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Arch Financial Services, Inc. v. Geyer

Superior Court of New Jersey, Appellate Division

October 10, 2013

ARCH FINANCIAL SERVICES, INC., PETER GALLIC and JOHN ROCK, Plaintiffs-Respondents,
v.
CHARLES W. GEYER, STEWART SMITH, ESTELLE SMITH, DANIEL STRAFFI, ESQ., ANTHONY AMBROSIO, ESQ., NEW FALLS CORPORATION, Defendants, and EAZY BROOK, INC., CHARLES K. GEYER, LORRIEANN GEYER, GFTA, LLC and ACME AUTO BODY, Defendants-Appellants. ARCH FINANCIAL SERVICES, INC., PETER GALLIC and JOHN ROCK, Plaintiffs-Appellants,
v.
CHARLES W. GEYER, STEWART SMITH, ESTELLE SMITH, DANIEL STRAFFI, ESQ., EAZY BROOK INC., NEW FALLS CORPORATION, CHARLES K. GEYER, LORRIEANN GEYER, GFTA, LLC, ACME AUTO BODY, Defendants, and ANTHONY AMBROSIO, ESQ., Defendant-Respondent.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued January 15, 2013

On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-2335-08.

Ronald T. Nagle argued the cause for appellants in A-2332-11.

Mitchell B. Seidman argued the cause for respondents in A-2332-11 and appellants in A-3996-11 (Seidman & Pincus, LLC, attorneys; Mr. Seidman and Andrew Pincus, on the briefs).

Edward Grossi argued the cause for respondent Anthony Ambrosio in A-3996-11.

Respondent Eazy Brook, Inc. in A-3996-11 has not filed a brief.

Before Judges Messano, Lihotz and Ostrer.

OPINION

LIHOTZ, J.A.D.

These appeals, calendared back-to-back and consolidated for purposes of this opinion, include challenges in A-2332-11 by defendants Eazy Brook, Inc., Charles K. Geyer, Lorrieann Geyer, GFTA, LLC, and Acme Auto Body (collectively defendants), seeking to vacate a judgment, made final on February 21, 2012, in favor of plaintiffs Arch Financial Services, Peter Gallic, and John Rock, and challenges in A-3996-11 by plaintiffs to the dismissal of their claims against defendants Anthony Ambrosio, Esq., Stewart and Estelle Smith (the Smiths). Following our review of the arguments presented on appeal, in light of the record and applicable law, we affirm.

I.

Plaintiffs recovered a judgment against defendant Charles W. Geyer for breach of a commercial mortgage brokerage agreement. Prior to trial on plaintiffs' complaint, Geyer consented to entry of judgment against him in the amount of $390, 411.00, which was filed on March 6, 2001.

Efforts to satisfy the judgment were thwarted because Geyer owned no assets, with one exception. In 2000, Geyer had entered into a Collection Agreement and Limiting Assignment Agreement with the Smiths (the Geyer-Smith agreement), to collect a $1, 796, 451.57 judgment they had secured against Alfred Faiella in 1991. Under the Geyer-Smith agreement, Geyer was entitled to forty percent of any recovery above $100, 000, plus reimbursement of his out-of-pocket expenses. After accounting for accrued interest, the Smiths's judgment had increased to more than $4.3 million.

On October 14, 2005, Faiella filed a voluntary petition for bankruptcy relief. In late 2005 or early 2006, Ambrosio was retained by Geyer to attempt recovery on the Smith judgment in the bankruptcy case. A significant factual dispute litigated at trial was whether Ambrosio solely represented the Smiths or also represented and took direction from Geyer. Geyer retained Ambrosio to represent the Smiths's judgment interest. Ambrosio filed an adversary proceeding seeking to declare Faiella could not discharge the Smiths's debt.

In January 2007, plaintiffs discovered the Smith-Geyer agreement. They secured a Writ of Execution on February 28, 2007, directing the Sheriff of Warren County to execute and levy on Geyer's assets, as follows:

All present and future rights, credits, monies, properties, and all other amounts now due and owing, or which in the future become due and owing, from [the Smiths] to Charles W. Geyer including, but not limited to, all amounts due or to become due and owing from [the Smiths] to Charles W. Geyer pursuant to the "Collection Agreement [a]nd Limited Assignment" dated November 28, 2000.

The Warren County Sheriff's Office served the writ of execution on the Smiths on March 15, 2007. Plaintiff's counsel also notified Ambrosio of the execution and levy on the Smiths and provided a copy of the writ. The correspondence requested Ambrosio to insure his clients pay plaintiffs "all monies they would otherwise pay to Charles W. Geyer including, but not limited to Charles W. Geyer's share of any money they recover from . . . Faiella in . . . bankruptcy or in the adversary proceeding" Ambrosio was prosecuting against Faiella.

After the Smiths were served with the writ, but before Ambrosio received the correspondence notifying him a writ was served upon the Smiths, Geyer sent a facsimile to Ambrosio instructing him "to please keep [the faxed document] with your Smith file." Geyer included a December 10, 2000 document assigning his rights under the Geyer-Smith agreement to Eazy Brook. Eazy Brook was solely owned by Geyer's son, Charles K. Geyer, whom we will identify as Charles K. At trial, the parties disputed whether the Assignment was actually created in 2000 and effective as of that date, a position advanced by defendants, or invalid and void as an attempt by Geyer to insulate his contract rights from his creditors by a fraudulent transfer to Charles K., the plaintiffs' position. Evidential support for plaintiffs' position the assignment represented a fraudulent transfer included that Geyer admitted his interest in the Geyer-Smith agreement was his sole asset, there was no consideration for the assignment, several versions of the purported assignment agreement existed, and Geyer had individually executed an October 11, 2005 extension of the Geyer-Smith agreement without mention of Eazy Brook or the purported assignment of rights.

Following the Faiella bankruptcy case, the Smiths joined forces with another of Faiella's creditors, New Falls Corporation. Each filed an adversary proceeding contesting the dischargability of their respective debts. The Smiths and New Falls agreed to cooperate with each other and split any recovery obtained in either action sixty-five percent in favor of the Smiths and thirty-five percent in favor of New Falls. The Smiths's adversary proceeding was tried first, and was unsuccessful. In the course of New Falls's adversary proceeding, the debtor's wife agreed to a "global." In effect, she paid $1.7 million to be distributed to the creditors, New Falls withdrew its action contesting discharge, and the trustee ended the pursuit of preferential transfers.

Plaintiffs read about the settlement as reported in the newspaper. On July 23, 2008, plaintiffs obtained and the sheriff executed a Writ of Execution to the bankruptcy trustee, executing on the portion of the funds which comprised Geyer's interest under the Geyer-Smith agreement. The trustee ignored the writ, an action later found immune from liability by the Bankruptcy Court.

Fearing Ambrosio may not honor the writ of execution, plaintiffs commenced this action to enjoin his disbursement of the proceeds of the bankruptcy settlement. The complaint, against Geyer, the Smiths, Eazy Brook, New Falls, Ambrosio and the bankruptcy trustee, asserted claims for declaratory relief and turnover, and to set aside the assignment as a fraudulent transfer. Injunctive relief was denied and the trustee delivered a check for $1, 327, 489.81 to Ambrosio, from which he retained $125, 000 as his legal fee and paid $309, 888 to New Falls, $590, 532 to the Smiths, and $302, 000 to Eazy Brook. Eazy Brook redistributed its share of the proceeds, as follows: $25, 000 to Lorrieann Geyer, Charles K.'s wife; $162, 000 to GFTA, a limited liability company owned and operated solely by Charles K.; $100, 000 to Acme Auto Body, solely owned by Charles K.; $1, 800 to Charles K.; and part to counsel for fees and costs in this case.

Plaintiffs amended their verified complaint alleging legal malpractice, professional negligence, and conversion against Ambrosio, seeking turnover of Geyer's portion of the recovery of the Smiths's judgment and fraudulent transfer and conversion against any person or entity to which the funds were paid. A second amended complaint added claims against the Smiths for conversion and failure to turn over the portion of funds to which plaintiffs claimed entitlement after serving the writs of execution.

The trial judge conducted a three-day bench trial and issued a written opinion. He made specific factual findings including credibility determinations. He determined Geyer and Charles K. were not truthful, that the assignment was not presented to the Smiths on the claimed date of execution, December 10, 2000, and the only verifiable evidence of its creation was the day it was faxed to Ambrosio. He found Ambrosio represented the Smiths and Geyer, "who gave Ambrosio instructions as to how to proceed in the later distribution of funds obtained from the bankruptcy trustee." However, Ambrosio did not know the assignment of interest to Eazy Brook was fraudulent. The judge concluded plaintiffs established the transfer to Eazy Brook of Geyer's share of the distribution received from the bankruptcy trustee was fraudulent, requiring the subsequent transferees to disgorge all amounts received. The judge rejected as unfounded plaintiffs' claims for conversion, violation of the execution statute and legal malpractice.

Judgment against defendants was entered on December 8, 2011. Defendants' appeal (A-2332-11) challenges the articulated factual finding that the transfer to Eazy Brook was fraudulent. A separate order entered December 8, 2011, dismissed plaintiffs' claims against Ambrosio and the Smiths. Plaintiffs appealed (A-3996-11) arguing ...


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