ARDRY TECHNICAL SERVICES, INC. v. ARDRY TECH, L.L.C., et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1512-05T21512-05T2

ARDRY TECHNICAL SERVICES, INC.,

Plaintiff-Appellant/

Cross-Respondent,

vs.

ARDRY TECH, L.L.C., GENERX CORP.,

CHARLES LEE, CHRISTOPHER R.

TRAHAN, KATHY TRAHAN, LAWRENCE R.

BISAILLON and BERNADETTE BISAILLON,

Defendants-Respondents,

and

ROBERT Y. KIM,

Defendant-Respondent/

Cross-Appellant,

and

ROBERT Y. KIM,

Third-Party Plaintiff,

vs.

FRANK ALBANESE, JAMES HOLCOMB,

JOSEPH CARBERRY, SMOLIN, LUPIN

& CO., P.A. and CHRIS DE VITO,

Third-Party Defendants.

__________________________________

 

Submitted: January 24, 2007 - Decided:

Before Judges Cuff, Fuentes and Baxter.

On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-799-02.

Fein, Such, Kahn & Shepard, attorneys for appellant/cross-respondent (Gregg P. Tabakin, on the brief).

Seidman & Associates, attorneys for respondent/cross-appellant Robert Y. Kim (Mitchell B. Seidman, of counsel and on the brief).

Brian J. Fruehling, attorney for respondents Christopher R. Trahan and Kathy Trahan; and Nashel, Kates, Nussman, Rapone & Ellis, attorneys for respondents Lawrence R. and Bernadette Bisaillon (Mr. Fruehling and Michael Farhi, on the joint brief).

PER CURIAM

Plaintiff Ardry Technical Services, Inc. (ATSI) appeals from an order granting summary judgment to defendants Christopher Trahan and Kathy Trahan (the Trahan defendants) and defendants Lawrence Bisaillon and Bernadette Bisaillon (the Bisaillon defendants) and an order denying plaintiff's motion for reconsideration. Defendant Robert Kim also appeals from an order denying his motion for summary judgment. We reverse and remand for trial.

The ATSI complaint seeks to recover on personal guarantees executed by the Trahan defendants, the Bisaillon defendants and defendant Kim in connection with a loan from ATSI to defendant Ardry Tech, L.L.C. (Ardry Tech). ATSI asserts that funds were disbursed to Ardry Tech but not repaid by the business. Therefore, it sought recourse from the personal guarantors.

On April 20, 1994, ATSI and defendant Generx Corp. (Generx) formed a joint venture to engineer, distribute, and market electronic ballasts and related projects under a distribution agreement with Goldstar Instrument Electric Co., Ltd. The new joint venture was named Ardry Tech, L.L.C.; ATSI and Generx each held a fifty percent interest. ATSI and its principals agreed to finance the venture; the Generx principals agreed to run the daily operations of Ardry Tech. The Generx principals were defendants Kim, Lawrence Bisaillon, Charles Lee and Christopher Trahan.

On July 29, 1994, Ardry Tech executed a promissory note in which it, as the "Maker," promised to pay to the order of ATSI, as the "Payee," "Five Hundred Thousand ($500,000.00 USD) Dollars or, if less, the aggregate unpaid principal amount of all advances made by the Maker to the Payee from time to time and remaining outstanding . . . with interest computed as set forth in Paragraph 1."

Paragraph 1, entitled "Payment," provided that interest would be paid monthly and outlined the repayment terms as follows:

(a) Monthly Payments - The principal sum of $500,000.00 with interest thereon to be computed as set forth in subparagraph 1(c) shall be paid as follows:

(1) Commencing on the 15 day of August, 1994 and each month thereafter interest on the amount then outstanding shall be paid monthly; and

(2) Principle [sic] shall be repaid within forty-five (45) days of the close of each fiscal year . . . .

(3) The entire unpaid balance of any principal, interest or late charge to be payable upon termination of the Joint Venture . . . .

The promissory note contained a "Default" and "Acceleration" provision.

3. Default. If any of the following events (each of such events herein called a "Default") shall occur:

(a) The Maker shall fail to pay any installment due under this Note within thirty (30) days of its due date or shall fail to pay in full this Note within thirty (30) days of an event of acceleration, and such default in either case shall continue for thirty (30) days after written notice thereof; . . . then, and unless the same shall have been waived in writing by the Payees, the Payees may at their option by written notice to the Maker declare the entire original amount due of $500,000 or, if less, the aggregate unpaid principal amount of all advances made by the Maker to the Payee from time to time less any payments made under this Note to be due and payable. . . .

Paragraph four contains provisions for acceleration:

4. Acceleration. If the Maker elects to liquidate or dissolve then, the entire original amount due of $500,000.00 or, if less, the aggregate unpaid principal amount of all advances made by the Maker to the Payee from time to time less any principal payments made under this Note shall become due and payable.

On July 29, 1994, the same day the promissory note was executed, the Trahan defendants, the Bisaillon defendants, and defendant Kim executed personal guarantees in favor of ATSI in which they guaranteed payment of the July 29, 1994 promissory note. The "Guarantee" agreement stated in pertinent part:

NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Guarantor hereby agrees as follows:

1. Guarantee. Guarantor hereby unconditionally and irrevocably guarantees the payment, and not merely the collectability, of all sums payable by Maker to The Payee or any subsequent Payee under the Note. . . .

. . . .

5. Limitation of Guarantee. Notwithstanding any of the foregoing the amount of the guarantee shall in no event exceed the allocate share of Generx, Corp. in the joint venture known as ArdryTech L.L.C., that is fifty percent (50%) of any amount due pursuant to the Note, plus the amount of any monies due ArdryTech by Generx, Corp. and costs of collection.

In March 1996, a corporate resolution was adopted to effect the liquidation of Ardry Tech. Defendants Christopher Trahan, Charles Lee, Robert Kim, and Lawrence Bisaillon signed the resolution, but plaintiff's principals refused to sign it. Nevertheless, Ardry Tech ended its business operations.

During discovery following initiation of litigation, Frank Albanese and James Holcomb, principals of ATSI, were deposed. Both stated that no payments of principal or interest were ever made by Ardry Tech or the guarantors on the July 29, 1994 promissory note.

In response to Kim's motion to dismiss the complaint, ATSI submitted a certification from Holcomb that stated that Ardry Tech "did in fact make payments toward the obligation." Holcomb stated that Ardry Tech made at least two payments to ATSI: $325,000 on September 3, 1996, and an additional $200,000 on October 11, 1996.

The Trahan defendants and the Bisaillon defendants filed motions for summary judgment to dismiss plaintiff's complaint. They asserted that their obligation was limited to $500,000 and ATSI admitted through Holcomb that Ardry Tech paid $525,000 to ATSI.

In a responsive certification, Holcomb stated that the promissory note, which provides for payment of the "aggregate unpaid principal amount of all advances made by the Maker to the Payee from time to time and remaining outstanding" referred to "subsequent advances which were contemplated during the life of the entity." He alleged that plaintiff loaned defendant Ardry Tech more money than the funds represented by the promissory note and that defendant guarantors' other defenses, such as the lack of consideration defense, were baseless.

The motion judge granted defendants' summary judgment motion to dismiss plaintiff's complaint against them but allowed ATSI to file a motion for reconsideration within fourteen days. The motion judge characterized the parties' financial relationship as a "revolving" loan situation, not one that required a simple, flat payment of $500,000 as alleged by defendants. As such, the judge wanted proof of defendants' debt to plaintiff and an explanation of how their $325,000 and $200,000 payments to plaintiff fit into a larger loan and repayment scheme and whether $525,000 did, in fact, satisfy defendants' obligation on the $500,000 loan.

The motion for reconsideration filed by ATSI was accompanied by another Holcomb certification, a certification by Kathleen Meller, and a ledger detailing payments from Ardry Tech to ATSI and amounts still due. The motion judge granted ATSI's motion for reconsideration, vacated the earlier order, and reinstated the complaint. Once again, the motion judge permitted the Trahan and Bisaillon defendants to file a motion for reconsideration within fourteen days.

In response to the motion for reconsideration, ATSI filed a third certification by Holcomb. In this certification, Holcomb explicitly stated that "[d]efendants' position is incorrect" because the terms of the guarantee define defendants' obligation "'of all sums payable by Ardry Tech, LLC to [plaintiff]' and does not contain any provision extinguishing the guarantee when the `first' $500,000.00 has been paid." Moreover, Holcomb restated that defendants' $325,000 and $200,000 payments in September and October 1996 were not paid against the balance of the $500,000 guarantee and that defendants' obligation was not discharged.

On August 5, 2005, after hearing oral argument, the motion judge granted defendants' motion for reconsideration and dismissed the complaint against the Trahan and Bisaillon defendants. The judge reasoned that under the terms of the promissory note, if the maker (defendant Ardry Tech) elected to liquidate or dissolve, then the $500,000 or less would become due. Since the maker did elect to liquidate or dissolve, the $500,000 became due. Thereafter, defendants paid $525,000 and satisfied their obligation.

On August 23, 2005, ATSI filed a notice of motion for reconsideration based on a fourth certification from Holcomb. Holcomb attempted to correct a mistake from his December 12, 2004 certification in which he stated that Ardry Tech paid plaintiff $325,000 and $200,000 towards the promissory note. He attributed this mistake to a "misreading of the spreadsheet."

The motion judge denied plaintiff's motion on September 23, 2005. In doing so, she determined that the fourth Holcomb certification was a "sham affidavit" and that the Trahan and Bisaillon defendants guarantee was extinguished by payment by Ardry Tech of $525,000.

ATSI argues that genuine issues of material fact existed regarding the nature of the financial relationship between ATSI and Ardry Tech, the amount of funds advanced to Ardry Tech, the amount of any repayments, and the amount of any sums due to ATSI. All of these factual issues informed the extent of the guarantors' obligation and precluded resolution of ATSI's claims against the guarantors in a summary judgment context.

When an appellate court is asked to review a trial court's grant of summary judgment, the appellate court applies the same standard as was applied in the trial court. Gen. Accident Ins. Co. v. N.Y. Marine and Gen. Ins. Co., 320 N.J. Super. 546, 553 (App. Div. 1999). Summary judgment must be granted if "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). When considering whether there is a genuine issue of material fact, it must be determined whether the evidence presented as part of the motion, "when viewed in the light most favorable to the non-moving party," is enough to allow a rational factfinder to find in favor of the non-moving party. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). "[W]hen the evidence 'is so one-sided that one party must prevail as a matter of law,' the trial court should not hesitate to grant summary judgment." Ibid. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S. Ct. 2505, 2512, 91 L. Ed. 2d 202, 214 (1986)). Measured by this standard, summary judgment was not appropriate on this record. The record is not so one-sided that summary judgment was appropriate.

The motion record reveals genuine issues of material fact regarding the nature of the financial relationship between ATSI and Ardry Tech. ATSI asserts that no payments were ever made on the promissory note. It also contends that the $525,000 paid by Ardry Tech to ATSI was on letters of credit associated with other transactions between these business concerns. If so, the personal guarantees that concern only the promissory note would not be affected.

Moreover, the record suggests that neither the parties nor the terms of the promissory note ever contemplated the simple dispensation of $500,000 and the repayment of that sum plus interest. Rather, the financial arrangement reflected by the promissory note between ATSI and Ardry Tech may have been in the nature of a revolving loan with funds advanced and funds repaid on a recurring basis. If so, the repayment of $525,000 during the time Ardry Tech operated may not have extinguished the guarantees executed by the Trahan and Bisaillon defendants. Finally, the Trahan defendants and the Bisaillon defendants contest the nature of the financial relationship and the amount of funds advanced to the company. All of these issues precluded summary judgment.

We recognize that the motion judge determined that the fourth Holcomb certification should be considered a "sham affidavit" and that it should not be allowed to create or insinuate an issue of fact and preclude entry of summary judgment in favor of the Trahan and Bisaillon defendants. Even without the so-called sham affidavit, however, key factual issues remained contested. Moreover, the sham affidavit rule should be invoked with considerable hesitation.

"'[A sham affidavit is a]n affidavit that contradicts clear testimony previously given by the same witness, usu[ally] used in an attempt to create an issue of fact in response to a motion for summary judgment.'" In re Citx Corp., 448 F.3d 672, 679 (3d Cir. 2006) (quoting Black's Law Dictionary, 63 (8th ed. 2004)). The "sham affidavit" doctrine generally "refers to the trial court practice of disregarding an offsetting affidavit that is submitted in opposition to a motion for summary judgment when the affidavit contradicts the affiant's prior deposition testimony." Shelcusky v. Garjulio, 172 N.J. 185, 194 (2002). When a contradiction between a party's affidavit or certification and prior affidavits or testimony is unexplained or unqualified, then the sham affidavit doctrine calls for the rejection of the affidavit. Ibid.

However, the use of the sham affidavit doctrine should be limited. The Court cautioned that:

Courts should not reject alleged sham affidavits where the contradiction is reasonably explained, where an affidavit does not contradict patently and sharply the earlier deposition testimony, or where confusion or lack of clarity existed at the time of the deposition questioning and the affidavit reasonably clarifies the affiant's earlier statement.

[Id. at 201-02.]

Moreover, "'every discrepancy contained in an affidavit does not justify a [trial] court's refusal to give credence to such evidence.'" Id. at 204 (quoting Kennett-Murray Corp. v. Bone, 622 F.2d 887, 894 (5th Cir. 1980).

Although Holcomb's deposition testimony and his various certifications may be confusing, read as a whole, they seek to explain an on-going business relationship and the financial arrangements between the two business concerns. In this context, the last certification should not be considered as an attempt to create a sham issue of fact simply to defeat summary judgment. Ultimately, the credibility of Holcomb must be resolved by the trier-of-fact. In the face of several genuine issues of material fact, summary judgment is precluded in favor of the Trahan and Bisaillon defendants.

II

Finally, we address the appeal filed by defendant Kim. He asserted that the complaint was barred by the statute of limitations and his motion to dismiss that complaint on this ground was denied. Realizing that the order granting summary judgment in favor of the Trahan and Bisaillon defendants and dismissing the complaint as to them was an interlocutory order, Kim and ATSI executed a consent order dismissing plaintiff's complaint against Kim and dismissing his counterclaims and third-party complaint. The order provides that if ATSI is successful in its appeal, its complaint against Kim will be reinstated as well as his answer, counterclaim and third-party complaint. Nevertheless, Kim seeks review of the order denying his motion to dismiss the complaint.

The matter was clearly interlocutory until entry of the consent order. The contrivance of finality for purposes of appeal does not warrant review of an otherwise interlocutory order, particularly where we have reversed the order granting summary judgment and dismissing the complaint.

Reversed and remanded for trial. We do not retain jurisdiction.

 

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A-1512-05T2

May 14, 2007