Court Opinion

ID: 4444276
Source: CourtListenerOpinion
Date Created: 2019-10-04 14:07:58.404217+00
Date Added: 2024-06-11T14:25:11.352635
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
     internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

                                                         SUPERIOR COURT OF NEW JERSEY
                                                         APPELLATE DIVISION
                                                         DOCKET NO. A-5122-17T3

JOHN G. WEBB, III, ESQ.,

          Plaintiff,

v.

PAUL FIORAVANTI,

          Defendant-Respondent,

and

PCE INVESTMENT
BANKERS, INC.,

     Defendant-Appellant.
__________________________

                    Argued September 9, 2019 – Decided October 4, 2019

                    Before Judges Fasciale, Moynihan and Mitterhoff.

                    On appeal from the Superior Court of New Jersey, Law
                    Division, Morris County, Docket No. L-1549-16.

                    Justin D. Santagata argued the cause for appellant
                    (Kaufman Semeraro & Leibman, LLP, attorneys; Justin
                    D. Santagata, on the briefs).
            Merrill M. O'Brien argued the cause for respondent
            (O'Brien Thornton LLC, attorneys; Merrill M. O'Brien,
            on the brief).

PER CURIAM

      Defendant PCE Investment Bankers, Inc. (PCE) appeals from the trial

court's: June 7, 2018 order of disposition following a bench trial in an

interpleader action filed by plaintiff John G. Webb III; July 10, 2018 "order

denying new judgment"; and August 31, 2018 order enforcing defendant Paul

Fioravanti's writ of execution. 1 Having reviewed the record and guided by our

standards of review and applicable law, we affirm.

      In his interpleader complaint, filed July 12, 2016, Webb alleged he had

represented Teleios, Inc., formerly known as Arete Development, Inc. (Arete)

until he withdrew as counsel "at the end of May[] 2016." Arete's shareholders—

the Etteres, a father and his three sons—entered into an employment agreement

with Fioravanti, dated November 4, 2013, which, in part, provided:

            If [Arete's] Board in its discretion effects a sale, merger
            or other significant reorganization of the ownership of
            the Company or of substantially all of its assets during
            the Term, you shall receive a commission, or, "success
            fee," payable at the closing of any change of control of

1
  In its merits brief, PCE did not contest any other aspect of the August 31, 2018
order, including the trial court's denial of its request for a stay pending appeal.
As such, we will not address that denial. See Jefferson Loan Co. v. Session,
397 N.J. Super. 520, 525 n.4 (App. Div. 2008).
                                                                           A-5122-17T3
                                        2
            the Company or sale of substantially all of the
            Company's assets in an amount equal to ten percent
            (10%) of the net transaction value.

      PCE is self-described in its merits brief as "a large investment bank that,

among other things, is engaged in the business of procuring buyers for

companies." Webb alleged in his complaint that PCE was engaged by Arete "to

assist with the planned sale of its business" and that "with the assistance of PCE

and Fioravanti, entered into an asset-purchase agreement with Glotel, Inc." in

2015. PCE's agreement with Arete provided in part:

            At the closing of a Transaction, you shall pay to us a
            cash fee (the "Sale Transaction Fee") of (5.0%) percent
            of the Aggregate Consideration (as defined below) in
            connection with the Transaction. Notwithstanding the
            immediately preceding sentence, the minimum Sale
            Transaction Fee will be $200,000.

                  ....

            The foregoing consideration will be due to us, as and to
            the extent provided above, regardless of whether or not
            you have engaged or are obligated to pay a fee or
            commission to any investment banker, broker, or
            advisor.

      The proceeds of the asset purchase were insufficient to meet Arete's

obligations to Fioravanti and PCE, and each obligee notified Webb of a claimed

entitlement to $40,000 of the proceeds (the funds or the $40,000)—the amount

remaining after what was thought to be all of Arete's creditors were paid—held

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by Webb in his attorney trust account. Webb's complaint alleged "these funds

are due to one or more of the [d]efendants, but each party's entitlement and claim

to the funds is a matter in dispute that must be resolved by the [c]ourt." Webb

demanded judgment permitting him to deposit the $40,000 into court, requiring

defendants to interplead any claims they had to the funds and exonerating him

from any liability concerning the funds.

      PCE filed a counterclaim alleging it, not Fioravanti, procured the buyer

for Arete's assets; its claim, therefore, was superior to Fioravanti's. It also filed

cross-claims against Fioravanti who PCE said was its "primary contact" in

negotiating its agreement with Arete. PCE alleged Fioravanti failed to disclose

his "success fee" agreement prior to its engagement and, if that fee had been

disclosed, PCE either would not have entered into the agreement or it would

have required Fioravanti to subordinate his fee to PCE's entitlement. PCE

specifically claimed "Fioravanti fraudulently omitted a material fact from PCE

at or before PCE's engagement letter and then again during negotiations for the

sale of" Arete's assets and, as such, "[he] should have no claim to the $40,000

held in escrow." It also alleged unjust enrichment and unclean hands, justifying

the denial of any award of the funds to Fioravanti and the award of those funds

to PCE.

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                                         4
      Webb deposited the funds into court pursuant to a consent order to which

Fioravanti, PCE and Webb agreed; the order also provided Webb was dismissed

from the action with prejudice and without liability.

      Following the bench trial, although the trial court was "convinced that

Arete has substantial financial obligations to each" defendant for fees due in

connection with the asset purchase, the court concluded "the remaining amount

owed to them is not properly before this [c]ourt." The court found that the

parties did not show that there was an agreement with regard to the funds and

neither had shown exclusive entitlement to them.

      The trial court rejected Webb's testimony that Arete had disclaimed the

funds. The court concluded the funds still belonged to Arete, and that they "not

be distributed to anyone without the company's consent, especially since Arete

was not a party to this action." The court ruled both defendants were "at liberty

to seek satisfaction of their claims by . . . appropriate legal action." The court

entered an order of disposition allowing an Arete representative to, upon motion,

collect the funds and, inasmuch as neither defendant had "shown entitlement to

the funds," it denied "[a]ll other requests" for relief.

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                                          5
      PCE filed a motion 2 "pursuant to [Rule] 4:49 to vacate the [court's] 'order

of disposition' and for the [c]ourt to enter new findings of fact and conclusions

of law" and "to take additional testimony on the limited issue of Arete['s]

disclaimer of its interests [in] the $40,000." PCE proffered a letter it received

after the trial concluded which it claimed Webb mentioned at trial; the letter,

from one of Arete's successor's shareholders, was dated July 14, 2016—two days

after the interpleader complaint was filed. It read:

            We acknowledge that you are holding $40,000.00 in
            your attorney trust account resulting from the
            transaction between Teleios, Inc., formerly known as
            Arete Development, Inc., and Glotel, Inc. We
            understand that both Paul Fioravanti and PCE
            Investment Bankers, Inc. ("PCE") have made claims to
            those funds.

            We have no objection to you releasing those monies to
            the Superior Court Account through an interpleader
            action. We also do not object, in the event of a
            settlement, to you releasing those monies to either Paul
            Fioravanti and/or PCE. We understand and

2
  Although PCE requested oral argument, there is no indication the trial court
granted it. The court should have granted the request because the motion did
not involve a pretrial discovery or calendaring issue. R. 1:6-2(d). The court
also did not provide a reason in the order as to why it did not grant oral argument.
See LVNV Funding, L.L.C. v. Colvell, 421 N.J. Super. 1, 5-6 (App. Div. 2011).
PCE, however, mentions the trial court's failure to grant oral argument only in
the procedural and factual background section of its merits brief and does not
make any further argument on appeal; as such we will not address this issue.
See Jefferson, 397 N.J. Super. at n.4.
                                                                            A-5122-17T3
                                         6
             acknowledge that Teleios, Inc. has no claim to those
             funds.

PCE also asserted Arete had been on notice of the interpleader action and never

sought to appear.

      The trial court denied the motion explaining, "[a]t trial, PCE failed to

show it is entitled to the money" and "[e]ven assuming (for argument's sake)

Arete 'has disclaimed interest in the $40,000,' it does not follow that PCE is

therefore entitled to the money." The court concluded PCE had "failed to show

that the [c]ourt erred in concluding that [it] did not establish at trial that it was

entitled to the money."

      Subsequently, Matthew Ettere, on behalf of Arete, filed a motion to

withdraw the funds, asserting Arete still owed tax obligations and all parties

agreed "the tax liability of Arete would be a priority, and would be satisfied

before any payments to Fioravanti or anyone else would be made." Fioravanti

opposed the motion and filed a cross-motion seeking to enforce a writ of

execution he had obtained against Teleios in a separate action; he also requested

the trial court open the record to admit the same July 14, 2016 letter previously

proffered by PCE in its motion to vacate the judgment if the trial court had "any

concern with the veracity of attorney Webb's sworn testimony that Teleios had

disclaimed ownership of the $40,000." PCE also opposed Teleios's motion and

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                                         7
filed a Rule 4:50-1 cross-motion for relief from judgment and for a stay, arguing

Arete no longer existed and, as such, Ettere did not have authority to file the

motion to withdraw funds, and that the "evidence submitted by Matthew Ettere

. . . that Arete has no claim to the $40,000" justified relief.

       The trial court recognized and enforced Fioravanti's judgment and writ of

execution, allowing him to levy on the funds; determined Arete's motion was

"moot because of Fioravanti's [w]rit"; and denied PCE's motion because its

"claims, even if they eventually proceed to judgment, would be secondary or

subordinate to the levy of Fioravanti."

      PCE argues that: the trial court erred in determining Arete never

disclaimed the funds; the court's "order of disposition" was "wholly

unsupportable"; and the trial court misunderstood interpleader and avoided

adjudicating PCE's claims against Fioravanti that would have established its

priority to the funds.

      Our review of "the findings and conclusions of a trial court following a

bench trial are well-established." Allstate Ins. Co. v. Northfield Med. Ctr., PC,

228 N.J. 596, 619 (2017). While we review the trial court's interpretation of law

de novo, Manalapan Realty, LP v. Twp. Comm. of Manalapan, 140 N.J. 366,

378 (1995),

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                                          8
            we give deference to the trial court that heard the
            witnesses, sifted the competing evidence, and made
            reasoned conclusions. Reviewing appellate courts
            should "not disturb the factual findings and legal
            conclusions of the trial judge" unless convinced that
            those findings and conclusions were "so manifestly
            unsupported by or inconsistent with the competent,
            relevant and reasonably credible evidence as to offend
            the interests of justice."

            [Allstate Ins. Co., 228 N.J. at 619 (alteration in
            original) (citations omitted) (quoting Griepenburg v.
            Township of Ocean, 220 N.J. 239, 254 (2015)).]

      We do not "engage in an independent assessment of the evidence as if

[we] were the court of first instance," State v. Locurto, 157 N.J. 463, 471 (1999),

and will "not weigh the evidence, assess the credibility of witnesses, or make

conclusions about the evidence," Mountain Hill, LLC v. Twp. of Middletown,

399 N.J. Super. 486, 498 (App. Div. 2008) (quoting State v. Barone, 147 N.J.
599, 615 (1997)). "Reversal is reserved only for those circumstances when we

determine the factual findings and legal conclusions of the trial judge went 'so

wide of the mark that a mistake must have been made.'" Llewelyn v. Shewchuk,

440 N.J. Super. 207, 214 (App. Div. 2015) (quoting N.J. Div. of Youth & Family

Servs. v. M.M., 189 N.J. 261, 279 (2007)). "If we are satisfied that the trial

judge's findings and result could reasonably have been reached on sufficient

credible evidence in the record as a whole, his [or her] determination should not

                                                                           A-5122-17T3
                                        9
be disturbed." Pioneer Nat'l Title Ins. Co. v. Lucas, 155 N.J. Super. 332, 338

(App. Div. 1978).

      This action was procedurally misguided from Webb's filing of the

complaint.    As the trial court recognized in its statement of reasons

accompanying its August 31, 2018 order, plaintiff filed an action pursuant to

Rule 4:31. He did not seek leave of the court to deposit the funds with the

Superior Court Trust Fund pursuant to Rule 4:57-1, under which, upon deposit

control is relinquished to the court, Kostick v. Janke, 221 N.J. Super. 37, 40-41

(Law Div. 1987), aff'd, 223 N.J. Super. 311, 314-15 (App. Div. 1988), "until it

adjudicates the rights of the parties to the monies," Granduke v. Lembesis, 256
N.J. Super. 546, 549 (App. Div. 1992). If the deposit is made pursuant to Rule

4:57-1, "[q]uestions of ownership and entitlement depend on the adjudication of

the underlying claims between the parties." Ibid.

      In an interpleader action filed under Rule 4:31, "[p]ersons having claims

against the plaintiff may be joined as defendants and required to interplead when

their claims are such that the plaintiff is or may be exposed to double or multiple

liability." Webb was not a proper plaintiff because, as the custodian of the funds

deposited in his attorney trust account, he was not exposed to an y liability.

Attorneys holding funds in an attorney trust account are not ordinarily subject

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                                       10
to liability. Liberty Mutual Ins. Co. v. Cressman, 336 N.J. Super. 67, 70 (App.

Div. 2000). In Cressman, we held, "an attorney who simply knows of a client's

debt has no duty to pay the creditor from the proceeds of a settlement" unless an

equitable basis is shown, "such as inducing to its detriment [the creditor's]

reliance upon [counsel's] representation that [the creditor's] lien would be

satisfied." Ibid.

      No claim was made against Webb in this action.              Indeed, he was

dismissed, per the terms of the consent order by which the funds were deposi ted

into court, "with prejudice [and] without liability to either party in this

interpleader action only." Although Arete or its successor could have instituted

an action under Rule 4:31, Webb had no authority to do so. He was no longer

Arete's or Teleios's counsel so he could not act in their stead.         Thus, the

interpleader action was procedurally flawed from its inception.

      Furthermore, deferring to the trial court's assessment of the witnesses'

credibility on the stand, we discern the trial court's conclusion that Arete did not

disclaim the funds is supported.       Notwithstanding Webb's testimony that

"several months before" he filed the interpleader complaint, Arete had

"disclaimed in conversations with [him] any interest in the $40,000" and that

prior to filing the complaint, his counsel received the letter from Arete's

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                                        11
successor stating that it made no claim on the funds held in his trust account, 3

the court was "dubious to accept any representations that Arete has no interest

in, or that it relinquished its rights" to the funds, rejecting both Webb's testimony

about his conversation with his client—whose identity and authority was not

disclosed—and about the July 12, 2016 letter. Simply put, the trial court did not

find competent, credible evidence that Arete disclaimed the funds.

      We are unconvinced that the July 12 letter, later produced when PCE

moved for a new trial, was sufficient to clearly and convincingly establish the

appearance that there was a miscarriage of justice under the law requiring the

grant of relief under Rule 4:49-1(a).4 The letter was authored by Jonathan

Ettere. Although he indicated he was writing "for Teleios, Inc.," the letter does

3
  The letter is actually dated two days after the complaint was filed and is
addressed to Webb, not his counsel.
4
   We note the trial court, in deciding PCE's post-trial motion, concluded PCE
failed to show that the court erred in concluding PCE had not established at trial
its entitlement to the funds and "[i]n fact, PCE [did] not even attempt to show
how the [c]ourt erred in concluding" PCE did not establish that entitlement. The
trial court's decision seems to address a motion made pursuant to Rule 4:49-2.
In any event, our "review of a trial court's action on a new trial motion is
essentially the same as that controlling the trial judge," Dolson v. Anastasia, 55
N.J. 2, 7 (1969), "except that the appellate court must afford 'due deference' to
the trial court's '"feel of the case,"' with regard to the assessment of intangibles,
such as witness credibility." Jastram v. Kruse, 197 N.J. 216, 230 (2008) (quoting
Feldman v. Lederle Labs., 97 N.J. 429, 463 (1984)).

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                                        12
not set forth his authority to act on the corporation's behalf or that Teleios

authorized him to state that it had no objection to the release of the funds to the

court's account through an interpleader action or to releasing the funds to either

PCE or Fioravanti, stating, "We understand and acknowledge that both

[Fioravanti and PCE] have made claims to those funds."

      Arete's motion to release the funds, made by Matthew Ettere, was

ostensibly filed on Arete's behalf, contradicting Jonathan Ettere's claims. While

we do not agree with the trial court that "Arete's motion confirms that Arete

agrees that the monies are its property" because, like Jonathan's actions, there is

no evidence Matthew had authority to act for the corporation, the evidence does

not support that the factual findings and legal conclusions of the trial judge went

"so wide of the mark" that reversal and a new trial is required. See Llewelyn,

440 N.J. Super. at 214.

      The procedural missteps also left the trial court without a basis to decide

the parties' claims to the funds. As noted, Arete was never joined as a party;

neither was Teleios. PCE never instituted suit—as Fioravanti did—against

Arete or Teleios for its contractual fee. Thus, PCE never judicially established

                                                                           A-5122-17T3
                                       13
its underlying claim to the funds. 5 Such was required before PCE's claims of

priority over Fioravanti to Arete's funds could be adjudicated.

      In a true interpleader action instituted by Arete pursuant to Rule 4:31, the

underlying claim could have been resolved, thus establishing PCE's entitlement

to the funds. And if Fioravanti and his claim were joined, see R. 4:27-1; 4:28-

1; 4:29-1, the court could have determined the parties' respective entitlement, if

any, to the funds. Reading Rules 4:27-1, 28-1 and 29-1 in para materia with

Rule 4:31, and the entire controversy doctrine, Rule 4:30A, we conclude the

procedural errors thwarted the goal of avoiding waste, inefficiency, delay and

unfairness to parties "and the need for complete and final disposition through

the avoidance of 'piecemeal decisions,'" Cogdell v. Hosp. Ctr. at Orange, 116
N.J. 7, 15 (1989), and joining all parties claiming an interest in the same

property, see generally Kessler v. Tarrats, 191 N.J. Super. 273, 312-13 (Ch. Div.

1983) (holding a party seeking to enforce a lien against a property "must join

such persons as will be affected by the enforcement of the lien" including prior

lienholders), aff'd, 194 N.J. Super. 136 (App. Div. 1984).

5
   We also note Fioravanti's action against Arete, disclosed in the Rule 4:5-1
certification incorporated in his answer to Webb's complaint, was never joined
in the interpleader action.
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                                       14
      We thus affirm the trial court's initial decision to return the funds to Arete,

its denial of PCE's motion to vacate its prior judgment and its order enforcing

Fioravanti's writ and denying PCE's cross-motion for relief from judgment. In

light of our decision, we need not address PCE's other claims.

      Affirmed.

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                                        15