JARWICK DEVELOPMENTS, INC v. JOSEPH WILF
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2799-14T3
JARWICK DEVELOPMENTS, INC.,
ADA REICHMANN and JOSEF HALPERN,
Plaintiffs-Respondents,
v.
JOSEPH WILF and THE ESTATE OF
HARRY WILF, deceased, individually
and as partners in the partnership
known as J.H.W. Associates;
LEONARD A. WILF; ZYGMUNT WILF, MARK WILF;
SIDNEY WILF; RACHEL AFFORDABLE HOUSING;
HALWIL ASSOCIATES, a partnership; and
PERNWIL ASSOCIATES, a partnership,
Defendants-Appellants,
and
MARVIN L. COHEN CPA and MIRONOV,
SLOAN & PARZIALE, LLC f/k/a BECK,
WEISS & COMPANY, P.A.,
Defendants.
Argued April 17, 2018 – Decided June 1, 2018
Before Judges Yannotti, Carroll and DeAlmeida.
On appeal from Superior Court of New Jersey,
Chancery Division, Morris County, Docket No.
C-000184-92.
Peter C. Harvey argued the cause for
appellants (Patterson Belknap Webb & Tyler,
LLP and Lasser Hochman, LLC, attorneys; Peter
C. Harvey, on the brief; Sheppard A. Guryan
and Bruce H. Snyder, of counsel and on the
briefs).
Alan M. Lebensfeld argued the cause for
respondent Josef Halpern (Lebensfeld Sharon &
Schwartz, PC, attorneys; Alan M. Lebensfeld
and David M. Arroyo, on the brief).
Price O. Gielen (Neuberger, Quinn, Gielen,
Rubin & Gibber, PA) of the Maryland bar,
admitted pro hac vice, argued the cause for
respondents Jarwick Developments, Inc. and ADA
Reichmann (Lowenstein Sandler LLP, and Price
O. Gielen, attorneys; Michael T.G. Long and
Price O. Gielen, on the brief).
PER CURIAM
This appeal arises from the denial of a post-judgment motion
filed by defendants Josef Wilf, the Estate of Harry Wilf, Leonard
A. Wilf, Zygmunt Wilf, Mark Wilf, Sidney Wilf, Rachel Affordable
Housing, Halwil Associates (collectively, "defendants"), and the
Pernwil Associates Partnership ("Pernwil" or "the Partnership").
Defendants' motion sought to escrow the entire proceeds from the
court-ordered sale of Pernwil's sole asset, a 764-unit garden
apartment complex known as Rachel Gardens.
The appeal was argued back-to-back with defendants' appeal
in No. A-2053-13 from the December 20, 2013 judgment entered in
favor of plaintiffs Jarwick Developments, Inc., Ada Reichmann, and
Josef Halpern (Halpern) following a lengthy bench trial. The
2 A-2799-14T3
judgment awarded plaintiffs substantial compensatory and punitive
damages along with attorney's fees, and ordered the dissolution
of Pernwil. The decades-long history that resulted in that
judgment is fully set forth in our unpublished opinion in No. A-
2053-13 and incorporated by reference here.
Contemporaneously with the entry of the December 20, 2013
judgment, the trial court ordered the parties to execute an
agreement with independent real estate broker Kislak Company, Inc.
to list and sell Rachel Gardens (the "sale order"). Defendants
chose not to comply with the sale order and instead unsuccessfully
sought a stay of the partnership dissolution. On April 11, 2014,
the trial court granted Halpern's application for an order in aid
of litigant's rights, directed defendants to execute the listing
agreement within five days, and awarded plaintiffs reasonable
attorney's fees necessitated by defendants' failure to comply with
the sale order. On June 30, 2014, the court denied defendants'
motion for reconsideration, and awarded Halpern $10,000 for
attorney's fees and costs associated with his application to compel
defendants' compliance. Defendants' subsequent appeal from the
April 11 and June 30, 2014 orders awarding attorney's fees was
also argued back-to-back with the present appeal and No. A-2053-
13, and is the subject of our separate unpublished opinion in No.
A-5752-13 affirming those orders.
3 A-2799-14T3
Kislak procured an offer from Cammeby's International, Ltd.
to purchase Rachel Gardens for $136 million. On May 15, 2014, the
trial court entered an additional order in aid of litigant's rights
that authorized plaintiffs to execute a purchase and sale agreement
with Cammeby's on behalf of the Partnership for $136 million. The
order further provided that, following the closing of the sale,
"the parties forthwith shall proceed to dissolve the Partnership,
to satisfy its debts, and to liquidate and distribute its
assets. . . ."
To facilitate the dissolution of the Partnership and the
impending sale of Rachel Gardens, on May 28, 2014, the parties
entered into (i) a Service Agreement, and (ii) a Redemption and
Sale Agreement ("RSA").
The Service Agreement provided that defendants would manage
the property in strict compliance with designated orders
previously entered by the trial court. It expressly stated it
"contain[ed] the entire agreement between the parties relating to
management of the [Rachel Gardens] Property . . . ." Notably, it
was silent as to any management fee. It also stipulated that:
In the event that any motion or proceeding is
commenced to obtain a declaration of rights
hereunder, or to enforce any provision hereof,
the prevailing party in any such motion or
proceeding shall be entitled to recover its
or his reasonable attorney's fees, in addition
4 A-2799-14T3
to any and all other relief, whether legal or
equitable, to which it or he may be entitled.
Pursuant to the RSA, for tax purposes, defendants transferred
their collective fifty percent partnership interest to Pernwil.
In return, they received a fifty percent interest, as tenants in
common, in the Rachel Gardens property. The RSA also contained a
provision awarding attorney's fees to a prevailing party, similar
to that set forth in the Service Agreement.
On June 25, 2014, on the eve of the scheduled sale of Rachel
Gardens, defendants moved to escrow the entire sale proceeds. They
contended Jarwick's interest in the partnership should be fixed
either as of December 15, 2006, the date of our prior remand 1, or
October 2009, the date Jarwick filed an amended complaint seeking
dissolution of the Partnership. Defendants also sought a
management fee for their management of the Partnership during the
dissolution period. Finally, they asserted an escrow was necessary
pending the resolution of several potential claims against the
Partnership. These included (i) health insurance premiums paid
on behalf of Halpern by an unrelated partnership totaling
$216,826.56; (ii) a performance bond posted to the Township of
1
Jarwick Devs., Inc. v. Wilf, No. A-5027-03 (App. Div. Dec. 15,
2006).
5 A-2799-14T3
Montville in the amount of $168,334; and (iii) a refund claim by
Verizon Communications for $152,800.
In addition to opposing the motion, on June 26, 2014,
plaintiffs' counsel served defendants with a frivolous litigation
notice ("FLN"), pursuant to Rule 1:4-8(b)(1). The FLN stated
defendants' motion to escrow the sale proceeds presented frivolous
arguments, and demanded the motion be immediately withdrawn.
Upon the trial judge's retirement, the case was re-assigned
to Judge Stephan C. Hansbury. Due to Judge Hansbury's
unavailability, defendants' escrow motion was heard by Assignment
Judge Thomas L. Weisenbeck on July 11, 2014. Following oral
argument, Judge Weisenbeck denied the motion in a comprehensive
oral opinion.
Addressing first the potential claim held by Verizon, Judge
Weisenbeck concluded an uncertain debt that may never become
payable is not subject to levy and sale. Relying on Canger v.
Froysland,
283 N.J. Super. 615 (Ch. Div. 1994), and Cohen v. Cohen,
126 N.J.L. 605 (E. & A. 1941), the judge elaborated:
[L]et me deal first with the Verizon claim
. . . the thrust of the argument here is that
there is alleged a possible breach of contract
by Garden Communications not necessarily by
plaintiffs. The claim is characterized . . .
as a "possible Verizon refund claim." And
that the "status of the agreement remains
uncertain at this time." In summary[,] this
is a speculative claim which is inadequate in
6 A-2799-14T3
this court's view to cause a withholding of
any net proceeds.
Next, with respect to the performance bond posted with the
Township of Montville, the judge found it "uncontroverted that
there is $791.37 which seems to be the potential outstanding
claim. . . ." In any event, the judge noted "there is some $1
million in the partnership account," which could be utilized "to
the extent that there is any call for this amount."
The judge next rejected defendants' claim for health
insurance premiums paid on behalf of Halpern for "a number of
reasons." First, the court noted this claim, even if genuine,
belonged to Knoll Manor Associates, a separate partnership that
was not a party to this litigation. Additionally, relying on
Knorr v. Smeal,
175 N.J. 431 (2003), the court noted defendants
"knew of this claim since at least May 31, 2012 . . . but they
failed to pursue it until now." Accordingly, the doctrine of
waiver barred relief. Similarly, the judge relied on McNally v.
Providence Washington Insurance Company,
304 N.J. Super. 83 (App.
Div. 1997), in finding this claim was also barred by the entire
controversy doctrine. That doctrine "requires that a party who
has elected to hold back from an initial lawsuit a related
component of the controversy be barred from thereafter raising it
7 A-2799-14T3
in a subsequent proceeding." McNally,
304 N.J. Super. at 92
(citation omitted).
Next, Judge Weisenbeck denied defendants' application for
management fees in light of the trial judge's March 17, 2011 order
that barred payment of management fees to defendants. That order
was incorporated by reference in the parties' Service Agreement
and the parties expressly agreed to be bound by it.
Finally, with respect to the appropriate valuation date,
Judge Weisenbeck concluded that defendants' request to limit
Jarwick's interest in the Partnership to either 2006 or 2009 was
"not supported by any adequate legal basis." Drawing guidance
from
N.J.S.A. 42:1A-45(a) and (b), the judge determined "the
valuation date is not uncertain but occurs upon the sale of [Rachel
Gardens]." The judge declined to address plaintiffs' application
for attorney's fees but advised that they could renew their
application before Judge Hansbury.
On July 24 and 25, 2015, plaintiffs filed separate motions
for frivolous litigation sanctions pursuant to Rule 1:4-8, and for
attorney's fees under the prevailing party provisions of the RSA
and Service Agreement. Judge Hansbury granted the motions, finding
defendants' application to set a valuation date completely lacked
merit both substantively and procedurally. The judge also
characterized defendants' request for a $30 million escrow as
8 A-2799-14T3
"shocking" and "most egregious." The judge added that the motion
was one of the least meritorious motions he had ever heard. The
court entered memorializing orders on August 22, 2014 and September
3, 2014, awarding plaintiffs reasonable attorney's fees against
defendants and their counsel, and directing plaintiffs' counsel
to file and serve a certification of services in compliance with
Rule 4:42-9.
After considering the certification of services filed by
plaintiffs' respective counsel, which defendants contested as
excessive, on January 6, 2015, Judge Hansbury awarded $48,241.86
in counsel fees to Jarwick and $34,026.21 to Halpern. In a written
statement of reasons, the judge found defendants' valuation claim
"was without reasonable basis in law, equity or good faith
argument."
The judge noted that, in our prior 2006 remand, we held that
the valuation of Jarwick's interest at a fixed moment in time was
inadequate as an appropriate remedy.2 The judge explained that:
In partnership dissolution, by definition the
business entity is being dissolved; its assets
are being liquidated; and the cash is being
distributed to each of the partners in
accordance with their ownership interest. See
N.J.S.A. 42:1A-45(a)(b). Thus, no ownership
entity continues to operate the business or
own property, and there is no rationale to
2
See Jarwick Devs., Inc., No. A-5027-03 (slip op. at 14).
9 A-2799-14T3
cut-off any partner's interest at any prior
point in time. . . .
Judge Hansbury found defendants' reliance on Musto v. Vidas,
333 N.J. Super. 52 (App. Div. 2000), misplaced. The judge
explained that, in Musto, in ordering a buy-out of an oppressed
minority shareholder, we were "guided by
N.J.S.A. 14A:12-7(8), the
statute pertaining to oppressed minority shareholders in a
closely-held corporation." In contrast, in the present case,
[the trial judge] ordered dissolution, not a
compelled buy out, and therefore, the [c]ourt
is guided by the partnership statute[,]
N.J.S.A. 42:1A-39 and [-]45. Upon dissolution
a liquidation of the partnership's assets
occurs and the partnership ceases to exist.
In a buy-out the corporation continues to own
and operate the corporation.
Judge Hansbury proceeded to separately address defendants'
claim for management fees, and for outstanding claims allegedly
owed for Halpern's health insurance premiums, the performance bond
to Montville, and a refund of services to Verizon. After carefully
analyzing each of these claims, the judge concluded defendants'
motion to hold the sale proceeds in escrow was frivolous pursuant
to Rule 1:4-8, the Service Agreement, and the RSA, and consequently
plaintiffs were entitled to an award of counsel fees. Finally,
the judge engaged in a thorough analysis of the various factors
set forth in RPC 1.5(a) in calculating the amount of the fee
awards.
10 A-2799-14T3
Defendants appeal from the orders denying their motion to
escrow the proceeds from the sale of Rachel Gardens and awarding
attorney's fees to plaintiffs. They argue, as they did before the
trial court, that: (1) a judicially-liquidated partnership is
valued as of the date liquidation is sought; (2) they were entitled
to management fees for partnership dissolution services they
performed; (3) the outstanding partnership liabilities required
escrow of the sale proceeds; and (4) their arguments sought legal
clarity and did not warrant sanctions. Additionally, they contend
the fee awards were excessive.
Having considered these arguments in light of the record and
applicable legal standards, we conclude they lack sufficient merit
to warrant extended discussion. R. 2:11-3(e)(1)(E). We affirm
substantially for the reasons stated by Judges Weisenbeck and
Hansbury in their thorough and thoughtful opinions. We add the
following comments.
As a preliminary matter, defendants argued before the trial
court that the proceeds of the sale should not have been
distributed until the contingent liabilities were settled.
However, in their brief on appeal and at oral argument before us,
defendants acknowledged that "the passage of time has now rendered
escrow for these liabilities moot." An issue is considered moot
when our decision "can have no practical effect on the existing
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controversy." Redd v. Bowman,
223 N.J. 87, 104 (2015) (citation
omitted); Greenfield v. N.J. Dep't of Corr.,
382 N.J. Super. 254,
258 (App. Div. 2006). "[C]ourts of this state do not resolve
issues that have become moot due to the passage of time or
intervening events." State v. Davila,
443 N.J. Super. 577, 584
(App. Div. 2016) (alteration in original) (quoting City of Camden
v. Whitman,
325 N.J. Super. 236, 243 (App. Div. 1999)).
Accordingly, we decline to address defendants' contention that
outstanding partnership liabilities require escrow of the sale
proceeds.
Next, we review a trial court's imposition of frivolous
litigation fees for an abuse of discretion. Masone v. Levine,
382 N.J. Super. 181, 193 (App. Div. 2005). Reversal is warranted only
when "the discretionary act was not premised upon consideration
of all relevant factors, was based upon consideration of irrelevant
or inappropriate factors, or amounts to a clear error in judgment."
Ibid.
An award of fees against a party engaging in frivolous
litigation is governed by
N.J.S.A. 2A:15-59.1, which requires a
judge to determine whether a pleading filed by a non-prevailing
party was frivolous.
N.J.S.A. 2A:15-59.1(a)(1). In order to
award fees under the statute, the court must consider "the
pleadings, discovery, or the evidence presented" and find that a
12 A-2799-14T3
claim or defense was either pursued "in bad faith, solely for the
purpose of harassment, delay or malicious injury" or made with
knowledge that it "was without any reasonable basis in law or
equity and could not be supported by a good faith argument for an
extension, modification or reversal of existing law."
N.J.S.A.
2A:15-59.1(b)(1), (2).
Rule 1:4-8 supplements the statute, with each assigning
different responsibility for frivolous litigation. McDaniel v.
Man Wai Lee,
419 N.J. Super. 482, 498 (App. Div. 2011); Ferolito
v. Park Hill Ass'n.,
408 N.J. Super. 401, 407 (App. Div. 2009).
While the frivolous litigation statute applies only to parties,
Rule 1:4-8 is directed to the conduct of attorneys. ASHI-GTO
Assocs. v. Irvington Pediatrics, P.A.,
414 N.J. Super. 351, 363
(App. Div. 2010).
Rule 1:4-8 provides that, by signing a pleading, the attorney
attests to its accuracy and legitimacy — specifically, that to the
best of his or her knowledge, information, and belief, formed
after an inquiry reasonable under the circumstances:
(1) the paper is not being presented for any
improper purpose, such as to harass or to
cause unnecessary delay or needless increase
in the cost of litigation;
(2) the claims, defenses, and other legal
contentions therein are warranted by existing
law or by a non-frivolous argument for the
13 A-2799-14T3
extension, modification, or reversal of
existing law or the establishment of new law;
(3) the factual allegations have evidentiary
support or, as to specifically identified
allegations, they are either likely to have
evidentiary support or they will be withdrawn
or corrected if reasonable opportunity for
further investigation or discovery indicates
insufficient evidentiary support.
(4) the denials of factual allegations are
warranted on the evidence or, as to
specifically identified denials, they are
reasonably based on a lack of information or
belief or they will be withdrawn or corrected
if a reasonable opportunity for further
investigation or discovery indicates
insufficient evidentiary support.
[R. 1:4-8(a).]
"The nature of conduct warranting sanction under Rule 1:4-8
has been strictly construed, and 'the term "frivolous" should be
given a restrictive interpretation' to avoid limiting access to
the court system." First Atl. Fed. Credit Union v. Perez,
391 N.J. Super. 419, 432-33 (App. Div. 2007) (citation omitted)
(quoting McKeown Brand v. Trump Castle Hotel & Casino,
132 N.J.
546, 561-62 (1993)).3 Therefore, imposing sanctions in the form
of attorney's fees "is not warranted where the [attorney] has a
reasonable good faith belief in the merit[s] of [the] action."
3
Frivolousness is interpreted similarly under Rule 1:4-8 and the
frivolous litigation statute. See DeBrango v. Summit Bancorp,
328 N.J. Super. 219, 226-27 (App. Div. 2000).
14 A-2799-14T3
J.W. v. L.R.,
325 N.J. Super. 543, 548 (App. Div. 1999). The Rule
does, however, impose a continuing duty on the attorney who filed
an action to amend or withdraw allegations if, upon further
investigation and discovery, they have no evidentiary support.
LoBiondo v. Schwartz,
199 N.J. 62, 98 (2009).
Here, defendants relied on baseless arguments in support of
their motion to escrow the entire net proceeds from the sale of
Rachel Gardens. Their request to set a valuation date contradicted
our 2006 opinion remanding the matter, which rejected the concept
that Jarwick was entitled to damages based on the value of its
interest in the Partnership as of a specific, fixed date. In
addition, even if an alternative valuation date was appropriate,
as defendants contend, they nonetheless sought to escrow the entire
proceeds of the sale rather than a reasonable estimation of the
disputed amount. Nor did they tailor their application so as to
only seek to escrow the amount of the purported contingent
liabilities. Further, defendants made no convincing showing that,
if they were successful in appealing the trial court's judgment
and post-judgment orders, the funds, if distributed, were unlikely
to be returned.
Defendants' request for management fees was similarly
baseless, given the absence of any provision in the partnership
agreement according them that right. The post-judgment Service
15 A-2799-14T3
Agreement between the parties similarly did not provide for
management fees, and it incorporated by reference the trial judge's
March 17, 2011 order that barred payment of management fees to
defendants.
Additionally, the parties' May 28, 2014 Service Agreement and
RSA each contain a prevailing party provision that constitutes an
independent basis for awarding attorney's fees to plaintiffs. As
an exception to the so-called "American Rule," a prevailing party
can recover attorneys' fees if expressly provided for by contract.
Packard-Bamberger & Co. v. Collier,
167 N.J. 427, 440 (2001)
(citing Dep't of Envtl. Prot. v. Ventron Corp.,
94 N.J. 473, 504
(1983)); cf. Satellite Gateway Commc'ns, Inc. v. Musi Dining Car
Co.,
110 N.J. 280, 285 (1988) (noting although Rule 4:42-9(a) does
not include contracts within its eight exceptions under which
attorney's fees may be awarded, fees may be awarded by contract).
Having prevailed on the motion to escrow the sale proceeds, which
also unsuccessfully sought to collect management fees, plaintiffs
were contractually entitled to attorney's fees pursuant to the
Service Agreement and RSA.
In calculating the amount of reasonable attorneys' fees, "an
affidavit of services addressing the factors enumerated by RPC
1.5(a)" is required. R. 4:42-9(b). Courts then determine the
"lodestar," defined as the "number of hours reasonably expended"
16 A-2799-14T3
by the attorney, "multiplied by a reasonable hourly rate." Litton
Indus., Inc. v. IMO Indus., Inc.,
200 N.J. 372, 386 (2009) (citing
Furst v. Einstein Moomjy, Inc.,
182 N.J. 1, 21 (2004)). "The
court must not include excessive and unnecessary hours spent on
the case in calculating the lodestar." Furst,
182 N.J. at 22
(citing Rendine v. Pantzer,
141 N.J. 292, 335-36 (1995)). The
court is required to make findings on each element of the lodestar
fee. Id. at 12. The fee awarded must be "reasonable," RPC 1.5(a),
and reasonableness is a "calculation" to be made in "every case."
Furst,
182 N.J. at 21-22.
We afford trial courts "considerable latitude in resolving
fee applications." Grow Co., Inc. v. Chokshi,
424 N.J. Super.
357, 367 (App. Div. 2012). We will not disturb the trial court's
award of counsel fees "except 'on the rarest occasions, and then
only because of a clear abuse of discretion.'" Ibid. (quoting
Rendine,
141 N.J. at 317). Here, Judge Hansbury engaged in a
thorough analysis of the applicable factors when calculating the
fee award. We discern no abuse of discretion.
Affirmed.
17 A-2799-14T3
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