion was decided expressly states that the party bringing suit may elect to sue the partnership and its partners in either the same or separate actions. Additionally, the comment to § 307(b), the section enacted in New Jersey as N.J.S.A. 42:1A-19(b), explains that the purpose of the section is
to clarify that the partners need not be named in an action against the partnership. In particular, in an action against a partnership, it is not necessary to name a partner individually in addition to the partnership.
[Unif. P'ship Act § 307(b) cmt. 2 (1997).]
When the Legislature adopted the UPA in 2000, it did not modify this section to include a requirement that individual partners be named in lawsuits against the partnership in order to preserve a claim against the partner individually. And, there are no cases that have cited or relied on Maxlar for this proposition since the enactment of N.J.S.A. 42:1A-19(b) in December 2000. Therefore, we agree that plaintiffs' failure to name Baldonado in the initial action does not bar their claim against him individually in the second action.
Baldonado's argument that the entire controversy doctrine bars plaintiffs' claims is similarly unavailing. The July 2010 order that was the basis for the judgments explicitly stated that it was not "a substantive ruling on the merits as to whether BALDONADO is personally liable for the claim against DIA if there are no partnership assets to satisfy the judgment" and that such a determination "should be litigated, if necessary, as part of the collection process." This language expressly reserved the issue of Baldonado's personal liability, consistent with the court's authority "to direct reservation of a claim against an . . . unjoined party for later action[.]" Pressler & Verniero, Current N.J. Court Rules, comment 3.4 on R. 4:30A (2013). As the comments to Rule 4:30A state, "the entire controversy doctrine does not apply when the court has done so[.]" Ibid. In addition, the doctrine does not apply because plaintiffs' claims against Baldonado individually did not accrue until DIA was found to be liable and unable to satisfy the judgment. See id., comment 3.3 on R. 4:30A; see also N.J.S.A. 42:1A-19(d)(4) (providing that a judgment creditor cannot seek satisfaction of a judgment against a partnership from the assets of a partner unless "a court grants permission" to do so "based on a finding that partnership assets subject to execution are clearly insufficient to satisfy the judgment"). Finally, Baldonado has failed to satisfy his burden to establish "both inexcusable conduct and substantial prejudice[, ]" which is necessary to bar plaintiffs' claim on entire controversy grounds. See Hobart Bros. Co. v. Nat'l Union Fire Ins. Co., 354 N.J.Super. 229, 242 (App. Div.), certif. denied, 175 N.J. 170 (2002).
Baldonado's argument that plaintiffs' claims are barred by the statute of limitations lacks sufficient merit to warrant discussion in a written opinion, R. 2:11-3(e)(1)(E), beyond the following brief comments. As Baldonado states, the applicable statute of limitations is six years. See N.J.S.A. 2A:14-1. However, the cause of action to impose liability upon him personally did not accrue until there was a final judgment against the partnership in 2010. See N.J.S.A. 42:1A-19(d)(4); Evanston Ins. Co. v. Dillard Dep't Stores, Inc., 602 F.3d 610, 617-18 (5th Cir. 2010) (noting that "a partner has no liability until the partnership liability is established[, ]" and finding, therefore, that a cause of action against partners "on their personal liability for the partnership's obligation" accrues "at the earliest, upon entry of judgment against" the partnership).
Accordingly, we affirm the order granting summary judgment to plaintiffs and turn to Baldonado's appeal from the order that dismissed his complaint against Wasserman.
In reviewing a trial court's decision to grant a motion to dismiss pursuant to Rule 4:6-2(e), this court applies a de novo standard of review. Rezem Family Assocs., LP v. Borough of Millstone, 423 N.J.Super. 103, 114 (App. Div.), certif. denied, 208 N.J. 368 (2011). The motion calls for the court to determine the adequacy of the pleading itself and the applicable test is "whether a cause of action is suggested by the facts." Velantzas v. Colgate-Palmolive Co., 109 N.J. 189, 192 (1988).
The Supreme Court described the scope of our review as follows:
In reviewing a complaint dismissed under Rule 4:6-2(e) our inquiry is limited to examining the legal sufficiency of the facts alleged on the face of the complaint. However, a reviewing court searches the complaint in depth and with liberality to ascertain whether the fundament of a cause of action may be gleaned even from an obscure statement of claim, opportunity being given to amend if necessary. At this preliminary stage of the litigation the Court is not concerned with the ability of plaintiffs to prove the allegation contained in the complaint. For purposes of analysis plaintiffs are entitled to every reasonable inference of fact. The examination of a complaint's allegations of fact required by the aforestated principles should be one that is at once painstaking and undertaken with a generous and hospitable approach.
[Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989) (internal citations and quotation marks omitted).]
Further, when the motion is not decided based on the sufficiency of the pleading itself, the standard applicable to summary judgment motions applies. R. 4:6-2(e) (stating that when "matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided by R. 4:46").
The motion to dismiss Baldonado's third-party complaint against Wasserman was not granted because the pleading itself failed to suggest a cause of action against Wasserman. Indeed, the allegations plainly pleaded a claim for contribution based upon the joint and several liability of Baldonado and Wasserman as equal partners in DIA. See N.J.S.A. 42:1A-18(a); see also Whitfield v. Bonanno Real Estate Corp., 419 N.J.Super. 547, 555 (App. Div. 2011) ("[P]artners are jointly and severally liable for all obligations of the partnership").
Rather, the motion judge based the dismissal of the third-party complaint upon Baldonado's non-compliance with Rule 4:5-1(b)(2), his failure to join Wasserman pursuant to Rule 4:28-1, and the application of both the entire controversy doctrine and laches. However, none of these rules or doctrines provide for the draconian sanction of dismissal simply based upon non-compliance.
The motion judge recognized that, generally, a successive action will not be dismissed for failure to comply with the joinder rule "unless the failure of compliance was inexcusable and the right of the undisclosed party to defend the successive action has been substantially prejudiced by not having been identified in the prior action." The motion judge rejected Baldonado's contention that the arguments pressed by Wasserman required a factual determination that was inappropriate for the court to make in deciding the motion. Instead, she concluded that the issues could be decided based upon her review of the public record. We disagree.
Whether a party's conduct is "inexcusable" and whether a party has suffered "substantial prejudice" are issues that clearly call for fact-finding. By reviewing the litigation history and making findings based upon her interpretation of the record, the motion judge went beyond the review of the pleading to determine its legal sufficiency. The court was therefore required to apply the standard applicable to summary judgment motions -- which also requires that all reasonable inferences be drawn in favor of the non-moving party and authorizes dismissal only if "there is no genuine issue as to any material fact challenged and . . . the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c).
As we have noted, any cause of action seeking to impose personal liability upon Baldonado and/or Wasserman did not accrue until there was a judgment against DIA. N.J.S.A. 42:1A-19(b) explicitly permitted an action to be brought against them "in separate actions[, ]" excusing the failure to name either Baldonado or Wasserman in the first action. And, the record shows that, although not named as a party, Wasserman was aware of plaintiffs' action against the partnership, having testified in that action. Both the applicable law and the facts contained in the record thus precluded a finding that Wasserman was entitled to a dismissal of Baldonado's third-party complaint as a matter of law. We are therefore satisfied that the motion judge erred in granting the motion to dismiss Baldonado's third-party complaint.
After reviewing the arguments made by plaintiffs, Baldonado, and Wasserman in light of the record and applicable legal principles, we are further satisfied that any argument not specifically addressed lacks sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). In sum, the order granting summary judgment to plaintiffs is affirmed; the order dismissing Baldonado's third-party complaint is reversed and the matter remanded for further proceedings. We do not retain jurisdiction.