UNITED AIRCONDITIONING CORP. II, et al. v. C. RAIMONDO & SONS CONSTRUCTION CO., INC., et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1959-05T5

UNITED AIRCONDITIONING CORP. II,

individually and on behalf of all

beneficiaries of a Lien Law

Article 3-A trust,

Plaintiff-Appellant,

v.

C. RAIMONDO & SONS CONSTRUCTION CO., INC.,

CHARLES RAIMONDO, SR., CHARLES RAIMONDO, JR.,

FRANK RAIMONDO,

Defendants-Respondents.

___________________________________________________

 

Argued October 11, 2006 - Decided November 9, 2006

Before Judges Kestin, Weissbard and Graves.

On appeal from Superior Court of New Jersey,

Law Division, Bergen County, L-10432-04.

Andrew R. Turner argued the cause for appellant

(Turner Law Firm, attorneys; Mr. Turner, on

the brief).

Wendy F. Klein argued the cause for respondents

(Cole, Schotz, Meisel, Forman & Leonard,

attorneys; Ms. Klein, of counsel and on the brief).

PER CURIAM

Plaintiff, United Airconditioning Corporation, appeals from a November 4, 2005, order of summary judgment dismissing its complaint against defendant Frank Raimondo, as well as a provision of that same order dismissing its complaint against defendant Charles Raimondo, Sr. on the basis of mootness resulting from his death in April 2005. In addition, plaintiff appeals from an October 7, 2005, order denying its motion to amend its complaint to add the Estate of Charles Raimondo, Sr. as a defendant. We affirm as to Frank Raimondo (Frank) and reverse with respect to the Estate of Charles Raimondo, Sr. (Charles Sr.).

C. Raimondo & Sons Construction Co., Inc. (Raimondo & Sons) is a New Jersey corporation. Plaintiff is a New York corporation. On February 7, 2002, Raimondo & Sons entered into a contract with the New York Hotel Trades Council and Hotel Association of New York City, Inc. to act as general contractor on the construction of a project known as the Harlem Health Center. On June 21, 2002, Raimondo & Sons entered into a contract with plaintiff by which plaintiff agreed to install heating and air-conditioning systems (HVAC work) for the project at a contract price of $3,120,000. Under the contract, plaintiff was to receive monthly progress payments from the general contractor which would, in turn, receive progress payments from the owner.

Around January 31, 2003, plaintiff requisitioned $603,349 from Raimondo & Sons for HVAC work performed during the month of January 2003. In turn, on February 21, 2003, Raimondo & Sons requisitioned $2,390,150 from the owner for January 2003 work, which included plaintiff's $603,349 requisition. Thereafter, Raimondo & Sons received payment in full from the owner, but never paid any of the money received to plaintiff for its work.

In June 2003, plaintiff filed a complaint in New York Supreme Court against Raimondo & Sons, Frank Raimondo and Charles Raimondo, Jr. (Charles Jr.) for breach of contract, reasonable value of work performed, and diversion of trust funds received from the project owner. In January 2004, on defendants' motion, the New York action was stayed pending plaintiff's prompt institution of suit in New Jersey, pursuant to a forum selection clause in the contract between plaintiff and Raimondo & Sons. In July 2004, plaintiff instituted the present action, which was substantially similar to the previous action filed in New York, with the exception of adding Charles Sr. as a defendant. The individual defendants answered, but the corporate defendant did not and a default was entered against Raimondo & Sons.

On March 3, 2005, Charles Sr. died. On September 21, 2005, plaintiff moved to add the Estate of Charles Sr. and his executor as defendants. Frank and Charles Jr. did not oppose substitution of Charles Sr.'s estate but claimed that plaintiff had not properly served the executor. On October 7, 2005, the judge denied the motion to amend due to the impending October 24, 2005, trial date. On September 23, 2005, Frank and Charles Jr. had moved for summary judgment, and plaintiff had cross-moved for summary judgment against them. Thereafter, the court was informed that Charles Jr. had filed for bankruptcy, thereby automatically staying all proceedings against him. After argument on October 21, 2005, the trial judge granted summary judgment in favor of Frank and denied plaintiff's opposing motion for summary judgment in its favor.

Plaintiff raises two distinct issues for our consideration. The first is whether the Law Division erred in declining to hold the individual officers of Raimondo & Sons, specifically Frank, strictly liable under the New York Lien Law, see McKinney's Lien Law, 1 to -251, for the trust funds received from the project owner for the benefit of sub-contractors such as plaintiff, but diverted; or, alternatively, to "conduct a limited hearing" as to Frank's acquiescence in the diversion of these trust funds. The second issue before us is whether it was error to deny plaintiff's application to add the Estate of Charles Sr. as a defendant.

As it appears, the first issue has two parts. The first part is whether the New York Lien Law, see McKinney's Lien Law, 71-79, imposes strict liability on officers of a general contractor that has diverted funds received in trust from an owner of property or whether, as Judge Harris decided, there must be a showing of knowing participation in the diversion. On this question, we are in substantial agreement with Judge Harris for the reasons expressed in his October 22, 2005, oral decision. The New York lien law is not a strict liability statute. See Forest Elec. Corp. v. Karco-Davis, Inc., 686 N.Y.S.2d 411 (N.Y. App. Div. 1999), Ace Hardwood Flooring Co. v. Glazer, 426 N.Y.S.2d 69 (N.Y. App. Div. 1980), Schwadron v. Freund, 329 N.Y.S.2d 945, 954 (N.Y. Sup. Ct. 1972), Scriven v. Maple Knoll Apartments, Inc., 361 N.Y.S.2d 730 (N.Y. App. Div. 1974).

The second part of the first issue, also answered negatively by the judge, was whether plaintiff presented sufficient facts as to Frank's liability, together with legitimate inferences from those facts, to overcome the summary judgment standard as formulated in Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). On this issue, plaintiff tendered the October 18, 2005, affidavit of Richard Veltri, submitted in opposition to defendants' summary judgment motion. Because of its significance, we set out the affidavit in full:

1. I am the Executive Vice President of the Plaintiff and duly authorized to make this certification. I am fully familiar with the books and business records of the Plaintiff, and the matters involved in this lawsuit, including the project which forms the basis of the lawsuit.

2. As part of my responsibilities, I interacted with management of the corporate defendant. Most of my interaction, most was conducted through Frank Raimondo, including pre-contract discussions and negotiations, discussions specifically regarding the contract, and necessary actions while on the Project, including change orders and payment certifications and requests. I can say with certainty, that Frank Raimondo was very much involved in the Project, interaction with Plaintiff, management, and the specific issues involved in this lawsuit. I make this statement based upon my experience with the Project and direct contact with Frank Raimondo. In those instances when I was unable to communicate directly with either Messrs. Raimondo, I was told by the person with whom I was speaking that the particular issue would need to be cleared with Frank Raimondo.

3. Annexed hereto are true and correct copies of portions of the payments received from the corporate defendant, including check numbers 25135 (dated December 11, 2002), 25841 (dated January 21, 2003), 26070 (dated January 31, 2003), 26329 (dated February 20, 2003), and 26563 (dated February 27, 2003). A copy of the Asset Purchase Agreement was furnished by counsel to the individual defendants by letter dated April 11, 2005 in accordance with the Order filed April 1, 2005 by Your Honor.

4. This certification is made in support of Plaintiff's motion for summary judgment, and in opposition to Defendants' motion for summary judgment.

In granting Frank's motion, Judge Harris found the Veltri submission to be a "sham" affidavit, prohibited by Shelcusky v. Garjulio, 172 N.J. 185 (2002), because it contradicted sworn answers to interrogatories signed by Veltri on behalf of plaintiff with respect to Frank's participation in the project, statements made by him, and information known by him concerning the alleged diversion of trust funds. As a result, the judge struck the affidavit. We see evidence, however, that the interrogatory answers were provided under the consistent but ultimately mistaken understanding that the lien law imposed strict liability on corporate officers, thereby providing a "plausible explanation" for the inconsistency. Id. at 202.

Nevertheless, although the judge expressed the view that the Veltri affidavit, if accepted, created a genuine issue of material fact as to Frank's responsibility for the diversion of trust funds, we disagree. In our view, the affidavit failed to present sufficient facts from which reasonable jurors could conclude that Frank knowingly participated, actively or by acquiescence, in the misapplication of the funds received by Raimondo & Sons. It is important to note that Veltri's affidavit is the only evidence, other than Frank's corporate designation as executive vice-president, to support Frank's liability. No depositions were taken of Frank, Charles Jr., Charles Sr., or any other corporate officers who were not named as defendants, which might have provided evidence of who did what, who knew what, and the nature of each person's responsibility within the corporation. There is no presumption of knowledge that flows from merely being an officer. See Ace Hardwood Flooring Co., supra, 426 N.Y.S.2d at 70.

Plaintiff's alternate request for a "limited hearing" actually seeks a mini-trial to remedy the lack of discovery. We conclude that such a hearing is not warranted. If summary judgment was appropriate on the record as it existed, no trial is required. Thus, we agree with the judge's conclusion that summary judgment was properly granted to Frank, but for the different reason we have explained.

We reach a different conclusion as to the judge's refusal to allow plaintiff to amend its complaint to add the Estate of Charles Sr., and his executor, as defendants. As noted, Charles Sr. died on March 3, 2005. Up until that time, he was participating in the case through counsel. Plaintiff's attorney learned of the death no later than a case management conference on April 4, 2005. By letter of May 25, 2005, defense counsel informed plaintiff's counsel of the name of the executor of the estate and enclosed copies of letters testamentary issued to him. Nevertheless, no motion to add the Estate was filed until September 21, 2005, returnable October 7, 2005, less than three weeks before trial. We are unable to discern any satisfactory reason for the delay.

However, the attorneys who had been representing all of the individual defendants, including Charles Sr., did not object to the amendment, although they claimed that the Estate had not been properly served with the motion, since the law firm did not represent the Estate nor agree to accept service of papers on its behalf. In the order of November 4, 2005, granting Frank's summary judgment motion, the judge stated that he "makes no finding with regard to a subsequent lawsuit against the Estate of Charles Raimondo, Sr., including any ruling with regard to the Entire Controversy Doctrine." Indeed, if the order under review is affirmed, plaintiff may well be met with an entire controversy defense to any new action.

We conclude that the only just outcome is to permit plaintiff to amend the present action to substitute Charles Sr.'s Estate for him individually. Given the dismissal of Frank, which we have affirmed, and the stay of proceedings against Charles Jr., only the case against Charles Sr. remains. Plaintiff has already obtained a default judgment in the amount of $842,226 against Raimondo & Sons, thereby fixing the amount of damages.

Affirmed as to Frank Raimondo; reversed and remanded as to Charles Raimondo, Sr.

 

(continued)

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A-1959-05T5

November 9, 2006