Court Opinion

ID: 4189474
Source: CourtListenerOpinion
Date Created: 2017-07-26 13:11:08.301878+00
Date Added: 2024-06-11T09:24:04.557574
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                 APPROVAL OF THE APPELLATE DIVISION

                                     SUPERIOR COURT OF NEW JERSEY
                                     APPELLATE DIVISION
                                     DOCKET NO. A-2599-13T4

VICTOR LOURO and
JENNIFER LOURO,

       Plaintiffs-Respondents,

v.

FILIPE PEDROSO1 and PEDROSO
LAW FIRM, P.C.,

       Defendants,

and

PEDROSO LEGAL SERVICES, LLC,

     Defendant-Appellant.
____________________________________

            Argued April 15, 2015 – Decided June 4, 2015

            Before Judges Ashrafi and O'Connor.

            On appeal from Superior Court of New Jersey,
            Law Division, Essex County, Docket No.
            L-5717-12.

            Filipe Pedroso argued the cause for pro se
            appellant.

            Monique D. Moreira argued the cause for
            respondents (Jose B. Moreira, P.C.,
            attorney; Ms. Moreira and Jose B. Moreira,
            on the brief).

1
    The party was incorrectly designated as Felipe Pedroso.
PER CURIAM

     Attorney Filipe Pedroso, who is a sole practitioner

operating his law practice in corporate form pursuant to Rule

1:21-1A or -1B, appeals on behalf of Pedroso Legal Services,

LLC, from a judgment of more than $21,000 entered after a jury

trial for the non-payment of office rent.   He contends the

judgment should not have included the limited liability company

he formed while the lawsuit was pending but should be only

against Pedroso Law Firm, P.C.   The trial court ruled that the

limited liability company was a successor to the professional

corporation that was originally the named defendant and that the

firm under its new name was also liable for the judgment.     We

agree and affirm.

     Appellant has not provided a full record of the case.2     He

has not provided transcripts of the trial but initially filed

only transcripts of the jury's verdict and the trial court's

post-trial hearing regarding the form of the judgment.     After

plaintiffs filed a responding brief in this court, appellant

added a transcript of the testimony of a single witness at the

trial, the prior owner of the building in which the firm's

2
  It is the appellant's responsibility to provide this court with
the record relevant to all issues presented on appeal. See R.
2:5-3, 5-4, 6-1.

                                 2                          A-2599-13T4
office was rented.   Nevertheless, we can deduce the following

from the limited record we have been provided.

    On August 1, 2012, plaintiffs Victor and Jennifer Louro

filed a complaint against Pedroso individually and Pedroso Law

Firm, P.C. ("the law firm" or "P.C.") to eject them from

commercial premises at 38 Jefferson Street in Newark.

Plaintiffs had acquired title to the property in May 2012 from a

third party following a foreclosure and a sheriff's sale of the

property.   Plaintiffs also sought compensation for unpaid rent

for defendants' continuing use of office space at the property

without paying its fair rental value.

    Before the case came to trial, the court issued an order

ejecting Pedroso and the law firm from the premises by the end

of June 2013.   Unbeknownst to the court and plaintiffs, Pedroso

established a new limited liability company on July 13, 2013,

which he named Pedroso Legal Services, LLC ("the LLC").    He was

the founder and has always been the sole member of the LLC.

Using the LLC as the new name for his firm, he resumed his

practice of law at 8 Wilson Avenue, which is close to 38

Jefferson Street in the Ironbound section of Newark.

    The jury trial was held in December 2013 before Judge W.

Hunt Dumont.    Plaintiffs alleged that Pedroso had fraudulently

                                 3                         A-2599-13T4
prepared and executed two vastly different leases with the prior

owner of the property, Armando Pena, who is related to Pedroso.

    Pena, who testified through a Portuguese interpreter, was

the owner of 38 Jefferson Street from 2001 to 2012.   In 2011,

foreclosure proceedings commenced, and Pena eventually lost his

title.   Pena testified that Pedroso is his step-daughter's

husband and had rented the first floor of the building for his

law practice.    Although Pena acknowledged his signature on

several documents shown to him at the trial, he stated he did

not read English well and did not understand the contents of the

documents.   He testified that Pedroso had prepared the documents

and he trusted their contents.    He was collecting rent of $1,500

per month from Pedroso's law firm until February 2010.    At about

that time, Pena agreed that the law firm's rent would be reduced

to $425 per month in exchange for legal services he was

receiving from Pedroso, which were apparently related to the

pending foreclosure of the property.   However, Pena did not

receive any rent payments from Pedroso and his law firm after

February 2010.

    The first lease prepared by Pedroso, which was marked as

Exhibit P-1 at the trial, was dated December 1, 2007.     It was

for a term of one year and designated the rent for the first-

floor office space to be $2,500 per month.    The lease was signed

                                 4                          A-2599-13T4
by Pena and by Pedroso as president of "Law Offices of Filipe

Pedroso, P.C."    A one-paragraph "Lease Extension" dated November

4, 2008 (Exhibit P-2) continued the rent at $2,500 per month for

another year.    The Lease Extension was signed by Pena and by

Pedroso as President of "Pedroso Law, P.C."     Plaintiffs alleged

that the 2007 lease and the 2008 lease extension overstated the

rent that the law firm was paying because they were intended to

be used by Pena to apply for financing from a bank.

    The second lease prepared by Pedroso (Exhibit P-3) was

dated December 1, 2009, and signed by Pena and by Pedroso as

president of "Pedroso Law, P.C."     It was for a term of ten years

and set the rent for the same first-floor office space at $425

per month for the entire ten-year term.    According to

plaintiffs, this second lease was intended to defraud a

subsequent purchaser of the property once it became apparent

that the mortgage on the property would be foreclosed.     Since we

do not have transcripts of the entire trial, we do not know what

Pedroso's defenses were to plaintiffs' allegations.

     By responding to specific questions on a verdict form, the

jury found that the law firm had occupied the first-floor space

at 38 Jefferson Street during plaintiffs' ownership from May 1,

2012, to June 30, 2013, and that the value of that use was

$1,500 per month.   The jury also found that plaintiffs had not

                                 5                          A-2599-13T4
proven by clear and convincing evidence that Pedroso committed a

fraud against plaintiffs with respect to use of the premises and

the two leases he prepared.    Therefore, the jury's verdict for

unpaid rent was only against the law firm and not against

Pedroso personally.

    After the trial, plaintiffs submitted to the judge a

proposed form of judgment for $21,000 ($1,500 multiplied by

fourteen months), plus pre-judgment interest and costs, to be

entered against "Pedroso Law Firm, P.C. and any subsequent law

firm created by Felipe Pedroso."      Over the next several weeks,

the parties submitted letters disputing whether the judgment

should be entered against any entity other than Pedroso Law

Firm, P.C.

    On January 8, 2014, Judge Dumont heard argument regarding

the form of the judgment.     He ruled that the judgment would not

be entered against "any subsequent law firm" but that the LLC

would be included as a named defendant against whom the judgment

would apply since it was already in existence and was a

successor of the law firm.

    On appeal of that ruling, Pedroso argues that the LLC is a

separate entity that was not named as a defendant in this case

and against which a judgment cannot be entered.      He cites cases

for the general proposition that a corporate entity is separate

                                  6                          A-2599-13T4
from its parent and its shareholders, and he argues that it is a

violation of the LLC's due process and equal protection rights,

and its rights to fundamental fairness under our State

Constitution, to include it as a judgment debtor in this case.

    We find no error in Judge Dumont's careful consideration of

the issue and his ruling that the LLC is a successor to the

business of the law firm and is thus obligated to pay the

judgment.

    At the January 8, 2014 hearing, Judge Dumont asked Pedroso

when he formed the LLC, what the purpose was of forming the new

entity, what the nature of its practice is, who owned each

entity, and specifically, why the firm under a new name should

be considered a different party from the firm under its former

corporate name.    Pedroso was evasive as to when he formed the

LLC, claiming that he did not want to misstate the date, even

though he must certainly have known he formed it shortly after

his firm was evicted from 38 Jefferson Street just six months

earlier.    He admitted that both corporate entities were created

by and owned solely by him, and that he was the only lawyer in

the firm.    He did not identify any new or specialized area of

practice for which the entity had been formed.    He could not

deny that the office location of the firm under its new name was

                                 7                          A-2599-13T4
virtually down the street from the old firm, but he claimed that

the two firms did not share the same clients or client base.

     Pedroso argued that the old firm was not doing any business

and that the new firm was seeking to "rejuvenate" his law

practice by seeking new clients through a marketing strategy,

namely, a website and internet contact with clients.   He claimed

he was forming "a new image" as Pedroso Legal Services, LLC.      He

stated he only included the name Pedroso on the letterhead of

the new firm because attorney ethics rules in this State require

that it be included.3

     Remarkably, Pedroso argued that, just as some home building

or remodeling contractors might create separate limited

liability companies for the construction of each individual

house so that they can "isolate" their potential liability, he

can do the same as a lawyer with respect to his law practice.

After he tried to avoid the judge's hypothetical questions about

what liability the new firm had for debts of the law firm for

such things as fees owed to deposition stenographers, he

ultimately claimed that the LLC would have no liability for any

3
  The most prominent feature of the letterhead of Pedroso Legal
Services, LLC, is a multi-colored website address in much larger
and bolder type than any other printed material. The letterhead
includes Pedroso's last name but does not include his full name
and gives no indication that he is the only attorney in the
firm.

                               8                            A-2599-13T4
such debts incurred by the law firm.    He stated that the firm in

fact had no such debts and that the rent arrears debt of this

case was merely "pending" at the time the LLC was created.

Pedroso argued that any judgment creditor of the old law firm

would have to bring a separate lawsuit against his new law firm,

including the filing and service of a new summons and complaint

against the LLC, in order to obtain a judgment against the LLC.

       The trial judge would not countenance such arguments and

made findings fully supported by the record.    The judge found

that Pedroso changed the name of his firm as soon as he moved

out of the Jefferson Street office.    There was no dispute that

Pedroso was engaged alone in the practice of law and that he

continued to practice after June 2013, although at a new

location and under a new firm name.    The judge found there was

nothing significantly different in Pedroso's practice of law

under the former corporate name and under the new LLC.     The

judge stated to Pedroso: "Each of these firms were created by

you.   There is an identity of interest between them.   You're

both located in the Ironbound section of Newark.    You are the

sole practitioner of the firm.    You're using the letterhead of

the former law firm."4

4
  The judge was referring to correspondence the court had
received in December 2013 on letterhead marked "PEDROSO LAW
                                                      (continued)

                                 9                          A-2599-13T4
    Based on these findings, the judge concluded that the LLC

is simply the new name of Pedroso's law firm, which has

continued in business.   The judge stated that applying the

judgment to any law firm Pedroso might create in the future

would be too broad a remedy for plaintiffs but that Pedroso

Legal Services, LLC, was an existing successor of Pedroso Law

Firm, P.C., and had full notice of the proceedings.   Therefore,

the judgment would also be against the LLC.

    The law recognizes that a corporation is a separate entity

from its shareholders, and that the shareholders are generally

not liable for the contractual obligations of the corporate

entity.   See State, Dep't of Envtl. Prot. v. Ventron Corp., 94

N.J. 473, 500 (1983).    "Except in cases of fraud, injustice, or

the like, courts will not pierce a corporate veil."   Ibid.

(citing Lyon v. Barrett, 89 N.J. 294, 300 (1982)).    However, the

corporate veil will be pierced "to prevent an independent

corporation from being used to defeat the ends of justice, Telis

(continued)
Professional Corporation." No street address or telephone
number was included on the letterhead, and no full name of any
attorney. Thus, Pedroso was appearing in court on behalf of
himself and the two corporate entities under yet a different
name from his prior or current law firm names. We note as well
that the names of the law firm used for the leases that Pedroso
prepared and signed in 2007 through 2009 are different from
other designations of the law firm. The record does not reveal
whether these other names were actual corporate entities or
Pedroso simply used different firm names on different documents.

                                 10                         A-2599-13T4
v. Telis, 132 N.J. Eq. 25 (E. & A. 1942), to perpetrate fraud,

to accomplish a crime, or otherwise to evade the law, Trachman

v. Trugman, 117 N.J. Eq. 167, 170 (Ch. 1934)."   Ventron Corp.,

supra, 94 N.J. at 500.

    Here, Pedroso believes he can evade the payment of a

judgment for rent arrears on the office space his law firm

occupied simply because he has decided to "rejuvenate" and to

change the "image" of his firm under a new name and at a

different location.   The legal profession is not so disdainful

of the rights of creditors that it would allow Rules 1:21-1A and

-1B to be thus misused by a member of the New Jersey bar.     The

Rules of Professional Conduct for lawyers in this State do

require general honesty.   See RPC 8.4(c).

    In Ramirez v. Amsted Industries, Inc., 86 N.J. 332 (1981),

a products liability case, the Court held that a successor

corporation that acquired the assets of a predecessor

corporation can be held responsible for the debts and

liabilities of the predecessor if:

         (1) the purchasing corporation expressly or
         impliedly agreed to assume such debts and
         liabilities; (2) the transaction amounts to
         a consolidation or merger of the seller and
         purchaser; (3) the purchasing corporation is
         merely a continuation of the selling
         corporation, or (4) the transaction is
         entered into fraudulently in order to escape
         responsibility for such debts and
         liabilities.

                                11                          A-2599-13T4
          [Id. at 340-41.]

Here, Judge Dumont found that the LLC is merely a continuation

of the law firm under its prior corporate identity.    Pedroso's

license to practice law in this State was used in conducting the

business of the prior law firm just as it is now used to conduct

the business of the successor LLC.     Appellant offered no

credible evidence that the LLC is not a continuation of the law

practice of the prior firm.

    Appellant argues that the judgment could not be entered in

the absence of service of process upon the LLC.     However, our

courts have permitted the amendment of judgments to correct the

name of the responsible party.     In Bussell v. DeWalt Products

Corp., 259 N.J. Super. 499, 503 (App. Div. 1992), certif.

denied, 133 N.J. 431 (1993), after the plaintiff obtained a

$600,000 judgment against DeWalt Products Corporation, it moved

to amend the judgment to name DeWalt's successor, Black & Decker

(U.S.) Inc.   Id. at 504.    The trial court granted the motion,

finding that Black & Decker was the real party in interest and

had actually defended the lawsuit through its insurance carrier.

Ibid.   We affirmed the amendment because Black & Decker had

notice of the lawsuit and participated in the defense.        We

noted: "Even if an individual is not named as a party of record,

he may be liable for the judgment if he participated in the suit

                                  12                           A-2599-13T4
or had an opportunity to be heard."      Id. at 510-11.   See also

Louisville & Nashville R.R. Co. v. Schmidt, 177 U.S. 230, 238,

20 S. Ct. 620, 623, 44 L. Ed. 747, 751 (1900) (Where judgment

was entered against an entity that was not named originally in

the pleadings but which had notice and participated in the

litigation, "[t]he mere fact that the proceeding to hold it

liable was by rule does not conflict with due process under the

Fourteenth Amendment . . . .").

    In Bohny v. Associated Dyeing & Printing Corp., 12 N.J.

Misc. 259, 260-62 (Sup. Ct. 1934), the court permitted amendment

of the defendant's name in a judgment from that of the prior

corporate entity, which had declared bankruptcy at the time of

the conduct complained of in the action, to a similarly-named

corporate entity, which held all of the previous company's

assets.   Describing the second corporate entity as the

"successor in fact, if not in law" of the first, the court noted

that a motion to amend the pleadings "would have been granted as

of course . . . ."    Id. at 261.

    The reasoning of these cases is similar to the standard

stated in Rule 4:9-3 for relation back of an amendment of a

pleading:

            An amendment changing the party against whom
            a claim is asserted relates back if . . .
            that party (1) has received such notice of
            the institution of the action that the party

                                    13                        A-2599-13T4
         will not be prejudiced in maintaining a
         defense on the merits, and (2) knew or
         should have known that, but for a mistake
         concerning the identity of the proper party,
         the action would have been brought against
         the party to be brought in by amendment.

    Here, the LLC knew through its sole member, Pedroso, that

an action for unpaid rent was pending and that Pedroso had

changed the name and corporate form of his law firm while that

action was pending.   There is no issue as to the notice the LLC

had of plaintiffs' lawsuit and of the jury's verdict.   Although

it is somewhat inaccurate to describe the naming of the original

defendant law firm as a "mistake," Pedroso's actions in founding

a new corporate entity to replace the existing defendant provide

the equivalent justification for allowing the amendment of the

judgment to include the LLC as a successor defendant.

    In sum, Judge Dumont rejected Pedroso's arguments for good

reason, found that Pedroso Legal Services, LLC, was a

continuation of Pedroso's law practice under the name Pedroso

Law Firm, P.C., and correctly determined that the judgment

should apply to the successor law firm.

    Affirmed.

                                14                        A-2599-13T4