ALLIANCESHIPPERS, INC v. DEAN MENTONIS and KARI MENTONIS -
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0313-16T2
ALLIANCE SHIPPERS, INC.,
Plaintiff-Appellant,
v.
DEAN MENTONIS and KARI
MENTONIS,
Defendants-Respondents.
____________________________
Argued December 20, 2017 – Decided March 2, 2018
Before Judges Alvarez, Nugent and Geiger.
On appeal from Superior Court of New Jersey,
Law Division, Middlesex County, Docket No.
L-11476-14.
Ronald Horowitz argued the cause for
appellant.
James V. Milano argued the cause for
respondents (Veitengruber Law, LLC,
attorneys; James V. Milano, on the brief).
PER CURIAM
Plaintiff Alliance Shippers, Inc., appeals from a June 29,
2016 order, dismissing its complaint following a bench trial and
a September 2, 2016 order denying reconsideration. After
considering the arguments presented in light of the record and
applicable law, we affirm.
I.
We recount the pertinent facts from the trial record.
Plaintiff is a freight transportation company. Prior to the
initiation of this action, plaintiff had obtained judgments and
an order in several related cases.
DeMar Foodservices, Inc. (DeMar) was a produce distribution
business. It purchased produce at wholesale and sold it at a
markup to restaurants and other food outlets. DeMar purchased
produce daily from the Hunts Point Market, which had seventy-five
to one hundred vendors. Spero Mentonis purchased the produce for
DeMar, not Dean Mentonis.1 DeMar paid for the produce in cash and
by check. Purchases from Kris-Pak Sales Corp. (K-P) and GAF
Produce were by check.
K-P obtained a June 22, 2007 consent judgment in federal
court in New York against Spero and DeMar for $427,580. Plaintiff,
in turn, obtained a June 14, 2012 judgment in the amount of
$371,225.69 against K-P for unpaid freight transportation
1
Spero Mentonis is the father of Dean Mentonis and the father-
in-law of Kari Mentonis. Because these three individuals and two
others share the same surname, we will refer to them by their
respective given names. We mean no disrespect in doing so.
2 A-0313-16T2
services. Plaintiff obtained a second judgment against K-P's
receivables for $34,215, which was collected.
After K-P went bankrupt, plaintiff obtained an August 24,
2012 order that released DeMar, which ceased its operations in
June 2010, and Spero from payment obligations under a consent
judgment in favor of K-P. The order permitted plaintiff to execute
on the rights and credits owed to K-P by Spero and DeMar to the
extent of $371,225.69. On April 18, 2013, plaintiff obtained a
default judgment against DeMar and the Estate of Spero W. Mentonis
in the amount of $371,225.69.
After being substituted as the creditor for K-P, plaintiff
allegedly discovered defendants Dean and Kari Mentonis transferred
over $204,000 out of DeMar's bank accounts between June 28, 2006
and May 12, 2009.
On December 10, 2014, plaintiff initiated this action against
Dean and Kari, alleging that during DeMar's insolvency, Dean had
authorized fraudulent transfers of DeMar's assets to Dean and Kari
to avoid payment of DeMar's debts. On March 4, 2015, defendants
filed an answer. Following discovery, the trial court conducted
a two-day bench trial. Before the trial began, defendants moved
to dismiss the complaint on the basis of discovery deficiencies.
The judge reserved decision.
3 A-0313-16T2
On the first day of trial, plaintiff presented Edward Wright,
its Vice President of the Protective Service Division, and Dean
as witnesses. Wright verified K-P owed plaintiff approximately
$369,700 for transportation services prior to filing bankruptcy.
He also testified plaintiff obtained a judgment against DeMar and
the Estate of Spero W. Mentonis because they owed money to K-P.
Following Wright's brief testimony, Dean testified at length.
Dean had been employed by Gargiulo Produce since March 2010. Prior
to that, he had worked for DeMar, the family business founded by
his father Spero, for about fifteen years. Dean stopped receiving
a salary from DeMar in January 2010 when DeMar could no longer pay
him. Dean left the company at that point by his own choosing.
Dean's mother, Velia, and brother, Mark, also worked for DeMar.
Spero was active in running DeMar from 2006 until it closed.
Despite his declining health, Spero still had full capacity to run
the company from his home over the telephone, remained in charge,
and made every decision.
Due to his declining health, Spero gave Dean check-writing
authority on DeMmar's bank accounts with Wachovia Bank and Commerce
Bank several years prior to DeMar's closing. Dean also had
authority to make wire transfers and cash withdrawals using a
debit card from DeMar's account. Spero, Velia, and Mark, also had
authority to make wire transfers and cash withdrawals. Bank
4 A-0313-16T2
account statements were either sent or taken by Mark to Spero's
home office in Stroudsburg, Pennsylvania, where they were kept.
It was not Dean's responsibility to maintain purchase receipts
from vendors. The purchase receipts were kept by Spero.
For several years prior to Spero's death in 2012, DeMar was
not doing well financially and had trouble paying its bills. DeMar
was unable to pay its vendors, its employees, and its truck loans.
Basically, the company's only assets were accounts receivable.
DeMar closed in June 2010.
From 2006 to 2009, Dean's responsibilities were customer
service, handling customer orders, overseeing deliveries, and
setting up product. Dean did not do the bookkeeping or the
accounting for DeMar and did not have possession of DeMar's books
and records. DeMar did not have a bookkeeper or an accountant.
Dean testified he never held the title of president of DeMar
and was neither an officer nor an owner of DeMar. A Commerce Bank
signatory form listed Spero as president.
In 2003, DeMar purchased a vehicle financed by Ford Credit.
On a credit application dated July 6, 2003, that he signed, Dean
is identified as the president and sole owner of DeMar. Dean
testified the credit application was not in his handwriting, he
did not complete it, and he probably did not review the application
before signing it.
5 A-0313-16T2
In 2007, Dean leased a 2008 Ford Explorer. The credit
application, dated December 28, 2007, and signed by Dean, states
he had worked for DeMar for nineteen years and earned $11,380 per
month. Dean testified he did not tell the dealer the number of
years he worked there. He also said he most likely did not review
the application before signing it. A November 2, 2011 credit
application stated Dean had worked for Gargiulo Produce for ten
years.
During his last three years working for DeMar, Dean withdrew
monies from DeMar's bank accounts by checks and wire transfers but
denied ever receiving a cash withdrawal. He received checks and
wire transfers, but Kari did not. The funds were deposited into
Dean and Kari's joint account. Dean testified none of the
withdrawals were turned over to Dean or Kari's personal creditors
or used to pay personal expenses.
Vendors eventually stopped accepting checks from DeMar
because its checks were being returned for insufficient funds. As
a result, DeMar had to purchase produce in cash or with certified
checks.
Dean stated he withdrew cash from DeMar's account to purchase
produce from market vendors because the company could not obtain
credit. When he was told to cash a check or to make a payment,
he did so, but he did not act independently. Similarly, when he
6 A-0313-16T2
was told to make out a check to cash to pay a vendor, he did so.
Dean testified DeMar got better prices when it purchased produce
in cash.
During plaintiff's case in chief, Dean authenticated 131
checks and wire transfers and identified four of the 131 checks
as paychecks. The four paychecks totaled less than $2000. On
cross-examination, Dean stated some of the checks made out to
defendants were reimbursements for DeMar's truck maintenance and
repair expenses.
As to the Citibank credit card account, Dean testified it was
his company expense account and was paid by DeMar. With respect
to DeMar's payment of a $472.49 Cablevision bill, Dean testified
DeMar had a cable TV and internet access account for the business
property.
At one point during the trial, plaintiff's counsel advised
the judge he would not ask Dean about specific transactions,
indicating plaintiff had other witnesses for that purpose.
Plaintiff did not present those witnesses.
Notwithstanding the Ford Credit and Wachovia Bank credit
applications, wherein Dean certified he was the sole owner of
DeMar and held the offices of president and vice president, three
different people were listed as president on documents admitted
into evidence. Dean also testified he went to work for Garguilo
7 A-0313-16T2
Produce shortly before DeMar's closing in 2010, despite certifying
he had been working for Garguilo for almost eleven years on the
2011 Ford Credit loan application.
Plaintiff called Kari as its final witness. Kari was not a
DeMar employee and did not receive a salary from DeMar. She
testified that, although she was not an employee of DeMar, she
"might have answered phones occasionally" but only if she was
present. She also helped at times by inputting orders into the
computer.
Defendant moved for a directed verdict at the close of
plaintiff's case. The trial court rendered an oral decision,
denying the motion.
Following submission of written summations, the trial court
issued a June 29, 2016 oral decision in favor of defendants,
finding plaintiff had failed to meet its burden of proof. The
trial judge found Wright's testimony was credible, and portions
of Dean's testimony were credible. The court found Dean:
established that DeMar was essentially a
. . . family business. [He] established that
Spero . . . was the founder of the business.
. . .
[His] testimony established . . . that
he was not the debtor on the judgments
obtained in this matter, but he was, in fact,
employed with DeMar . . . for approximately
[fifteen] years. . . .
8 A-0313-16T2
[T]he testimony clearly established that
he . . . not only had financial access to the
business, but was involved in the day-to-day
business of this company. He was[] undoubtedly
aware of the stipulation and consent judgment
that was entered into by [Spero] and DeMar
. . . in 2007[.]
The judge also found Dean's testimony "that much of DeMar's
business was done through cash transaction [was] certainly
credible to a certain extent." However, she "questioned the
frequency of these transactions and the date upon which . . . the
transactions occurred." The judge concluded that, "[a]lthough the
transactions cited by the plaintiff look suspicious on their face,
following the testimony of Dean . . . questions . . . remained
unresolved."
The judge also reviewed Kari's testimony and found it "did
nothing to resolve the unanswered questions . . . in determining
whether or not this was a case where . . . there were, in fact,
fraudulent transfers."
The trial court's examination of the documents offered by
plaintiff revealed incomplete records were presented. Only
selected transactions, representing selected checks on different
dates, were presented. The judge then engaged in the following
analysis:
These select transactions, on their face,
appear perhaps to support the theory of the
plaintiff's case. However, while the
9 A-0313-16T2
transactions selected by the plaintiff were
undoubtedly suspect and . . . the defendant
did not, and could not fully satisfy the
lingering questions posed by the number,
amount, and time periods of the transactions
confronted with, the [c]ourt has not been
presented with the full picture.
How DeMar Food Services did business,
their assets, debts, or solvency of this
business at the time the plaintiff alleges the
defendants were misappropriat[ing] funds all
remain[] unanswered questions. The plaintiff
did not employ the services perhaps of a
forensic accountant, but instead relied upon
the testimony of Dean Mentonis and, as such,
the [c]ourt is now being asked to draw the
negative inferences from a group of select
transactions over a three-year period.
The negative inferences that could be
drawn are that the defendant, Dean Mentonis,
aware of the failing health of his father and
the outstanding debts owed and the likelihood
that DeMar would go out of business either
with or without his father's approval and/or
sanction began transferring funds to himself
for his own personal needs or in order to avoid
having to pay that amount of money to its
outstanding creditor or creditors.
One could further infer that Dean
Mentonis involved his wife to a limited extent
in an effort to perhaps remove some of the
suspicion that might be associated with the
number, the frequency, and the amount of the
transactions.
It's also plausible, however, that DeMar
Food Services, who continued to do business
despite the stipulation and consent judgment
that was . . . entered in New York in 2007 was
in trouble financially for a number of years,
and as such much of their business was done
in cash.
10 A-0313-16T2
It's possible that they did much of their
business in cash because that's where they got
the better deals. It's plausible that some
of the money withdrawn and/or transferred was,
in fact, to pay vendors or, in fact, to pay
back the Mentonis for money that they laid out
for the business. There are, indeed, a myriad
of ways to interpret the evidence.
A . . . perhaps . . . reasonable
interpretation of the evidence is that . . .
a combination of all of the above indicated
that, in fact, some transactions cited by
plaintiff were legitimate and some were not.
Which were the legitimate transactions and
which were not? This case remains filled with
suspicion and unanswered questions.
Mere suspicion, however, is not enough.
The judge concluded plaintiff had not met its burden of proof
and entered an order dismissing plaintiff's complaint. Plaintiff
moved for reconsideration, which the judge denied on September 2,
2016. This appeal followed.
On appeal, plaintiff argues the trial court erred: (1) in
holding plaintiff did not meet its burden of proof; (2) in not
piercing the corporate veil; (3) by not holding defendants liable
under the Fraudulent Transfer Act; and (4) by not imposing punitive
damages.
II.
Our review of the final determinations made by the trial
court sitting in a non-jury case is limited. "[W]e do not disturb
the factual findings and legal conclusions of the trial judge
11 A-0313-16T2
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." Seidman
v. Clifton Sav. Bank, S.L.A.,
205 N.J. 150, 169 (2011) (quoting
In re Tr. Created by Agreement Dated Dec. 20, 1961,
194 N.J. 276,
284 (2008)); see also Rova Farms Resort, Inc. v. Inv'rs Ins. Co.
of Am.,
65 N.J. 474, 484 (1974).
Review on appeal "does not consist of weighing evidence anew
and making independent factual findings; rather, our function is
to determine whether there is adequate evidence to support the
judgment rendered at trial." Cannuscio v. Claridge Hotel & Casino,
319 N.J. Super. 342, 347 (App. Div. 1999) (citing State v. Johnson,
42 N.J. 146, 161 (1964)). "An appellate court 'should give
deference to those findings of the trial judge which are
substantially influenced by his opportunity to hear and see the
witnesses and to have the feel of the case, which a reviewing
court cannot enjoy.'" State v. Nunez-Valdez,
200 N.J. 129, 141
(2009) (alteration in original) (quoting State v. Elders,
192 N.J.
224, 244 (2007)). Deference is especially appropriate "when the
evidence is largely testimonial and involves questions of
credibility." In re Return of Weapons to J.W.D.,
149 N.J. 108,
117 (1997). However, we owe no deference to the "trial court's
interpretation of the law and the legal consequences that flow
12 A-0313-16T2
from established facts." Manalapan Realty, LP v. Twp. Comm. of
Manalapan,
140 N.J. 366, 378 (1995). We review such decisions de
novo. 30 River Court E. Urban Renewal Co. v. Capograsso,
383 N.J.
Super. 470, 476 (App. Div. 2006) (citing Rova Farms,
65 N.J. at
483-84).
III.
Plaintiff claims Dean is liable under the Uniform Fraudulent
Transfer Act (the Act),
N.J.S.A. 25:2-20 to -34, for engaging in
fraudulent conveyances. Plaintiff maintains Dean placed corporate
assets beyond the reach of creditors with the intent to defraud,
delay, or hinder them.
Fraudulent conveyance is defined as:
A transfer made or obligation incurred by a
debtor . . . whether the creditor's claim
arose before or after the transfer was made
or the obligation was incurred, if the debtor
made the transfer or incurred the obligation:
a. With actual intent to hinder, delay, or
defraud any creditor of the debtor.
[N.J.S.A. 25:2-25(a).]
"The purpose of the Fraudulent Transfer Act . . . is to
prevent a debtor from placing his or her property beyond a
creditor's reach." Gilchinsky v. Nat'l Westminster Bank N.J.,
159 N.J. 463, 475 (citing In re Wintz Cos.,
230 B.R. 848, 859 (8th
Cir. 1999)). "Underlying the Act is the notion that a debtor
13 A-0313-16T2
cannot deliberately cheat a creditor by removing his property from
the 'jaws of execution.' Fraudulent claims thus allow the creditor
to undo the wrongful transaction so as to bring the property within
the ambit of collection." Ibid. (citations omitted). In
Gilchinsky, the Court adopted the following two-part test:
In determining whether a transfer constitutes
a fraudulent conveyance, there are two
relevant inquiries. The first is whether the
debtor [or person making the conveyance] has
put some asset beyond the reach of creditors
which would have been available to them at
some point in time but for the conveyance.
The second is whether the debtor transferred
property with an intent to defraud, delay, or
hinder the creditor. Transfers calculated to
hinder, delay, or defeat collection of a known
debt are deemed fraudulent because of the
debtor's intent to withdraw the assets from
the reach of process. Both inquiries involve
fact-specific determinations that must be
resolved on a case-by-case basis. The person
seeking to set aside the conveyance bears the
burden of proving actual intent.
[Id. at 475-76 (alteration in original)
(citations omitted).]
The Court noted courts "generally look to factors commonly
referred to as 'badges of fraud'" when "determining whether the
circumstances of a particular transaction give rise to the
conclusion that the transferor intended to thwart or evade
creditors." Id. at 476.
N.J.S.A. 25:2-26 lists the badges of
fraud to be "consider[ed] in determining whether a debtor conveyed
14 A-0313-16T2
property with the actual intent to place it beyond the reach of
creditors." Id. at 476-77. The relevant badges of fraud are:
a. The transfer or obligation was to an
insider;
b. The debtor retained possession or control
of the property transferred after the
transfer;
. . . .
d. Before the transfer was made or obligation
was incurred, the debtor had been sued or
threatened with suit;
e. The transfer was of substantially all the
debtor's assets
. . . .
g. The debtor removed or concealed assets;
h. The value of the consideration received by
the debtor was reasonably equivalent to the
value of the asset transferred or the amount
of the obligation incurred; [and]
i. The debtor was insolvent or became
insolvent shortly after the transfer was made
or the obligation was incurred.
[N.J.S.A. 25:2-26.]
"In determining actual intent to defraud, courts should
balance the factors enumerated in
N.J.S.A. 25:2-26, as well as any
other factors relevant to the transaction." Gilchinsky,
159 N.J.
at 477. "Actual intent often must be established through
15 A-0313-16T2
inferential reasoning, deduced from the circumstances surrounding
the allegedly fraudulent act." Ibid.
Plaintiff had the burden of proving its cause of action by a
preponderance of the evidence. To prove an allegation by the
preponderance of the evidence, plaintiff must convince the
factfinder "the allegation is more likely true than not true."
Model Jury Charges (Civil), 1.12(H), "Preponderance of the
Evidence" (approved Nov. 1998).
Plaintiff contends it met that burden by presenting direct
and circumstantial evidence of DeMar's insolvency and defendants'
fraudulent transfers. The trial court disagreed, holding
plaintiff did not satisfy its burden of proving actual intent to
defraud since questions pertinent to a fraudulent transfer
analysis remained unresolved even after consideration of the
testimony and review of plaintiff's circumstantial evidence. The
trial court noted plaintiff did not employ the services of a
forensic accountant. Instead, plaintiff's case relied almost
exclusively on Dean's testimony, and as such, the court was "being
asked to draw . . . negative inferences from a group of select
transactions [allegedly made by Dean] over a three-year period."
The trial court also held plaintiff did not prove defendants
converted corporate assets for their own use. Recognizing negative
inferences could be drawn from Dean's testimony and plaintiff's
16 A-0313-16T2
circumstantial evidence, the court concluded there were "a myriad
of ways to interpret the evidence." Although finding the case was
"filled with suspicion and unanswered questions," the trial court
concluded "[m]ere suspicion, however, is not enough."
While finding Dean to be an insider, the trial court noted
he "was not the debtor on the judgments obtained in this matter,
but he was, in fact, employed with DeMar . . . for approximately
[fifteen] years." The trial court further noted the circumstantial
evidence and testimony neither addressed "[h]ow DeMar . . . did
business," nor sufficiently described "their assets, debts, or
solvency of this business at the time the plaintiff alleges the
defendants were misappropriat[ing] funds."
The court recognized that "perhaps a reasonable
interpretation of the evidence" is "some transactions cited by the
plaintiff were legitimate and some were not," but was unable to
determine "[w]hich were the legitimate transactions and which were
not[.]" The court held misappropriation had not been proven,
finding only factor (a), transfer to an insider, satisfied. The
trial record adequately supports these findings and conclusions.
On appeal, plaintiff reasserts facts that the trial court
already weighed and attempts to have this court consider the facts
de novo. Ordinarily, "[o]ur original factfinding authority must
be exercised only with great frugality and in none but a clear
17 A-0313-16T2
case free of doubt." Tomaino v. Burman,
364 N.J. Super. 224, 234-
35 (App. Div. 2003) (citations omitted). We decline to do so in
this case. The evidence was not "free of doubt." Rather,
assessing the evidence should "be left to the trial court which
has a 'feel of the case' and is in the best position to assess the
evidence." Id. at 235. (citation omitted).
We next address plaintiff's contention that the trial court
erred by not piercing the corporate veil. New Jersey courts have
pierced the corporate veil of a closely-held corporation to impose
personal liability on the owner for wrongful conduct. Stochastic
Decisions, Inc. v. DiDomenico,
236 N.J. Super. 388, 394 (App. Div.
1989) (citing Kugler v. Koscot Interplanetary, Inc.,
120 N.J.
Super. 216 (Ch. Div. 1972)). A party seeking to pierce the
corporate veil bears the burden of establishing that the corporate
form should be disregarded. See Richard A. Pulaski Constr. Co.
v. Air Frame Hangars, Inc.,
195 N.J. 457, 472 (2008).
Plaintiff contends since Dean certified he was an officer of
DeMar on multiple banking applications, and "personally benefited
himself and his wife by directing a substantial amount of DeMar
funds to himself[,]" the corporate veil should be pierced. If
true, that conduct would implicate defendants personally.
Trustees of Structural Steel & Ornamental Iron Workers Fund v.
Huber,
136 N.J. Super. 501, 505 (App. Div. 1975). For the same
18 A-0313-16T2
reasons the trial court properly concluded plaintiff did not prove
fraudulent transfers, plaintiff also failed to meet its burden of
establishing the corporate veil should be pierced.
Defendant's remaining arguments are without sufficient merit
to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed.
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