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F.K. v. Integrity House, Inc.

Superior Court of New Jersey, Appellate Division

July 8, 2019

F.K., Plaintiff-Appellant,
INTEGRITY HOUSE, INC., Defendant-Respondent, and THOMAS LUSCH and MARVIN DEUPREE, Defendants.

          Submitted May 20, 2019

          On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-2239-16.

          Marc L. Winograd, attorney for appellant.

          Law Offices of Daniel J. Mc Carey, LLC, attorneys for respondent (Daniel J. Mc Carey, on the brief).

          Before Judges Sumners, Mitterhoff and Susswein.


          MITTERHOFF, J.S.C.

         Plaintiff F.K. appeals the trial court's December 11, 2018 order granting summary judgment to defendant Integrity House and dismissing his complaint with prejudice. The trial court determined that defendant was entitled to immunity from plaintiff's negligence action under New Jersey's Charitable Immunity Act ("the Act"), N.J.S.A. 2A:53A-7 to -11. On appeal, plaintiff contends that the amount of private contributions received by defendant, roughly $250, 000 or 1.26% of annual revenue, is too insignificant to entitle defendant to charitable immunity. Having reviewed the record in light of the applicable legal principles, we conclude that defendant did not present sufficient evidence to support its entitlement to the affirmative defense of charitable immunity. Accordingly, we reverse.


         We glean the following facts from the record.

         Integrity House's stated purpose in its certificate of incorporation is "[t]o keep former drug addicts drug free." Integrity House is a tax-exempt organization under section 501 (c)(3) of the Internal Revenue Code, 26 U.S.C. § 501(c)(3). On its 2015 tax return, Integrity House described its mission as follows: "Integrity House is committed to helping individuals and families through an effective and measurable system of comprehensive therapeutic community addiction treatment and recovery support in a way that brings about positive, long-term lifestyle change."

         As alleged in his complaint, plaintiff was a resident at the Integrity House residential drug-treatment facility in Newark. On November 3, 2015, he sustained personal injuries when he slipped and fell due to a wet condition on an interior staircase within the facility. Plaintiff filed a complaint alleging Integrity House was negligent in the maintenance of the premises.

         Integrity House answered the complaint, asserting, among other defenses, the affirmative defense of charitable immunity. Before the close of discovery, Integrity House moved for summary judgment on the ground of charitable immunity. In support of its motion for summary judgment, Integrity House submitted its 2015 tax return.[1]

         Integrity House reported $20, 094, 046 in total revenue for the 2015 tax year. According to Part VII, "Statement of Revenue," Integrity House received $15, 355, 805 from government grants, [2] $157, 310 from fundraising events, and $296, 409 from "[a]ll other contributions, gifts, grants, and similar amounts not included above." Integrity House also reported $4, 261, 364 in "program service revenue."[3] With regard to the fundraising revenue and private contributions, Schedule G, Part II, "Fundraising Events," specifies that Integrity House received $252, 855 in "gross receipts" from two fundraising events[4] and $157, 310 in "contributions" from those events.

         After hearing oral argument on May 12, 2017, the trial court issued an order and written opinion denying the motion for summary judgment. The trial court concluded that while Integrity House's 2015 tax return appeared to show that it received roughly $250, 000 in contributions, the record did not conclusively "reveal the source of those funds and how they were utilized." The trial court noted that there was still one month before the discovery end date and determined that Integrity House's source of funds remained a disputed factual issue.

         After the close of discovery, Integrity House re-filed its motion for summary judgment. The renewed motion added only short certifications of Integrity House's CEO and CFO stating that all of the roughly $252, 000 in "gross receipts" raised from fundraising for the 2015 tax year were used in furtherance of Integrity House's charitable purposes.

         In opposition to defendant's renewed motion for summary judgment, plaintiff submitted a report from a forensic accounting expert analyzing the 2015 tax return. In pertinent part, the expert concluded:

I have looked at the financial documents and have highlighted certain pages and line items. Annexed hereto as Exhibit A is page one of Integrity House's 2015 Form 990. This page reports total revenues received of $20, 094, 046 for 2015 but the [d]efendant in its brief makes no mention of this amount.
With regard to the "charitable contribution of almost $300, 000 for the calendar year," attention is directed to Schedule G. Part II, Fundraising Events, annexed hereto as Appendix B. On that page, the sum of $252, 855 is reported as gross receipts from fundraising events and the sum of $157, 310 is reported as contributions. The [d]efendant in his brief provides absolutely no explanation as to the source of the funds for either of these amounts. As a forensic accountant, without supporting third-party documentation, I cannot determine whether these funds were obtained from a government or private source.
With regard to the certification of [Integrity House's CFO], I note that she provides absolutely no information regarding the source of Integrity House's revenue in the year 2015. She provides no explanation regarding the source of the $20, 094, 046 received by Integrity House during that year and she provides absolutely no analysis regarding the source of the $252, 855 reported as gross receipts and no analysis of the $157, 310 reported as contributions. It appears that all she attempts to do in her certification is justify Integrity House's expenditures. Her certification does not enable me, as a forensic accountant, to determine whether these funds were obtained from a government or private source. The certification of [Integrity House's CEO] provides absolutely no information in this regard as well.
In my professional opinion and to a reasonable degree of certainty in the field of forensic accounting, Integrity House has failed to provide an analysis of the source of its funds for the year in which the November 3, 2015 accident took place. Based on the information provided by Integrity House, there is absolutely no documentation which would facilitate a determination of the funding sources.

         Without hearing further oral argument, the trial court entered an order granting summary judgment on October 27, 2017.

         Plaintiff appealed, and we vacated the dismissal order and remanded for further proceedings because the trial court failed to issue an oral or written reasoning for its conclusion that Integrity House was entitled to charitable immunity. F.K. v. Integrity House, No. A-1376-17 (App. Div. October 26, 2018). On remand, the trial court issued an order and written opinion granting summary judgment on December 11, 2018.[5]

         In its written decision, the trial court determined that Integrity House established the three elements necessary for charitable immunity: that the organization "(1) was formed for nonprofit purposes; (2) is organized exclusively for religious, charitable or educational purposes; and (3) was promoting such objectives and purposes at the time of the injury to plaintiff who was then a beneficiary of the charitable works." Tonelli v. Bd. of Educ. of Wyckoff, 185 N.J. 438, 444-45 (2005) (quoting Hamel v. State, 321 N.J.Super. 67, 72 (App. Div. 1999)).

         The trial court found that Integrity House satisfied the first prong based upon its incorporating documents and status as a non-profit organization as defined in Section 501(c)(3) of the Internal Revenue Code, 26 U.S.C. § 501(c)(3). In so holding, the trial court rejected plaintiff's reliance on Abdallah v. Occupational Ctr. of Hudson Cty., Inc., 351 N.J.Super. 280 (App. Div. 2002) and contention that Integrity House received too small a portion of its funding from private contributions. The trial court reasoned: "The [c]ourt's opinion in [Morales v. N.J. Acad. of Aquatic Scis., 302 N.J.Super. 50 (App. Div. 1997)] is clear that a receipt of ...

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