Court Opinion

ID: 4178948
Source: CourtListenerOpinion
Date Created: 2017-06-20 14:12:25.240196+00
Date Added: 2024-06-11T14:38:45.008676
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NOT FOR PUBLICATION WITHOUT THE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-3377-14T2

JOEMAX REALTY, INC.,

        Plaintiff-Appellant/
        Cross-Respondent,

v.

STONEWALL OF SADDLE RIVER,
L.P., NORTH AMERICAN LINEN,
L.L.C., PAUL V. D'AMBROSIO,
and MICHAEL D'AMBROSIO,

        Defendants-Respondents/
        Cross-Appellants,

and

NORTHEAST LINEN SUPPLY CO., INC.,

     Defendant-Respondent.
__________________________________

              Argued October 18, 2016 – Decided           June 20, 2017

              Before Judges Yannotti, Kennedy, and Gilson.

              On appeal from the Superior Court of New
              Jersey, Law Division, Union County, Docket No.
              L-3629-14.

              Robert J. Jeney, Jr., argued the cause for
              appellant/cross-respondent (Jeney, Jeney &
              O'Connor, attorneys; Mr. Jeney, on the brief).
           Ronald L. Davison argued the cause for
           respondents/cross-appellants (Starr, Gern,
           Davison & Rubin, P.C., attorneys; Mr. Davison,
           on the brief).

           Richard J. Allen, Jr., argued the cause for
           respondent (Kipp & Allen, attorneys; Mr. Allen
           and Karen A. Beerbower, on the brief).

PER CURIAM

     Plaintiff Joemax Realty, Inc. (Joemax or plaintiff) appeals

from a January 16, 2015 order that dismissed with prejudice its

complaint against all defendants.            Joemax also appeals from a

February 20, 2015 order denying its motion for reconsideration.

Certain defendants cross-appeal from an April 10, 2015 order

denying their motion seeking sanctions against Joemax and its

counsel for filing frivolous litigation.         N.J.S.A. 2A:15-59.1; R.

1:4-8.

     We   affirm   the    order   granting    summary    judgment   to   all

defendants   and    the     order    denying     Joemax's     motion     for

reconsideration because the applicable statute of limitations

barred Joemax's fraudulent transfer claims.             We also affirm the

order denying defendants' motion for sanctions.

                                    I.

     The underlying litigation arose out of a commercial lease and

a separate sale of the lessee's assets. The facts were established

in the summary judgment record.

                                     2                              A-3377-14T2
      Defendant North American Linen, LLC (NA Linen) operated a

commercial laundry business and leased its business premises from

plaintiff Joemax.      Before 2008, NA Linen was apparently losing

money and was unable to make its lease payments.

      Defendant Michael D'Ambrosio managed NA Linen.                  Defendant

Paul D'Ambrosio was Michael's father and, before 2008, he leant

NA   Linen    significant   monies     through    a     partnership    that    he

controlled.      That partnership is defendant Stonewall of Saddle

River, L.P. (Stonewall).

      In April 2008, NA Linen sold most of its assets to defendant

Northeast Linen Supply Co., Inc. (NELS).               The purchase price for

those assets was $3,382,686, which NELS paid with $2,113,131 in

cash and a promissory note of $1,047,565 (the Promissory Note).

      At the time of the 2008 asset sale, NA Linen owed Stonewall

over $3 million and Stonewall held security interests in NA Linen's

assets.      Consequently, to make the asset sale, NA Linen had to

discharge     Stonewall's   security       interest.     To   accomplish    that

discharge, NA Linen, Stonewall, and NELS signed a "Release of

Security Interest Letter," dated April 17, 2008.                  That letter

provided that the purchase price for NA Linen's assets, including

the Promissory Note, would be paid to Stonewall.               Thus, on April

17, 2008, NA Linen assigned the Promissory Note to Stonewall.

                                       3                                A-3377-14T2
     Separately, in January 2009, Joemax sued NA Linen and others

in Monmouth County for failure to pay the rents and other costs

due under the commercial lease (the Monmouth County action).             In

July 2009, Joemax obtained a default judgment for $817,000 against

NA Linen.

     Joemax had also named other defendants in the Monmouth County

action, including Paul D'Ambrosio.            Joemax alleged that Paul

D'Ambrosio had signed a guarantee to pay NA Linen's rents.             The

claims   against   Paul   D'Ambrosio   were    ultimately    settled   and

dismissed with prejudice in an order entered on July 21, 2014, in

the Monmouth County action.

     In December 2009, after Joemax obtained the default judgment

against NA Linen, Joemax applied for a writ seeking to attach the

Promissory Note given by NELS to NA Linen.       Joemax's attorney sent

a copy of that application to NELS.     An attorney representing NELS

responded to Joemax's attorney in a letter dated January 8, 2010.

That January 8, 2010 letter enclosed a copy of the Promissory Note

and advised Joemax that the Promissory Note was "subordinated to

two different superior creditors of NELS . . . As a result of

those subordination agreements, NELS is currently required to

withhold payment to [NA Linen]."

     A copy of the January 2010 letter was also sent to an attorney

who had represented NA Linen in the asset sale.             That attorney

                                   4                              A-3377-14T2
sent Joemax's attorney a letter dated January 14, 2010, which

advised Joemax that the Promissory Note had been assigned.         In

that regard, the January 14, 2010 letter stated:

          [W]e believe that a further clarification of
          the said Promissory Note is required in view
          of [Joemax seeking a writ of attachment
          against the Promissory Note.]

          . . .

          [P]lease be advised that on April 17, 2008,
          the said Promissory Note was assigned by [NA
          Linen] to its secured creditor. As a result,
          [NA Linen] has no interest in the Promissory
          Note that is subject to attachment.

     In February 2010, Joemax's attorney served a subpoena on NELS

seeking documents related to the sale of NA Linen's assets to

NELS.   NELS responded in July 2010, by producing a compact disc

containing various documents related to the asset sale.          The

documents included a copy of the "Release of Security Interest

Letter" dated April 17, 2008.       That letter explained that the

entire purchase price for the assets of NA Linen would be paid to

Stonewall "in satisfaction of the indebtedness of [NA Linen] to

Stonewall."

     More than four years later, on September 10, 2014, Joemax's

attorney wrote to NELS's attorney, claiming that NELS had withheld

the "Release of Security Interest Letter."   On September 15, 2014,

NELS's attorney responded, noting that a copy of the letter had

                                5                           A-3377-14T2
been provided as part of the collection of documents on the compact

disc that had been produced in July 2010.

      On September 30, 2014, Joemax filed a verified complaint

alleging that the transfer of the Promissory Note by NA Linen to

Stonewall was a fraudulent transfer and that NELS assisted that

fraudulent transfer.1 Joemax's complaint asserted two counts under

the fraudulent transfer action and named as defendants Stonewall,

NA Linen, NELS, Paul D'Ambrosio, and Michael D'Ambrosio.

      After filing answers, defendants moved to dismiss Joemax's

complaint or, in the alternative, for summary judgment. Defendants

argued that Joemax knew of the assignment of the Promissory Note

by July 2010, but it waited beyond the applicable four-year statute

of limitations to file its complaint.            Defendants also argued that

the   assignment      of   the    Promissory   Note    was   not    a    fraudulent

transfer.       Finally, defendant Paul D'Ambrosio argued that the

claims against him were barred by the entire controversy doctrine.

      The     trial   court      initially   denied    defendants'       motion       on

November 21, 2014.          A written statement of reasons accompanied

that order.     Defendants, however, moved for reconsideration, which

the   court    granted.       The    court   found    that   it    had   not     fully

appreciated     the   documents      submitted   and    that      defendants       were

1
  On October 6, 2014, Joemax also filed an order to show cause,
which was entered that same day.

                                         6                                     A-3377-14T2
entitled to summary judgment because Joemax's claims were barred

by the statute of limitations. The court also held that the claims

against Paul D'Ambrosio were barred by the entire controversy

doctrine.    The court explained the reasons for the rulings on the

record on January 16, 2015.            That same day, the court entered an

amended order dismissing with prejudice Joemax's complaint against

all defendants.

       Joemax filed for reconsideration, but the court denied that

motion in an ordered entered on February 20, 2015.

       Thereafter, all defendants except NELS filed a motion for

sanctions against Joemax and its attorney.               Defendants argued that

sanctions were warranted under the frivolous litigation statute,

N.J.S.A. 2A:15-59.1, and Rule 1:4-8.              The trial court denied that

motion in an order entered on April 10, 2015.                The court issued a

written     statement    of     reasons       explaining    that   Joemax     acted

reasonably    in     bringing    the    lawsuit    and     the   action    was   not

frivolous.        The court also clarified that it dismissed Joemax's

complaint because the record established that by July 2010, Joemax

knew   of   the    assignment    of    the    Promissory    Note   based    on   the

documents produced to Joemax by defendants.

                                        II.

       Joemax now appeals from the January 16, 2015 order granting

summary judgment to defendants and the February 20, 2015 order

                                          7                                 A-3377-14T2
denying its motion for reconsideration.           All defendants with the

exception of NELS cross-appeal from the April 10, 2015 order

denying their motion for sanctions.            We address the appeal and

cross-appeal in turn.

      A.   Joemax's Appeal

      In reviewing a summary judgment order, we use a de novo

standard of review and apply the same standard employed by the

trial court.   Davis v. Brickman Landscaping, Ltd., 219 N.J. 395,

405 (2014).    Accordingly, we determine whether the moving party

has demonstrated that there were no genuine disputes as to any

material facts and, if not, whether the moving party is entitled

to judgment as a matter of law.        Id. at 405-06; Brill v. Guardian

Life Ins. Co. of Am., 142 N.J. 520, 540 (1995); R. 4:46.

      Joemax makes two arguments on its appeal.          First, it contends

that the trial court applied an outdated version of the statute

of limitations found in N.J.S.A. 25:2-31(a).            Second, it contends

that the court erred in applying the entire controversy doctrine.

We need not spend time addressing the nuances of these arguments

because the record establishes that by July 2010, Joemax knew that

the   Promissory   Note   had   been       assigned   and,   therefore,   the

applicable statute of limitations bars its claims against all

defendants.

                                       8                             A-3377-14T2
     The claims in Joemax's complaint are based on the Uniform

Fraudulent Transfer Act (the Act), N.J.S.A. 25:2-20 to -34.            While

Joemax does not expressly identify which sections of the Act it

relies on, such claims can either be brought under N.J.S.A. 25:2-

25(a) or (b), or N.J.S.A. 25:2-27(a) or (b).              The statutes of

limitations for all of those claims are set forth in N.J.S.A.

25:2-31.   That statute of limitations provides that claims under

N.J.S.A. 25:2-25(a) must be brought "within four years after the

transfer was made or the obligation was incurred or, if later,

within one year after the transfer or obligation was discovered

by the claimant[.]"     N.J.S.A. 25:2-31(a).        Claims under N.J.S.A.

25:2-25(b) or N.J.S.A. 25:2-27(a) must be brought "within four

years   after   the   transfer   was   made    or   the   obligation    was

incurred[.]"    N.J.S.A. 25:2-31(b).   Finally, claims under N.J.S.A.

25:2-27(b) must be brought "within one year after the transfer was

made or the obligation was incurred."         N.J.S.A. 25:2-31(c).

     Here, the undisputed facts establish that Joemax knew of the

transfer of the Promissory Note by July 2010, but it waited more

than four years to file its fraudulent transfer action.

     The document giving notice to Joemax was the letter sent by

NA Linen's lawyer to Joemax's lawyer on January 14, 2010.         At that

point in time, Joemax was seeking to attach the Promissory Note.

NA Linen's lawyer, however, informed Joemax that the Promissory

                                   9                              A-3377-14T2
Note had been assigned to a secured creditor.                 Specifically, the

letter stated:    "[P]lease be advised that on April 17, 2008, the

said Promissory Note was assigned by [NA Linen] to its secured

creditor.    As   a   result,     [NA    Linen]   has    no   interest   in   the

Promissory Note that is subject to attachment."                    There is no

ambiguity in that disclosure.        The letter informed Joemax that the

Promissory Note had been assigned and, thus, transferred.

     That   Joemax    knew   of   the    transfer   is    reinforced     by   two

additional documents that Joemax received by July 2010. In January

2010, Joemax received a copy of the Promissory Note.                          The

Promissory Note stated that it could be assigned to Stonewall.                  In

July 2010, Joemax received the Release of Security Interest Letter,

which explained that the entire purchase price for the assets of

NA Linen had been paid to Stonewall, in part through assignment

of the Promissory Note.           Those two documents established that

Joemax knew by July 2010, that the Promissory Note had been

assigned.

     Thus, we need not address Joemax's argument that the trial

court relied on an outdated version of N.J.S.A. 25:2-31(a).                   The

question here is not whether or when Joemax could have or should

have discovered the transfer of the Promissory Note.               Instead, the

undisputed material facts established that Joemax did discover the

transfer of the Promissory Note by July 2010.                  We note further

                                        10                               A-3377-14T2
that the trial court, here, ultimately clarified that it was

granting   summary     judgment   because   it   found   that   the    record

established that Joemax knew of the transfer by July 2010.

     We also need not address the entire controversy doctrine

argument because the claims by Joemax are barred by the applicable

statute of limitations.       Thus, we affirm the January 16, 2015

order granting summary judgment to defendants and the February 20,

2015 order denying reconsideration to Joemax.

     B.     Defendants' Cross-Appeal

     In their cross-appeal, defendants, with the exception of

NELS, argue that plaintiff's claims were frivolous and the trial

court erred in not granting them fees and sanctions.

     We review a trial judge's decision on an application for fees

or sanctions under an abuse of discretion standard.          United Hearts

v. Zahabian, 407 N.J. Super. 379, 390 (App. Div.) (citing Masone

v. Levine, 382 N.J. Super. 181, 193 (App. Div. 2005)), certif.

denied, 200 N.J. 367 (2009).       N.J.S.A. 2A:15-59.1 provides that a

prevailing party in a civil action may be awarded reasonable costs

and attorney's fees if the court finds that the complaint or

defense    of   the   non-prevailing     party   was   frivolous.      To    be

considered frivolous, the filing must be found to have been made

in "bad faith, solely for the purpose of harassment, delay or

malicious injury[,]" or made "without any reasonable basis in law

                                    11                                A-3377-14T2
or equity and could not be supported by a good faith argument for

an extension, modification or reversal of existing law."   N.J.S.A.

2A:15-59.1(b).

     Rule 1:4-8(b) provides that a party may make a motion for

sanctions against another party's attorney that has filed a paper

with a court for a frivolous purpose.    The rule goes on to provide

certain procedures that must be followed in order to qualify.     The

rule also imposes limitations on the amount that can be imposed

as a sanction.    R. 1:4-8(b) and (d).

     The conduct warranting sanctions under Rule 1:4-8 or fees

under N.J.S.A. 2A:15-59.1 has been strictly construed and narrowly

applied.   McKeown-Brand v. Trump Castle Hotel & Casino, 132 N.J.

546, 561 (1993); Wyche v. Unsatisfied Claims & Judgment Fund of

N.J., 383 N.J. Super. 554, 560 (App. Div. 2006).    Here, it was not

initially obvious that plaintiff's claim was barred by the statute

of limitations.   Thus, we find no abuse of discretion in the trial

court's decision denying defendants' motion for sanctions and

fees.

     Affirmed.

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