Court Opinion

ID: 4193288
Source: CourtListenerOpinion
Date Created: 2017-08-04 13:08:50.968387+00
Date Added: 2024-06-11T14:40:35.819618
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                   APPROVAL OF THE APPELLATE DIVISION
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      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-3932-14T4

IN THE MATTER OF THE
GENERAL ASSIGNMENT FOR
THE BENEFIT OF CREDITORS
OF VILLAGE SUNDRIES &
TOBACCO, INC., d/b/a
VILLAGE DISTRIBUTORS, TO
BARRY W. FROST.

___________________________________

           Submitted October 25, 2016 – Decided            April 21, 2017

           Before Judges Reisner and Rothstadt.

           On appeal from Superior Court of New Jersey,
           Chancery Division, Ocean County, Docket No.
           191663.

           Ronald Horowitz, attorney for appellants
           Direct Coast to Coast, LLC and Selective
           Transportation Corporation.

           Trenk, DiPasquale, Della Fera & Sodono,
           P.C., attorneys for respondent Village
           Sundries & Tobacco, Inc. (Anthony Sodono,
           III, of counsel; Michele M. Dudas, on the
           brief).

           Brian W. Hofmeister, attorney for respondent
           Barry W. Frost.

PER CURIAM
       Appellants,   Direct   Coast       to   Coast,    LLC   (Direct),     and

Selective Transportation, Corp. (Selective), are creditors of

Village Sundries and Tobacco, Inc. (Village), the debtor in this

assignment for the benefit of creditors (ABC) action.1 They appeal

from   the   Chancery   Division's    March     18,     2015   order   allowing

commissions to Village's assignee, Barry W. Frost, and attorney's

fees to special counsel, Trenk, DiPasquale, Della Fera & Sodono,

P.C. (Trenk).      The court previously authorized Frost to retain

Trenk for the purpose of pursuing counterclaims in litigation that

had been filed against Village.           Appellants argue the award of a

full commission to Frost was unconscionable "considering that the

[a]ssignee did very little, if anything, in this matter" and that

Frost "did not present any evidence whatsoever of work he performed

for the estate."     As to the court's fee award to Trenk, they argue

the application was procedurally defective, as "not a single factor

enumerated by R.P.C. 1.5 [was] addressed . . . by [Trenk's]

[a]ffidavit of [s]ervices."     According to appellants, the defects

should have resulted in the denial of the application.                 Finally,

1  Appellants, who had filed a complaint in March 2011 to recover
monies owed by Village, were among approximately thirty creditors
who filed claims in this action. The allowed claims totaled in
excess of approximately three million dollars.

                                      2                                A-3932-14T4
they contend that their counsel was entitled to a fee award.                 We

disagree and affirm.

     The history leading to this dispute can be summarized as

follows.    Trenk, as counsel to Village, initiated the ABC on May

31, 2011, establishing Barry W. Frost as assignee.2             At the time

of the assignment, Trenk had been representing Village in a federal

district court matter that was pending in the Southern District

of New York in which Village was named as a defendant (New York

action).3   The Chancery judge in the ABC action entered an order

on April 27, 2012, authorizing Frost to retain Trenk as "special

counsel . . . for the purpose of representing the [a]ssignee in

pursuing    counterclaims   against       [plaintiff]   in   [the   New   York

action]."     On January 7, 2013, the district court entered a

judgment against Village in favor of the plaintiff in the New York

action in the amount of $558, 179.98 and administratively closed

2    On July 7, 2011, the Chancery Division entered an order
authorizing the assignee to retain the law firm of Teich Groh as
attorneys for Frost, as assignee. Frost was a partner at Teich
Groh until the firm ceased operating on December 31, 2013.     A
second firm assumed the role of counsel to the assignee.

3   The action was captioned Strategic Funding Source, Inc. v.
Petegorsky, Docket No. 11 Civ. 7376.

                                      3                              A-3932-14T4
the matter due to the remaining defendants having sought relief

in bankruptcy.4

      Frost filed an application in this action on December 1,

2014, seeking approval of his final accounting, allowing payment

of his commissions, approval of fees and costs for payment of

professional administrative claims, and final approval of the

proposed   distribution      of   Village's   estate.      Appellants    filed

objections to the assignee being awarded the maximum commission

allowed under N.J.S.A. 2A:19-43 and to Trenk being awarded the

amount of fees contained in its application.              They asserted "the

total [attorney's] fees [and] the total commission should be deemed

as unconscionable if not outrageous."          Appellants claimed that the

amount collected by the assignee on the accounts receivable did

not   warrant   an   award   of   a   full   commission   or   counsel   fees.

Appellants also challenged the reasonableness of the $400 per hour

rate charged by Trenk.

      The Chancery judge considered oral argument on January 28,

2015, and requested additional submissions from counsel.                   The

additional materials submitted by Frost included copies of Trenk's

detailed billing records, denoting the exact services rendered and

4   It is not clear from the record whether this dismissal was
the result of Trenk's efforts.

                                       4                             A-3932-14T4
time   expended.        In   addition   a    certification   of   counsel     was

submitted that included a curriculum vitae (CV) for the attorney

handling the matter.         The CV described counsel's experience in the

field of debtor/creditor's rights and related matters.

       On March 18, 2015, the Chancery judge rejected appellants

contentions for the reasons stated in an oral decision placed on

the record that day.5         The judge entered an order awarding Frost

the    full    statutory     commission      of   twenty   percent,    totaling

$32,098.11.      He awarded Trenk $12,811.87 in fees and $19.20 in

costs.

       In his decision, the Chancery judge stated he                  found it

inappropriate      to    entertain      appellants'    argument,      which    he

considered a "blanket objection" that lacked reference to specific

case law and supporting certifications.            The judge also found that

due to the poor condition of Village's financial records, counsel

was required to expend more time than would otherwise be necessary

to pursue Village's claims, especially when the time expended was

compared to the amounts recovered.            He stated:

              [O]n the issue as to the success ultimately
              achieved versus the percentage of fees --
              professional fees and commission[] cost[s]
              sought, the Court notes that due diligence and
              a fair, reasonable and appropriate period of

5    Appellants did not provide us with a transcript of that
argument. We glean from the judge's decision the nature of the
arguments raised by the parties.

                                         5                             A-3932-14T4
          service for the assignment of the benefit of
          creditors was necessary.

          No one objected to the characterization,
          representation made on the record . . . on
          numerous occasions . . . that [Village] did
          not maintain accurate or even what one might
          characterize as good, appropriate records.
          Rather, they were sloppy, they were difficult
          to ascertain and sort through. . . .

          And the fact of the matter is, as is often the
          case in sometimes modest estate litigation,
          the hours spent and the fair, reasonable
          entitlement to fees, costs, [and] commissions
          do not necessarily equate automatically with
          the amount recovered.      The services were
          fair[,]    reasonable[,]   and    appropriate,
          commensurate with the fact of [Village] not
          keeping records.

     Turning to appellants' objection to Trenk's $400 per hour

rate,   the   judge   found   the   rate   sought   was   reasonable   and

commensurate with those charged by "probate attorneys" throughout

the State of New Jersey.       He noted the extensive experience of

counsel in probate matters and observed that, even if he were            to

adjust the hourly fee downward to $300, the reduction in overall

fees would be offset by new fees incurred in generating the updated

accounting.    He also confirmed that the court carefully reviewed

counsel's submissions to make sure they were accurate in their

calculation of their fee, stating that they had "been double

[-]checked."    The judge concluded counsel took fair, reasonable

steps to recover accounts receivable; and, accordingly, "counsel's

                                     6                           A-3932-14T4
entitled   to    compensation     for   those    efforts,     for   those   legal

services rendered, as well as for hiring of [Trenk] . . . and the

cost disbursements rendered on behalf of the client."

     This appeal followed.

     "[T]he allowance of assignee's commissions and attorney's

fees ordinarily rests within [the trial judge's] sound discretion

and should be upset only if the exercise thereof is manifestly

erroneous."      In re Assignment for Benefit of Creditors of Munson-

Lied Co., 68 N.J. Super. 281, 289 (App. Div. 1961).                     We will

disturb a trial court's allowance of commissions and award of

counsel fees "only on the rarest of occasions[.]"               Litton Indus.,

Inc. v. IMO Indus., Inc., 200 N.J. 372, 386 (2009) (quoting

Packard-Bamberger & Co., Inc. v. Collier, N.J. 427, 444 (2001)).

  Applying this standard, we conclude the Chancery judge did not

abuse   his     discretion   in   awarding      Frost   the    full   statutory

commission or Trenk the full amount of the counsel fees and costs

it applied for as special counsel.              We affirm substantially for

the reasons expressed by the Chancery judge.                  We add only the

following comments.

     An ABC proceeding "is a state court-administered liquidation

proceeding similar to a Chapter 7 bankruptcy proceeding whereby

an individual, partnership, or corporation in financial distress

can liquidate its assets in an orderly fashion to equitably pay

                                        7                               A-3932-14T4
its creditors."       44 New Jersey Practice, Debtor-Creditor Law and

Practice § 3.1, at 109 (Michael D. Sirota & Michael S. Meisel)

(2000) (citing Gilroy v. Somerville Woolen Mills, 67 N.J. Eq. 479

(Ch. 1904)).       ABC proceedings in New Jersey are governed by

N.J.S.A. 2A:19-1 to -50.        The statute's purpose is to treat all

creditors equally and avoid any disproportionate payments to a

favored creditor.       N.J.S.A. 2A:19-2.

      In   an   ABC    proceeding,   "an    individual,     partnership      or

corporation, known as the 'assignor,' voluntarily assign[s] by

transfer or conveyance all of its assets in trust to an independent

third party, known as the 'assignee.'" New Jersey Practice, supra,

§ 3.1. at 110.        The assignee acts in a "dual capacity" pursuant

to powers set forth in N.J.S.A. 2A:19-13 and N.J.S.A. 2A:19-14.

The assignee "'stands in the shoes' of the assignor with general

powers to act in his stead as his 'successor,'" In re Gen.

Assignment for Benefit of Creditors of Brill's Hardware Co., 67
N.J. Super. 289, 292 (Cty. Ct. 1961) (citations omitted), and has

"full power and authority to dispose of all of the assignor's

property . . . as the assignor had at the time of the general

assignment."    N.J.S.A. 2A:19-13.        The assignee also "represent[s]

the   assignor's      entire   creditor    constituency."       New     Jersey

Practice, supra, § 3.31 supra, at 118.            In that capacity, the

assignee has "the same power to set aside conveyances and to

                                     8                                A-3932-14T4
recover or reach assets for the benefit of the creditors as a

creditor would have who was the holder of a judgment and levy

against    the   assignor      and    his       property       at   the    date   of    the

assignment."     N.J.S.A.      2A:19-14.

      Compensation      for    an     assignee       is    left       to   the    court's

discretion, but may not exceed "[twenty percent] on all sums

received by the said assignee." N.J.S.A. 2A:19-43. In determining

the   amount,    "the   court        should      look     to    the    nature     of    the

[assignor's] business and its attendant problems." In re Francilli

Carriers, Inc., 77 N.J. Super. 522, 526 (Ch. Div. 1962).                            "[T]he

[twenty] percent limitation . . . is confined to sums awarded

directly to the assignee and does not include items of expense

paid out of the estate for which court approval is sought, that

is, attorney fees, auctioneer fees and the like.                      Id. at 526.       See

also In re General Assignment for Benefit of Creditors of Shay,

75 N.J. Super. 421, 439-40 (App. Div. 1962).

      An   assignee's       engagement          of   an        attorney     to    provide

professional services "can only be accomplished by motion and

affidavit seeking a court order . . . ."                   In re Xaviers, Inc., 66
N.J. Super. 561, 567 (App. Div. 1961).                     Court approval of the

retention is a condition to any award of counsel fees for services

performed on behalf of the assignee.                    See Francilli, supra, 77

N.J. Super. at 526.           Applications for an award of counsel fees

                                            9                                     A-3932-14T4
from the assignor's estate must be supported by a certification

of services containing the information required by Rule 4:42-9(b),

including "the factors enumerated by [R.P.C. 1.5(a)]."                 R. 4:42-

9(b)(emphasis added).           However, "an award of counsel fees may be

affirmed     even    if   the    affidavit     of   services   is   deficient."

Elizabeth Bd. of Educ. v. N.J. Transit Corp., 342 N.J. Super. 262,

272-73 (App. Div. 2001).

      Applying these guiding principles, we discern no reason to

vacate the Chancery judge's award of the commission or counsel

fees.   Turning first to Frost's commission, the judge properly

considered the nature of Village's business, the involvement of

approximately thirty creditors, and the problems arising from

Village's poor maintenance of its business records.                 Contrary to

appellants assertions, the fact that the amounts recovered by the

assignee were not substantial in relation to the creditors' claims

and   that   there    were      no   billing   records   associated    with   the

assignees efforts, the assignee was still entitled to a commission

up to the statutory cap.

      We are not persuaded otherwise by appellants' reliance on

Munson-Lied.    In that case, unlike the present matter, in addition

to the statutory commission, the assignee received an award for

attorneys fees for legal services he performed.                     Munson-Lied,

supra, 68 N.J. Super. at 578.            Here, the assignee was awarded his

                                         10                             A-3932-14T4
twenty percent commission separate and distinct from the fees

awarded to Trenk or to other firms that acted as counsel to the

assignee.   There was no evidence that the assignee received a

double award.

      As to the award of counsel fees to Trenk, although the

information required by Rule 4:42-9(b) was not expressly included

in counsel's certification of services,6 the Chancery judge had

adequate information available to him to assess many if not all

the   factors   in    order   to   reach   his   conclusion   about   Trenk's

entitlement to the fees claimed.           Specifically, the judge noted

the time, labor and difficulty of the questions involved, the

results obtained, the length of relationship with the client, the

fee customarily charged in the locality, and the experience,

reputation, and ability of the lawyer or lawyers performing the

services.       See    R.P.C.      1.5(a)(1),(3),(4),(5),(6),     and     (7).

Accordingly, while Trenk's application was procedurally deficient,

the judge was able to make findings based upon billing statements,

representations made by counsel, and the resumes of the attorney's

seeking fees that address the necessary factors.               Moreover, in

6   Trenk argues that its fee application was not subject to the
requirements of Rule 4:42-9(b) because it was seeking fees payable
from a fund in court under Rule 4:42-9(a). We disagree. Rule
4:42-9(b) is applicable to all fee applications where the court
is called upon to make a determination of the amount based on
reasonableness.

                                      11                              A-3932-14T4
making his award, the judge limited it to those fees incurred for

services "which benefited [the] creditors."   Francilli, supra, 77

N.J. Super. at 529 (allowing fees "to the attorney for the assignor

for his services performed in the successful effectuation of the

assignment in question").7

     Finally, appellants aver that if Trenk is entitled to a fee

award, then they too should be compensated for paying legal fees

to their attorneys whose work benefited all the creditors.    While

we agree that a creditor's attorney may be entitled to fees where

the attorney renders "valuable services . . . for the benefit of

all the creditors," In re Gen. Assignment, supra, 75 N.J. Super.

at 424-25 (finding "attorney's objections to the commissions,

counsel fees and disbursements operated materially to the benefit

of the estate and the ultimate benefit of the creditors generally

. . . entitl[ing attorney] to the reasonable counsel fee awarded

to him by the trial court"), we find no evidence that such an

application was made to the Chancery judge or that such services

were in fact provided by appellants' counsel in this case. Without

the issue being properly raised before the Chancery judge, we have

7   We discern from the record that some of the fees associated
with Trenk's pursuit of the counterclaim in the New York action
were for services performed prior to the entry of the order
appointing it as special counsel. However, we conclude that the
Chancery judge did not abuse his discretion by awarding those fees
because they were incurred for the purpose approved by the court.

                               12                          A-3932-14T4
no cause to determine the issue.     See Nieder v. Royal Indem. Ins.

Co., 62 N.J. 229, 234 (1973).

     Affirmed.

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