ANNETTE BIVIANO v. ROBERT AVELLA
Annotate this CaseNOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court."
Although it is posted on the internet, this opinion is binding only on the
parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1778-15T4
ANNETTE BIVIANO, as Executrix of
the ESTATE OF RONALD AVELLA,
individually and derivatively on
behalf of HIGHPOINT GARAGE, INC.,
AVELLA'S GARAGE, INC.,
HIGHPOINT REALTY, INC.,
54TH STREET REALTY, INC.,
and 612 REALTY, INC.,
Plaintiff-Respondent,
v.
ROBERT AVELLA and STEVEN AVELLA,
Defendants,
and
ROBERT AVELLA and STEVEN AVELLA,
individually and derivatively on
behalf of HIGHPOINT GARAGE, INC.,
AVELLA'S GARAGE, INC.,
HIGHPOINT REALTY, INC.,
54TH STREET REALTY, INC.,
and 612 REALTY, INC., and
HIGH POINT CONTRACTING,
Defendants/Third-Party
Plaintiffs,
v.
ANNETTE BIVIANO, as Executrix
of the ESTATE OF RONALD AVELLA,
PATRICK AVELLA, and ANTHONY BIVIANO,
Third-Party Defendants/
Respondents.
__________________________________________
Submitted May 31, 2017 – Decided May 15, 2018
Before Judges Leone and Moynihan.
On appeal from Superior Court of New Jersey,
Chancery Division, General Equity Part, Hudson
County, Docket No. C-000060-12.
Marino, Mayers & Jarrach, LLC, attorneys for
appellants Ralph J. Torraco, C.P.A., and Ralph
J. Torraco, P.A. (Joseph A. Marino, on the
briefs).
Bruce E. Baldinger, attorney for respondents
Annette Biviano and Anthony Biviano.
The opinion of the court was delivered by
LEONE, J.A.D.
Appellants Ralph J. Torraco, C.P.A., and Ralph J. Torraco,
P.A., filed a writ of execution seeking to claim funds escrowed
for payment to respondent Patrick Avella and the Estate of Ronald
Avella (Estate) pursuant to a settlement agreement. Appellants
claimed a right to those funds because, subsequent to the
settlement agreement, they obtained a judgment against
corporations in which the Estate and Patrick had been shareholders,
and the funds were proceeds from the sale of some of the
Corporations' assets. The trial court rejected appellants' claim.
We affirm.
2 A-1778-15T4
I.
Appellants challenge the trial court's October 2, 2015 order
enforcing the settlement agreement and November 30, 2015 order
denying reconsideration. The following facts are derived from the
opinions attached to those orders.
Five cousins – brothers Robert and Steven Avella, brothers
Patrick and Ronald Avella, and Alan Avella1 – owned shares in five
family-run corporations: Highpoint Garage, Inc.; Avella's Garage,
Inc.; Highpoint Realty, Inc.; 54th Street Realty, Inc.; and 612
Realty, Inc. (collectively "the Corporations"). In 2005, Patrick
and Ronald became disabled but maintained their ownership interest
in the Corporations, while Steven and Robert ran the day-to-day
operations of the Corporations.
In 2007, Alan transferred his ownership interest in the
Corporations to Ronald and Patrick. Ronald died in May 2010 and
his sister, respondent Annette Biviano, became executrix of his
Estate.
On February 16, 2012, Biviano filed in Bergen County a
complaint as executrix of the Estate, individually and on behalf
of the Corporations, against Robert and Steven. The complaint
alleged Robert and Steven mismanaged the Corporations. The
1
Because of their common last name, we refer to each by his first
name.
3 A-1778-15T4
complaint sought the appointment of a special fiscal agent to
effectuate the dissolution, liquidation, and sale of all assets
held by the Corporations. Robert and Steven, individually and on
behalf of the Corporations, filed a counterclaim and a third-party
complaint against Patrick, Biviano, and her son Anthony Bivano.
The case was transferred to Hudson County and Jack Wind, Esq., was
appointed as special fiscal agent for the Corporations on May 31,
2012.
The case was settled on July 11, 2014, and a settlement
agreement was executed on August 25, 2014. In the settlement
agreement, the parties agreed the Corporations would pay the Estate
and Patrick $253,445 each, "representing one-half of the net
proceeds" (less corporate taxes owed) from the June 2013 sale of
"the property previously owned by 54th Street Realty commonly
known as 5419 Tonnelle Avenue, North Bergen," and the June 2013
sale of "the assets previously owned by Avella's Garage." The
$701,000 proceeds of those sales was being held by the State and
were expected to be released after the State reviewed the corporate
tax returns for 54th Street Realty and Avella's Garage and
subtracted the corporate taxes owed. "The Corporations shall
effectuate payment to the Estate" and Patrick within ten days of
"the date upon which the proceeds are released by the State."
4 A-1778-15T4
In exchange, the settlement agreement provided that the
Estate and Patrick would transfer all of their voting rights in
the Corporations to Robert and Steven, and place all their shares
in the Corporation in escrow with Wind, with the shares to be
transferred to Robert and Steven when the State released the
proceeds. The parties agreed to pay Wind and anyone retained by
Wind.
In the August 25 settlement agreement, Robert and Steven
agreed to indemnify and hold harmless the Estate and Patrick for
environmental liabilities and taxes owed by Highpoint Realty and
612 Realty, including the properties at 608-610 22nd Street, 621-
23 22nd Street, and 2207 West Street in Union City (collectively
"the Highpoint/612 properties"). The agreement also provided that
"should the remaining properties owned by Highpoint Realty and 612
Realty be sold before the release of the proceeds by the State,"
then "the net proceeds from the sale of those properties shall be
placed in" Wind's escrow account.2
On November 24, 2014, appellants obtained a default judgment
against Avella's Garage, Highpoint Realty, 54th Street Garage, and
612 Realty (collectively "the four corporations") and Steven,
2
The Highpoint/612 properties were sold before the State released
the balance of the escrow funds. However, the net proceeds of the
sale were not placed in Wind's trust account, but were distributed
directly to Robert and Steven.
5 A-1778-15T4
holding them jointly, severally, and separately liable for
$121,097. The default judgment was based on appellants' complaint
filed March 28, 2014, and amended June 2, 2014, which alleged
Steven individually and as managing agent for the four corporations
signed a 2011 retainer agreement for appellants to provide
accounting services, but appellants had not been paid for those
services.
On December 5, 2014, appellants had the sheriff serve a writ
of execution on Wind's trust account for the $121,097. At that
time, the escrow account had no funds in it, as the State had not
yet released the funds it was holding to satisfy the unpaid
corporate taxes.
In June and July of 2015, the State released a total of
$647,617.59 to Wind's escrow account. Wind paid out: $46,276.40
to Wind for his performance as special fiscal and escrow agent;
$4,564.00 to Robert A. Kaye, Esq.; and $16,944.00 to Raymond
Toscano, C.P.A.3 After those payments were deducted, $570,490.19
remained in the escrow account.
Patrick filed a motion to enforce the settlement agreement.
He requested disbursements to the Estate and himself of the
3
Wind retained Kaye to perform legal services in connection with
the case, and Toscano to file the four corporations' outstanding
tax returns.
6 A-1778-15T4
remaining escrow funds without deduction for the amount owed to
appellants. The Estate joined in the motion. Appellants filed a
letter and certification in opposition. Wind cross-motioned for
counsel fees of $6,051.30 and $3,393.00 more for Toscano.
A hearing was held on September 4, 2015. On October 2, 2015,
the trial court ordered: that the settlement agreement was to be
specifically enforced; that Wind must distribute from the escrow
account to the Estate and Patrick in equal one-half shares "the
balance of the funds presently now on deposit, or to be deposited";
that appellants' writ of execution would not apply to the funds
then deposited or to be deposited with Wind.
In accordance with that order, Wind disbursed all funds from
the escrow account. Appellants later filed a motion for
reconsideration, which the trial court denied on November 30,
2015. On December 14, 2015, they filed a timely appeal of both
the October 2 and November 30, 2015 orders. See R. 2:4-3(b).
II.
Respondents Annette Biviano and Anthony Biviano argue
appellants lack standing to appeal because they were not parties
to the case. However, the motion to enforce the settlement
agreement asked the trial court to declare that any funds in the
trust account should not be used to satisfy the writ of execution
from "Ralph J. Torraco, C.P.A. and Ralph J. Torraco, P.A."
7 A-1778-15T4
Moreover, the court granted that relief against "Ralph J. Torraco,
C.P.A. and Ralph J. Torraco, [P.A.]," after allowing appellants
to file a brief in opposition and present argument at the hearing.
The court also ruled on their motion for reconsideration as if
they were a party.
Appellants argue they were de facto intervenors, citing Ross
v. Ross,
308 N.J. Super. 132 (App. Div. 1998). In Ross, we held
that a person "effectively intervened" by participating in the
trial court and by appealing, making our and the trial court's
judgments binding on the effective intervenor. Id. at 148-49.
In these circumstances, appellants have standing to appeal
even without formal intervention. See DNI Nev., Inc. v. Medi-Peth
Med. Lab, Inc.,
337 N.J. Super. 313, 313 n.1 (App. Div. 2001).
"It is well established that 'a party aggrieved by a judgment may
appeal therefrom. It is the general rule that to be aggrieved a
party must have a personal or pecuniary interest or property right
adversely affected by the judgment in question.'" State v. A.L.,
440 N.J. Super. 400, 418 (App. Div. 2015) (quoting Howard Sav.
Inst. v. Peep,
34 N.J. 494, 499 (1961)). Appellants have a
pecuniary interest adversely affected by the trial court's orders,
and are bound by them. Thus, we consider appellants' appeal.
8 A-1778-15T4
III.
"Process to enforce a judgment or order for the payment of
money and process to collect costs allowed by a judgment or order,
shall be a writ of execution[.]" R. 4:59-1(a). A writ of execution
may levy on "[m]oney belonging to a defendant" against whom the
judgment has been obtained.
N.J.S.A. 2A:17-15.
The December 2014 writ of execution informed the sheriff that
appellants had obtained a judgment against Steven and the four
corporations, and commanded the sheriff to satisfy the judgment
"out of the personal property of the said Judgment debtor[s]."
The trial court held that execution of the writ upon the funds in
escrow would have been improper because it was directed at funds
of the Estate and Patrick, not of Steven or the four corporations.
The trial court's ruling was supported by the language of the
August 2014 settlement agreement. It provided that "[t]he
Corporations shall make a single payment to the Estate," and an
identical payment to Patrick, of the proceeds from the earlier
sale of the properties of 54th Street Realty and Avella's Garage.
Because those proceeds were "currently being held by the State of
New Jersey," the Corporations were required to "effectuate payment
to the Estate" and Patrick within ten days of "the date upon which
the proceeds are released by the State of New Jersey."
9 A-1778-15T4
Thus, the settlement agreement already required the proceeds
to be paid to the Estate and Patrick once they were received from
the State. The Corporations had no right to keep those proceeds,
as they had already bargained them away in the settlement
agreement.
"New Jersey has a 'strong public policy in favor of the
settlement of litigation.'" Rodriguez v. Raymours Furniture Co.,
225 N.J. 343, 359 (2016) (citation omitted). Because "'[t]he
settlement of litigation ranks high in our public policy,'" New
Jersey "courts 'strain to give effect to the terms of a settlement
wherever possible.'" Brundage v. Estate of Carambio,
195 N.J.
575, 601 (2008) (citations omitted). "'An agreement to settle a
lawsuit is a contract, which like all contracts, may be freely
entered into and which a court, absent a demonstration of "fraud
or other compelling circumstances," should honor and enforce as
it does other contracts.'" Ibid. (citation omitted).
Appellants argue the proceeds were still the property of
"54th Street Realty Inc." and "Avella's Garage Inc." They note
the checks from the State were payable to those corporations at
the "Margulies Wind Attorney Trust Acct." However, that trust
account was set up by Wind to effectuate the payments to the Estate
and Patrick required by the settlement agreement. Thus, by making
its checks payable to the trust account, the State recognized that
10 A-1778-15T4
the proceeds had to go to escrow rather than to the two
corporations. That the State included the two corporations' names
on the checks did not change to whom the proceeds belonged under
the settlement agreement.
As the trial court found, the funds ultimately deposited in
the escrow account were "those that pursuant to the settlement
agreement belong to the Estate" and Patrick. As they were not the
judgment debtors appellants obtained a judgment against, "the writ
of execution d[id] not apply to the monies" subsequently deposited
in the escrow account by the State.
IV.
In addition, the trial court found that the writ of execution
did not allow appellants to seize the monies deposited six months
later by the State "because at the time the writ was served there
was no money whatsoever in the escrow account." The court properly
relied on T & C Leasing, Inc. v. Wachovia Bank, N.A.,
421 N.J.
Super. 221 (App. Div. 2011).
In T & C Leasing, the plaintiff filed a writ of execution on
a debtor's bank account, with a statement by the sheriff that it
included "any other monies due or to become due[.]" Id. at 224
(internal quotation omitted). After additional money was
deposited about five months later, the plaintiff claimed the bank
"was required to turn over any additional funds deposited into the
11 A-1778-15T4
account after the writ of execution was served until the underlying
judgment was satisfied." Id. at 224-25. We held that the "levy
was fixed in time as of the date the sheriff served the writ[.]"
Id. at 230. We explained that a levy upon money "differs from
Article 7 wage and related executions that create a continuing
lien,
N.J.S.A. 2A:17-50, in concept, policy and procedure." Id.
at 228.
Here, as in T & C Leasing, "[t]he execution and levy contained
no language evidencing an intention to create a continuing lien[.]"
Id. at 230. Nor did appellants go through the procedures for a
wage execution, which requires advance notice to the debtor who
can object and demand a hearing prior to the wage execution. Id.
at 229. Rather, this was "a levy on personalty" and money, which
attaches only the property present at the time of execution. Id.
at 229-30.
Wind alerted appellants when the State was paying money into
the trust account. They "could have utilized the same writ of
execution, which is valid for two years from the date of its
issuance, and instructed the sheriff to return to [Wind] and make
another levy," but they "chose not to do so." Id. at 230 (citation
omitted). Thus, the levy did not prevent Wind from paying the
later-deposited funds from the trust account to the Estate and
Patrick. As the trial court found, appellants' argument that they
12 A-1778-15T4
had a "levy on funds subsequent to the service of the writ is
invalid."
V.
Nonetheless, appellants make various arguments why they had
a right to the funds subsequently paid by the State into the escrow
account for payment to the Estate and Patrick.
A.
First, appellants argue the four corporations had to pay them
the escrowed funds under the statutory chapter governing corporate
dissolutions,
N.J.S.A. 14A:12-1 to -19. The Estate's complaint
sought the Corporations' involuntary dissolution under
N.J.S.A.
14A:12-7, automatic dissolution under
N.J.S.A. 14A:12-1(1)(g), and
voluntary dissolution under
N.J.S.A. 14A:12-4, as well as the
appointment of a receiver under
N.J.S.A. 14A:14-2.4
However, instead of dissolving the Corporations, the
settlement agreement essentially provided that, to settle the
litigation, proceeds from the earlier sale of property belonging
to Avella's Garage and 54th Street Realty would be paid to the
Estate and Patrick in exchange for the transfer of their stock in
all of the Corporations to Robert and Steven. Nothing in the
4
No receiver was appointed. Thus, the escrowed proceeds were not
held in custodia legis. See N.J. Realty Concepts, LLC v.
Mavroudis,
435 N.J. Super. 118, 123-27 (App. Div. 2014).
13 A-1778-15T4
settlement agreement suggested that any of the Corporations were
dissolved.
Appellants also offered no proof that any of the Corporations
had dissolved by any of the methods in
N.J.S.A. 14A:12-1(1).
Appellants did not show that a certificate of dissolution had been
filed as required by N.J.S.A. 14A:12-1(1)(a)-(e) and (h). See
N.J.S.A. 14A:12-2(2), -3, -4(6), -4.1(2), -5(1). Appellants
provided no proof that the Superior Court had ordered the
dissolution of any of the Corporations,
N.J.S.A. 14A:12-1(f), or
that the Secretary of State had repealed or revoked any of the
Corporations' "certificate of incorporation for nonpayment of
taxes or for failure to file annual reports,"
N.J.S.A. 14A:12-
1(1)(g).5 Nor did appellants show under
N.J.S.A. 14A:12-1(1)(h)
that Avella's Garage, 54th Street Realty, or any of the
Corporations "has no assets, has ceased doing business and does
not intend to recommence doing business, and has not made any
distributions of cash or property to its shareholders within the
last 24 months and does not intend to make any distribution
5
The Estate's complaint alleged that Highpoint Garage had been
ordered dissolved by the State but had not been formally dissolved,
and that the corporate charters for Highpoint Garage, Highpoint
Realty, and 54th Street Realty had been revoked for failure to
file annual reports. However, the answer denied those allegations,
and the settlement agreement did not admit the Estate's
allegations.
14 A-1778-15T4
following its dissolution." N.J.S.A. 14A:12-4.1(2)(c); see
N.J.S.A. 14A:12-4.1(1). Without a showing that any of the four
corporations had dissolved by one of the methods in
N.J.S.A.
14A:12-1(1), appellants could not claim the proceeds from the sale
of their assets by invoking the statutes addressing such
dissolutions.
Nonetheless, appellants cite a dissolution statute providing:
"Except as a court may otherwise direct, a dissolved corporation
shall continue its corporate existence but shall carry on no
business except for the purpose of winding up its affairs by . . .
(c) paying, satisfying and discharging its debts and other
liabilities[.]"
N.J.S.A. 14A:12-9(1); see Landa v. Adams,
162 N.J. Super. 318, 321 (App. Div. 1978). Even assuming this
provision requires the payment of debts and liabilities by a
dissolved corporation, appellants did not show any of the
Corporations were dissolved.
Appellants cite another subsection of
N.J.S.A. 14A:12-9
providing that "title to the corporation's assets shall remain in
the corporation until transferred by it in the corporate name."
N.J.S.A. 14A:12-9(2)(b). That provision addresses how a dissolved
corporation "shall continue to function in the same manner as if
15 A-1778-15T4
dissolution had not occurred."
N.J.S.A. 14A:12-9(2). Appellants
did not show the Corporations were dissolved.6
Appellants assert the payments to the Estate and Patrick
violate a dissolution statute providing that "[a]ny assets
remaining after payment of or provision for claims against the
corporation shall be distributed among the shareholders according
to their respective rights and interests."
N.J.S.A. 14A:12-16.
However, that statute applies only if the corporation is dissolved.
See ERA Advantage Realty, Inc. v. River Bend Dev. Co., Inc.,
284 N.J. Super. 92, 97-100 (Law Div. 1994).
Appellants cite another dissolution statute providing that
"[a]t any time after a corporation has been dissolved, the
corporation, or a receiver appointed for the corporation pursuant
to this chapter, may give notice requiring all creditors to present
their claims in writing."
N.J.S.A. 14A:12-12(1). Even if this
provision requires notice to creditors when a corporation is
dissolved, no such notice was required here, because appellants
6
Appellants also rely on case law predating the enactment of
N.J.S.A. 14A:12-9, under which directors of a dissolved
corporation became trustees, but
N.J.S.A. 14A:12-9(2)(a) provides
that "the directors of the corporation shall not be deemed to be
trustees of its assets[.]" As its drafters stated in 1968: "This
section represents a drastic departure from current New Jersey
law," as it "eliminates the present statutory scheme of voluntary
dissolution pursuant to which directors of dissolved corporations
become trustees[.]" Pachman, Title 14A Corporations,
Commissioners' Comment-1968 (2018).
16 A-1778-15T4
did not show the Corporations were dissolved. Equally irrelevant
is
N.J.S.A. 14A:12-13, which bars creditors provided notice under
N.J.S.A. 14A:12-12 from bringing claims against "a corporation in
dissolution" or its shareholders unless the creditors fall within
certain exceptions. See Pachman, Corporations, at 633.
Appellants cite another dissolution statute, which provides:
"At any time after a corporation has been dissolved in any manner,
a creditor . . . may apply to the Superior Court for a judgment
that the affairs of the corporation and the liquidation of its
assets continue under the supervision of the court."
N.J.S.A.
14A:12-15. But appellants made no such application, and did not
show the Corporations were dissolved.
New Jersey courts have applied these sections of
N.J.S.A.
14A:12-1 to -19 only where a corporation was dissolved in one of
the ways set forth in
N.J.S.A. 14A:12-1(1). "This was not the
situation in the case before us." Asbestos Workers Local Union
No. 32 v. Shaughnessy,
306 N.J. Super. 1, 4 (App. Div. 1997). In
Asbestos Workers, we found
N.J.S.A. 14A:12-9(1) inapplicable even
though a corporation's charter had been suspended for failure to
file its annual report and pay the requisite fees. Id. at 2-4.
We noted that treating non-dissolved corporations as dissolved
merely because their corporate charters were suspended "could
cause havoc in the business community." Id. at 3. The same would
17 A-1778-15T4
be true if a corporation's sale of assets, without more, were
treated as placing a corporation in dissolution.
As the trial court stated in denying reconsideration, "[t]his
case does not involve corporate dissolution[.]" The court noted
the four corporations against which appellants have a judgment
"were never dissolved and continue to exist." Absent proof to the
contrary, appellants' invocation of the dissolution statutes was
inapposite.
B.
On appeal, appellants cite additional statutes, but they did
not raise those statutes before the trial court, and we need not
consider them. Zaman v. Felton,
219 N.J. 199, 226 (2014). In any
event, the newly-cited statutes are equally inapplicable.
Appellants now cite a statute making directors liable if they
transfer "assets to shareholders during or after dissolution of
the corporation without paying, or adequately providing for, all
known debts, obligations and liabilities of the corporation[.]"
N.J.S.A. 14A:6-12(1)(c). Again, appellants have not shown the
corporations have been dissolved. In any case, they neither showed
the Estate or Patrick were directors of the Corporations, nor
sought to sue them in that capacity.
Appellants now cite a statute providing that "[e]very
transfer made and every obligation incurred by a corporation which
18 A-1778-15T4
is or will be thereby rendered insolvent, is fraudulent as to
creditors without regard to its actual intent if the transfer is
made or the obligation is incurred without a fair consideration."
N.J.S.A. 15A:14-10(a). However, appellants have not shown the
settlement agreement lacked fair consideration. Rather, the
settlement agreement involved an exchange of money to the Estate
and Patrick in return for their stock in the Corporations and an
end to two years of litigation.7
C.
In the trial court, appellants briefly argued that the motion
to enforce the settlement agreement would aid and abet a violation
of
N.J.S.A. 25:2-1, -2, -3, -7, and -15. However,
N.J.S.A. 25:2-
1 addressed self-dealing trusts;
N.J.S.A. 25:2-2 addresses
transfers of "real estate";
N.J.S.A. 25:2-7 and -15 were repealed
in 1989; and
N.J.S.A. 25:2-3 required a showing which appellants
failed to make, namely that the conveyance was "contrived in fraud,
covin or collusion, with intent to hinder, delay or defraud
creditors." The trial court made no comment regarding these
inapplicable statutes. On appeal, other than citing "
N.J.S.A.
25:2-2 et seq." without explanation, appellants make no arguments
concerning these sections, and we do not address them. "An issue
7
Appellants also now cite
N.J.S.A. 14A:14-10(1), but it was
repealed in 1989.
19 A-1778-15T4
not briefed on appeal is deemed waived." Sklodowsky v. Lushis,
417 N.J. Super. 648, 657 (App. Div. 2011).
On appeal, appellants instead invoke the Uniform Fraudulent
Transfers Act (UFTA),
N.J.S.A. 25:2-20 to 25:2-34. In particular,
they now claim violations of
N.J.S.A. 25:2-25 and
N.J.S.A. 25:2-
27, based on the factors in
N.J.S.A. 25:2-26. Because they did
not cite those sections or present that argument to the trial
court, we decline to address it. New Jersey "appellate courts
will decline to consider questions or issues not properly presented
to the trial court when an opportunity for such a presentation is
available unless the questions so raised on appeal go to the
jurisdiction of the trial court or concern matters of great public
interest." Selective Ins. Co. of Am. v. Rothman,
208 N.J. 580,
586 (2012) (quoting Nieder v. Royal Indem. Ins. Co.,
62 N.J. 229,
234 (1973)). Neither of those exceptions applies.
It would be particularly inappropriate to address a UFTA
claim raised for the first time on appeal. Under the UFTA, "[t]he
person seeking to set aside the conveyance bears the burden of
pro[of]," the "inquiries involve fact-specific determinations that
must be resolved on a case-by-case basis," and the court "should
balance the factors enumerated in N.J.S.A. 25:2-26." Gilchinsky
v. Nat'l Westminster Bank N.J.,
159 N.J. 463, 476-77 (1999). "A
court applying [the UFTA] must undertake a fact-sensitive inquiry,
20 A-1778-15T4
analyzing the circumstances and terms of the transfer at issue."
Motorworld, Inc. v. Benkendorf,
228 N.J. 311, 326 (2017). By
failing to raise the UFTA before the trial court, appellants
prevented that court from making the fact-sensitive inquiry and
fact-specific determinations, and balancing, all of which should
be done by a trial court in the first instance.
D.
Appellants argue the trial court should have applied "the
doctrine of equitable subordination," requiring the Estate and
Patrick Avella, as shareholders, to subordinate their claims until
the four corporations' creditors are paid in full. Appellants
claim this "doctrine" is "imposed by
N.J.S.A. 14A:6-12(1)(c),
N.J.S.A. 14A:12-9(1)(c), and
N.J.S.A. 25:2-2 et seq.," but as set
forth above, those statutes are inapplicable.
As the trial court noted, appellants cited no cases supporting
this "doctrine." The court believed appellants might be referring
to the "[t]he judge-made doctrine of equitable subordination" in
bankruptcy, which has been incorporated in 11 U.S.C. § 510(c)(1)
of the federal Bankruptcy Code. United States v. Noland,
517 U.S. 535, 538-39 (1996). That doctrine traditionally required that a
"creditor had engaged in 'some type of inequitable conduct,'"
"that the misconduct have 'resulted in injury to the creditors of
the bankrupt or conferred an unfair advantage on the claimant,'
21 A-1778-15T4
and that the subordination 'not be inconsistent with the provisions
of the Bankruptcy Act.'" Id. at 539 (quoting In re Mobile Steel
Co.,
563 F.2d 692, 700 (5th Cir. 1977)); see also id. at 543.
The trial court also believed appellants might be referring
to the situation where "a mortgagee who negligently accepts a
mortgage without knowledge of intervening encumbrances will
subrogate to a first mortgage with priority over the intervening
encumbrances to the extent that the proceeds of the new mortgage
are used to satisfy the old mortgage." Trus Joist Corp. v. Nat'l
Union Fire Ins. Co.,
190 N.J. Super. 168, 178-79 (App. Div. 1983)
(referencing "equitable subordination"), rev'd,
97 N.J. 22, 29
(1984) (referring to this as "equitable subrogation").
Those doctrines are irrelevant here. As the trial court
stated, "[t]his case is not about the priority of mortgages nor
does it implicate the Bankruptcy Code." Moreover, appellants have
not shown the Estate or Patrick engaged in any inequitable conduct
or acted negligently.
E.
Finally, appellants argue the trial court should have made
the escrow funds belonging to the Estate and Patrick attachable
to pay the four corporations' debts because they were shareholders
and insiders. However, courts generally "abide by 'the fundamental
propositions that a corporation is a separate entity from its
22 A-1778-15T4
shareholders, and that a primary reason for incorporation is the
insulation of shareholders from the liabilities of the corporate
enterprise.'" Richard A. Pulaski Constr. Co. v. Air Frame Hangars,
Inc.,
195 N.J. 457, 472 (2008) (citation omitted). "'[E]xcept in
cases of fraud, injustice, or the like, courts will not pierce a
corporate veil.'" Ibid. (citation omitted). "'[T]he party seeking
an exception to the fundamental principle that a corporation is a
separate entity from its principal bears the burden of proving'"
such fraud or injustice. Ibid. (citation omitted).
Appellants offered no evidence that the four corporations
were "either a fraud or a sham, or that [they] had failed to
observe the requisite corporate formalities." Id. at 473.
Appellants did not show that the four corporations had been "'used
to defeat the ends of justice, to perpetrate fraud, to accomplish
a crime, or otherwise to evade the law.'" Id. at 472 (citation
omitted). The trial court properly found "no evidence of 'fraud
or injustice' that would justify a court order that would pierce
the corporate veil to impose liability on the corporate
principals." Indeed, in their reply brief, appellants argue that
"[n]o one asked or argued for the piercing of any corporate veils,"
because appellants believed the escrowed funds still belonged to
54th Street Realty and Avella's Garage.
23 A-1778-15T4
VI.
Appellants challenge the denial of reconsideration, but fail
to make the required showings. "Reconsideration should be used
only where '1) the [c]ourt has expressed its decision based upon
a palpably incorrect or irrational basis, or 2) it is obvious that
the [c]ourt either did not consider, or failed to appreciate the
significance of probative, competent evidence.'" Pitney Bowes
Bank, Inc. v. ABC Caging Fulfillment,
440 N.J. Super. 378, 382
(App. Div. 2015) (alteration in original) (citation omitted). "[A]
trial court's reconsideration decision will be left undisturbed
unless it represents a clear abuse of discretion." Ibid.
Appellants' remaining arguments lack sufficient merit to
warrant discussion. R. 2:11-3(e)(1)(E).
Accordingly, we reject appellants' challenges to the trial
court's rulings. In reaching this conclusion, we are cognizant
of the general policies "'favoring enforcement of judgments'" and
"'lend[ing] the creditor all reasonable assistance for the
enforcement of his claim, especially against a debtor who, though
possessed of the means to pay, seeks to evade his obligation.'"
N.J. Realty Concepts,
435 N.J. Super. at 130 (citation omitted).
However, as discussed above, appellants failed to provide the
evidence to support their theories to enforce the judgment naming
24 A-1778-15T4
the four corporations and Steven against the escrowed money
belonging to the Estate and Patrick.
Appellants allege the trial court left them as judgment
creditors without a remedy. However, nothing in the trial court's
opinions and orders or our opinion prevents appellants from
proceeding against the four corporations, or against Steven, to
collect the judgment obtained against them.8 Nor do those orders
and opinions prevent appellants from presenting the necessary
evidence to pierce the corporate veil or invoke the dissolution
or fraudulent conveyance statutes in an appropriate proceeding.
Affirmed.
8
It is not clear that the four corporations lack any other assets.
For example, the Estate's complaint and the answer of Robert and
Steven agreed that 612 Realty had another asset, namely 612-616
22nd Street.
25 A-1778-15T4
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