IRA A. ROSENBERG v. GARDINER SMITH

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

IRA A. ROSENBERG,

Plaintiff-Respondent,

v.

GARDINER SMITH,

Defendant-Appellant.

___________________________

February 13, 2014

Before Judges Simonelli, Fasciale and Haas.

On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-1607-12.

Gardiner Smith, appellant, argued the cause pro se.

Theodora T. McCormick argued the cause for respondent (Sills Cummis & Gross, P.C., attorneys; Jonathan S. Jemison, of counsel and on the brief).

PER CURIAM

Defendant Gardiner Smith appeals from the November 16, 2012 Law Division order, which granted summary judgment to plaintiff Ira Rosenberg, entered judgment against defendant in the amount of $50,000 plus pre-judgment interest, and denied defendant's motion to compel discovery. For the reasons that follow, we affirm.

We derive the following facts from the record. In early 2010, defendant, an attorney, was soliciting investors for TenX BioPharma, Inc. (TenX), a drug development company. Defendant solicited plaintiff, also an attorney, and plaintiff's law firm, Sills Cummis & Gross, P.C. (Sills Cummis), to purchase $50,000 of TenX's Series B Subordinate Debentures. Plaintiff and Sills Cummis declined to purchase the stock; however, plaintiff agreed to give defendant an interest-free loan for $50,000 so that defendant could purchase the stock.

On February 4, 2010, plaintiff issued a check to defendant from his personal checking account in the amount of $50,000. The check contained the notation, "Loan TenX." There were no other terms set forth on the check, and no other loan documents. Defendant deposited the check and purchased $50,000 of TenX Series B Subordinate Debentures. At his deposition, he admitted the $50,000 was a loan, not a gift, and the check "memorialized" the loan.

Five months after the loan transaction, defendant became engaged in a dispute with TenX investors who were attempting to take control of the company and terminate defendant's employment as chief executive officer (CEO). Plaintiff represented defendant in that dispute, and sent a letter to the chairman of TenX's board of directors challenging the termination. As a result of the letter, defendant's employment was not terminated.

Two months later, on September 22, 2010, in his capacity as TenX's CEO, defendant signed a retainer agreement for Sills Cummis to represent TenX in connection with the sale of the company's assets. The retainer agreement disclosed the law firm's prior representation of defendant, and specifically terminated that representation. Thereafter, neither plaintiff nor Sills Cummis represented defendant in connection with any dispute with TenX, and any communications between the two men were in connection with plaintiff's representation of TenX.

In October 2010, a group of creditors filed an involuntary petition under Chapter 11 of the Bankruptcy Code against TenX. Defendant, acting pro se, raised severance and retaliation claims in that matter, asserting that the board of directors terminated his employment in retaliation for initiating a fraud investigation against a member of the board of directors. Defendant prevailed, and in September 2012, the bankruptcy court awarded him $125,000 in severance pay.

In March 2011, the bankruptcy court approved Sills Cummis as TenX's special transactional counsel in connection with the sale of all or substantially all of the company's assets. In seeking approval, plaintiff submitted an affidavit disclosing his unsecured $50,000 loan to defendant that remained unpaid. Defendant never filed an objection or response to the affidavit, and consented to Sills Cummis serving as special transactional counsel.

Prior to filing the complaint in this matter on February 29, 2012, plaintiff demanded repayment of the loan, but defendant refused to pay. On April 11, 2012, defendant filed a counterclaim, alleging that plaintiff was his personal attorney, and plaintiff breached his fiduciary duty by asking defendant not to memorialize the loan terms in writing, and using the loan to coerce defendant to retain Sills Cummis to represent TenX and generate additional legal fees. Defendant also asserted a malpractice claim, alleging that plaintiff took action adverse to him in the bankruptcy matter and failed to advise him of his defenses under the Dodd-Frank Act,1 to the alleged retaliation for reporting fraud.2

The case was assigned to Track I, with a 150-day discovery period commencing on April 11, 2012 and ending on September 9, 2012. The court sent the parties a notice advising that discovery ended on September 9, 2012, and an application to extend discovery must be made pursuant to Rule 4:24-1(c). Defendant served two document requests during the discovery period. Plaintiff produced the requested documents. Defendant served no other discovery demands during the discovery period, nor did he file a motion to compel or extend discovery.

In September 2012, plaintiff filed a motion for summary judgment returnable on October 12, 2012. Defendant did not file an affidavit in opposition to the motion, as required by Rule 4:46-5(a), nor did he assert he was deprived of discovery or needed additional discovery. Rather, defendant argued that plaintiff agreed the loan was a non-recourse loan payable only when defendant realized a $50,000 profit from his TenX investment. Defendant also argued that plaintiff never demanded payment, and plaintiff breached his fiduciary duty and committed malpractice.

On October 4, 2012, defendant served a new document demand, to which plaintiff objected and did not respond. On October 5, 2012, defendant filed motion to compel plaintiff to produce the requested documents.

Judge Thomas Vena found there was no affidavit or evidence supporting defendant's arguments about the loan. Rather, the evidence showed that defendant admitted the $50,000 was a loan, and the check itself indicated it was a loan. Because the check contained no time for re-payment, the judge concluded the loan was payable on demand. The judge also concluded that plaintiff demanded payment and defendant failed to pay. The judge therefore granted summary judgment on the complaint and entered judgment against defendant.

Judge Vena concluded there was no affidavit or authenticated documents supporting defendant's claim that plaintiff was his personal attorney and breached his fiduciary duty, or that defendant suffered any damages resulting from the alleged breach. The judge found that the September 2010 retainer agreement defendant signed as TenX's CEO confirmed that plaintiff no longer represented him.

As for the malpractice claim, Judge Vena determined that this was not a common knowledge case, and thus, an affidavit of merit was required. The judge determined that defendant showed no substantial compliance or exceptional circumstances to excuse his failure to file an affidavit of merit, and defendant's failure to file an affidavit of merit required dismissal of the malpractice claim. The judge granted summary judgment and dismissed the counterclaim with prejudice. Having granted summary judgment, the judge dismissed defendant's motion to compel as moot.

On appeal, defendant argues there were material factual disputes about the loan, its repayment terms, and whether plaintiff demanded payment before filing the complaint. He also argues that Judge Vena erred in dismissing his counterclaim and denying his motion to compel discovery.3 We disagree with these arguments.

Our review of a ruling on summary judgment is de novo, applying the same legal standard as the trial court. Nicholas v. Mynster, 213 N.J.463, 477-78 (2013). Thus, we consider, as the trial judge did, "'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.'" Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007) (quoting Brill v. Guardian Life Ins. Co. of Am., 142 N.J.520, 536 (1995)). 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). If there is no genuine issue of material fact, we must then "decide whether the trial court correctly interpreted the law." Massachi v. AHL Servs., Inc., 396 N.J. Super. 486, 494 (App. Div. 2007), certif. denied, 195 N.J. 419 (2008). We review issues of law de novo and accord no deference to the trial judge's conclusions on issues of law. Nicholas, supra, 213 N.J.at 478.

In addition, we generally defer to the trial court's decisions regarding discovery matters absent an abuse of discretion or mistaken understanding of the applicable law. Pomerantz Paper Corp. v. New Cmty. Corp., 207 N.J. 344, 371 (2011); see also Pressler & Verniero, Current N.J. Court Rules, cmt. 4.6 on R. 2:10-2 (2014).

Applying the above standards, we discern no reason to disturb Judge Vena's rulings. There is no affidavit or evidence creating any factual dispute in this case. Rather, the evidence confirms that the $50,000 was a loan payable on demand, plaintiff demanded payment, and defendant failed to pay. A loan is deemed payable on demand where, such as here, there is no time stated between the debtor and creditor as to when repayment is due. Denville Amusement Co., Inc. v. Fogelson, 84 N.J. Super. 164, 169 (App. Div. 1964). Thus, the judge properly granted summary judgment in plaintiff's favor on the complaint, and properly entered judgment against defendant.

The evidence also confirms there was no attorney-client relationship between plaintiff and defendant at the time of the loan transaction or at the commencement of the bankruptcy matter or thereafter. Thus, plaintiff breached no duty to defendant, nor did he commit malpractice in connection with the loan or the bankruptcy matter. Even if an attorney-client relationship existed, because defendant's malpractice claim was not based on common knowledge, he was required to file an affidavit of merit pursuant to N.J.S.A. 2A:53A-27. See Couri v. Gardner, 173 N.J. 328, 341 (2002). Defendant's failure to file an affidavit of merit or show that exceptional circumstances prevented the filing compelled dismissal of his counterclaim with prejudice. Palanque v. Lambert-Woolley, 168 N.J. 398, 404 (2001). Thus, Judge Vena properly granted summary judgment in plaintiff's favor on the counterclaim.

Because summary judgment had been granted and the counterclaim was dismissed with prejudice, Judge Vena correctly denied defendant's motion to compel the production of documents as moot. In any event, the motion was improper. Defendant served the new document request after the discovery end date without first filing a motion prior thereto to extend discovery, as mandated by Rule 4:24-1(c).

Affirmed.

1 Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. No. 111-203, 124 Stat. 1376 (2010).

2 Defendant also alleged false claims and predatory lending but did not address these claims before the trial judge or on appeal. These claims are, thus, deemed waived. Sklodowsky v. Lushis, 417 N.J. Super. 648, 657 (App. Div. 2011); Pressler & Verniero, Current N.J. Court Rules, cmt. 4 on R. 2:6-2 (2014).

3 We decline to address defendant's argument that plaintiff committed fraud. Defendant did not allege fraud in his counterclaim or raise this issue before Judge Vena and it is not jurisdictional in nature, nor does it substantially implicate the public interest. Alloway v. Gen. Marine Indus., L.P., 149 N.J. 620, 643 (1997).