NOEL LOVE GROSS v. THE FERRY BINGHAMTON INC

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

NOEL LOVE GROSS, AS TRUSTEE

OF TRUST B UNDER THE LAST

WILL AND TESTAMENT OF NELSON

GROSS,

Plaintiff-Respondent,

V.

THE FERRY BINGHAMTON, INC.,

MI & SUN INTERNATIONAL CORP.,

HUDSON LANDING INC., and

DANIEL KIM, individually,

Defendants/Third Party

Plaintiffs-Appellants,

V.

NEIL R. GROSS, STEVE KIM,

and JOUAHN NAM,

Third Party Defendants.

______________________________________

June 23, 2015

Submitted May 19, 2015 Decided

Before Judges Reisner and Higbee.

On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-1529-13.

Daniel D. Kim, attorney for appellants.

Morgan Lewis & Bockius, LLP, attorneys for respondent (John McGahren, on the brief).

PER CURIAM

Defendants appeal a March 13, 2014 order granting summary judgment to plaintiff, entering judgment against all defendants for damages in the amount of $392,533.34, and dismissing defendants counterclaim without prejudice.1 We affirm substantially for the reasons set forth by Judge Rachelle L. Harz in her well-reasoned and thorough oral opinion of March 24, 2014.

Plaintiff and defendants entered into a commercial lease.

Defendants failed to make rent payments, and plaintiff then obtained a judgment of possession for the subject premises. Thereafter, plaintiff filed this breach of contract claim against defendant entities and their Chief Financial Officer, Daniel Kim (Kim), individually. Plaintiff sought back rent payments and other damages for the cost of remediating the premises. In response, defendants filed a counterclaim against plaintiff.

The court found there were no material facts in dispute, that defendants breached the lease, and that Kim was liable in his individual capacity. Plaintiff also filed a motion to dismiss defendants' counterclaim without prejudice, which was granted by the trial court. We affirm substantially for the reasons set forth by Judge Rachelle L. Harz in her well-reasoned and thorough oral opinion of March 24, 2014.

I

The following facts underlie the litigation. Defendant, Mi & Sun Corp. (Mi & Sun), purchased co-defendant companies Binghamton and Hudson Landing via a stock purchase agreement on June 13, 2007. Binghamton owned the Binghamton Ferry, and Hudson Landing owned the liquor license operating within the ferry. The ferry was located at a premises owned by plaintiff in the Borough of Edgewater, New Jersey. Defendant Kim was the Secretary and CFO of Mi & Sun.2

Binghamton and Hudson Landing executed a written lease agreement with plaintiff. The Lease rented the subject premises to defendants for a term of ninety-nine years, commencing on June 15, 2007. Under the lease, defendants were obligated to make specific rent payments, and incur other expenses relating to the property, which were due on the first day of each month. Defendants failed to make payments on the lease from inception through March 23, 2011. Plaintiff sent a letter to defendants demanding the unpaid rent. Months later, in a letter dated September 24, 2011, defendants memorialized the following agreement between the parties. Defendants agreed to pay rent in the amount of $100,000 per year, paid equally every month; to pay $50,000 of arrears of the basic rent by March 1, 2012; and, if the $50,000 was not paid by its due date, defendants agreed that plaintiff "shall be permitted to obtain judgment in possession of the lease and the tenant shall acknowledge the judgment in possession and the tenant shall walk away from the premises and the projects."

Subsequent to that agreement, defendants made one payment of $8,333 on January 6, 2012, but made no other rent payments under the lease. Defendants failed to pay the $50,000 in arrears by March 1, 2012, as promised in the September 24, 2011 letter. Defendants also failed to deliver possession of the premises after March 1, 2012, requiring plaintiff to bring legal action seeking judgment for possession of the premises. On December 19, 2012, plaintiff obtained a judgment for summary dispossession against defendants, Binghamton, Mi & Sun Corp., and Hudson Landing.

The lease also required the tenant-defendants to "comply with all laws and ordinances, and all rules, orders and regulations . . . of all governmental authorities." Defendants committed numerous building code and municipal violations, which resulted in more than $650,000 in fines. During the term of the lease, the ferry broke apart, and became partially submerged. A Notice of Violation was sent to both plaintiff and Daniel Kim from the New Jersey Department of Environmental Protection (DEP), on August 28, 2013. Plaintiff therefore was obligated to address the removal of the ferry, and could not re-let the premises until the same was completed.

On May 17, 2013, the Borough of Edgewater (Edgewater), Mi & Sun Corp., and Daniel Kim individually entered into a Settlement Agreement. Daniel Kim and Mi & Sun agreed, "at its sole cost and expense" to remove the Binghamton Ferry Boat in accordance with the requirements of the New Jersey DEP. Defendants also agreed to pay Edgewater $250,000, which was held in escrow, from the funds Hudson Landing received upon sale of the liquor license. Those funds would be held in escrow until the ferry was removed.

Defendants did not pay for the removal of the ferry. Plaintiff obtained a quote for the removal of the ferry of $415,000. There were various other costs associated with the removal of the ferry, including insurance, asbestos removal, oil spill protection, which totaled just under $50,000. Primarily based on these facts, plaintiff was awarded summary judgment in the breach of lease action against defendants, including Daniel Kim, individually.

As to the reasons for entering judgment against Kim individually, Judge Harz found that Kim had co-mingled assets and acted in a fraudulent manner by taking corporate funds for his personal use, and she found that by his wrongful actions he lost the corporate shield of personal protection. As one example of this activity, Judge Harz stated in her opinion

The liquor license for the Binghamton Ferry was owned by Hudson Landing. An agreement for the sale of the liquor license was made by and between Hudson Landing, Inc., a New Jersey corporation, and Daniel Kim, an individual, collectively defined as seller, and Haven Riverfront Restaurant and Bar, LLC, a New Jersey limited liability company, the buyer, on or about January 11th, 2013. Paragraph 9C-1 of the liquor license agreement states that Hudson Landing, Inc., - - duly organized corporation, validly existing and in good standing under the laws of New Jersey. However, as of the date of the liquor license agreement, Hudson Landing's corporate certificate was suspended.

. . . The purchase price to be paid to seller by buyer for the license, pursuant to the liquor license agreement, was $800,000. $250,000 of the proceeds for the sale of the liquor license by Hudson Landing were to be paid by the buyer of the liquor license through the buyer's attorney's attorney trust account to the Borough of Edgewater, pursuant to the settlement agreement between the Borough, Daniel Kim and Mi & Sun. The balance of the proceeds for the sale of the liquor license in the amount of $550,000 - - which went directly to Mr. Kim, individually - - are currently unaccounted for.

In addition, Judge Harz found that both Mi & Sun and Hudson Landing did not maintain proper corporate procedures or observe corporate formalities. Both of their corporate charters were revoked at various points during this litigation. Judge Harz recognized that allowing Kim to use the corporate shield to protect him from personal liability would result in a substantial injustice.

II

On this appeal, defendants raise these two points which are the same issues they raised in the trial court

POINT I

THE LOWER COURT COMMITTED GRIEVOUS ERROR IN FINDING PERSONAL LIABILITY WHERE THERE WAS NO EVIDENCE WHATSOEVER THAT DANIEL KIM COMMITTED FRAUD OR PERSONALLY RENDERED INJUSTICE AND THUS THERE WAS NO BASIS FOR PIERCING THE CORPORATE VEIL.

POINT II

THERE IS NO BASIS IN THE RECORD FOR ANY FINDING THAT DANIEL KIM PERSONALLY COMMITTED FRAUD OR PERPETUATED INUSTICE.

We agree with the imposition of personal liability on Kim. A corporation is a separate entity from its shareholders. State Dept. of Envtl. Prot. v. Ventron Corp., 94 N.J. 473, 500 (1983). The benefits of forming a corporation is to insulate individuals from liabilities of the company. However, "in cases of fraud, injustice, or the like," piercing the corporate veil is appropriate. Ibid. (citing Lyon v. Barrett, 89 N.J. 294, 300 (1982)). The purpose of the doctrine is to prevent an independent corporation from being used to defeat the ends of justice, to perpetrate fraud, to accomplish a crime, or otherwise to evade the law. Ibid. (citations omitted). Conceptually, "'piercing the corporate veil is not technically a mechanism for imposing "legal" liability, but for remedying the fundamental unfairness [that] will result from a failure to disregard the corporate form.'" Verni ex rel. Burstein v. Harry M. Stevens, Inc., 387 N.J. Super. 160, 199 (App. Div. 2006) (quoting Trs. of the Nat'l Elevator Indus. Pension, Health Benefit & Educ. Funds v. Lutyk, 322 F.3d 188, 193 (3d Cir. 2003)), certif. denied, 189 N.J. 429 (2007).

We review a motion for summary judgment de novo under the same legal standard applied by the trial court. Coyne v. N.J. Dep't of Transp., 182 N.J. 481, 491 (2005). Thus, we are to determine "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[s] in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995); see R. 4:46-2(c).

A "trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference[.]" McDade v. Siazon, 208 N.J. 463, 473 (2011) (citations and quotation marks omitted).

In this case, we agree that summary judgment was correctly entered by Judge Harz for the reasons set forth in her clear and comprehensive opinion. Plainly stated, defendants breached the lease and caused damages to the plaintiff. In addition, allowing Daniel Kim to use the corporate structure to shield himself from personal liability would defeat the ends of justice.

The final point raised by defendants is as follows

POINT III

THE LOWER COURT COULD NOT HAVE GRANTED SUMMARY JUDGMENT AGAINST MI & SUN INTERNATIONAL CORPORATION WHILE DISMISS[ING] THE COUNTER-CLAIM WITHOUT PREJUDICE PURSUANT TO R. 4:23-5(a).

The court properly dismissed defendants' counterclaim for failure to produce discovery. Defendants seem to confuse the effect of the dismissal of their counterclaim with the dismissal of their third-party complaints against other parties without prejudice. In their brief, defendants argue extensively that they were defrauded originally by the third-party defendants, and that is why their business enterprise was unsuccessful and they were unable to pay rent. Despite these arguments, defendants did not appeal the orders dismissing their third-party complaint, which was entered by a different judge months before the counterclaim was dismissed and summary judgment was entered.

The other arguments raised by defendants do not warrant consideration in a written opinion. R. 2:11-3(e)(1)(E).

Affirmed.

1 To the extent that this appeal may be interlocutory because some of the claims were dismissed without prejudice, we grant leave to appeal nunc pro tunc in the interests of justice.

2 The record also reveals that Kim was the Secretary and CFO of Hudson Landing and the Ferry Binghamton, Inc.