Opinion
DOCKET NO. A-4142-12T3
06-19-2015
JOYCE MOROCHA MACDONALD, Plaintiff-Appellant/Cross-Respondent, v. GERALDINE E. O'KANE, AS EXECUTRIX OF THE ESTATE OF LEONARD GRAZIANO, Defendant-Respondent, and GERALDINE E. O'KANE, AS EXECUTRIX OF THE ESTATE OF EMILY GRAZIANO, Defendant-Respondent/Cross-Appellant.
William R. Connelly, attorney for appellant/cross-respondent. Geraldine E. O'Kane, attorney for respondent/cross-appellant. Geraldine E. O'Kane, attorney for respondent, joins in the brief of respondent/cross-appellant.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Sabatino and Simonelli. On appeal from the Superior Court of New Jersey, Chancery Division, Passaic County Docket No. C-106-08. William R. Connelly, attorney for appellant/cross-respondent. Geraldine E. O'Kane, attorney for respondent/cross-appellant. Geraldine E. O'Kane, attorney for respondent, joins in the brief of respondent/cross-appellant. PER CURIAM
This appeal involves the grant of summary judgment and award of attorney's fees and costs to plaintiff Joyce Morocha MacDonald pursuant to the Oppressed Shareholder Statute, N.J.S.A. 14A:12-7. The trial judge initially awarded plaintiff $27,500 rather than the $35,809 she sought, but later reduced the award to $15,000. On appeal, plaintiff argues that because the judge found she was an oppressed shareholder under the statute and that her fellow shareholders, Leonard Graziano (Leonard) and Emily M. Graziano (Emily) did not act in good faith, she was entitled to $35,809 pursuant to N.J.S.A. 14A:12-7(8)(d) and (10). Alternatively, plaintiff seeks reinstatement of the $27,500 award.
We shall sometimes refer to Leonard Graziano as Leonard and Emily Graziano as Emily and collectively refer to Leonard and Emily as the Grazianos. The Grazianos are deceased.
On cross-appeal, defendant Estate of Emily Graziano (the Estate) argues that plaintiff was not an oppressed shareholder entitled to summary judgment and attorney's fees. The Estate also argues that the judge erred in granting plaintiff's motion for leave to amend the complaint and in dismissing the matter with prejudice. For the reasons that follow, we affirm.
We derive the following facts from the record. Plaintiff's father, Norman Haley (Norman), owned ninety-eight acres of property located in West Milford, which was used for commercial purposes, including a tavern, several apartment units, a rooming house and a paintball business. Norman also owned a corporation known as Reflection Lakes Inn, Inc. (RLI) that held a retail distribution liquor license for the tavern and also operated the property and the property's rental business.
In 1972, Norman conveyed a fifty-percent interest in the property to the Grazianos. He also conveyed to them a fifty-percent shareholder interest in RLI and RLI's tavern's equipment, fixtures and furnishings. Although the parties agreed to form a new corporation for the property, they never did so. Instead, they continued operating the property and the property's rental business through RLI. As evidence of this arrangement, they deposited all of the rental income generated by the property into an RLI corporate bank account and paid all expenses for the property from that account. In addition, on RLI's corporate tax returns they listed "rental" as the corporation's business activity, listed the buildings on the property as corporate assets, and reported all rental income from the property as corporate income and all expenses as corporate expenses.
In 2005, Norman conveyed to plaintiff a twenty-five percent share of the property and a twenty-five percent shareholder interest in RLI. Plaintiff later began managing the property and the property's rental business. In 2007, plaintiff and Leonard discovered that Norman improperly withdrew money from RLI's corporate bank account. As a result, plaintiff, Leonard and Emily opened a new corporate bank account for RLI. Although the account bore their individual names, they opened it with RLI's federal tax identification number.
In July 2008, Leonard withdrew approximately $83,000 from the new corporate bank account without plaintiff's consent, leaving plaintiff with no funds to pay corporate expenses. In addition, Leonard and Emily instructed tenants to pay their rent directly to them instead of RLI. The Grazianos placed the money taken from the bank account and the rental income into their personal bank accounts and refused to account for or return the funds despite plaintiff's demands.
In August 2008, plaintiff filed a complaint against Leonard, Emily and Norman. She alleged that Leonard breached his fiduciary duty and wilfully deprived her of profits generated by the property by wrongfully withdrawing money from the bank account for his personal use and refusing to return the funds. She sought partition and sale of the property and an accounting of the monies Leonard had wrongfully withdrawn. She also sought compensatory and punitive damages and attorney's fees and costs for Leonard's improper conduct. As to RLI, she sought relief pursuant to N.J.S.A. 14A:12-7 as an oppressed minority shareholder.
Leonard, Emily and Norman filed an answer, but not a counterclaim. During the litigation, they maintained the untenable position that plaintiff was not a shareholder of RLI or owner of the property. They also asserted that because RLI did not own the property, and because the property and rental business were generally not operated through RLI, plaintiff was not an oppressed shareholder entitled to relief pursuant to N.J.S.A. 14A:12-7.
The parties subsequently agreed to sell the property and liquor license and equally divide the proceeds. All of plaintiff's other claims remained unresolved. Leonard, Emily and Norman later died, and plaintiff filed a motion for leave to amend the complaint to substitute their respective estates as defendants. Plaintiff also sought to add Emily to the claims she had asserted against Leonard based on discovery, which allegedly revealed that Emily acted in concert with Leonard to take money from the bank account and the rental income. The Grazianos' respective estates opposed the motion.
Norman died in November 2009; Leonard died in October 2010; and Emily died in September 2011.
On September 17, 2012, plaintiff voluntarily dismissed all claims against Norman's estate.
In an August 10, 2012 order and oral opinion, the trial judge granted the motion and permitted plaintiff to amend the complaint, except as to the breach of fiduciary duty claim, which the judge ruled would remain solely against Leonard's estate. The judge also permitted the parties to request an adjournment of the trial date if necessary. Plaintiff then filed an amended complaint. The Grazianos' respective estates did not file a counterclaim.
There was no dispute that Leonard improperly withdrew money from the corporate account and that he and Emily refused to account for or return the funds despite plaintiff's demands and court orders compelling them to do so. It was not until June 2012, nearly four years after Leonard improperly withdrew the funds, that their estates finally complied with the court orders.
In August 2012, plaintiff filed a motion for summary judgment and for an award of attorney's fees and costs in the amount of $35,809, representing attorney's fees of her first attorney, who withdrew due to a conflict of interest, and fees of her second attorney. Plaintiff submitted a statement of material facts and supporting certification in accordance with Rule 4:46-2(a), which confirm the facts stated in this opinion. She also submitted her attorneys' billing statements, which totaled $35,809.
To support her claim for attorney's fees and costs, plaintiff relied on N.J.S.A. 14A:12-7(8)(d), which provides, in pertinent part, that "[i]f the court finds that the action was maintainable under [N.J.S.A.] 14A:12-7(1)(c),[] the court in its discretion may award to the selling shareholder or shareholders reasonable fees and expenses of counsel and of any experts, including accountants, employed by them." Plaintiff also relied on N.J.S.A. 14A:12-7(10), which provides that "[i]f the court determines that any party to an action brought under this section has acted arbitrarily, vexatiously, or otherwise not in good faith, it may in its discretion award reasonable expenses, including counsel fees incurred in connection with the action, to the injured party or parties."
N.J.S.A. 14A:12-7(1)(c) provides as follows:
In the case of a corporation having 25 or less shareholders, the directors or those in control have acted fraudulently or illegally, mismanaged the corporation, or abused their authority as officers or directors or have acted oppressively or unfairly toward one or more minority shareholders in their capacities as shareholders, directors, officers, or employees.
The Estate did not file a responding statement either admitting or disputing each of the facts in plaintiff's statement of material facts, as required by Rule 4:46-2(b). The Estate merely filed a letter brief that contained a statement of facts unsupported by competent evidence or citation to the record. Accordingly, all of the facts in plaintiff's statement of material facts were deemed admitted. R. 4:46-2(b).
Leonard's estate did not oppose the motion. --------
In a December 20, 2012 order, the judge awarded plaintiff $27,500 and dismissed the case with prejudice. In a January 4, 2013 order and amplified written opinion, the judge noted that N.J.S.A. 14A:12-7(10) did not require a finding of bad faith. Relying on Musto v. Vidas, 333 N.J. Super. 52 (App. Div.), certif. denied, 165 N.J. 607 (2000), the judge determined only a finding of a lack of good faith was required to award attorney's fees and costs under N.J.S.A. 14A:12-7(10). The judge found that the Grazianos acted with a lack of good faith by making unauthorized withdrawals from the corporate account and engaging in other actions that effectively excluded plaintiff from RLI. However, the judge reconsidered the original attorney's fee award and found that plaintiff had wrongly sought fees for the services of her first attorney, who withdrew from the case due to a conflict of interest. The judge declined to award fees for the first attorney after January 2009, but decided to award some fees incurred prior to the second attorney's appearance. The judge found the sum of $15,000 to be reasonable under the circumstances and ordered the award to be paid from the Grazianos' share of the net proceeds of the sale of the property and liquor license.
Plaintiff filed a motion for reconsideration and the Estate filed a cross-motion for reconsideration. In a March 28, 2013 order and written opinion, the judge denied plaintiff's motion and granted the Estate's motion in part. The judge found it was undisputed that Leonard improperly withdrew money from the corporate bank account, refused to return it despite court orders compelling return, and deprived plaintiff of her share of the money and access to funds to pay corporate expenses. The judge concluded that under the circumstances of this case, plaintiff was an oppressed minority shareholder entitled to relief pursuant to N.J.S.A. 14A:12-7. The judge found no reason to increase the award of attorney's fees. This appeal followed.
We review a ruling on summary judgment de novo, applying the same standard governing the trial court. Davis v. Brickman Landscaping, Ltd., 219 N.J. 395, 406 (2014). Thus, we consider, as the judge in this case did, "'whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party.'" Id. at 406 (quoting Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995)). If there is no genuine issue of material fact, we must then "'decide whether the trial court correctly interpreted the law.'" DepoLink Court Reporting & Litig. Support Servs. v. Rochman, 430 N.J. Super. 325, 333 (App. Div. 2013) (citation omitted). We review issues of law de novo and accord no deference to the trial judge's conclusions on issues of law. Nicholas v. Mynster, 213 N.J. 463, 478 (2013).
Applying these standards, we discern no reason to disturb the judge's rulings. We reject the Estate contention on cross-appeal that because RLI did not own the property, plaintiff was not an oppressed shareholder entitled to summary judgment and relief pursuant N.J.S.A. 14A:12-7. The competent evidence in this case clearly established that: the parties operated the property and its rental business through RLI, thus entitling plaintiff to relief pursuant to N.J.S.A. 14A:12-7 as a minority shareholder; the Grazianos acted with a lack of good faith; and plaintiff was entitled to reasonable attorney's fees and costs pursuant to N.J.S.A. 14A:12-7(8)(d) and N.J.S.A. 14A:12-7(10). We are satisfied that the ultimate award of $15,000 was fair and reasonable, applying our limited scope of review to the trial court's fee award. See, e.g., Rendine v. Pantzer, 141 N.J. 292, 316-17 (1995) (recognizing the discretion commonly exercised by trial judges in deciding counsel fee applications); see also Litton Indus., Inc. v. IMO Indus., Inc., 200 N.J. 372, 386 (2009).
We have considered the Estate's arguments that the judge erred in granting plaintiff's motion for leave to amend the complaint and in dismissing the matter with prejudice in light of the record and applicable legal principles and conclude they are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION