Opinion
DOCKET NO. A-0178-12T2
2013-09-17
JOSEPH BALSAMO, Plaintiff-Appellant, v. GAIL ORTUSO, Defendant-Respondent, and BACKSTAGE INTERNATIONAL, INC., Defendant.
Robert A. Ballard, Jr. argued the cause for appellant (Ballard & Dragan, attorneys; Mr. Ballard, on the brief). Joseph F. Trinity argued the cause for respondent (Gebhardt & Kiefer, attorneys; Mr. Trinity, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Fisher and Koblitz.
On appeal from the Superior Court of New Jersey, Chancery Division, Hunterdon County, Docket No. C-14019-11.
Robert A. Ballard, Jr. argued the cause for appellant (Ballard & Dragan, attorneys; Mr. Ballard, on the brief).
Joseph F. Trinity argued the cause for respondent (Gebhardt & Kiefer, attorneys; Mr. Trinity, on the brief). PER CURIAM
Plaintiff Joseph Balsamo commenced this action against his alleged partner, defendant Gail Ortuso, in a hair salon business — Backstage International, Inc. — claiming, in the wake of the business's failure, that Ortuso is liable for half the balance due on a line of credit that Balsamo personally guaranteed. On cross-motions for summary judgment, the trial judge held that Ortuso could not be held liable because the line of credit was obtained by Balsamo prior to the formation of the parties' alleged partnership. Although the record reveals no dispute about this factual premise for the judge's holding, the critical question is whether the line of credit was drawn upon before or after formation of the alleged partnership. Because the facts relevant to this pivotal question are disputed, we reverse.
As the opponent of a summary judgment motion, Balsamo was entitled to have the trial judge assume the truth of his factual allegations in ascertaining the existence of a triable issue. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). In reviewing such a determination, we are bound to that same standard. Estate of Hanges v. Metropolitan Prop. & Cas. Ins. Co., 202 N.J. 369, 374 (2010); Greenberg v. Pryszlak, 426 N.J. Super. 591, 603 n.7 (App. Div. 2012).
In granting summary judgment, the trial judge implicitly recognized a factual dispute about the nature of the parties' relationship but determined that even if, as Balsamo alleged, Ortuso was a shareholder in Backstage or was Balsamo's "de facto partner," Ortuso could not be held personally liable for debts incurred by Balsamo prior to the formation of that relationship. Although the judge's legal conclusion may be generally true, see, N.J.S.A. 42:1A-18(b) (declaring that "[a] person admitted as a partner in an existing partnership is not personally liable for any partnership obligation incurred before the person's admission as a partner"); see also Conklin Farm v. Leibowitz, 140 N.J. 417, 422 (1995), and although there is no dispute that Balsamo possessed the line of credit prior to the formation of the parties' alleged partnership, the critical issue is whether the line of credit was accessed before or after the alleged partnership was formed.
The record provides no clarity about the nature of the parties' legal relationship. The complaint alleges that Backstage is a subchapter S corporation in which both Balsamo and Ortuso are shareholders; elsewhere Balsamo contends he held fifty-one percent and Ortuso forty-nine percent of Backstage's stock. But the record does not contain copies of stock certificates or articles of incorporation or other evidence to demonstrate — to the degree required at the summary judgment stage — that Backstage was incorporated or that Ortuso was a shareholder. In any event, the judge properly made no attempt to define the parties' relationship but instead merely assumed, for purposes of her decision, that Ortuso was a "de facto partner" and that principles of partnership law applied.
In examining the factual record relevant to that question, we observe that Balsamo opposed Ortuso's summary judgment motion by relying upon, among other things, the following excerpt from his deposition testimony:
Q. Where did the $75,000 from [the] line of credit go?
A. We originally used some of it to start the actual start up costs of the business. We also used our own credit cards which we both paid off and we made monthly payments. As the business progress[ed] it was not bringing in the income it was supposed to be bringing in at the end of the month or whatever point of the month I remember Ms. Ortuso would say we need to do more and she would write up the deposit slips. She knew where the money was coming and I would deposit that amount.
Q. Did it go to payroll?
A. Some went to payroll. Most of it went to rent. It was for overhead and things like that. I really don't know. She took care of the business. If I had to make an educated guess mostly for the rent.
Q. Have you ever done an accounting as to specifically where the $75,000 went?
A. I have not, but it could be done.
This testimony alone required a denial of Ortuso's motion for summary judgment. These sworn statements support Balsamo's contention that the business received the benefit of at least some part if not the entire balance on that line of credit. Accordingly, if Ortuso is eventually found to be Balsamo's partner — a question that presently defies summary judgment — she may ultimately be held personally jointly or severally liable for some portion of the balance due on the line of credit. N.J.S.A. 42:1A-18(a); Conklin, supra, 140 N.J. at 421.
Because the summary judgment motion was decided on a very narrow ground, the record's limitations hamper our ability to further expound on Ortuso's potential liability. Resolving that ultimate question must start with an identification of the parties' relationship, a matter the trial judge implicitly — and correctly — recognized was incapable of being determined at the summary judgment stage.
Reversed and remanded for further proceedings in conformity with this opinion. 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