DAVID CRONHEIM MORTGAGE CORPORATION, et al. v. THE ESTATE OF CHARLES DODGE, et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A- 2832-04T22832-04T2

DAVID CRONHEIM MORTGAGE

CORPORATION, DANIEL D. CRONHEIM

AND ROBERT CRONHEIM,

Plaintiffs-Respondents,

v.

THE ESTATE OF CHARLES DODGE

AND JOHN VERB, EXECUTOR OF

THE ESTATE OF CHARLES DODGE,

Defendants-Appellants.

______________________________________________________________

 

Argued October 31, 2005 - Decided

Before Judges Lintner, Parrillo and Holston, Jr.

On appeal from Superior Court of New Jersey, Chancery Division, Morris County, Docket No. C-19-02.

James B. Daniels argued the cause for appellants (Budd Larner, attorneys; Mr. Daniels, on the brief).

Todd M. Sahner argued the cause for respondents (Marcus, Brody, Ford, Kessler & Sahner, attorneys; (Mr. Sahner, on the brief).

PER CURIAM

Defendants, the Estate of Charles Dodge (Dodge) and John Verb (Verb), executor of the Estate of Charles Dodge, appeal paragraph 1 of the Chancery Division's final judgment dated December 30, 2004, incorporating the court's order for partial summary judgment entered January 27, 2003 in favor of plaintiffs, David Cronheim Mortgage Company (DCMC), Daniel D. Cronheim (D. Cronheim) and Robert Cronheim (R. Cronheim), and against defendants on the first count of plaintiff's complaint alleging breach of a loan agreement in the amount of $777, 186.36 with interest from February 28, 2000. Defendants further appeal the April 16, 2003 order denying defendants' motion for reconsideration. We affirm.

Plaintiffs sued to collect an alleged loan made by DCMC, to the decedent, Dodge. Defendants filed an answer denying liability and asserting as an affirmative defense the six-year limitation period contained in N.J.S.A. 2A:14-2. Defendants also counter-claimed seeking an accounting of the proceeds of a policy insuring Dodge's life and the enforcement of a shareholder buyout agreement.

Plaintiffs moved for summary judgment, and defendants cross-moved. The trial court awarded partial summary judgment to DCMC in the amount of $777,186.36. The January 27, 2003 order stated that defendants could set off this amount against plaintiffs' obligations under the buyout agreement. The order was interlocutory since it did not address the counterclaim. The court attached a comprehensive written opinion to the order.

On April 16, 2003, the trial court denied defendants' motion for reconsideration, attaching its written opinion to the order. Subsequently, the parties resolved the counter-claim by an agreement establishing DCMC's value under the buyout agreement. The court memorialized the agreement in the December 30, 2004 final judgment that entered a net judgment in favor of plaintiffs and against defendants in the amount of $77,186.36 with interest from February 28, 2000. The final judgment reserved for appeal the partial summary judgment entered January 24, 2003.

From 1988 until his death on February 19, 2000, Dodge was president, chief executive officer (CEO) and 50% shareholder of DCMC, a sub-chapter S corporation. R. Cronheim owned 5% of the stock and was chairman of the board. His son, D. Cronheim, owned 45% of the stock and was executive vice-president. Neither Cronheim was active in managing DCMC's day-to-day activities.

Beginning in 1988 and ending in 2000, DCMC paid money to Dodge for his personal expenses and those payments were carried on DCMC's books as loans to Dodge and shown as an asset on DCMC's balance sheets. The loan amounts were kept as a running handwritten talley contemporaneously maintained by DCMC's outside accountant, Herbert Limsky (Limsky). According to Limsky's certification, each year he would meet with Dodge and R. Cronheim to go over the personal expenses and determine the aggregate amount of expenditures that were made by DCMC on Dodge's personal behalf during the year. The amount derived would then be added with Dodge's consent to Dodge's loan account.

The categories of expenses charged to the loan account generally included personal American Express charges, payments made to Dodge's personal life insurance policies and his 401K retirement plan, personal medical insurance premiums and personal real property and income taxes. The checks were written monthly.

At the end of every year, Limsky would prepare a financial statement and an income tax return for DCMC that would "reflect the aggregate amount of the loan extended to Mr. Dodge as a result of the meetings . . . ." As its president, Dodge signed all of the DCMC's tax returns from 1998 until his death in February 2000. He also reviewed and approved the financial statements each year before they were finalized. The financial statements had a "notes" section, indicating the dates and amounts that were advanced from DCMC to Dodge. These statements, in turn, were given by DCMC to numerous financial institutions with which DCMC did business, with Dodge's knowledge and consent.

According to R. Cronheim's certification, "[b]ecause the amount Mr. Dodge owed to DCMC was constantly changing, he never executed a formal Promissory Note for that particular obligation, nor did we ever discuss any interest rate. Rather, Mr. Dodge assured me during conversations that we would have at least on an annual basis that he intended to repay the loan. I would have been very, very happy to receive the principal without interest." R. Cronheim stated, "I considered that it was due on demand but I never made the demand." Since there was no promissory note, there was no document signed by Dodge to DCMC evidencing the terms, conditions of repayment, maturity date, interest rate, or security for the loan. Additionally, there was no board of director's resolution authorizing loans to the president.

At the time of Dodge's death, the amount agreed to and included in the loan account was $758,193.73. After his death, DCMC's accountants identified specific additional expenses paid on behalf of Dodge, including personal New Jersey income taxes and insurance benefits, bringing the total to $777,186.36.

According to paragraph 8 of Limsky's certification, the last incident whereby amounts were credited against the loan prior to Dodge's death occurred when "the Dodge loan was partially repaid in 1999 through a credit of $14,901.60 for business travel that Mr. Dodge had personally paid for in the first instance." Additionally, according to Limsky's deposition testimony, the loan schedule reflected that in 1995 Dodge was given credit against the loan balance for $43,870.78 that he personally expended and for which he was not reimbursed.

Dodge's executor, Verb, signed and filed with the Internal Revenue Service (IRS) estate tax return form 706. One of the debts of the estate listed on the form is $758,194 owed to DCMC. Moreover, the statement of uncontested facts in defendant's appendix confirms that, "[a]t no time did Mr. Dodge declare any of the monies charged to his loan account as income on any income tax returns filed with the Internal Revenue Service or the State of New Jersey."

The issue presented is whether the evidence on summary judgment established by clear and convincing evidence that the money advances made from DCMC to Dodge constituted a loan to which DCMC is entitled to repayment or whether a material issue of fact exists as to whether the advances were intended as compensation or subject to a condition precedent, i.e., that repayment was conditioned on the corporation's profitability and that condition never occurred.

Defendants present the following arguments for our consideration.

POINT I

ACCORDING TO PLAINTIFFS, DODGE'S OBLIGATION TO REPAY WAS CONDITIONED ON THE CORPORATION'S PROFITABILITY, AND THAT CONDITION NEVER OCCURRED.

POINT II

THE TRIAL COURT SHOULD HAVE GRANTED DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT BECAUSE PLAINTIFFS DID NOT ESTABLISH THEIR CLAIM AGAINST DECEDENT BY CLEAR AND CONVINCING EVIDENCE.

POINT III

ALTERNATIVELY, PLAINTIFFS' CLAIM REQUIRED A PLENARY TRIAL.

POINT IV

THE STATUTE OF LIMITATIONS BARS THE COLLECTION OF ADVANCES MADE BEFORE AUGUST 17, 1995.

POINT V

THE TRIAL COURT ERRED IN DENYING THE MOTION FOR RECONSIDERATION

POINT VI

THIS COURT SHOULD GRANT DEFENDANT'S MOTION TO SUPPLEMENT THE RECORD BECAUSE THE PROPOSED SUPPLEMENT ESTABLISHES THE LACK OF PROBATIVE VALUE OF SCHEDULE K OF THE ESTATE TAX RETURN.

POINT VII

IN THE EVENT OF A REMAND, THE CASE MUST BE ASSIGNED TO A DIFFERENT JUDGE.

Summary judgment must be granted if "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 528-29 (1995).

In determining whether there is a genuine issue of material fact for summary judgment purposes, the trial court must ascertain "what reasonable conclusions a rational jury can draw from the evidence. . . ." Id. at 535. To make the determination, the judge must accept as true all evidence that supports the position of the party defending against the motion and accord him or her the benefit of all legitimate inferences, which can be deduced therefrom. Ibid. If reasonable minds could differ, the motion must be denied. Ibid.

The "essence of the inquiry" is "'whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'" Id. at 536 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S. Ct. 2505, 2512, 91 L. Ed. 2d 202, 214 (1986)). The trial court is required to consider whether the "competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Id. at 540. The opposing party must nevertheless offer facts, which are substantial or material in opposing the motion, in order to defeat the grant of summary judgment. Judson v. Peoples Bank & Trust Co. of Westfield, 17 N.J. 67, 74-5 (1954).

Even though the allegations of the pleadings may raise an issue of fact, if the other papers show that, in fact, there is no real material issue, then summary judgment can be granted. Id. at 75. Thus, "[b]are conclusions in the pleadings, without factual support in tendered affidavits, will not defeat a meritorious application for summary judgment." U.S. Pipe & Foundry Co. v. Am. Arb. Ass'n, 67 N.J. Super. 384, 399-400 (App. Div. 1961). Furthermore, disputed issues that are "of an insubstantial nature" cannot overcome a motion for summary judgment. Brill, supra, 142 N.J. at 530. Thus, when the evidence "'is so one-sided that one party must prevail as a matter of law[,]'" the trial court should not hesitate to grant summary judgment. Id. at 533 (quoting Liberty Lobby, supra, 477 U.S. 251-52, 106 S. Ct. at 2512, 91 L. Ed. 2d at 214).

After carefully reviewing the record in the light of the written and oral arguments advanced by the parties, we affirm the grant of partial summary judgment of January 27, 2003 substantially for the reasons expressed by Judge MacKenzie in his written opinion of January 27, 2003 and the April 16, 2003 denial of reconsideration substantially for the reasons expressed in Judge MacKenzie's written opinion of April 16, 2003. We add the following:

We are completely satisfied that the undisputed proofs demonstrate that neither plaintiffs nor Dodge ever viewed the payments made by DCMC for Dodge's personal expenses as anything other than advances to Dodge in the nature of loans, which Dodge had an obligation to pay in the future. We are likewise convinced that the repayment of the ever increasing loan obligation was never contingent upon corporate profitability. There was no writing establishing such a condition precedent and the clear understanding from the excerpted deposition statements of R. Cronheim and Linsky, relied upon by defendants, is that the monies lent constituted a debt that Dodge owed DCMC and that he would repay, hopefully from funds derived from corporate profits, but not conditioned upon them. We are also satisfied that the statute of limitations bar was equitably tolled by Dodge's annual promises to pay based on which DCMC continued to extend loans to Dodge. See Burlington County Country Club v. Midlantic Nat'l Bank S., 223 N.J. Super. 227, 235 (Ch. Div. 1988) (citing Bassett v. Christensen, 127 N.J.L. 259, 261 (E. & A. 1941)). Moreover, the statute of limitations begins to run anew every time a repayment is made on the loan. Id. at 235; See also Freeman v. State, 347 N.J. Super. 11, 31 (App. Div.) certif. denied, 172 N.J. 178 (2002) (A statute of limitations is not permitted to be used "as a sword" by an adversary whose conduct induces a claimant into allowing the limitation period to pass (Citing Dunn v. Borough of Mountainside, 301 N.J. Super. 262, 280 (App. Div. 1997), certif. denied, 153 N.J. 402 (1998)). It is clear from the corporate records and Limsky's deposition and certification that in 1999 there was a credit against the loan for Dodge's legitimate business travel for which Dodge used his personal American Express card to pay. Lastly, the corporate records maintained by DCMC and its accountant provided clear and convincing proof of Dodge's indebtedness to DCMC. See Denville Amusement Co. v. Fogelson, 84 N.J. Super. 164, 167-68 (App. Div. 1964). Plaintiffs were entitled to partial summary judgment as a matter of law.

 
Affirmed.

The solvency of the Dodge estate is evidenced by paragraph two of the December 30, 2004 final judgment, that valued DCMC at $1,400,000 on February 28, 2000 and pursuant to the shareholders agreement between DCMC and Dodge, awarded $700,000 to the Dodge estate.

(continued)

(continued)

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A-2832-04T2

November 16, 2005