Court Opinion

ID: 4429493
Source: CourtListenerOpinion
Date Created: 2019-08-20 19:24:58.394161+00
Date Added: 2024-06-11T09:24:49.042853
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NOT FOR PUBLICATION WITHOUT THE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-1046-17T1

ALLIANCE SHIPPERS, INC.,

          Plaintiff-Appellant,

v.

JOHN J. GARCIA,

          Defendant,

and

CARLOS O. GARCIA,

     Defendant-Respondent.
________________________________

                   Argued October 29, 2018 – Decided January 29, 2019

                   Before Judges Haas and Sumners.

                   On appeal from Superior Court of New Jersey, Law
                   Division, Middlesex County, Docket No. L-6000-12.

                   Alan M. Lebensfeld argued the cause for appellant
                   (Lebensfeld Sharon & Schwartz, PC, attorneys;
                   Ronald Horowitz, on the brief).
              David W. Fassett argued the cause for respondent
              (Arseneault & Fassett, LLP, attorneys; David W.
              Fassett, on the brief).

PER CURIAM

        Plaintiff Alliance Shippers, Inc. appeals the October 13, 2017 order

granting defendant Carlos Garcia's reconsideration motion to vacate the Law

Division's prior order to reinstate the complaint against defendant. We affirm.

        In 2012, plaintiff, a New Jersey corporation, filed suit in the Law Division

against Krisp-Pak Sales Corp., a wholesale produce business incorporated in

New York State and based in the Bronx. Several months after Krisp-Pak closed

its operations, plaintiff obtained a default judgment in June 2012 against the

business totaling $369,700.68 plus prejudgment interest in the amount of

$1,067.68, counsel fees, and costs to be determined.

        Facing difficulty collecting on its judgment, plaintiff sued Krisp-Pak's

officers and shareholders, Carlos Garcia and John Garcia1 (collectively referred

to as defendants or the Garcias), two months later, alleging they were personally

liable for the judgment against Krisp-Pak.          Plaintiff specifically alleged

defendants were liable under the theories of fraudulent transfer (transferring

1
    John Garcia is not a party to this appeal.

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Krisp-Pak's assets to avoid judgment collection) and failure to comply with a

post-judgment notice of demand under N.J.S.A. 2A:17-74.2

       On February 8, 2013, the motion judge entered an order (February 2013

order) granting defendants' motion to dismiss the complaint for lack of personal

jurisdiction.     In pertinent part, as to Carlos,3 the judge relied upon his

certification in which he asserted that he was a citizen and domiciliary of

Florida, without any personal or business contacts with New Jersey.

       Plaintiff did not appeal the order. Instead, in July 2013, plaintiff filed a

complaint, which was later amended, in the United States District Court,

Southern District of New York, against defendants alleging claims of fraudulent

2
    N.J.S.A. 2A:17-74 provides:

                Every agent or person having charge or control of any
                property of a corporation shall, upon request therefor
                by any officer having for service a writ of execution
                against it, furnish to such officer the names of the
                directors and officers of the corporation, and a schedule
                of all its property, including debts due or to become due
                to it so far as he has knowledge thereof.

                Any such agent or person who shall neglect or refuse to
                comply with the provisions of this section shall himself
                be liable to pay to the execution creditor the amount due
                on the execution, with costs.
3
   Intending no disrespect, we use first names for ease of reference because
defendants share a last name.
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                                           3
transfer, recharacterization, equitable subordination, breach of fiduciary duties

and punitive damages. Plaintiff did not assert the claim of failure to comply

with a post-judgment notice of demand as it alleged in the dismissed Law

Division action.

      In an April 17, 2015 order and opinion, the federal district court granted

defendants' Rule 12(b)(6) motion to dismiss the complaint with prejudice. The

court found there was "not a single factual allegation supportive of any

fraudulent intent by defendants" to support a claim of fraudulent transfer. The

allegations of recharacterization and equitable subordination were dismissed

because they involved bankruptcy claims, which were not properly before the

court. The breach of fiduciary duties claim, as set forth in plaintiff's amended

complaint, was determined to be conclusory and threadbare. And as to the

punitive damages claim, the court found that it was a remedy not a claim, and,

moreover, the complaint's allegations of defendants' misconduct did not satisfy

the high standard needed to award such damages. The dismissal order was

unanimously affirmed for the same reasons by the Second Circuit Court of

Appeals in a summary order dated October 14, 2016.

      Less than a year later, plaintiff returned to the Law Division to continue

pursuit of its claims against Carlos by filing a Rule 4:50-1 motion to vacate the

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February 2013 order of dismissal. On September 15, 2017, a different motion

judge entered an order (September 2017 order) vacating the February 2013

order.

         In an oral decision, the judge stated that relief was appropriate because

plaintiff discovered new evidence, which established that Carlos had sufficient

contacts in New Jersey to warrant personal jurisdiction over him. In a separate

Law Division action to collect on the Krisp-Pak judgment, plaintiff sought

orders of execution against delinquent receivables owed by Krisp-Pak's former

customers. One such customer, Xenofon Gialias, stated in a November 2016

deposition that between 2008 and 2011, he had rented a house he owned in

Leonia to Carlos. In a subsequent December 2016 response to a production of

documentation request that was made at the deposition, Gialias' counsel advised

plaintiff's counsel that Gialias had no written lease agreement or any other

documentation evidencing the rental to Carlos other than a hand-written letter

dated December 12, 2011, purportedly signed by Carlos. The letter stated that

he (Carlos) was terminating his lease to the house. Below Carlos' alleged

signature, was the handwritten notation purportedly signed by a Tara Glass,

stating "I, Tara Glass will leave Wed. Jan. 18, 2012." The judge determined the

rental established that Carlos had contacts with New Jersey during the time in

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                                         5
question, which was a material contradiction of Carlos' certification that was

provided to and relied upon by the prior motion judge to support the February

2013 order of dismissal in Carlos' favor.

      Claiming the judge failed to consider applicable law asserted in his

opposition to plaintiff's motion, Carlos moved for reconsideration. Applying

Rule 4:49-2, the judge agreed by entering an order on October 13, 2017, vacating

the September 2017 order and, in turn reinstating the February 2013 order of

dismissal.

      In his oral decision, the judge rejected Carlos' argument that plaintiff's

motion to vacate the February 2013 order of dismissal (as to him) based upon

newly discovered evidence was untimely. The judge determined that Rule 4:50-

2 – which affords a one-year period to file a Rule 4:50-1(b) motion to vacate an

order based upon newly discovered evidence – did not apply. The judge granted

plaintiff's motion to vacate the February 2013 order under the lens of Rule 4:50-

1(f), which is a catch-all provision that authorizes relief for a party from an order

for "any other reason justifying relief from the operation of the . . . order." See

A.B. v. S.E.W., 175 N.J. 588, 593 (2003). Rule 4:50-2 provides that a Rule

4:50-1(f) motion must be filed within a reasonable time after entry of the order

ought to be vacated instead of the limited one-year period for filing a Rule 4:50-

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                                         6
1(b) motion. The judge reasoned that since plaintiff filed its motion to vacate

in August 2017, about six months after it received the alleged lease termination

letter written by Carlos, the motion was filed within a reasonable time.

      Nonetheless, the judge granted reconsideration and reinstated the

February 2013 dismissal of the complaint as to Carlos because the judge

recognized that he overlooked the res judicata argument raised by Carlos to

oppose the plaintiff's motion to vacate the dismissal. Relying upon Velasquez

v. Franz, 123 N.J. 498, 505-07, 510 (1991), the judge determined that because

plaintiff's Law Division claims against Carlos arising from the judgment against

Krisp-Pak were similar to the federal court claims dismissed with prejudice, res

judicata barred plaintiff from further re-litigating the Law Division claims. The

judge stated that in Velasquez, our Supreme "Court held that under both federal

and New Jersey law[, the d]istrict [c]ourt judgment was an adjudication on the

merits, which precluded re-litigation in New Jersey [s]tate [c]ourt even though

the federal judgment dismissed the plaintiff's claims prior to trial and without

any fact[-]finding." See 123 N.J. at 507.

      Before us, plaintiff argues the statutory notice of demand claim remains

viable because the federal court did not dismiss the claim, and that equitable

estoppel bars Carlos' ability to apply res judicata to preclude collection of the

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state judgment debt based on to the federal court's order of dismissal. We find

insufficient merit in these arguments to warrant extensive discussion in a written

opinion, Rule 2:11-3(e)(1)(E), and affirm primarily based on the trial judge's

oral decision. We add the following brief remarks.

      The fact that plaintiff's dismissed federal complaint did not include a

notice of demand claim does not prevent application of res judicata to bar

plaintiff from pursing the claim against Carlos in the Law Division. Plaintiff

cites no valid reason why it could not have raised the claim in the federal action.

"The principle of res judicata applies not only to 'all matters litigated and

determined by such judgment but also as to all relevant issues which could have

been presented, but were not.'" Culver v. Ins. Co. of N. Am., 115 N.J. 451, 463

(1989) (quoting Anselmo v. Hardin, 253 F.2d 165, 168 (3d Cir. 1958)).

Moreover, the notice of demand claim should be precluded because it relies upon

the same theory of recovery, the same witnesses and documents, and the same

material facts as the claims that were included in the federal action. See Wadeer

v. N.J. Mfrs. Ins. Co., 220 N.J. 591, 606-08 (2015) (citing Culver, 115 N.J. at

461-62). That being, Carlos diverted Krisp-Pak's assets to prevent plaintiff from

collecting on the judgment against Krisp-Pak.

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                                        8
      As for equitable estoppel, it does not apply to allow plaintiff to prosecute

its fraud claims against Carlos. As explained by the Court in Knorr v. Smeal,

178 N.J. 169, 178 (2003), the doctrine is:

            "founded in the fundamental duty of fair dealing
            imposed by law." [It] is designed to prevent injustice
            by not permitting a party to repudiate a course of action
            on which another party has relied to his [or her]
            detriment. . . . Estoppel, unlike waiver, requires the
            reliance of one party on another. In short, to establish
            equitable estoppel, plaintiffs must show that defendant
            engaged in conduct, either intentionally or under
            circumstances that induced reliance, and that plaintiffs
            acted or changed their position to their detriment.

            [Id. at 178 (citations omitted).]

      Carlos did nothing to mislead plaintiff to believe something that he later

sought to repudiate in order to defend against plaintiff's claims. His initial

defense to the complaint was that the Law Division lacked personal jurisdiction

over him, which he still maintains.4 Plaintiff, however, never relied upon Carlos'

contention that he had no New Jersey contacts to its detriment in pursuing

collection against Krisp-Pak. Plaintiff filed this action on the belief that our

courts had jurisdiction over Carlos. Plaintiff's attempt to sue Carlos in New

York federal court was dismissed on its merits, due to the failure to state a claim,

4
 He certified that he never rented a house in New Jersey and denied writing the
December 12, 2011 lease termination letter.
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                                         9
and had nothing to do with Carlos' assertion that he did not live or do business

in New Jersey. Lastly, the motion judge granted Carlos' reconsideration motion

to vacate the September 2017 order based upon res judicata, which thereby

reinstated the February 2013 order dismissing the Law Division lawsuit

irrespective of the lack of personal jurisdiction concern that formed the basis for

the initial dismissal.

      Affirmed.

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