Opinion
DOCKET NO. A-1680-14T2
08-31-2016
LIANG WANG and MENGXI LIU, Plaintiffs-Appellants, v. BRYAN K. ECOCHARDT, MICHELE F. ECOCHARDT, PREMIER FLOOR COVERING, LLC and FLOORS TO GO OF CENTRAL JERSEY, LLC, d/b/a FLOORS TO GO and d/b/a PREMIER CARPET AND FLOORING, Defendants-Respondents.
Paul F. O'Reilly argued the cause for appellants (Bertollini & O'Reilly, LLC, attorneys; Mr. O'Reilly, on the briefs). Richard G. Huizenga argued the cause for respondents.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Messano and Simonelli. On appeal from the Superior Court of New Jersey, Law Division, Somerset County, Docket No. L-0508-14. Paul F. O'Reilly argued the cause for appellants (Bertollini & O'Reilly, LLC, attorneys; Mr. O'Reilly, on the briefs). Richard G. Huizenga argued the cause for respondents. PER CURIAM
Plaintiffs Liang Wang and Mengxi Liu appeal from the October 24, 2014 Law Division order, which granted the motion filed by defendants Bryan K. Ecochardt (Bryan), Michele F. Ecochardt (Michele) and Floors to Go of Central Jersey, LLC, (Floors to Go), d/b/a Premier Carpet and Flooring (Premier Carpet), to dismiss the complaint with prejudice. For the following reasons, we affirm in part and reverse in part.
We use defendants' first names for ease of reference.
We derive the following facts from the record. Bryan was the owner and principal of defendant Premier Floor Covering, L.L.C. (Premier Floor). Premier Floor, formed on September 22, 2004, was engaged in the business of selling and installing residential and commercial floor coverings. Its place of business was located on South Broad Street in Hamilton Township. In September 2010, the State of New Jersey filed a tax lien against Bryan and Premier Floor in the amount of $28,490.
In September 2010, plaintiffs entered into a contract with Premier Floor to install hardwood floors in their home. In November 2010, they filed a pro se complaint against Bryan for breach of contract. Also in November 2010, the Elias Wilf Corporation obtained a judgment against Bryan and Premier Floor in the amount of $4751.
On December 8, 2010, Michele, Bryan's wife, formed Floors To Go, with its place of business located at Premier Plaza on Brunswick Pike in Lawrenceville. Michele was listed on corporate filings as the registered agent, but no principals were listed. Bryan was an employee of the newly-formed company. Premier Floor and Premier Carpet had the same web and email addresses, and the website for Floors To Go referenced Premier Floor and listed the Brunswick Pike address as the address for both entities.
In February 2011, Bryan filed a motion to dismiss pursuant to Rule 4:6-2(e), arguing that plaintiffs contracted with Premier Floor and he could not be held individually liable. Plaintiffs retained an attorney, who then filed an amended complaint against Bryan and Premier Floor, alleging breach of contract; unjust enrichment; violation of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -195; and sale of non-conforming goods. Plaintiffs subsequently agreed to dismiss the complaint as to Bryan. On March 18, 2011, the court entered an order memorializing the dismissal.
In May 2011, the State of New Jersey filed another tax lien against Bryan and Premier Floor in the amount of $10,698. Thereafter, Premier Floor was dissolved on June 18, 2011.
In August 2011, plaintiffs filed a motion for entry of final judgment by default against Premier Floor pursuant to Rule 4:43-2(a). On September 6, 2011, the court entered final judgment against Premier Floor on the CFA claim in the amount of $92,066 plus attorney's fees and costs.
In December 2011, plaintiffs filed a motion to pierce the corporate veil and impose successor liability on Bryan and Floors To Go and/or Premier Carpet for the judgment against Premier Floor (the post-judgment motion). Plaintiffs served the post-judgment motion on Bryan, Michele, and Floors To Go, and also served an information subpoena on Bryan and Michele. Bryan and Michele filed certifications in opposition to the motion; Michele filed a cross-motion to quash her information subpoena; and counsel for Bryan, Michele and Floors To Go entered an appearance on their behalf at oral argument.
On February 17, 2012, the motion judge entered an order denying the post-judgment motion and granting Michele's cross-motion (the February 2012 order). As to Bryan, the judge found that "there [were] no allegations of comingling [of] corporate assets or under-capitalization[.]" As to Michele and Floors To Go, the judge found as follows:
Premier [Floor] ceased operations in March of 2011, and was officially terminated in June 2011. At the time of the termination, Premier Floor . . . was subject to two tax liens filed by the State of New Jersey, a judgment by Elias Wilf Corporation.
On or about December 8th, 2010, [Michele], wife of Bryan [], formed Floors
To Go . . . . It conducts businesses as Premier Carpet . . . . Plaintiff[s] argue[] that this entity was formed to fraudulently avoid creditors because the defunct [Premier Floor] was dissolved in the face of two tax liens and the Wilf judgment. In support of their application, plaintiffs note[] both companies used the same contact e-mail and website. The plaintiffs argue that the corporate veil should be pierced because Bryan is now an employee of Floors To Go.
In the opposition to [] plaintiffs' motion, [Michele] certifies that in forming Floors To Go she complied with all corporate formalities, there's no commingling of corporate assets, and that Floors To Go was funded by her father's capital contributions. Bryan . . . certif[ied] that [Michele] was not a shareholder in Premier Floor . . . . and not be involved in the management at all. Bryan certifies that [Premier Floor] currently has no assets and was put out of business due to the poor economy.
Unfortunately, circumstances like Premier Floor . . . do occur. A business becomes unable to pay its debts and must be dissolved.
Because the plaintiff[s] [have] not made the requisite showing of fraud, the plaintiffs' motion to pierce the corporate veil as to [Michele] and Floors To Go is, in fact, denied, and, therefore, the . . . cross-motion to quash the information subpoena is, in fact, granted.
On April 14, 2014, plaintiffs filed a complaint against Bryan, Michele, Premier Floor, Floors To Go, and Premier Carpet, asserting, in part, violation of the Uniform Fraudulent Transfer Act (UFTA), N.J.S.A. 25:2-20 to -34; successor liability; and piercing the corporate veil (the second complaint). On July 2, 2014, Bryan became the registered agent for and managing member of Floors To Go.
Defendants filed a motion to dismiss the second complaint pursuant to Rule 4:6-2(e), arguing that the entire controversy doctrine and doctrine of collateral estoppel barred plaintiffs' piercing the corporate veil and successor liability claims. Defendants also argued that the statute of limitations barred the UFTA claim. Oral argument was held before a different judge who issued a preliminary decision denying the motion without prejudice. However, that judge never entered an order memorializing his decision and the matter was transferred back to the first motion judge for final disposition. The first motion judge reviewed the transcript of the oral argument and, in a written opinion dated October 24, 2014, found that the statute of limitations did not bar the UFTA claim and the entire controversy doctrine did not bar the piercing the corporate veil and successor liability claims. However, the judge granted the motion as to the piercing the corporate veil and successor liability claims based on collateral estoppel, finding as follows:
In opposition, plaintiffs argued, as they do in this appeal, that the court lacked jurisdiction to consider the motion because the February 2012 order was void under the holding in an unpublished opinion, Marange Printing, Inc. v. Finish Line NJ, Inc., No. A-2735-12 (App. Div. Mar. 7, 2014). However, unpublished opinions do not constitute precedent or bind us. Trinity Cemetery Ass'n v. Twp. of Wall, 170 N.J. 39, 48 (2001); R. 1:36-3. More importantly, plaintiffs invoked the court's jurisdiction by serving the post-judgment motion on defendants, who appeared in response thereto. --------
After reviewing the transcript of the [o]ral [a]rgument before this [c]ourt on February 17, 2012, it is clear that this [c]ourt substantively disposed of the issues when it denied [p]laintiffs' motion to pierce the corporate veil against [Bryan and Michele] and impose successor liability against Floors To Go. . . . That issue is identical to issues presented to the [c]ourt today: whether liability can be imposed on the current [d]efendants. The issue was actually litigated before this [c]ourt and an [o]rder was issued that was not appealed. That determination was indeed essential to the prior judgment because it concerned whether [p]laintiffs were able to join [Bryan and Michele] and [Premier Floor and Floors to Go] to the judgment. Finally, [p]laintiffs were a party in that proceeding.
On appeal, plaintiffs argue that collateral estoppel does not apply because the issues of whether Bryan, Michele and Premier Carpet had successor liability, whether the corporate veil should be pierced, and whether defendants violated the UFTA were never raised in the post-judgment motion, were not actually litigated, and were not determined by a valid and final judgment. Plaintiffs also argue that the issues were not identical, as defendants engaged in additional fraudulent transfers after the post-judgment motion.
Our review of a dismissal for failure to state a claim pursuant to Rule 4:6-2(e) is de novo, following the same standard as that of the trial court. Smerling v. Harrah's Entm't, Inc., 389 N.J. Super. 181, 186 (App Div. 2006); Banner v. Hoffman-La Roche Inc., 383 N.J. Super. 364, 373-74 (App. Div. 2006), certif. denied, 190 N.J. 393 (2007); Donato v. Moldow, 374 N.J. Super. 475, 482-83 (App. Div. 2005). "Thus, like the trial court, [we] must accept as true the facts alleged in the complaint, and credit all reasonable inferences of fact therefrom, to ascertain whether there is a claim upon which relief can be granted." Malik v. Ruttenberg, 398 N.J. Super. 489, 494 (App. Div. 2008).
In evaluating such a motion, "courts are cautioned to search the complaint 'in depth and with liberality to ascertain whether the fundament of a cause of action may be gleaned even from an obscure statement[,]'" Banco Popular North America v. Gandi, 184 N.J. 161, 165 (2005) (quoting Printing Mart-Morristown v. Sharp Electronics Corp., 116 N.J. 739, 746 (1989)), "particularly if further discovery is taken." Id. at. 183 (quoting Pressler & Verniero, Current N.J. Court Rules, comment 4.1 on R. 4:6-2 (2014)). However, the complaint must state "the facts on which the claim is based," Rule 4:5-2, rather than relying on conclusory allegations or the assertion that "essential facts that the court may find lacking can be dredged up in discovery." Printing Mart-Morristown, supra, 116 N.J. at 768; R. 4:5-2. Applying these standards, we conclude the judge properly granted the motion as to all claims except the UFTA claim.
"As a general principle, 'collateral estoppel is that branch of . . . res judicata which bars relitigation of any issue which was actually determined in a prior action, generally between the same parties, involving a different claim or cause of action.'" In re Liquidation of Integrity Ins. Co., 214 N.J. 51, 66 (2013) (quoting N.J. Div. of Youth & Family Servs. v. R.D., 207 N.J. 88, 114 (2011)). The standard for applying collateral estoppel is well settled:
[f]or the doctrine of collateral estoppel to apply . . . the party asserting the bar must show that: (1) the issue to be precluded is identical to the issue decided in the prior proceeding; (2) the issue was actually litigated in the prior proceeding; (3) the court in the prior proceeding issued a final judgment on the merits; (4) the determination of the issue was essential to the prior judgment; and (5) the party against whom the doctrine is asserted was a party to or in privity with a party to the earlier proceeding.The doctrine "must be applied equitably, not mechanically." Pivnick v. Beck, 326 N.J. Super. 474, 485 (App. Div. 1999) (citation omitted), aff'd, 165 N.J. 670 (2000). "While more frequent application of collateral estoppel conserves judicial resources and avoids repetitious litigation, a variety of factors may make its use in a particular case either unjust or counterproductive." State v. Gonzalez, 75 N.J. 181, 190 (1977). "Moreover, because collateral estoppel is an equitable doctrine, it should only be applied when fairness requires." Pivnick, supra, 326 N.J. Super. at 486.
[Olivieri v. Y.M.F. Carpet, Inc., 186 N.J. 511, 521 (2006) (first alteration in original) (quoting In re Estate of Dawson, 136 N.J. 1, 20-21 (1994)).]
"Collateral estoppel will not be applied 'where, after the rendition of the judgment, events or conditions arise which create a new legal situation or alter the rights of the parties.'" Kozlowski v. Smith, 193 N.J. Super. 672, 675 (App. Div. 1984) (quoting Washington Twp. v. Gould, 39 N.J. 527, 533 (1963)). Further, collateral estoppel does not apply if there are "other circumstances [that] justify affording [plaintiff] an opportunity to relitigate the issue." Barker v. Brinegar, 346 N.J. Super. 558, 566 (App. Div. 2002) (alterations in original) (citation omitted). "An example of other compelling circumstances making it inappropriate to invoke the doctrine is that new evidence has become available that could likely lead to a different result." Id. at 567; see Fama v. Yi, 359 N.J. Super. 353, 360 (App. Div. 2003) (stating that collateral estoppel does not apply in cases "where plaintiff obtained new evidence").
The piercing the corporate veil and successor liability claims raised in the second complaint are identical to the issues raised in the post-judgment motion. Those issues were actually litigated in the prior proceeding; the court issued a final judgment on the merits; the determination of the issue was essential to the February 2012 order; and plaintiffs were parties to the earlier proceeding and had a full and fair opportunity to litigate the issues as to Bryan, Michele, Floors To Go, and Premier Carpet.
Lastly, Floors To Go was formed in December 2010, prior to the dissolution of Premier Floor in June 2011, and prior to the entry of the February 2012 order. There was no evidence that any assets of Premier Floor were transferred to or comingled with Floors To Go. The fact that Bryan became the registered agent for and managing partner of Floors To Go and Michele transferred her ownership interest to him after entry of the February 2012 order was insufficient to impose successor liability or to pierce the corporate veil. See Lefever v. K.P. Hovnanian Enters., 160 N.J. 307, 310 (1999) (stating the factors necessary to find successor liability); Woodrick v. Jack J. Burke Real Estate, Inc., 306 N.J. Super. 61, 73 (App. Div. 1997) (stating the additional factors necessary to find a de facto continuation). There is no new evidence that could likely lead to a different result. Accordingly, collateral estoppel bars plaintiffs' piercing the corporate veil and successor liability claims in the second complaint. We, thus, affirm on these issues.
We reach a different conclusion as to the UFTA. That issue was never actually litigated in the post-judgment motion and there was no final determination on the merits. Thus, the UFTA claim is not barred by collateral estoppel. We therefore, reverse on this issue, but express no view as to the merits of the claim.
Affirmed in part and reversed in part. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION