S. REID WEINMAN v. RICHARD J. SIMON

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NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
 
 
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NOS. A-2584-04T2
A-3683-04T2

REID WEINMAN,

Plaintiff-Appellant/Cross-Respondent,

v.

RICHARD J. SIMON,

Defendant-Respondent/Cross-Appellant,

and

SIMON & WEINMAN, LLC,

Defendant.
________________________________________________________________

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April 28, 2006

Argued March 6, 2006 - Decided

Before Judges Holston, Jr. and Gilroy.

On appeal from Superior Court of New Jersey, Chancery Division, Middlesex County, Docket No. C-105-99.

Anthony B. Vignuolo argued the cause for appellant/cross-respondent (Borrus, Goldin, Foley, Vignuolo, Hyman & Stahl, attorneys; Mr. Vignuolo, on the brief).

Richard J. Simon argued the cause for respondent/cross-appellant (Mr. Simon of counsel and on the brief; Jeffrey Zajac, on the brief).


 
PER CURIAM

These consolidated appeals arise out of a written arbitration decision dated February 27, 2003, as clarified by a written supplemental decision of the arbitrator dated May 6, 2003. This dispute involves a federal tax obligation owed by plaintiff, Reid Weinman, and defendant, Richard J. Simon, former stockholders of the law firm of Simon and Weinman, LLC (LLC), which dissolved on December 31, 1997.
Weinman appeals the Chancery Division's January 5, 2005 order amending and modifying the court's order of September 8, 2003, which confirmed the arbitrator's final decision. The January 5, 2005 order entered judgment in Weinman's favor and against Simon in the amount of $7,363.95, representing Simon's share of the LLC's section 941 tax liability for the fourth quarter 1997, together with interest and costs from December 30, 2003. Simon appeals the Chancery Division's February 9, 2005 order denying his application to modify the court's September 8 and October 29, 2003 orders. Simon sought $32,939.25 from Weinman to satisfy what Simon contends is Weinman's share of the LLC's section 941 tax liability for the fourth quarter 1997 and to have the court declare him not liable to Weinman in any amount with respect to the LLC's fourth quarter 1997 tax liability. We affirm both orders as modified by this opinion.
Unable to resolve the LLC's financial issues with Simon, Weinman filed a complaint in the Chancery Division on April 20, 1999 against Simon and the LLC. The parties entered into a consent order on February 16, 2000, in which the parties agreed to submit their dispute to binding arbitration before retired Superior Court Judge C. Judson Hamlin. One of the many issues for resolution was the obligation of the parties respecting an Internal Revenue Service (IRS) tax lien for unpaid payroll taxes for the fourth quarter 1997.
At the time of the LLC's termination in December 1997, the parties conceded that they had not made required "trust" payments due the IRS for payroll taxes. Exhibits in evidence at the arbitration reflected an IRS claim slightly in excess of $86,000. The arbitrator's written decision of February 27, 2003 indicated that it was undisputed that Weinman had paid the IRS $43,000, which he and the IRS considered half of the LLC's liability. The decision also recited Simon's contention that the full liability was $48,000 (representing only the "trust" portion of the IRS debt for which the parties were personally liable) and that he was indebted to the IRS for $24,000, which he was currently paying down. The arbitrator stated that the actual amounts paid by Simon to the IRS were unsubstantiated and, therefore, determined that Simon should have ten days within which to supply proof to Weinman of his own payments to the IRS.
The arbitrator concluded: (1) the parties were equally liable for the full IRS claim as to the trust payments; (2) if Weinman paid his half of the obligation, Weinman's liability should be extinguished; and (3) if Weinman's payment exceeded half the partnership obligation, based on Simon's contention that the total IRS claim was only $48,000, Weinman would be entitled to a credit for that amount. The arbitrator determined that the "IRS written determinations of claims and payments shall be deemed to be conclusive and binding on the parties" and that "Simon shall be responsible for all interest and penalties that shall accrue after Weinman's last payment of $43,000."
Thereafter, the parties sought a clarification of the arbitrator's award. The clarification opinion dated May 6, 2003 required "the parties to identify with specificity the quantum of outstanding tax liability by July 15, 2003," and that "payments, balance due, computations of interest due, and penalties would be final as of that date." The decision clarified that the "award was to equalize each partners' tax liability" as of the date of Weinman's $43,000 payment and that Weinman's original equalization claim was for a $21,500 credit. Therefore, if Weinman overpaid his half of the tax obligation, Weinman would be entitled to a refund from Simon. If Simon failed to provide accurate and credible documentary proof of his payment on the obligation by July 15, 2003, Weinman would be entitled to a full half credit for his previous IRS payment.
On June 9, 2003, Weinman filed a motion to confirm the arbitrator's award followed by Simon's July 17, 2003 cross-motion to modify the arbitration. On September 8, 2003, Judge Travis Francis entered an order granting Simon until December 30, 2003 "to resolve the IRS lien." The extension was granted because Simon had undergone brain surgery during the summer of 2003 and was not medically approved to return to work until November 2003.
On December 30, 2003, defendant filed as documentation to resolve the IRS dispute a December 18, 2003 letter from L. Walling, Revenue Officer with the Small Business/Self-Employed Division of IRS directed to Simon and an accompanying computer print-out, purportedly establishing payments credited to the trust portion of the IRS debt along with accrued interest and penalties. Additionally, Simon presented two expert reports, one from Robert Fee, Esquire, a tax attorney of thirty-one years and the other from David Knoll, a licensed public accountant. Both opined that as a result of Weinman's accountant's negligence, the IRS applied Weinman's payment to the IRS to the LLC's portion of the debt and not to the trust portion.
On September 28, 2004, Weinman filed a motion to confirm the arbitrator's award and for entry of judgment in his favor against Simon in the amount of $21,500. Simon, on October 20, 2004, filed a cross-motion seeking to modify the court's September 8 and October 29, 2003 orders affirming the arbitration award based on the information he received from the IRS and based on his having fully paid off the trust portion of the parties' IRS obligation in the amount of $65,879.05. Simon additionally sought an order granting him a judgment against Weinman in the amount of $32,939, representing the amount Simon contended was Weinman's share of the IRS obligation paid by him.
At the December 1, 2005 hearing on the motions, Judge Francis denied the relief sought by Simon and modified the September 8, and October 29, 2003 orders affirming the arbitrator's award, based on the determination that instead of Simon being liable to Weinman in the amount of $21,500 that Simon was liable to Weinman in the amount of $7,363.95 with interest and costs from December 30, 2003. The judge's findings were memorialized in the orders of January 5, 2005 and February 9, 2005, from which the parties now appeal.
The judge in his oral opinion began his analysis based on the premise that the arbitrator's award was intended to equalize the payments of both parties. The court accepted the IRS print-out as proof that Weinman did not pay $43,000 to the IRS as reflected in the arbitrator's decision but, as corroborated by Weinman's certification wherein he set forth that his last payment to the IRS was in May 1999, the total payments made by Weinman were in the amount of $38,902.08.
The IRS letter from Walling confirmed that Weinman's payments, because they were not specifically designated as "trust fund" payments, were applied by the IRS to payroll taxes due from the LLC. The court, however, reasoned that notwithstanding the allocation by the IRS, the computer print-out conclusively proved that Weinman had paid $38,902.08 toward the IRS debt.
The judge accepted as accurate Simon's expert attorney's representation, contained in his opinion letter of October 19, 2004, that the amount of the employee "trust fund" tax liability, based on Walling's letter of October 6, 2004, was in the amount of $48,348.18 See footnote 1 as of December 16, 2003. The judge first divided the $48,348.18 by two, resulting in a shared tax liability of each party of $24,174.09. The judge then subtracted $24,174.09 from the $38,902.08 paid by Weinman and determined that Weinman had overpaid the tax liability by $14,727.9[9] See footnote 2 . Instead of entering judgment in favor of Weinman in the amount of $14,727.9[9], the judge mistakenly and without explanation divided $14,727.9[9] by two and entered judgment as a result of the mathematical miscalculation in favor of Weinman and against Simon in the amount of $7,363.95. The judge's order honored the arbitrator's decision that all interest and penalties were the responsibility of Simon. In the January 5, 2005 order, interest was awarded from December 30, 2003, the date by which Simon had "to resolve the IRS lien."
The judge, in his oral decision, specifically declined to address the IRS allocation of the $38,902.08 in payments made by Weinman towards the LLC tax liability instead of towards the "trust." The judge stated, "If the monies that were paid by Weinman should have been allocated to the trust or if the monies paid by Weinman were not owed [by the parties individually] to the IRS, then either Weinman or Simon as former members of the LLC could petition the IRS for either a refund or reallocation of those moneys." Based on the limited authority of the court to vacate an arbitration award, we find no error in the judge's decision with respect to the IRS allocation of Weinman's payments. N.J.S.A. 2A:24-8.
Plaintiff contends that the judge erred in modifying the arbitrator's award, absent fraud or wrongdoing, by reducing the $21,500 due to Weinman from Simon, as reflected in the arbitrator's decision. Weinman also contends that the judge further erred in permitting interest to run from December 30, 2003 and not from February 27, 2003, the date of the arbitrator's decision.
Defendant contends that the LLC no longer exists and the principals are only responsible for the "trust funds," representing the amounts deducted from employees' paychecks and not forwarded to the IRS. The extent of the parties' personal liability was confirmed by the December 18, 2003 IRS letter from Walling. The IRS generated computer print-out provided by Simon for the fourth quarter 1997, showed a trust fund indebtedness in the amount of $48,348.18 as of December 16, 2003.
Simon contends, therefore, that the court erred in not determining that Weinman was liable to him for $32,939.25, representing fifty percent of the trust fund debt paid by him. Simon argues that (1) he made "trust fund" payments of $9,538.33 reducing the "trust" amount due to $48,348.18 as of December 2003; (2) the $38,902.08 in payments made by Weinman were allocated by the IRS to the LLC's obligation, thus not reducing the parties' trust fund allocation at all; (3) on October 6, 2004, he paid the IRS $54,217.72, satisfying the trust fund indebtedness in full; and (4) he made total payments to the IRS of $65,879.05 toward the "trust fund" debt.
In support of his position, Simon asserts that the arbitrator did not have the required proofs necessary to render a final decision on the IRS obligation in February or May 2003 and that Weinman falsely represented to the arbitrator that he had paid $43,000 to the IRS. Therefore, Simon claims that the arbitrator's decision was subject to subsequent determinations by the IRS, because the decision was premised on Weinman's false allegation that Simon received a residual benefit from Weinman's payments to the IRS.
The Arbitration Act, N.J.S.A. 2A:24-1 to -11, provides that once an arbitrator issues an award, any party to the arbitration may seek confirmation of that award in the Superior Court within three months of the arbitrator's decision. N.J.S.A. 2A:24-7. If the court does not confirm the award, it can vacate the award for any of the four reasons enumerated in N.J.S.A. 2A:24-8. We are satisfied that none of the four reasons for vacation apply in this case, including "[w]here the award was procured by corruption, fraud or undue means[.]" N.J.S.A. 2A:24-8a; see also Tretina Printing, Inc. v. Fitzpatrick & Assocs., Inc., 135 N.J. 349, 358 (1994); Perini Corp. v. Greate Bay Hotel & Casino, Inc., 129 N.J. 479, 491 (1992).
Simon contends Weinman misrepresented to the arbitrator that he had paid the IRS $43,000 toward the tax deficiency. The arbitrator's decision states that "[t]here is no dispute that Weinman paid the IRS $43,000, which he and the IRS considered as his half of that liability. The submitted IRS statements support plaintiff's contentions." The arbitrator nonetheless concluded that it was "unclear from the submissions as to the actual amounts paid by Simon to date reducing the amount due the IRS." The arbitrator determined, "In the absence of more detailed information on this issue . . . [t]he IRS written determinations of claims and payments shall be deemed conclusive and binding on the parties." The arbitrator was clear, however, that the partners were equally liable for the full amount of the trust payment owed.
The record is unclear as to exactly what information was presented to the arbitrator by Weinman constituting proof of the payment by him of $43,000. However, we are satisfied that the arbitrator's finding was simply that the $43,000 figure constituted the best evidence before him as to the total of Weinman's payments toward the deficiency, pending a more definitive written determination being provided from the IRS.
The arbitrator's May 6, 2003 clarification letter confirmed that the exact amount of the tax liability, the payments made, and balances due were deemed by him to be uncertain. The arbitrator's clarification stated, "I hereby . . . requir[e] the parties to identify with specificity the quantum of outstanding tax liability by July 15, 2003. Payments, balance due, computations of interest due and penalties imposed will be final as of that date." We are convinced, therefore, that the record fails to support Simon's contention that the judge erred by failing to vacate the award, because of fraud on the part of Weinman in calculating the precise amount of the tax liability paid by him. See Empire Fire & Marine Ins. Co. v. GSA Ins. Co., 354 N.J. Super. 415, 420-22 (App. Div. 2002).
N.J.S.A. 2A:24-9a provides, "[w]here there was an evident miscalculation of figures or an evident mistake in the description of a person, thing or property referred to herein[,]" the award may be corrected or modified by the court. We are satisfied that Judge Francis properly exercised his discretion, based on the statutory authority provided by N.J.S.A. 2A:24-9, to correct the evident mistake in the precise amount paid to the IRS by Weinman, based on the total of the enumerated payments made by Weinman reflected on the IRS printout. The judge carried out the arbitrator's intent to insure equal payment by each of the partners by dividing the outstanding tax liability of $48,348.18 by two and thus arriving at a dual tax liability of $24,174.09. The judge then correctly subtracted $24,174.09 from the substantiated tax payment made by Weinman in the amount of $38,902.08 to arrive at an overpayment by Weinman in the amount of $14,727.9[9]. The court then mistakenly divided the $14,727.99 overpayment by two and entered judgment in favor of Weinman in the amount of $7,363.95. We are satisfied that the $7,363.95 figure constituted an evident miscalculation by the judge. Therefore, we remand the matter to the trial court to enter a corrected order reflecting a judgment in favor of Weinman in the amount of $14,727.99.
Weinman also contends that the court erroneously entered judgment permitting interest to run from December 30, 2003 and not from the date of the arbitrator's award of February 2003. It is true that interest on a judgment confirming an arbitrator's award normally runs from the date of the judge's decision confirming the award. Ukrainian Nat'l Urban Renewal Corp. v. Joseph L. Muscarelle, Inc., 151 N.J. Super. 386, 402 (App. Div.), certif. denied, 75 N.J. 529 (1977). Nevertheless, a court of equity has the ability to fashion remedies appropriate to a variety of situations. Caf Gallery, Inc. v. State, 186 N.J. Super. 189, 197 (Law Div. 1982). The general rule is that an arbitration award for a sum certain carries interest from the time it is due and payable. Harsen v. Bd. of Educ., 132 N.J. Super. 365, 385 (Law Div. 1975).
The arbitrator determined that interest and penalties after July 15, 2003 would be the sole responsibility of Simon. Because of the arbitrator's uncertainties with respect to payments made and in order to insure equality of payment by both partners, the arbitrator permitted Simon to confirm the IRS liability by a date certain. Because of Simon's subsequent brain surgery and resultant disability, the judge extended the date for Simon to resolve the IRS issue until December 30, 2003. We are satisfied that the judge acted well within his discretion, based on equitable principles, to impose interest on the judgment awarded in favor of Weinman from December 30, 2003, instead of from the February 27, 2003 arbitration decision. See R. 4:42-11; Pressler, Current N.J. Court Rules, comment 9 on R. 4:42-11 (2006) ("[P]rejudgment interest may run on contract claims . . . not as a matter of right but rather in accordance with equitable principles.").
We affirm the order of January 5, 2005 in part but remand to the trial court to enter a corrected order in accordance with this opinion. We affirm the order of February 9, 2005.

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Footnote: 1 The $48,348.18 balance due on the trust fund debt credited Simon for payments made by him to the IRS between April 15, 2000 and December 10, 2001 in the amount of $9,540.33.
Footnote: 2 The court's calculation was $14,727.91. The correct mathematical calculation is $14,727.99.

A-2584-04T2
 


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