Opinion
DOCKET NO. A-1118-13T1 DOCKET NO. A-1941-13T1
06-14-2016
ANNE MAVROUDIS and JOHN MAVROUDIS, Plaintiffs-Appellants, v. TANGIBLE SECURED FUNDING INC., Defendant-Respondent, and THE SHERIFF OF BERGEN COUNTY, Defendant. BENJAMIN A. STANZIALE, JR., trustee, Intervenor-Respondent.
Michael D. Camarinos argued the cause for appellants (Mavroudis & Guarino, LLC, attorneys; Philip L. Guarino and Mr. Camarinos, on the brief). Stephen Schnitzer argued the cause for respondent Tangible Secured Funding, Inc. (Mr. Schnitzer, attorney; Mitchell D. Cohen and Arlene N. Gelman of the Illinois bar, admitted pro hac vice, on the brief). Daniel R. Seaman argued the cause for respondent Benjamin A. Stanziale, Jr. (McCarter & English, LLP, attorneys; Michael P. Pasquale and Scott H. Bernstein, of counsel and on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Koblitz, Kennedy, and Gilson. On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-2249-13. Michael D. Camarinos argued the cause for appellants (Mavroudis & Guarino, LLC, attorneys; Philip L. Guarino and Mr. Camarinos, on the brief). Stephen Schnitzer argued the cause for respondent Tangible Secured Funding, Inc. (Mr. Schnitzer, attorney; Mitchell D. Cohen and Arlene N. Gelman of the Illinois bar, admitted pro hac vice, on the brief). Daniel R. Seaman argued the cause for respondent Benjamin A. Stanziale, Jr. (McCarter & English, LLP, attorneys; Michael P. Pasquale and Scott H. Bernstein, of counsel and on the brief). PER CURIAM
We consolidate these two appeals for the purpose of writing one opinion. Defendant Tangible Secured Funding, Inc. (Tangible) is the assignee of a judgment for more than $2.5 million against John Mavroudis. To collect on the judgment, Tangible sought a sheriff's sale of the personal property contained in the marital home. Plaintiffs, John and Anne Mavroudis, appeal under docket number A-1941-13 from a November 19, 2013 final judgment entered after a jury rejected their claim, filed pursuant to N.J.S.A. 2A:17-29, to declare that Anne was the sole owner of that property, which included a valuable Francis Picabia painting. They also appeal from a December 18, 2013 post-judgment order to turn over $1.3 million, the proceeds of the sale of the painting, in partial satisfaction of the judgment. In the related appeal, A-1118-13, plaintiffs challenge a November 1, 2013 order finding them in contempt for violating two court orders and, as a sanction, requiring them to pay $10,000 and defendant's counsel fees and costs. We affirm in all respects except with regard to the $10,000 sanction, which we reverse and remand.
On September 27, 2013 Tangible was substituted for General Electrical Capital Corporation (GECC). We will refer to Tangible rather than GECC throughout this opinion to avoid confusion.
We refer to plaintiffs by their first names for clarity and intend no disrespect.
On January 30, 2012, Tangible obtained a judgment in the amount of $2,503,551.90 with post-judgment interest, attorneys' fees, and costs as of November 4, 2011, against John and certain of his business associates. On March 5, 2012, the clerk of Bergen County filed a writ of execution directing defendant, the Sheriff of Bergen County, to satisfy the judgment out of the debtors' personal property within the county. On March 22, 2013, plaintiffs filed a complaint against Tangible seeking a declaratory judgment that Anne "is the sole owner of the personal property located in the Residence," and that the levy upon the property is therefore unlawful and must be released. In their complaint, which included a jury demand, plaintiffs alleged that all the personal property in their Alpine home levied upon or inventoried by the Sheriff belonged to Anne and none belonged to John.
Orders dated April 22 and April 23, 2013 temporarily restrained plaintiffs "from removing, discarding, hiding, transferring, selling, gifting, conveying or destroying all the personal property set forth in" the March 13, 2013 inventory report prepared by the Sheriff until further order of the court. The Sheriff's asset inventory report consisted of six pages of items located at the residence. The inventory report lists multiple pieces of wall art, including "LARGE WALL ART (TREES & WATER)" located in the billiard room.
On October 17, 2013 Tangible filed a verified petition and order to show cause in the Supreme Court of New York, seeking temporary restraint against Sotheby's, Inc. from selling the Picabia painting. The following day, Tangible filed an order to show cause requesting that the trial court sanction plaintiffs. On November 1, 2013, following oral argument, the court granted Tangible's request, finding that plaintiffs "improperly transferred a Francis Picabia oil painting titled Effet de soleil à Saint Honorat to Sotheby's for a sale scheduled to take place on or about November 7, 2013." The court also found that John had commissioned a reproduction of the painting to further cover up the wrongful transfer. The court held plaintiffs in contempt "for purposefully and intentionally violating" the April 2013 orders and imposed a sanction in the amount of $10,000. The court further ordered plaintiffs to pay, "as additional sanctions for their wrongful conduct, . . . all of Tangible's attorneys' fees, costs and expenses relating to Plaintiffs' contemptuous conduct."
Sotheby's is an auction house which sells fine art, jewelry, and furniture at public auctions and private sales.
This oil painting was large, approximately seven foot by ten foot, and depicted trees and water.
At trial, Anne and John testified they orally agreed when they became engaged before their 1970 marriage, that Anne would own their home and everything in it, while John would own the businesses and items outside the home. In 1975 Anne purchased the Alpine home in her name only.
The 1906 painting by Francis Picabia, Effet de Soleil à Saint Honorat (the Picabia) was purchased for $80,000 at Sotheby's in 1985. Plaintiffs testified that Anne used a $150,00 0 gift from her mother to buy the Picabia. Aimee Scillieri, the associate general counsel for Sotheby's, testified for Tangible regarding the Mavroudis's relationship with Sotheby's and the consignment of the Picabia. According to Scillieri, John was listed as the original purchaser of the Picabia in Sotheby's records and as the 2013 consignor in Sotheby's internal emails. At trial, John alleged that he was "acting on behalf of Anne in dealing with Sotheby's." John also ordered a reproduction of the painting based on a photograph taken at Sotheby's, "for sentimental reasons."
Tangible's witness, R.P., provided a description of John and Anne's Alpine residence from his attendance at a Christmas party at their home in December of 2006 or 2007. According to R.P.'s testimony, John showed R.P. the Picabia painting and told R.P. that John owned that painting. R.P. testified that John told him that "if [John] needed the money he could always sell it and get a substantial amount of money."
We refer to the witness by his initials to preserve his privacy.
R.P. resigned from the bar with prejudice and pled guilty in 1985 to an accusation charging the theft of client trust funds in violation of N.J.S.A. 2C:20-9. The accusation was expunged in June 23, 2004. Before R.P. testified, the court ruled that R.P.'s 1985 conviction was "not evidential" and would not "be allowed." During R.P.'s cross-examination, plaintiffs' counsel, at sidebar, argued that he was entitled to ask R.P. "whether he ever had a law degree, and whether he was a member of a Bar, and whether he still is and why not." The trial court confirmed its ruling that R.P.'s disbarment was inadmissible. During trial the court also precluded the use of documents that had not been produced pursuant to an August 9, 2013 discovery order.
Prior to trial, plaintiffs agreed to Tangible's motion to exclude "[a]ny references to any matters, legal theories, or remedies not previously pled by the Plaintiffs." After all testimony was completed, plaintiffs nonetheless asked the court to use a verdict form that provided an option for the jury to find that both John and Anne owned the personal property jointly, although counsel reiterated plaintiffs' claim, asserted throughout the trial, that Anne alone owned the property. The court denied plaintiffs' request, stating "I am going to use the verdict sheet that I have proposed, which says with the exception of the six items admittedly owned by [John], for example the cufflinks, the clock, et cetera, has the plaintiff proved by a preponderance of the evidence that the property in the sheriff's inventory list belongs solely to Anne Mavroudis." The jury unanimously found that plaintiffs failed to prove their claim and the court issued a judgment that "Anne Mavroudis is not the sole owner of the personal property levied upon by the Sheriff of Bergen County on March 13, 2013."
On or around December 31, 2013, John commenced a bankruptcy case in the United States Bankruptcy Court for the District of New Jersey by filing a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. The United States Bankruptcy Court subsequently converted John's Chapter 11 case to a case under Chapter 7 of the Bankruptcy Code. See 11 U.S.C.A. § 1112(b). Benjamin A. Stanziale, Jr., intervenor, was appointed to serve as the Chapter 7 trustee of John's bankruptcy estate. According to intervenor's brief, John filed a summary of schedules of assets and liabilities in the bankruptcy proceeding, which disclosed "that his bankruptcy estate had $1,886,895.31 in assets and $43,869,012.20 in liabilities" as of the date of his bankruptcy filing. We have since been informed that a settlement was reached in the bankruptcy matter with an agreement that, in exchange for $350,000, the trustee transferred the bankruptcy estate's interest in the personal property in the Alpine home to Anne, with the exception of the Picabia, which is subject to this appeal.
Standing
As an initial matter, Tangible and intervenor allege that John has no standing to pursue the declaratory judgment appeal because the Chapter 7 trustee, as representative of the estate, succeeded to John's rights to pursue causes of action. Under the United States Code, the commencement of a bankruptcy case by a voluntary petition creates a bankruptcy estate. 11 U.S.C.A. §§ 301(a), 541(a). A bankruptcy estate is comprised of "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C.A. § 541(a)(1). The bankruptcy trustee "is the representative of the estate" and "has capacity to sue and be sued." 11 U.S.C.A. § 323(a)-(b). John does not dispute the validity of this argument, pointing out that Anne still has standing. We agree and dismiss the declaratory judgment appeal, A-1941-13, as to John only. We will therefore refer only to Anne as the plaintiff in the issues concerning the declaratory judgment jury trial, A-1941-13.
Amendment of the Complaint and Verdict Sheet
Anne argues that the trial court erred in not allowing the jury to determine whether less than all the property belonged to Anne. Rule 4:9-2 permits amendments of pleadings to conform to the evidence. Our Supreme Court in Lynch v. Galler Seven-Up Pre-Mix Corp. applied the Rule and decided that the trial court did not abuse its discretion in denying the requested amendment. 74 N.J. 146, 150-51 (1977). The Court determined that the "plaintiffs' new theory was totally at variance with their pretrial discovery disclosures and the evidence theretofore presented." Id. at 151. Here, the trial court's refusal to amend plaintiffs' pleadings to conform to evidence was not a "clear abuse of discretion." See Franklin Med. Assocs. v. Newark Pub. Sch., 362 N.J. Super. 494, 506 (App. Div. 2003) (citing Salitan v. Magnus, 28 N.J. 20, 26 (1958)).
"An 'abuse of discretion is demonstrated if 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 of judgment.'" United Hearts, L.L.C. v. Zahabian, 407 N.J. Super. 379, 390 (App. Div.) (quoting Masone v. Levine, 382 N.J. Super. 181, 193 (App. Div. 2005)), certif. denied, 200 N.J. 367 (2009). Plaintiffs, in their March 22, 2013 complaint, initially sought a declaratory judgment confirming that Anne "is the sole owner of the personal property located" at the Alpine residence. In their verdict sheet, however, plaintiffs requested that the trial court provide the jury with the option that both John and Anne own the personal property jointly. Further, the jury verdict form sought to separate the jury's ownership determination as to the Picabia painting, the remaining paintings, and the remaining personal property. Plaintiffs failed to seek an earlier amendment of their pleadings; instead, they did not seek the option of a favorable verdict on a different theory until after the witnesses had completed their testimony. Tangible's inability to defend against joint ownership due to Tangible's lack of notice prior to the close of testimony caused the proposed amendment to be prejudicial. Thus the trial court's denial of that request was well-founded and not an abuse of discretion.
Evidentiary Issues
Anne argues that R.P.'s disbarment and conviction for the misappropriation of his client's trust funds are highly probative of his truthfulness, and should have been admitted. We disagree. Under section (b)(1) of N.J.R.E. 609, if "more than ten years have passed since the witness's conviction for a crime . . ., then evidence of the conviction is admissible only if the court determines that its probative value outweighs its prejudicial effect." The proponent of that evidence has the burden of proof. N.J.R.E. 609(b)(1). R.P.'s misconduct occurred approximately twenty-eight years before the date of the trial and the conviction was expunged more than nine years before the trial. Pursuant to N.J.S.A. 2C:52-27, "if an order of expungement is granted, the arrest, conviction and any proceedings related thereto shall be deemed not to have occurred."
Anne also argues that the trial court erred in precluding some evidence relating to the ownership of the Picabia painting and other artwork, which was not produced pursuant to a pretrial discovery order. The abuse of discretion standard applies to our review of the trial court's discovery decisions. Wilson v. Amerada Hess Corp., 168 N.J. 236, 253 (2001). A reviewing court "generally defer[s] to a trial court's disposition of discovery matters unless the court has abused its discretion or its determination is based on a mistaken understanding of the applicable law." Pomerantz Paper Corp. v. New Cmty. Corp., 207 N.J. 344, 371 (2011) (quoting Rivers v. LSC P'ship, 378 N.J. Super. 68, 80 (App. Div.), certif. denied, 185 N.J. 296 (2005)). In that regard, "[t]he right of a trial court to manage the orderly progression of cases before it has been recognized as inherent in its function." Casino Reinvestment Dev. Auth. v. Lustgarten, 332 N.J. Super. 472, 488 (App. Div.), certif. denied, 165 N.J. 607 (2000). We apply the same standard to the trial court's evidentiary decisions. See State v. Nantambu, 221 N.J. 390, 402 (2015) (stating that a trial judge's evidentiary decisions are entitled to deference and reviewed under an abuse of discretion standard).
Rule 1:7-3 permits an attorney to preserve excluded evidence by making an offer of proof in the absence of the jury. When an attorney fails to do so, "it is virtually impossible for the appellate court in reviewing the case to determine whether the exclusion had a prejudicial effect." Duffy v. Bill, 32 N.J. 278, 294 (1960). "[C]ounsel who does not choose to make the proffer may be foreclosed on appeal from raising the question of the prejudicial effect of the exclusionary ruling unless the record or context of the excluded question clearly suggests what was expected to be proved by the excluded evidence." Pressler & Verniero, Current N.J. Court Rules, comment on R. 1:7-3 (2016). No such offer of proof was preserved here. Anne failed to present a description of the evidence excluded or its adverse substantive effect upon plaintiffs. On the information presented, we are unable to conclude that the trial court abused its discretion in its evidentiary ruling to preclude documents.
Remaining Trial Arguments
In her remaining arguments, Anne claims that the trial court erred in (1) denying plaintiffs' application for a preliminary injunction; (2) denying the application for an injunction post-judgment; (3) directing a release of the proceeds of the sale of the painting; (4) entering a flawed post-judgment order because the amount of the outstanding judgment was in dispute and (5) not determining what personal property constituted fixtures. Given that we discern no error in the trial proceedings, and because only Anne has standing and her concern is with the ownership of the painting alone, these issues are without sufficient merit to warrant discussion in a written opinion, R. 2:11-3(e)(1)(E).
A final claim, concerning automobiles not owned by John is moot as Tangible conceded that Rio Vista, LLC owned the vehicles. See Greenfield v. N.J. Dep't of Corr., 382 N.J. Super. 254, 257-58 (App. Div. 2006) (describing an issue as moot when the decision "can have no practical effect").
Sanction Proceedings
Prior to the declaratory judgment trial, in October 2013, Tangible learned that plaintiffs had made arrangements to consign the Picabia to Sotheby's for sale at an auction scheduled to take place on November 7, 2013. Tangible obtained a restraining order in New York and filed in New Jersey for an emergency order to show cause seeking an order of contempt pursuant to Rules 1:10, 4:23-2, and 4:37-2, alleging that plaintiffs had failed to comply with the court's April 2013 orders. In support of its motion, defendant attached an October 15, 2013 inventory from Sotheby's of its dealings with plaintiffs, which included the Picabia.
In opposition to the order to show cause, plaintiffs submitted, among other things, the certification of John stating the following. In early August 2013, the trial was scheduled for September 2013. He was confident that the trial would establish Anne as the sole owner of the Picabia, based on the parties' pre-marital agreement that Anne owned all of the personal property in the Alpine residence. Anne wanted to sell the Picabia to pay off the mortgage on the Alpine home. He did not know the trial would be adjourned or that a November 2013 date would be suitable for the sale, pointing to a conversation in Sotheby's e-mail exchange with him indicating John was "leaning" towards selling. On September 13, 2013, he persuaded Anne to sell the Picabia, and the November 2013 sale date was a good opportunity to sell the painting. He was "surprised" to receive an e-mail from Sotheby's on September 22, 2013, stating that the Picabia had to be picked up the following day to be included in the sale. John "did not have the opportunity to review the Court's" April restraining orders and "the listing of the items levied, but [he] fully intended to do so and have Anne make an application to the court regarding the sale if the same were required." John pointed to Sotheby's documents from 2000 when they stored the Picabia, which listed Anne as the sole owner. He maintained that the October 17, 2013 letter to the trial court seeking permission to sell the painting was not made in response to defendant's New York action of that same date. John was "shocked" to learn that Sotheby's could commission a high quality reproduction of the Picabia. He ordered the photographic reproduction only because it "was a good solution to replace the decorative feature on the wall and sentimental value."
The order is dated October 17, 2013. However, defendants state that it was filed the following day. --------
In response, defendant attached several photographs of the Picabia and other items at plaintiffs' Alpine residence taken by the Sheriff during the inventory as well as a copy of the inventory list provided by plaintiffs in which they state that the "LARGE WALL ART (Trees & Water)" in the billiard room was obtained by Anne in 1985.
The court held a non-testimonial hearing on November 1, 2013, and found that plaintiffs had violated the April 2013 orders, and "contemptuously and affirmatively avoided the restraints in those orders" by surreptitiously consigning the Picabia painting to Sotheby's for sale. As a sanction, in an order issued that same day, the court required the plaintiffs to pay $10,000 and defendant's counsel fees and costs.
On appeal, plaintiffs make two arguments: (1) the court erred in determining issues of material fact without a hearing; and (2) the order prohibiting the sale of their personal property did not clearly include the painting.
Testimonial Hearing
Plaintiffs argue that the trial court erred in determining issues of material fact and credibility without conducting a testimonial hearing.
Our review of an award of sanctions is once again conducted under an abuse of discretion standard. United Hearts, L.L.C., supra, 407 N.J. Super. at 390. Pursuant to Rule 1:10-3:
Notwithstanding that an act or omission may also constitute a contempt of court, a litigant in any action may seek relief by application in the action. . . . The court in its discretion may make an allowance for counsel fees to be paid by any party to the action to a party accorded relief under this rule.
Generally, our Rules mandate certain procedures, including evidentiary hearings, for contempt-of-court adjudications. See R. 1:10-1 (contempt in the presence of the court); R. 1:10-2 (summary contempt proceedings); Wolfe v. Malberg, 334 N.J. Super. 630, 635-36 (App. Div. 2000). Our Supreme Court has held, however, that an evidentiary or adjudicatory hearing is not mandatory before a trial court imposes every sanction, for example, dismissal of a complaint for serious discovery violations pursuant to Rule 4:23-2(b)(3). Abtrax Pharm., Inc. v. Elkins-Sinn, Inc., 139 N.J. 499, 518-20 (1995).
"Relief under R. 1:10-3, whether it be the imposition of incarceration or a sanction, is not for the purpose of punishment, but as a coercive measure to facilitate the enforcement of the court order." Ridley v. Dennison, 298 N.J. Super. 373, 381 (App. Div. 1997). A payment for each additional day that an order is violated, for example, would be "a monetary sanction imposed pursuant to R. 1:10-3 [that] is a proper tool to compel compliance with a court order." Ibid. However, punitive monetary sanctions, having no relation to the opposing parties' fees and expenses or the imposition on the court's resources, should not be imposed without following the appropriate contempt of court proceedings under R. 1:10-1 or 1:10-2. Wolfe, supra, 334 N.J. Super. at 636-37.
Here, the trial court did not specify what Rule it followed in awarding the $10,000 sanction. Clearly, however, this monetary sanction was imposed as a result of plaintiffs' violation of the April restraining orders without consideration of the amount of counsel fees incurred by Tangible, which were separately awarded. The sanction was therefore punitive in nature. See id. at 637-38; Ridley, supra, 298 N.J. Super. at 380-81 (finding that imposition of a sanction was punitive where counsel and other fees had already been assessed). The court was thus required to hold a plenary hearing pursuant to Rule 1:10-2. We therefore reverse the imposition of this $10,000 sanction and remand for a testimonial hearing.
Rule 1:10-3 does not require a testimonial hearing before imposing counsel fees and costs on the opposing party. Plaintiffs submitted briefing, certification and exhibits and were given a sufficient opportunity to contest defendant's application for counsel fees at the November 1, 2013 hearing. The uncontested facts alone support such a remedy. We affirm the imposition of counsel fees substantially for the reasons stated in the November 1, 2013 attachment to the order.
Clarity of April Orders
The April orders refer to the inventory sheet, which lists "Large Wall Art (Trees & Water)" as an item in the billiards room. Plaintiffs' argument that the identification of the painting in the Sheriff's list was insufficiently detailed to describe the Picabia fails based on their July 2013 notation on plaintiffs' notated copy of the inventory list, provided in discovery, stating that the same "Large Wall Art" was obtained in 1985, the year Anne purchased the Picabia. Further, plaintiffs' assertion of mistake is belied by the belated October 17, 2013 request, after they were found out, for permission to consign the Picabia for auction.
After dismissing John's appeal for lack of standing, we affirm entirely Anne's appeal of the declaratory judgment, A-1941-13. With regard to A-1118-13, we affirm the imposition of counsel fees and reverse the $10,000 sanction and remand for further proceedings in conformity with this opinion.
Affirmed in part and reversed and remanded in part. We do not retain jurisdiction.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION