RUSSELL P. GOLDMAN, P.C. v. MARTIN RUBIN, P.C.

(NOTE: The status of this decision is published.)
 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0297-07T30297-07T3

RUSSELL P. GOLDMAN, P.C., a New

Jersey Professional Corporation,

and RUSSELL P. GOLDMAN,

Plaintiffs-Appellants,

v.

MARTIN RUBIN, P.C., a New Jersey

Professional Corporation, MARTIN

RUBIN, HAYT, HAYT & LANDAU, a New

Jersey Partnership, and FIRST

NATIONAL ACCEPTANCE CO., LLC.,

Defendants-Respondents.

_________________________________

 

Submitted: May 5, 2008 - Decided:

Before Judges Stern and C.L. Miniman.

On appeal from the Superior Court of New Jersey, Chancery Division, General Equity Part, Monmouth County, Docket No. C-339-03.

Bathgate Wegener & Wolf, attorneys for appellants (Michael M. DiCicco, on the brief).

Giordano, Halleran & Ciesla, attorneys for respondents (Robert J. Feinberg, of counsel and on the brief).

PER CURIAM

Plaintiffs Russell P. Goldman, P.C. (Goldman PC) and Russell P. Goldman (Goldman) (collectively, plaintiffs) appeal from two orders enforcing litigants' rights entered on July 6, 2007, and one order entered on August 17, 2007, amending the July orders. We reverse and remand for a plenary hearing.

This is a dispute between two creditors' rights attorneys over the sums due plaintiffs from defendants Martin Rubin, P.C. (Rubin PC); Martin Rubin (Rubin); and Hayt, Hayt & Landau, P.C. (Hayt PC), subsequent to the dissolution of Hayt, Hayt & Landau (HHL), a partnership in which both Goldman and Rubin had been the sole remaining equal partners. This action was filed on October 31, 2003, stating claims against all defendants, including First National Acceptance Co., LLC (FNAC), "a business purchasing and referring delinquent consumer accounts for collection," which was wholly owned by Goldman and Rubin.

The claims relating to FNAC were resolved by agreement (the FNAC Agreement) on May 28, 2004, pursuant to which Goldman and Rubin agreed to dissolve FNAC and transfer its assets, including uncollected debt, equally to Sycamore Financial Services, LLC (Sycamore), wholly owned by Goldman, and First American Acceptance Co., LLC (FAAC), wholly owned by Rubin. Like FNAC, both limited liability companies intended to engage in the business of purchasing and collecting debt. The FNAC Agreement provided for an equal sharing of costs incurred in dissolving FNAC, with the cost of substitutions of attorney to be borne by Sycamore.

The claims relating to the dissolution of HHL settled in October 2004 and the essential terms of the settlement were placed on the record on October 6, 2004. The settlement was thereafter reduced to writing (the HHL Agreement) on December 6, 2004. Among other things, Rubin P.C., Rubin, HHL and Hayt P.C. agreed to pay Goldman P.C. and Goldman the sum of $57,000 by January 5, 2005, and $120,000 in five equal installments beginning on November 1, 2005. Defendants failed to make the first $57,000 payment due on January 5, 2005, and were ordered to do so on April 29, 2005. They also failed to make the second payment and on January 30, 2006, were again ordered to do so.

Defendants again failed to make payment in full when due on November 1, 2006, in the amount of $29,280, instead issuing a check in the amount of $6025.31. To arrive at that number, defendants made the following deductions from the $24,000 principal amount due: (1) $10,000 as one-half of the deductibles in connection with settlement of two professional liability lawsuits; (2) $826.73 for fees advanced by HHL to out-of-state co-counsel; (3) $1078.13 for one-half of the January 10, 2006, Hayt LLC statement for professional services rendered by Rubin and James A. Fedorko, Jr., in connection with the transfer of "FNAG accounts" to plaintiffs; (4) $7012.50 for one-half of the November 1, 2006, Hayt LLC statement for professional services rendered by Rubin and the firm's IT Department for the FNAG file transfer operation; and (5) $3125 for preparation, review and signature of 297 substitutions of attorney. Also, defendants determined that the amount of interest due was $4067.67 rather than the amount specified in the Agreement, $5280. No explanation was given for the interest calculation.

Plaintiffs filed a third motion in aid of litigants' rights, this time on November 29, 2006, to compel payment of the full amount due, contending that the HHL Agreement only allowed setoffs for adjustments to the buyout consideration for transferred files and for certain attorney's liens in connection with clients other than FNAC. Plaintiffs also disputed the amounts of and the entitlement to the claimed setoffs. While the motion was pending, the parties resolved certain issues, but not all. As a result, plaintiffs filed a revised motion on or about February 9, 2007, seeking an order compelling defendants to (1) pay the funds due for Goldman's interest in HHL, (2) certify that they did not remove any documents from the Sycamore files and transfer such files to plaintiffs, (3) provide copies of substitutions of attorney to plaintiffs, and (4) provide plaintiffs with payments and correspondence that defendants receive with respect to Sycamore within three days of receipt. Plaintiffs also sought an award of counsel fees.

Defendants cross-moved for an order enforcing certain rights under the settlement agreement respecting the transfer of certain files. They sought an order (a) compelling plaintiffs to complete the transfer of HHL files handled for Sycamore, (2) declaring that the data transfer from defendants to plaintiffs was "full and final," (3) declaring that Goldman was the attorney responsible for the transferred accounts, (4) finding plaintiffs in breach of "the Settlement Agreement," (5) adjudicating that defendants had fully satisfied all obligations under "the Settlement Agreement," and (6) awarding defendants attorneys' fees and costs pursuant to Rule 1:10-3.

On March 16, 2007, after reciting each party's contentions, the judge engaged in the following colloquy with counsel:

THE COURT: . . . .

When is this going to end, people? This is the most ridiculous thing I've ever seen. Two very good, very competent pro-fesssionals, engaged in a divorce that never ends. What do you want?

MR. FEINBERG [Defense Counsel]: Your Honor, we filed a cross motion. I don't want to repeat. You have read so much of this stuff.

THE COURT: It makes me sick to even read this. I'm telling you what I'm going to do. I'm never going to see this again. If you people can't work it out, I'll appoint a receiver to do it. I'm just not going to deal with it anymore. I find it offensive for the caliber of the lawyers that are involved here to be arguing over what here? What are you arguing over?

MR. DiCICCO [Plaintiffs' Counsel]: Judge, we simply want to be paid or Mr. Goldman simply wants to be paid.

THE COURT: How much do you allege you're owned?

Mr. FEINBERG: He is owed a $24,000 payment as of November 1st, 2006. Rather than receive that 24,000 payment, Mr. Rubin took various deductions, none of which are authorized by the settlement agreement [which] was very clear.

THE COURT: Do you want me to hold a hearing? Let's spend $60,000 in legal fees for me to determine whether or not one lawyer owes another lawyer $24,000. Let's do that. And let me decide at that hearing the magnificent issue of whether or not one is entitled to copies of files or the original files and where they should be in fact delivered to each other. I think this is a very professional way of handling their problem. My compliments to your clients.

Counsel and the court did discuss the dispute over the sum to be paid on November 1, 2006, and the judge carried the matter to April 24, 2007, for a settlement conference, which was adjourned at the request of defense counsel to June 12, 2007, and then further adjourned.

On July 6, 2007, the judge placed his decision on the record after commenting that "[t]he parties just won't agree on anything." First, he found from the evidence in the case that Rubin had "indeed complied with the settlement agreement." He found with respect to the November 1, 2006, payment that "Rubin was also entitled to payment and reimbursement at the same time" and that Rubin thus issued a net check to Goldman. The judge stated:

The plaintiff does not dispute the amount owed. Instead, he contends only that an advance of $826.73 has been fully reimbursed by Mr. Goldman.

It is bizarre to me that these lawyers would spend tens of thousands of dollars to argue over $826.73. I guess I can take judicial notice they don't like each other anymore. Yet, he fails to provide any substantiation for that contention.

He noted that Rubin contended that this deduction was pursuant to Paragraph 12 of the HHL Agreement, representing fifty percent "of all claims, liabilities, awards, settlements and expenses involving HHL." Further, "Article 1, Paragraph 4, of the FNAC settlement agreement provided that all costs incurred to dissolve FNAC, to wind up the affairs, including but not limited to the cost of reproduction and transfer of data, the files, should be split equally." The judge concluded that the amounts deducted from the November 1, 2006, payment "were all authorized pursuant to the settlement agreements executed by the parties."

Turning to disputes respecting other obligations under the settlement agreements, the judge discussed each party's contentions and found that plaintiffs were not entitled to a certification that defendants did not remove any documents from the Sycamore files nor an order compelling the transfer of such files to plaintiffs because plaintiffs initially were to receive copies of the FNAC files to be transferred to Sycamore and it was only after the agreement that plaintiffs demanded the original files. The judge also found that plaintiffs were not entitled to any further copies of the substitutions of attorney because fully executed copies of 297 substitutions had already been supplied to plaintiffs twice. Also, he observed that there was "nothing to indicate that [Goldman] will not continue receiving same for the remainder of the filed copies." Last, the judge denied plaintiffs' request that defendants supply remittance checks and correspondence within three days because it was unwarranted and the agreement itself provided for monthly remittance payments. He also observed that defendants contended that the relief sought by plaintiffs was impossible to satisfy because defendants had to wait for clearance of checks payable to them before they could remit any money over to plaintiffs.

The judge concluded:

Based upon the proofs presented, the Court holds that Mr. Rubin has indeed complied with the parties' settlement agreement. The plaintiff's motion instead seems to request relief that was actually never contemplated by the parties. As such, the motion for litigant's rights is denied.

I am going to award counsel fees. Actually I won't award counsel fees this time but if there is another motion I'm going to certainly recommend to Judge Cavanagh that he do so.

In the July 6, 2007, order on plaintiffs' motion, the judge denied plaintiffs' motion in aid of litigant's rights seeking enforcement of the settlement, denied each specific item of relief and denied an award of counsel fees. The judge also noted in the bottom margin of the order that "[t]he court determines that the transfer of all accounts and files is complete, full and final."

In the companion order of July 6, 2007, the judge granted all of the relief sought and compelled plaintiffs to pick up all files relating to Sycamore from HHL within fourteen days and simultaneously return the copies of the files to defendants. The order also barred plaintiffs from seeking any further relief respecting these files if they failed to comply within the fourteen-day period. The judge declared that the transfer of all Sycamore accounts and files was "complete, full and final." He also declared that Goldman had been substituted for HHL as counsel in all matters previously handled by HHL for Sycamore and that neither HHL nor Rubin represented Sycamore or Goldman in any matter. Finally, he ordered that counsel fees would be awarded to defendants even though he denied this relief orally.

Immediately after entry of the July 6, 2007, orders, defendants filed a motion for an award of fees in the amount of $24,773.60. Plaintiffs cross-moved under Rule 4:49-2 to amend the July 6, 2007, order to deny an award of fees to defendants. On August 17, 2007, the judge entered an order denying an award of counsel fees to defendants and vacating the portion of the July 6, 2007, order awarding same and amending the July 6, 2007,

order to conform to the decision placed on the record. This appeal followed.

Plaintiffs contend that the judge erred in resolving disputed issues of fact based on conflicting certifications and was clearly mistaken in stating that plaintiffs did not dispute the amount owed because the amounts were very much in dispute. First, with respect to the $10,000 setoff for deductibles on professional liability lawsuits, plaintiffs contended in their motion certifications that the amounts were not due as of November 1, 2006, because half of that amount was not paid by defendants until later that month and the other half was not paid until the middle of 2007, thus disputing defendants' claim that they were entitled to this reimbursement as of November 1, 2006. Additionally, they pointed to the language of the HHL Agreement, which did not permit a setoff for these amounts against the annual principal and interest payment due under the agreement.

Second, with respect to the $11,215.63 deducted for Rubin's time in complying with the FNAC Agreement, not only did plaintiffs contend that it was not a proper setoff under the HHL Agreement, they also asserted that Rubin was not entitled to be recompensed for his personal time or that of his employees at all. They contended that such time was not a "cost incurred" within the meaning of Article I, 4, of the FNAC Agreement, which provides for sharing of "costs incurred to dissolve FNAC and to wind up its affairs, including, but not limited to the cost of reproduction and transfer of account data and files."

Third, plaintiffs urge that the judge was also mistaken in finding that plaintiffs "fail[ed] to provide any substantiation" for the contention that $826.73 had already been paid where, in fact, defendants' own reports accounted for the prior reimbursement of these monies. Indeed, on March 12, 2007, plaintiffs' counsel provided the judge with a reconciliation and backup information purportedly demonstrating that this sum had already been deducted from net checks on account collections. Thus, plaintiffs contend that the judge erred in denying their motion in aid of litigants' rights, which they urge ought to have been granted with an award of counsel fees.

A judge has a duty to make findings of fact and conclusions of law "on every motion decided by a written order that is appealable as of right." R. 1:7-4(a). "Naked conclusions do not satisfy the purpose of R. 1:7-4." Curtis v. Finneran, 83 N.J. 563, 570 (1980). Where a judge has complied with Rule 1:7-4(a), our review is limited.

Considering first the scope of our appellate review of judgment entered in a non-jury case, as here, we note that our courts have held that the findings on which it is based should not be disturbed unless "they are so wholly insupportable as to result in a denial of justice," and that the appellate court should exercise its original fact finding jurisdiction sparingly and in none but a clear case where there is no doubt about the matter. That the finding reviewed is based on factual determinations in which matters of credibility are involved is not without significance. Findings by the trial judge are considered binding on appeal when supported by adequate, substantial and credible evidence. It has otherwise been stated that "our appellate function is a limited one: we do not disturb the factual findings and legal conclusions of the trial judge unless we are convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice," and the appellate court therefore ponders whether, on the contrary, there is substantial evidence in support of the trial judge's findings and conclusions.

[Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 483-84 (1974), (citations omitted).]

However, where the facts are disputed or depend on credibility evaluations, a plenary hearing is required. Tancredi v. Tancredi, 101 N.J. Super. 259, 262 (App. Div. 1968); see also Scott v. Salerno, 297 N.J. Super. 437, 452 (App. Div.), certif. denied, 149 N.J. 409 (1997); Harrington v. Harrington, 281 N.J. Super. 39, 47 (App. Div.), certif. denied, 142 N.J. 455 (1995); Dunne v. Dunne, 209 N.J. Super. 559, 571 (App. Div. 1986).

Furthermore, where the entitlement to a credit against sums due is based on professional services by an attorney, that attorney must, at the very least, submit a detailed line item statement setting forth the amount of time spent on each day when services were rendered and the tasks performed that day.

Here, plaintiffs disputed the right to setoff the malpractice deductibles against the sums due under the HHL Agreement. This dispute required the judge to construe that agreement and, if it was ambiguous, to secure parol evidence respecting the parties' intentions. Yet the judge ignored this contract issue. Plaintiffs also disputed the timing of the setoff, asserting facts that purportedly demonstrated that the deductible amounts had not been paid on or prior to November 1, 2006, an issue that certainly affected the amount of interest due plaintiffs under the HHL Agreement in connection with the payment due on November 1, 2005. The judge erred in sweepingly concluding that there was no dispute as to the amount.

Plaintiffs also contended that the $826.73 for fees advanced by HHL to out-of-state co-counsel had already been paid through deductions from monies due them on collections account and that the November 1 deduction of this amount was a double recovery. The judge dismissed this dispute as "bizarre" and never discussed the proofs supplied by plaintiffs.

Plaintiffs also urged that the FNAC agreement did not permit defendants to bill plaintiffs for their professional services in performing under the FNAC Agreement. This dispute required the judge to construe the agreement and take testimony if necessary to determine the meaning of "costs." Even if the judge had concluded that "costs" included professional services in transferring these worthless FNAG files, the judge still had to determine whether those services were reasonable and the $8090.63 charges appropriate. Without the required level of detail respecting the services rendered, plaintiffs could not have any effective cross-examination available to them and the fact finder simply could not evaluate the reasonableness of the amount of time spent performing each task and the necessity of the task performed. If the judge reviewing an award of fees requires more information from defendants in order to evaluate the services rendered, it should be supplied. Because the quantum of the fees is disputed, a plenary hearing is required.

Finally, the plaintiffs also contended that defendants were not entitled to charge for professional time in preparing substitutions of attorney pursuant to the HHL Agreement. Here, too, the judge was required to construe the agreement and, possibly, take testimony if the judge finds the language of the agreement ambiguous. Also, as with the FNAG files, the judge had to determine whether the services were reasonable and the $3125 charged for preparation, review and signature of 297 substitutions of attorney was appropriate, and, if appropriate under the agreement, reasonable in amount, issues that had to be resolved by a plenary hearing because of the issues in dispute.

We have great respect for the judge's belief that the litigation might well be more costly than the amount in dispute. However, the court has an obligation to decide the dispute when one exists. There are mechanisms to award costs and fees if the position of one of the parties is frivolous.

Where a judge resolves disputed issues of fact based on opposing certifications without an evidentiary hearing and expresses opinions respecting credibility, the matter should be remanded to another judge. Johnson v. Johnson, 390 N.J. Super. 269, 275 (App. Div. 2007); see also P.T. v. M.S., 325 N.J. Super. 193, 200 (App. Div. 1999); Carmichael v. Bryan, 310 N.J. Super. 34, 49 (App. Div. 1998). Out of an excess of caution, the judge's various comments discussed above could be construed to express an opinion respecting the credibility of the plaintiffs. Accordingly, in reversing the denial of plaintiffs' motion in aid of litigants' rights, we feel constrained to remand the matter for a plenary hearing to be assigned to another judge. R. 1:12-1(d).

Reversed and remanded.

This coined term refers to "almost uncollectible" accounts where the debtor was in bankruptcy, deceased, or whose address was invalid or unknown or the statute of limitations had expired.

The November 1, 2006, Hayt LLC statement indicates that the IT Department spent five and a half hours in February 2006 exporting, transferring and converting the latest file data and information to Excel and the firm charged $100 per hour for its services yet the subtotal for "File Transfer Operation" was $14,025.

The November 1, 2006, Hayt LLC statement indicates that the Administrative Management and Support Department spent three hours in October and projected four hours in November to "develop and build query to identify files requiring substitutions of attorney," etc., for which the firm charged $75 per hour. The statement also indicates that Rubin spent three hours reviewing and signing 297 substitutions of attorney for which the firm billed $225 per hour. Although the total of these two line items was $1200, the statement indicated that the subtotal due was $3125.

(continued)

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A-0297-07T3

September 2, 2008