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Magna Fabrics, Inc. v. New York Art & Shipping, LLC

Superior Court of New Jersey, Appellate Division

August 8, 2013

MAGNA FABRICS, INC., Plaintiff-Respondent,


Argued February 12, 2013

On appeal from Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-3436-10.

Edward S. Kiel argued the cause for appellant Juil Pang (Cole, Schotz, Meisel, Forman & Leonard, attorneys; Mr. Kiel, on the brief).

Howard B. Leopold argued the cause for respondent Magna Fabrics, Inc. (Goodman & Leopold, attorneys; Mr. Leopold, on the brief).

Before Judges Messano and Kennedy.


Defendant Juil Pang appeals from a judgment for $821, 079 entered against him and in favor of plaintiff Magna Fabrics, Inc. (Magna or plaintiff), on an alleged oral guaranty of a lease between plaintiff and defendant New York Art & Shipping, LLC (NY Art). The jury found that defendant did not guarantee the lease in writing, but that he verbally guaranteed the lease. Further, although the jury was instructed not to proceed to the issue of piercing the corporate veil if it found a written or verbal guaranty to exist, it did so and found defendant liable on that theory of liability, as well.

On appeal, defendant claims there was no evidence supporting the alleged "oral" guaranty and thus the issue should not have been submitted to the jury, and that a new trial is warranted on the cause of action to pierce the corporate veil because of errors in the jury instructions. We agree, and vacate the judgment and remand for further proceedings consistent with this opinion.

We discern the following facts from the record.


NY Art is a limited liability company created by defendant Kiang Park (Park). Park and defendant were friends and members of the same church. Park borrowed $150, 000 from defendant, which was deposited in NY Art's bank account. Defendant and Park maintained that defendant was neither an owner nor an officer of NY Art, but that defendant simply lent Park money in order to help a fellow church member.

Lawrence Fink (Fink) is the president and owner of Magna, which owned a warehouse in North Bergen. Magna routinely leased the warehouse to other companies. Fink first met defendant and Park in the spring of 2008, at which time they discussed plans to rent Magna's warehouse. Fink claimed that defendant and Park represented at that time they were the owners of NY Art.

At a second meeting on June 13, 2008, Fink obtained "information disclosure agreements" from Park and defendant in order to obtain credit checks on them. Fink also wanted personal guaranties from defendant and Park. The credit checks revealed that defendant had good credit, but that Park had a bad credit history. Consequently, Fink felt that only defendant's personal guaranty really mattered. Fink also stated that both defendant and Park agreed to be personally bound on any lease of the warehouse by NY Art.

An initial draft of the lease for the warehouse listed NY Art as tenant and defendant and Park as guarantors. The final draft of the lease (the lease) also included personal guaranties by defendant and Park. While Park signed the lease on behalf of NY Art, however, defendant never signed the lease or any personal guaranty of the lease.

NY Art took possession of the premises in August 2008, and Magna later filed an eviction action against it for failure to pay rent. In June 2009, Magna obtained a judgment of eviction against NY Art.

Thereafter, plaintiff filed its complaint against NY Art, two other corporations that occupied the property as subtenants, Park and defendant, alleging breach of contract, fraud, fraudulent conveyance, and a cause of action against the individual defendants seeking to pierce the corporate veil. The breach of contract claim was based on an allegation that defendant and Park executed a written personal guaranty of NY Art's obligations under the lease. The other claims against defendant and Park were based on allegations that NY Art and other corporate defendants were alter egos of the individual defendants who operated them in a manner that resulted in fraud and injustice.

On August 23, 2011, a default judgment was entered against the two corporations, in the amount of $578, 937. NY Art also defaulted, and on December 28, 2011, Park filed a bankruptcy petition, which stayed the case as against him, leaving defendant as the only defending party at the time of trial.

A jury trial took place in January 2012. Following the close of testimony, defendant moved for a directed verdict, arguing that plaintiff had failed to make a prima facie case on any cause of action. The trial judge denied the motion for directed verdict.

Also, the parties submitted proposed jury charges. The parties disagreed on the charge respecting the effect of the statute of frauds, N.J.S.A. 25:1-15, on an alleged oral guaranty, a cause of action plaintiff had not specifically pled, and the charge pertaining to piercing the corporate veil. Over defendant's objection, the trial judge charged the jury on an alleged ...

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