NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0203-13T3

DELRAY HOLDING, LLC, and 

BAY DOCK HOLDINGS, LLC,

Plaintiffs-Respondents,

v.

SOFIA DESIGN AND DEVELOPMENT AT

SOUTH BRUNSWICK, LLC, SOFIA

HOMES, LLC, ANNE KELLY, 

and BURGESS STEEL, LLC,

Defendants,

and

THE GUERIN FAMILY TRUST, 

EUGENE GUERIN, JAMES GUERIN,

LOUIS FILOSO, MICHAEL REILLY, 

STEVEN LANGAN, JAMES CAREY, and

MARZENA CAREY, 

Defendants/Third-Party

Plaintiffs-Appellants,

v.

ROGER PASSARELLA, 

Third-Party DefendantRespondent.

______________________________________

Argued December 3, 2014 – Decided

Before Judges Fuentes, Ashrafi, and Kennedy.

APPROVED FOR PUBLICATION

March 2, 2015

APPELLATE DIVISION

March 2, 2015
2 A-0203-13T3

On appeal from Superior Court of New Jersey, 

Law Division, Monmouth County, Docket No. 

L-3425-11.

Andrew T. Walsh argued the cause for 

appellants (Chamlin, Rosen, Uliano & 

Witherington, attorneys; Mr. Walsh, on the 

brief).

Tennant D. Magee, Sr., argued the cause for 

respondents (Maggs & McDermott, L.L.C., 

attorneys; Mr. Magee, on the brief).

The opinion of the court was delivered by 

ASHRAFI, J.A.D. 

Appellants are individuals and a family trust that invested 

in two real estate development companies, Sofia Homes, LLC 

(Sofia Homes) and Sofia Design & Development at South Brunswick, 

LLC (Sofia Design) (jointly the Sofia Entities). The companies

failed financially and were forced into bankruptcy proceedings. 

In the course of the bankruptcy case and other litigation, the 

Sofia Entities settled claims against respondent Roger 

Passarella and two real estate development companies that he 

owns, respondents Delray Holding, LLC, and Bay Dock Holdings, 

LLC. 

This appeal is from summary judgment granted against 

appellants when they claimed in their individual capacities that 

respondents had interfered with their investment agreements with 

the Sofia Entities and thus damaged their interests. The trial 

court concluded the claims belonged to the Sofia Entities, and 
3 A-0203-13T3

therefore appellants lacked standing to bring them as 

individuals. As an alternative ground, the court determined 

that appellants did not refute respondents' accounting evidence, 

which showed that respondents did not cause any damages to the 

Sofia Entities. We affirm the trial court's decision.

I.

Sofia Homes, a construction company primarily engaged in 

residential development, owned property in Freehold known as the 

Liberty Crossing project. It was also the principal owner and 

the sole Class A member of Sofia Design, which was formed to 

develop and operate a single property in South Brunswick, an

office building to be named Gateway Commons. Appellants are 

variously members of Sofia Homes, Class B members of Sofia 

Design, or investors in the development projects. 

In 2006, Sofia Homes entered into a contract with 

respondent Bay Dock Holdings, LLC, to develop residential 

property in Wall Township. Sofia Homes and Bay Dock also 

entered into a cost sharing agreement for site improvements on 

their adjacent lands in Freehold. 

In 2009, respondents assisted the Sofia Entities in 

obtaining financing from Amboy National Bank for the Gateway 

Commons project. Anthony D'Amore, III, was then a member of 

Sofia Homes and Sofia Design, and also an undisclosed employee 
4 A-0203-13T3

of Bay Dock. He told appellants that Bay Dock was willing to 

offer its Freehold property as collateral for Sofia Design to 

receive additional funding for the Gateway Commons project. In 

exchange, Sofia Design would satisfy tax liens on Bay Dock's 

Freehold property and elevate D'Amore to managing member of 

Sofia Design. After the parties reached an agreement, Bay Dock 

transferred ownership of its Freehold land to a new company, 

respondent Delray Holding, LLC, which was created and owned by 

Passarella as its sole member.

The parties dispute the events that led to the financial 

failure of the Sofia Entities. However, it is undisputed that 

D'Amore transferred loan proceeds that belonged to the Sofia 

Entities to a bank account controlled by Bay Dock. Appellants 

allege that D'Amore conspired with Passarella to divert the 

funds as part of a secret plan to gain control of the Gateway 

Commons project. According to appellants, the diversion of the 

loan proceeds caused the Sofia Entities' projects to fail, which 

in turn led to the loss of appellants' equity interests, 

investments, loans, and anticipated profits to be derived from 

those projects.

Respondents, on the other hand, contend that D'Amore 

transferred the loan proceeds for the benefit of the Sofia 

Entities. They contend his purpose was to prevent Charles 
5 A-0203-13T3

Kelly, another member of Sofia Homes who is not a party in this 

litigation, from using the funds improperly for other ventures

and personal obligations. See In re D'Amore, 472 B.R. 679, 684 

(Bankr. D.N.J. 2012). Respondents argue that D'Amore paid debts 

owed by the Sofia Entities out of the Bay Dock account, see

ibid., and that he ultimately paid more on behalf of the Sofia 

Entities than he transferred into the Bay Dock account from the 

loan proceeds. Respondents contend the Sofia Entities suffered 

no losses but actually benefitted from the diversion of the loan 

proceeds.

By 2010, D'Amore had resigned from one of the Sofia 

Entities and been voted out as a member of the other. 

Litigation ensued. In March 2010, the Sofia Entities, Charles 

Kelly, and appellants filed a complaint in Superior Court, 

Monmouth County (MON-L-1430-10), against Bay Dock, Passarella, 

and D'Amore alleging misappropriation, conversion, and related

causes of action. 

D'Amore filed a voluntary petition for bankruptcy in August 

2010, which stayed the Monmouth County action as to him. 

D'Amore, supra, 472 B.R. at 684. In December 2010, the 

plaintiffs in the Monmouth County action filed an adversary 

complaint in the Bankruptcy Court against D'Amore, asserting 

claims for fraud, defalcation, and similar causes of action. 
6 A-0203-13T3

Ibid. Subsequently, D'Amore moved for summary judgment in the 

Bankruptcy Court, contending among other grounds that the 

individual investors and members of the Sofia Entities lacked 

standing to pursue their claims against him. Id. at 684-85. 

By written decision dated May 31, 2012, the Bankruptcy 

Court agreed with D'Amore. The court stated the funds that were 

allegedly misappropriated were the property of the Sofia 

Entities, not the property of the individual LLC members or 

investors. Any damages that could be claimed by the individuals

flowed through the companies and could not be claimed directly 

by them. Id. at 694-95. The Bankruptcy Court dismissed the 

individual claims of appellants. Id. at 696. 

On July 5, 2012, the Monmouth County court in MON-L-1430-10 

granted summary judgment on the same ground to Bay Dock and 

Passarella. 

The lawsuit that is the subject of this appeal, MON-L-3425-

11, was originally brought by Delray and Bay Dock. They claimed

the Sofia Entities and the individual defendants owed them money 

on the several development agreements of the companies. 

Appellants filed a counterclaim, and also a third-party 

complaint against Passarella. Appellants sought compensation 

for the loss of their investments and anticipated profits in the 

Gateway Commons and the Liberty Crossing projects on the ground 
7 A-0203-13T3

that the diversion of the loan proceeds was tortious 

interference with their investment agreements with the Sofia 

Entities and also entitled them to civil remedies under New 

Jersey's racketeering (RICO) statute, N.J.S.A. 2C:41-2, -4.

In December 2012, respondents and the Sofia Entities 

settled their disputes and dismissed all claims against one 

another, both in the bankruptcy proceedings and in the Monmouth 

County cases. As part of the settlement, respondents paid

$225,000 to the Sofia Entities. 

On July 26, 2013, the Law Division in this case granted 

summary judgment in favor of respondents. The court held that 

the claims remaining in the case were corporate claims and that 

appellants lacked standing to assert them as individuals. The 

court also determined that appellants did not have evidence of

any damages from D'Amore's diversion of the loan proceeds to Bay 

Dock because they had not challenged respondents' accounting,

which showed that Bay Dock paid out more on behalf of the Sofia 

Entities than it took in from their loan proceeds. 

This appeal is from the summary judgment order dismissing

all the claims contained in appellants' counterclaim and thirdparty complaint.
8 A-0203-13T3

II.

It is a fundamental principle of corporate law that:

A corporation is regarded as an entity

separate and distinct from its shareholders.

It is a principle of corporation law that

[r]egard for the corporate personality

demands that suits to redress corporate

injuries which secondarily harm all

shareholders alike are brought only by the

corporation. . . . The prevailing American

rule is that [w]hen an injury to corporate

stock falls equally on all stockholders,

then an individual stockholder may not

recover for the injury to his stock alone,

but must seek recovery derivatively in

behalf of the corporation.

[Strasenburgh v. Straubmuller, 146 N.J. 527,

549-50 (1996) (citations and internal

quotation marks omitted).]

Shareholders in a corporation may only sue individually

when they suffer a "special injury," as distinct from injuries

suffered by all shareholders. Pepe v. Gen. Motors Acceptance

Corp., 254 N.J. Super. 662, 666 (App. Div.), certif. denied, 130

N.J. 11 (1992). "A special injury exists 'where there is a

wrong suffered by [a] plaintiff that was not suffered by all

stockholders generally or where the wrong involves a contractual

right of the stockholders, such as the right to vote.'" 

Strasenburgh, supra, 146 N.J. at 550 (quoting In re Tri-Star

Pictures, Inc., 634 A.2d 319, 330 (Del. 1993)). To determine

whether a claim presents an individual cause of action or a

derivative claim belonging solely to the corporation, "courts
9 A-0203-13T3

examine the nature of the wrongs alleged in the body of the

complaint, not the plaintiff's designation or stated intention." 

Id. at 551 (citing Lipton v. News Int'l, Plc, 514 A.2d 1075,

1078 (Del. 1986)).

Our decision in Pepe, supra, 254 N.J. Super. 662, is

directly on point with respect to the issue in this appeal. In

that case, Virginia and Richard Pepe asserted contract and tort

claims resulting from the financial failure of the ten corporate

automobile dealerships they owned as shareholders. Id. at 664-

65. We held that the Pepes' claims:

all assert losses sustained by them as the

result of the destruction of their

corporations. As such, the claims are

entirely derivative of causes of action

which, but for their release by the

bankruptcy stipulation, would be available

to the corporations. The law is clear and 

uniform: shareholders cannot sue for 

injuries arising from the diminution in 

value of their shareholdings resulting from 

wrongs allegedly done to their corporations.

. . . Nor can stockholders assert individual 

claims for wages or other income lost 

because of injuries assertedly done to their 

corporations.

[Id. at 666 (citations omitted).]

Here, appellants make tort claims similar to those the 

Pepes made. Their claims of tortious interference with their

investment agreements are entirely dependent on losses the Sofia

Entities allegedly sustained as a result of the financial
10 A-0203-13T3

failure of the companies. The individual claims derive from the

claims that the Sofia Entities had against respondents and that

were settled in exchange for a substantial payment by

respondents. 

Appellants cite no cases to support their argument that 

they have standing to sue as individuals for the alleged losses 

of the Sofia Entities. Their conclusory statements that they 

"had a protected interest" and that their claims are not 

identical to those of the Sofia Entities' claims are not 

sufficient to overcome the prevailing law with respect to

standing to sue. 

Nor can an independent investor in a corporation sue for 

debts owed to the corporation. If it were otherwise, any 

investor or creditor could undermine the corporation's 

settlement of a dispute and bring an individual claim for causes 

of action that belong to the corporation. The Sofia Entities 

settled their claims against respondents, and individual 

investors and creditors cannot revive those same claims by 

asserting an individual cause of action. 

Because the members and other investors have not alleged an

injury caused by respondents that is distinct from that suffered

by any shareholder, investor, or creditor of the corporate
11 A-0203-13T3

entities, they lack standing to assert their claims of tortious

interference or racketeering violations.

III.

A secondary ground for summary judgment was that, even if

appellants have standing to pursue their claims, they failed to 

produce evidence to contradict respondents' accounting. The 

trial court discussed the importance of the accounting evidence

presented on respondents' summary judgment motion: 

[T]he accounting records indicate that the 

amount put into the [Bay Dock] account . . . 

was less than the amount paid out of the 

account for corporate bills [of the Sofia 

Entities]. Thus, these records indicate 

that D'Amore did not gain personal benefit 

from those funds and neither did [Bay Dock] 

or Passarella. . . . [A]ccording to the 

record evidence and the uncontested 

calculations by [respondents], the 

accounting records suggest that the [Bay 

Dock] account was used to pay for [the Sofia 

Entities'] corporate bills. Thus, 

[appellants] have failed to establish how 

D'Amore's deposit of the proceeds into the 

[Bay Dock] account . . . caused their 

injuries or resulted in damages. As such, 

apart from the issue of standing, the 

evidence here is so one-sided that 

[respondents] must prevail as a matter of 

law with regard to the counterclaims.

Appellants dispute this finding of the court. They rely on 

a certification of their attorney, and the exhibits attached to

that certification, and claim there was opposing accounting 
12 A-0203-13T3

evidence. They contend that whether the diversion of the loan 

proceeds damaged the Sofia Entities is a disputed issue of fact. 

In December 2013, respondents moved in this court to strike 

from our record on appeal the certification of appellants' 

attorney dated September 18, 2012, and its accompanying 

exhibits. Respondents asserted that these items were not 

included in the summary judgment papers submitted to the trial 

court. By order dated January 24, 2014, we remanded to the 

trial court pursuant to Rule 2:5-5(a) for the limited purpose of 

settling the summary judgment record. On March 5, 2014, the 

motion judge issued a letter-decision stating that the trial 

court had not retained the summary judgment record. Although 

the judge could not verify the summary judgment record, he 

inferred from the contents of the parties' motions in this court 

that the 2012 certification and its exhibits were not part of 

the summary judgment record.1 

Appellants are not able to assert that their attorney's

2012 certification was submitted in opposition to the summary 

 

1 We have not been formally informed of the record-retention 

practices of the Law Division, but we know that the court 

discarded the motion papers in less time than six months from 

the summary judgment order of July 26, 2013, until our remand 

order of January 24, 2014. Even a timely notice of appeal did 

not prompt the Law Division to retain the papers pertinent to 

this appeal. Civil litigants would be well-advised to keep

accurate records of motions and other papers in the event of an 

appeal or other future proceedings. 
13 A-0203-13T3

judgment motion in this case. Instead, they contend it was 

submitted in a motion for summary judgment in the prior Monmouth 

County case, MON-L-1430-10. Nevertheless, appellants argue that 

all parties had in their possession an accounting exhibit that 

contradicts respondents' evidence. Appellants contend that, 

therefore, respondents' accounting was in fact disputed. 

Appellants cannot base a challenge to factual evidence 

presented for the court's summary judgment review on evidence 

that was not presented to the court but was instead presented in 

a different although related case. 

Furthermore, the contradictory accounting evidence upon 

which appellants now rely is only a single page summary of 

several figures with no explanation or backup information. In 

contrast, respondents submitted a detailed spreadsheet of a 

"Cash Analysis" of "All Transactions" of the Bay Dock account. 

The trial court viewed respondents' detailed accounting evidence 

to be "unchallenged" for purposes of the summary judgment 

motion. We can find no error in the court's determination.

Appellants also argue that the accounting evidence is 

irrelevant to this case because their claim is not for the

misappropriation of the Sofia Entities' funds. They are 

mistaken. The accounting evidence is relevant to whether 

appellants can prove damages and causation. If Bay Dock in fact 
14 A-0203-13T3

paid out more on behalf of the Sofia Entities for legitimate 

debts related to the appropriate projects than D'Amore removed

from their loan proceeds, Bay Dock did not cause any damage to 

the Sofia Entities. Consequently, respondents cannot be held 

responsible for the financial failure of those companies and the 

loss of appellants' investment interests.

IV.

Having concluded that respondents were entitled to summary 

judgment on both grounds — lack of standing and the merits of 

appellants' claims for damages — we need not address any other 

arguments raised by either side in this appeal.

Affirmed.