Globe Motor Company and the Margolis Law Firm, LLC Vs. ilya Igdalev and Julia Igdalev

95 A.3d 791, 436 N.J. Super. 594

• Court: New Jersey Superior Court Appellate Division
• Decided: August 7, 2014
• Docket: A-0897-12
• Status: Published

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-0897-12T1

GLOBE MOTOR COMPANY, a corporation of the State of New Jersey, and THE MARGOLIS LAW FIRM, LLC, APPROVED FOR PUBLICATION Plaintiffs-Respondents, August 7, 2014 v. APPELLATE DIVISION

ILYA IGDALEV and JULIA IGDALEV,

Defendants-Appellants. ___________________________________

Argued December 11, 2013 - Decided August 7, 2014

Before Judges Sapp-Peterson, Lihotz and Hoffman.

On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-8638-11.

Christopher J. Koller argued the cause for appellants.

Sara A. Kimball argued the cause for respondents (The Margolis Law Firm LLC, attorneys; Ms. Kimball, on the brief).

The opinion of the court was delivered by

LIHOTZ, J.A.D. Defendants, Ilya and Julia Igdalev,1 appeal from a May 11,

2012 order denying their motion for summary judgment and a

separate order entered the same day granting summary judgment in

favor of plaintiffs Globe Motor Company (Globe) and The Margolis

Law Firm (Margolis). Defendants further appeal from the final

judgment filed on September 12, 2012, awarding plaintiffs

damages of $42,381, which included an award of attorney's fees.

On appeal, defendants raise several arguments maintaining entry

of summary judgment was erroneous. We disagree and affirm.

These are the facts viewed most favorably toward

defendants. Brill v. Guardian Life Ins. Co. of Am., 142 N.J.

520, 529–30 (1995). Plaintiffs filed a declaratory judgment

action (BER-L-8638-11) seeking a determination that defendants

were responsible to pay various costs and expenses resulting

from defendants' failure to comply with the terms of the

parties' settlement agreement (Globe II). Prior to addressing

the issues presented, we must provide background information

regarding the settlement in the underlying action and events

supporting plaintiffs' declaratory judgment complaint.

The underlying action (BER-C-203-08) was initiated by

Globe, as represented by Margolis, which alleged breach of

1 To avoid confusion, when referring to each individual defendant, we use his or her first name.

2 A-0897-12T1 contract and fraud against defendants and two others (Globe I).

That action was settled by a six-page written settlement

agreement. Among the terms of settlement was paragraph 2, which

stated:

That ILYA and JULIA shall jointly pay to GLOBE the amount of SEVENTY-FIVE THOUSAND ($75,000.00) DOLLARS, by certified or attorney trust account check payable to "The Margolis Law Firm LLC, as attorneys for Globe Motor Company" and delivered to The Margolis Law Firm LLC not later than 1:00pm on Friday, October 2, 2009 TIME BEING EXPRESSLY MADE OF THE ESSENCE.

The settlement agreement also provided that "[i]n the event

ILYA does not pay, for any reason or no reason, any portion of

the settlement amount, then in such event, JULIA shall pay the

entire SEVENTY-FIVE THOUSAND ($75,000.00) DOLLARS of the

settlement amount, as required by the provisions of paragraph #2

hereof." Upon "full payment" plaintiffs would enter a

stipulation dismissing the litigation and the agreement

contained a full mutual release of claims between the parties.

By October 2009, Margolis received two certified bank

checks totaling $75,000. More specifically, one check was for

$12,000 and the other for $63,000, each made payable to "The

Margolis Law Firm, LLC as Attorneys for Globe Motor Company."

The larger check contained a notation stating: "Remitter Mike

Povolotsky."

3 A-0897-12T1 Margolis accepted the certified checks as defendants'

payment under the terms of the settlement agreement. A

stipulation of dismissal, with prejudice, was later filed

concluding Globe I.

Almost one year later, Globe and Margolis were served with

a complaint filed by Brian Leonard, the designated Chapter 7

Trustee assigned to supervise the bankruptcy case initiated by

the debtor Auto Point, Limited (Auto Point).2 Leonard, on behalf

of the debtor's estate, filed an adversary proceeding to recover

$75,000 alleged to have been fraudulently transferred from the

debtor's assets and paid to Margolis and Globe. Leonard

asserted Auto Point "was not a client of, and owed no

obligations to" Margolis or Globe, and the debtor had "received

less than a reasonably equivalent value in exchange for the

[t]ransfers." Furthermore, Leonard's complaint maintained the

transfers were made when Auto Point was insolvent or the debtor

became insolvent as a result of the transfers. Leonard alleged

the transfers were voidable under various provisions of the

Bankruptcy Code.

Plaintiffs learned Povolotsky, defendants' friend and

business associate, owned Auto Point. The trustee had

2 Auto Point filed its voluntary petition pursuant to Chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Minnesota on April 23, 2010.

4 A-0897-12T1 determined the monies transmitted to Margolis to satisfy

defendants' obligations under the settlement agreement were

taken from Auto Point's funds.

Margolis and Globe hired separate bankruptcy counsel. A

settlement resolving Leonard's claims was reached, requiring

payment of $22,500. Additionally, they incurred attorney's fees

and costs.

When the bankruptcy action was terminated, plaintiffs filed

Globe II, seeking to recover damages sustained in defending and

settling the adversary proceeding. Plaintiffs alleged

defendants had breached the terms of settlement in the

underlying action by "fail[ing] to tender the amount due under

the Settlement free and clear from claims of others and not

subject to surrender . . . ." Plaintiffs alleged defendants'

breach caused plaintiffs to suffer damages equivalent to the

amounts paid to Leonard to settle the trustee's claims, along

with attendant attorney's fees and costs, both in the bankruptcy

action and the declaratory judgment matter. The Globe II

complaint also alleged unjust enrichment, breach of the covenant

of good faith and fair dealing, fraud, and also sought

indemnification from Julia.

The parties filed cross-motions for summary judgment.

Plaintiffs' counsel restated the facts regarding the Globe I

5 A-0897-12T1 litigation, settlement agreement, checks received, Minnesota

bankruptcy proceedings, terms of settlement of the adversary

proceeding, and attorney's fee expense incurred. Globe's vice

president affirmed these facts.

In support of defendants' motion for summary judgment, Ilya

certified:

4. In order to resolve that litigation, I entered into a Settlement Agreement, wherein Globe was to receive $75,000.00, payable to The Margolis Law Firm LLC, as Attorneys for Globe Motor Company.

5. This settlement was made as a business decision by all parties.

6. Pursuant to the Settlement Agreement and Release, I was to pay the sum of $75,000.00 and my former wife, Julia Igdalev, was a guarantor of said payment and in addition, entered into a confession of judgment if those payments were not made.

7. At approximately the same time the Settlement Agreement was executed, my New Jersey bank accounts had been restrained due to allegations in a criminal action against me.

8. Prior to the restraint of my funds, in the New Jersey bank accounts, I had a business and personal relationship with an individual named Michael Povolotsky.

9. Michael Povolotsky was a buyer and seller of cars in Minnesota, and also operated a business in Minnesota called "Auto Point Limited."

10. About the same time the Settlement Agreement was reached, Michael Povolotsky,

6 A-0897-12T1 individually, was holding more than $75,000.00 of money owed to me from prior dealings.

11. I requested Michael Povolotsky to make checks payable to The Margolis Law Firm LLC, in the total amount of $75,000.00 in settlement of this case.

Ilya averred neither he nor Julia "were asked, nor agreed

to indemnify or hold [plaintiffs] harmless from any claims[,]"

stating "[t]here was absolutely no provision in the Settlement

Agreement . . . that the funds were to come from my wife or

myself, individually, or [from] any specific payor."

Maintaining he acted "in good faith," Ilya insisted he made the

payment required under the settlement agreement, and based on

the release, neither he nor Julia had a further obligation to

plaintiffs.

Julia too filed a certification adopting as true and

correct all statements made by Ilya. "In addition, [she noted]

all payments were timely made and accepted without protest by

[p]laintiff[s], who had dismissed the . . . action with

prejudice."

Following a lengthy oral argument, the Law Division judge

denied defendants' and granted plaintiffs' motion for summary

judgment. The judge found defendants had materially breached

the settlement agreement because the monies tendered were

determined to have been transferred from the debtor Auto Point,

7 A-0897-12T1 without consideration, and were legally subject to recovery.

The judge therefore concluded Ilya did not pay the $75,000 as

required by the settlement agreement. He entered orders

memorializing this decision on May 11, 2012. Subsequent motions

were filed regarding recovery of attorney's fees and costs.

Final judgment was entered on September 12, 2012. Defendants'

appeal ensued.

We review the trial court's summary judgment order de novo,

applying the same standard that governs the trial court. W.J.A.

v. D.A., 210 N.J. 229, 237 (2012); Lapidoth v. Telcordia Tech.,

Inc., 420 N.J. Super. 411, 417 (App. Div.), certif. denied, 208

N.J. 600 (2011). Pursuant to Rule 4:46, we "consider 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." Brill, supra, 142 N.J.

at 540. "[W]hen the evidence is so one-sided that one party

must prevail as a matter of law, the trial court should not

hesitate to grant summary judgment." Ibid. (citation and

internal quotation marks omitted). If no genuine factual

dispute exists, we must decide whether the trial court's ruling

on the law, to which we owe no deference, was correct. W.J.A.,

supra, 210 N.J. at 237-38.

8 A-0897-12T1 Also implicated in our review are principles governing the

enforcement of the parties' terms of settlement. "Public policy

favors the settlement of disputes. Settlement spares the

parties the risk of an adverse outcome and the time and expense

-- both monetary and emotional -- of protracted litigation."

Willingboro Mall, Ltd. v. 240/242 Franklin Ave., L.L.C., 215

N.J. 242, 253-54 (2013). See also Herrera v. Twp. of S. Orange

Vill., 270 N.J. Super. 417, 424 (App. Div. 1993) (noting

"[t]here is a clear public policy in this state favoring

settlement of litigation"), certif. denied, 136 N.J. 28 (1994).

"Settlements avert the risks of litigation, spare the parties

ruinous litigation expenses, and conserve judicial resources."

Pinto v. Spectrum Chems. & Lab. Prods., 200 N.J. 580, 594

(2010). Moreover, settlements permit "litigants to resolve

disputes on mutually acceptable terms in place of risking

exposure to an adverse judgment[.]" DEG, LLC v. Twp. of

Fairfield, 198 N.J. 242, 259 (2009) (citation omitted). "A

defendant's likely settlement calculation is whether the payout

is less than the 'cost of the predicted judgment, discounted by

its probability, plus the transaction costs of further

litigation.'" Pinto, supra, 200 N.J. at 594 (quoting Evans v.

Jeff D., 475 U.S. 717, 734, 106 S. Ct. 1531, 1541, 89 L. Ed. 2d

747, 762 (1986)).

9 A-0897-12T1 "'An agreement to settle a lawsuit is a contract, which

like all contracts, may be freely entered into and which a

court, absent a demonstration of fraud or other compelling

circumstances, should honor and enforce as it does other

contracts.'" Brundage v. Estate of Carambio, 195 N.J. 575, 601

(2008) (quoting Pascarella v. Bruck, 190 N.J. Super. 118, 124-25

(App. Div.), certif denied, 94 N.J. 600 (1983)). The

"[i]nterpretation of a settlement agreement implicates

significant legal and policy principles[.]" Kaur v. Assured

Lending Corp., 405 N.J. Super. 468, 474 (App. Div. 2009). Our

review of legal questions is plenary. Zabilowicz v. Kelsey, 200

N.J. 507, 512 (2009).

When examining the terms of a settlement agreement, we are

guided by the rules of contract construction. Brundage, supra,

195 N.J. at 601. See also Thompson v. City of Atl. City, 190

N.J. 359, 379 (2007). "The polestar of contract construction is

to discover the intention of the parties as revealed by the

language used by them." Karl's Sales & Serv., Inc. v. Gimbel

Bros., Inc., 249 N.J. Super. 487, 492 (App. Div.), certif.

denied, 127 N.J. 548 (1991). In interpreting a contract, the

focus is on "the intention of the parties to the contract as

revealed by the language used, taken as an entirety; and, in the

quest for the intention, the situation of the parties, the

10 A-0897-12T1 attendant circumstances, and the objects they were thereby

striving to attain . . . ." Lederman v. Prudential Life Ins.

Co. of Am., Inc., 385 N.J. Super. 324, 339 (App. Div.) (citation

and internal quotation marks omitted), certif. denied, 188 N.J.

353 (2006). In that regard, the court may not re-write a

contract or grant a better deal than that for which the parties

expressly bargained. Solondz v. Kornmehl, 317 N.J. Super. 16,

21 (App. Div. 1998).

Recognizing the parties' autonomy in resolving their

disputes, "[i]t follows that any action which would have the

effect of vitiating the provisions of a particular settlement

agreement and the concomitant effect of undermining public

confidence in the settlement process in general, should not be

countenanced." Dep't. of Pub. Advocate, Div. of Rate Counsel v.

N.J. Bd. of Pub. Utils., 206 N.J. Super. 523, 528 (App. Div.

1985). With these principles in mind, we consider defendants'

arguments.

On appeal, defendants contend the judge incorrectly granted

summary judgment to plaintiffs, asserting the only "competent

evidential material[]" before the court was Ilya's certification

stating the $75,000 transferred by Povolotsky was Ilya's money.

Therefore, the funds could not belong to the debtor, Auto Point.

Because defendants challenged plaintiffs' claim regarding the

11 A-0897-12T1 ownership of the money used to satisfy the obligations under the

settlement agreement, defendants argue material factual disputes

obviated entry of summary judgment.

To support this contention, defendants claim "all parties

were aware of the restraint on Ilya['s] . . . funds in Bergen

County." Defendants' brief purports to quote from Ilya's

certification filed in support of defendants' motion and in

opposition to plaintiffs' motion for summary judgment. However,

the certification as filed contains no statement placing

plaintiffs on notice of the restraint of defendants' funds or

the need to rely on Povolotsky. In fact, the recitals recounted

and relied on by defendants' in their brief materially differ

from the actual facts of record.

Nevertheless, accepting as true Ilya's statement Povolotsky

was "holding . . . money owed . . . from prior dealings" does

not prove funds sent to plaintiffs by Povolotsky were Ilya's or

refute that the money transferred to plaintiffs actually

belonged to Auto Point. Defendants' contrary suggestion made to

create a dispute of material facts is illusory. See Shelcusky

v. Garjulio, 172 N.J. 185, 200-01 (2002) ("The very object of

the summary judgment procedure then is to separate real issues

from issues about which there is no serious dispute."). Quite

12 A-0897-12T1 simply, the assertion that Povolotsky held Ilya's money does not

mean he sent Ilya's money.3

Also, defendants mistakenly contend that absent a judgment

from the Bankruptcy Court determining the funds actually were

Auto Point's must mean they were Ilya's funds in Povolotsky's

possession. That Povolotsky held Ilya's money creates no

dispute of a material fact, which should subject plaintiffs to

the burden of a trial. Merely because Povolotsky held Ilya's

money does not establish he used those funds when making payment

to plaintiffs. Indeed, Ilya asserts no personal knowledge

establishing his money was actually transferred; at its best,

defendants' suggestion in this regard is merely supposition,

which is insufficient to defeat summary judgment.

The record, viewed most favorable to defendants, shows only

that after Ilya asked his friend and business associate to

satisfy the settlement obligation with money owed to him,

Povolotsky did so using assets of his company, Auto Point. Ilya

does not maintain Auto Point owed him money.

3 Our dissenting colleague maintains it is reasonable to "infer . . . that the funds Povolotsky used to buy the checks were those owed to Ilya." Post at ___ (slip op. at 7). We cannot abide by such a conclusion. Auto Point was a corporation. As such, it is an independent legal entity. Thus, if Povolotsky owed Ilya money, payment could not reasonably or permissibly come from Auto Point's funds. Importantly, Ilya never asserts Auto Point owed him money, as the dissent assumes. Post at ___ (slip op. at 7).

13 A-0897-12T1 Auto Point's ownership of the funds is evident from the

bankruptcy pleadings. Leonard is a fiduciary appointed by the

United States Bankruptcy Court to oversee the debtor's estate.

See 11 U.S.C.A. § 321 to § 323 (stating eligibility and general

duty of bankruptcy trustee). After examining the debtor's books

and records, Leonard filed the adversary proceeding to recover

money he found was taken from Auto Point's account and

transferred to plaintiffs. There is no dispute regarding the

amount transferred, which matched the sums delivered to

plaintiffs or that the checks as issued were made payable to

Margolis as attorney for Globe. Further, there is no evidence

Auto Point owed a debt or obligation to plaintiffs or Ilya.

Because the transfer was without consideration, it is subject to

recovery. See 11 U.S.C.A. § 548 (allowing trustee to avoid

fraudulent transfers made by a debtor within the four-year

limitations period). The settlement of the adversary action

represented a compromise by the parties with respect to the

contested and disputed issues, accepting the trustee's evidence,

along with each side's assessment of the cost and expense in

proceeding to trial.4

4 The dissent suggests the judge improperly faulted defendants for their "fail[ure] to participate in [the bankruptcy action] to which they had never been made a party." Post at ___ (slip op. at 9). We provide only these brief (continued)

14 A-0897-12T1 We conclude plaintiffs cannot be faulted for settling

rather than trying the adversary proceeding. See Frank Stamato

& Co. v. Lodi, 4 N.J. 14, 21 (1950) (citing Ramsey v. Perth

Amboy Shipbuilding Eng'g Co., 72 N.J. Eq. 165 (Ch. 1906), aff'd.

73 N.J. Eq. 742 (E. & A. 1908)). ("[I]t is well established that

a party who has been injured by a breach of contract must make

reasonable efforts to mitigate his damages[.]"). To suggest

(continued) comments. Joinder implicates establishment of subject matter jurisdiction, which is grounded in and limited by statute. Celotex Corp. v. Edwards, 514 U.S. 300, 307, 115 S. Ct. 1493, 1498, 131 L. Ed. 2d 403, 410 (1995). Pursuant to 28 U.S.C.A. § 157(b)(1), bankruptcy judges hear all core proceedings and "may enter final orders and judgments with respect to such proceedings." In re J.T. Moran Fin. Corp., 124 B.R. 931, 936 (Bankr. S.D.N.Y. 1991). Core proceedings are those "arising under Title 11 or arising in or related to a case under Title 11[.]" Phar-Mor, Inc. v. Coopers & Lybrand, 22 F.3d 1228, 1234 n.9 (3d Cir. 1994). See also 28 U.S.C.A. § 157(b)(2) (providing a non-exhaustive list of core proceedings). "By contrast, proceedings which are 'related to' a bankruptcy case are non-core." Id. at 1235. "In non-core proceedings, unless the parties consent to the bankruptcy court's jurisdiction, the bankruptcy judge has the power only to 'submit proposed findings of fact and conclusions of law to the district court,' and the parties are entitled to de novo review of any matter to which they 'timely and specifically' object." In re Arnold Print Works, Inc., 815 F.2d 165, 167 (1st Cir. 1987) (quoting 28 U.S.C.A. § 157(c)(1)). Jurisdiction over a non-core matter is permissible only if "the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy[.]" Celotex Corp., supra, 514 U.S. at 308, 115 S. Ct. at 1499, 131 L. Ed. 2d at 411 n.6. Here, plaintiffs' action to enforce the settlement agreement had no impact on the estate. Further, as we noted, Ilya's suggestion that Povolotsky held his funds would not defeat the trustee's position that funds were transferred from Auto Point and paid to plaintiffs.

15 A-0897-12T1 plaintiffs were required to complete a trial and obtain a

judicial determination is specious. Pinto, supra, 200 N.J. at

594.

We additionally reject defendants' argument suggesting the

motion judge's determination was erroneously based on his

finding Ilya was not credible. The judge's cited comments were

not a determination of contested facts; rather, the statements

represent an assessment that the asserted facts do not create a

material dispute. As the Court held in Shelcusky:

The determination that an offsetting affidavit creates only a sham factual dispute is squarely within the trial court's authority at the summary judgment stage, when the court is required to evaluate, analyze, and sift evidence to determine whether the evidential materials, when viewed in the light most favorable to the opposing party, would permit a rational factfinder to resolve the issue in favor of the opposing party. That rule does not intrude on the function of the jury because it does not require the trial court to determine credibility, or to determine the relative weight of conflicting evidence. We are confident that trial courts have the ability to distinguish sham affidavits from affidavits that raise a genuine issue of material fact.

[Shelcusky, supra, 172 N.J. at 201.]

Defendants next assert they fully complied with the

settlement terms as drafted and were innocent because they

lacked knowledge of any wrongdoing by their friend Povolotsky.

16 A-0897-12T1 Essentially, defendants believe their presentation of certified

checks that were accepted by plaintiffs, who thereafter filed a

full release and stipulation of dismissal, ends our inquiry.

Additionally, defendants argue plaintiffs could have rejected

the tender of the funds drawn on a Minnesota Bank or after

noticing one check contained Povolotsky's name as remitter. We

examine these points.5

Evaluating the relative innocence of the parties, when

deciding who bears the burden of Povolotsky's actions, we

conclude the manner and methods chosen were controlled by

defendants and accomplished at their direction. Therefore, the

consequences of Povolotsky's unseemly conduct falls to them

rather than plaintiffs. Povolotsky's failure equates to

defendants' failure to perform and strikes at the very heart of

the settlement agreement, defeating its purpose and representing

a material breach of its terms. See Restatement (Second)

Contracts § 241 comment a (1981) (discussing a material breach

of contract).

Defendants' contention that they complied with the letter

of the settlement agreement when they tendered a cashier's and a

5 Defendants also argue the judge erred because the settlement agreement did not contain a specific term that, if Ilya did not pay, a judgment would be entered against him. This argument lacks merit. R. 2:11-3(e)(1)(E).

17 A-0897-12T1 bank check totaling $75,000 is legally unfounded. An essential

element of the agreement was that plaintiffs received the

agreed-upon amount. Because legal claims attached to the money

tendered, which were not immediately apparent, payment was

illusory.

The constrained construction of the contractual obligations

asserted by defendants completely ignores the reality that legal

defenses attached to the funds, which prevented plaintiffs'

retention. By accepting the compromise set forth in the

settlement agreement, plaintiffs sought to end the litigation

with defendants and had no intention of becoming embroiled in a

new suit. When the monies used to satisfy defendants'

obligation were not free of the claims of others, the essence of

the settlement agreement was breached. Although Ilya delivered

payment, the funds used did not belong to Povolotsky and could

not be transferred to another. Therefore, the trustee's

recovery of $22,500 results in defendants not paying plaintiffs

the agreed sum of $75,000.

We also find defendants' argument that plaintiffs should

have been suspect of the out-of-state checks highly

disingenuous. After all, defendants commissioned Povolotsky to

act. Plaintiffs had no reason to doubt the efficacy of the

negotiable instruments, N.J.S.A. 12A:3-104(c), or know the money

18 A-0897-12T1 tendered actually belonged to Auto Point. The mode of payment

specified in the settlement agreement was intended to provide

some security that receipt of the designated instruments

evidenced existence of the funds. See Merchants' Nat'l Bank v.

State Bank, 77 U.S. 604, 648 (10 Wall.), 19 L. Ed. 1008, 1019

(1870) (acknowledging "[t]he practice of certifying checks has

grown out of the business needs of the country," and noting

"[t]hey enable the holder to keep or convey the amount specified

with safety. They enable persons not well acquainted to deal

promptly with each other, and they avoid the delay and risks of

receiving, counting, and passing from hand to hand large sums of

money."). Defendants' provision of a cashier's check and a bank

check, paid to the order of plaintiffs, reflected monies drawn

on the banks' funds, again a mode implying security of the

payment. N.J.S.A. 12A:3-104(g). However, even a cashier's

check is not free of legal defenses. See Santos v. First Nat'l

State Bank of N.J., 186 N.J. Super. 52, 63 (App. Div. 1982).6

6 We do not agree with our dissenting colleague that cashier's checks are the functional equivalent of cash. Post at ___ (slip op. at 13). In fact, Parks v. Commerce Bank, 377 N.J. Super. 378 (App. Div. 2005), makes clear federal regulatory treatment of the speed with which banks must process these instruments makes it "reasonable for the marketplace to treat them as the functional equivalents to cash." Id. at 385. Provisions of the Uniform Commercial Code remain applicable and "it is a mistake to conclude that cashier's checks are like cash in all situations." Santos, supra, 186 N.J. Super. at 63. We (continued)

19 A-0897-12T1 Contrary to the inference sought by defendants, there is no

evidence plaintiffs were party to Povolotsky's actions.7 As

such, plaintiffs qualified as a holder in due course, as defined

under Article 3 of the Uniform Commercial Code (UCC), codified

as N.J.S.A. 12A:3-101 to -605. A "holder in due course" is a

holder who takes the instrument (a) for value, (b) in good faith

and (c) without notice that it is overdue or has been dishonored

or of any defense against or claim to it on the part of any

person. N.J.S.A. 12A:3-302(a)(2).

Our assessment that defendants are liable under these facts

(rather than suggesting plaintiffs are at fault), aligns with

this concept.

The basic philosophy of the holder in due course status is to encourage free negotiability of commercial paper by removing certain anxieties of one who takes the paper as an innocent purchaser knowing no reason why the paper is not as sound as

(continued) can agree that "[u]nless otherwise agreed, if a certified check, cashier's check, or teller's check is taken for an obligation, the obligation is discharged to the same extent that discharge would result if an amount of money equal to the amount of the instrument were taken in payment of the obligation." N.J.S.A. 12A:3-310(a). However, if legal defenses defeat the payment, the obligation must be restored. This refutes our dissenting colleague's assertion that defendants complied with the settlement as a matter of law. Post at ____ (slip op. at 13). 7 As noted above, defendants' reliance on the proposition that plaintiffs knew what Povolotsky was doing was premised on a certification that is not part of the record.

20 A-0897-12T1 its face would indicate. It would seem to follow, therefore, that the more the holder knows about the underlying transaction, and particularly the more he [or she] controls or participates or becomes involved in it, the less he [or she] fits the role of a good faith purchaser for value; the closer his [or her] relationship to the underlying agreement which is the source of the note, the less need there is for giving him [or her] the tension-free rights considered necessary in a fast-moving, credit-extending commercial world.

[Unico v. Owen, 50 N.J. 101, 109-10 (1967).]

We also reject defendants' contention plaintiffs should

have included provisions in the settlement agreement restricting

payment solely from Ilya's funds, or otherwise requiring

indemnification, including in the event of third-party recovery,

as occurred here.8 Any notion that settlement agreements must

include language to curb all possible sharp or illicit practices

is antagonistic to one's obligation to negotiate in good faith.

Perhaps it was unforeseen that Povolotsky would be a scoundrel,

but we cannot ignore Ilya controlled that process. Therefore,

8 We understand the dissent finds the absence of such provisions compelling. Post at ____ (slip op. at 12-14). We disagree because the practical application of requiring the enumeration of all provisions that could defeat the apparent obligation of payment would be burdensome as impractical and, thus, discourage settlement arrangements. We also cannot accept that when weighing the responsibilities presented by these facts, Margolis should have rejected the cashier's check, because it did not reflect Ilya was the remitter. Post at ____ (slip op. at 13).

21 A-0897-12T1 he may not be relieved of the responsibility to tender full

payment if the process he chose was flawed. Under the terms of

the agreement, Julia was responsible if Ilya failed to pay "for

any reason or no reason." Thus, she too is liable. Globe is

due $22,500.9

We turn to defendants' challenges to the award of

attorney's fees. Citing the American Rule,10 defendants maintain

the fee award was legally unsupported. We are not persuaded.

In accordance with the American Rule, generally, attorney's

fees are not recoverable unless authorized by statute or

recognized as available by our Court Rules. See R. 4:42-9.

However, fee awards have been ordered when incurred as damages

sustained by a party forced into litigation with another as a

result of fraud, see Hagen v. Gallerano, 66 N.J. Super. 319, 333

(App. Div. 1961), and for third-party litigation arising because

9 We agree with our dissenting colleague that Margolis does not have a claim against defendants for breach of the settlement agreement. Post at ____ (slip op. at 9). We do not agree the payment to Leonard was differentiated between Margolis and Globe, as such an allocation of liability is not evident in the settlement terms. Nevertheless, if Margolis received money, it was for attorney's fees paid by Globe from the $75,000 recovery. Globe would remain liable for the fees recovered; therefore, defendants must repay the entirety of the sum remitted to Leonard. 10 The American Rule generally requires each party to bear all legal expense incurred in representation and generally precludes recovery of counsel fees from an adversary. N. Bergen Rex Transp., Inc. v. Trailer Leasing Co., 158 N.J. 561, 569 (1999).

22 A-0897-12T1 of a party's breach of contract, Dorofee v. Planning Bd. of

Pennsauken, 187 N.J. Super. 141, 144 (App. Div. 1982). "The

award of counsel fees as traditional damages in such settings is

not precluded by R[ule] 4:42-9." Ibid. (citing Cohen v. Fair

Lawn Dairies, Inc., 86 N.J. Super. 206 (App. Div. 1965), aff'd

44 N.J. 450 (1965)).

The judge found the fees incurred were necessary

consequences of defendants' breach of the settlement agreement.

Noting the fees incurred were causally related to defendants'

breach, the judge reasoned, "defendants put you in this

situation. You had no other choice [but] to do it [i.e., defend

the adversary proceeding]." Counsel's certification in support

of the fee request detailed the basis of all costs and expenses.

The judge found the request reasonable. Following our review we

cannot determine the judge misapplied his reasoned discretion.

Packard-Bamberger & Co. v. Collier, 167 N.J. 427, 444 (2001).

Affirmed.

23 A-0897-12T1 ________________________________________

SAPP-PETERSON, P.J.A.D., dissenting.

To accept the majority's decision is to conclude the facts

are so one-sided that plaintiffs were entitled to judgment as a

matter of law. Their decision, however, reflects consideration

of the facts in the light most favorable to plaintiffs, contrary

to the appropriate standard for granting summary judgment.

Brill, supra, 142 N.J. at 523. In addition, they place the

burden of proof on defendants as to the ownership of the funds

transferred. For the reasons that follow, I respectfully

dissent.

defendants. Ibid. On October 1, 2009, Globe reached a

settlement agreement with defendants Ilya and Julia Igdalev in

an underlying dispute (Globe I), requiring that defendants

jointly pay Globe $75,000 by certified or attorney trust account

check payable to Margolis, Globe's counsel in that matter and

co-plaintiff here, and that payment would be delivered to

Margolis by October 2, 2009. The terms also provided that if

Ilya failed to timely deliver the checks, Julia would have to

pay the entire amount in the same manner, as guarantor. The

parties agreed a stipulation of dismissal would be filed "[u]pon

full payment in accordance with th[e] [a]greement."

A-0897-12T1 Within days of reaching the settlement, defendants

presented two cashier's checks totaling the full obligation,

both made payable to Margolis on Globe's behalf. One of them

explicitly named a Mike Povolotsky, rather than either of

defendants, as the remitter, and the other specified no

remitter. For reasons unexplained, plaintiffs did not file the

stipulation of dismissal until March 23, 2010.

In April 2010, Auto Point filed a petition for Chapter 7

Bankruptcy. On February 24, 2011, sixteen months after

defendants paid the $75,000 and eleven months after the

stipulation of dismissal was filed, the bankruptcy trustee,

Brian Leonard, filed a complaint (adversary proceeding) against

plaintiffs in Minnesota bankruptcy court, claiming that Auto

Point "made two payments to [Margolis and Globe] on October 1,

2009, in the amount of $12,000.00 and $63,000.00 for a total of

$75,000.00. The payments were made from [Auto Point's] assets"

and "Auto Point was not a client of, and owed no obligations to,

The Margolis Law Firm, LLC. The Debtor did not owe any

obligations to Globe Motor Company."

The bankruptcy court admitted Margolis pro hac vice, but

both Margolis and Globe retained separate local counsel.

Leonard reached a settlement with Globe and Margolis for

$22,500, which amounted to thirty percent of the $75,000 he

2 A-0897-12T1 originally demanded. Both Globe and Margolis also each paid

$4000 in counsel fees to local Minnesota counsel.

Plaintiffs thereafter initiated the present action (Globe

II) against defendants, asserting defendants breached the

settlement agreement and release because the bankruptcy

proceedings in Minnesota effectively negated the settlement

payment, along with claims for breach of an implied covenant of

good faith and fair dealing, fraud, unjust enrichment, and

indemnification. Plaintiffs subsequently moved for summary

judgment and defendants cross-moved for summary judgment. The

court granted plaintiffs' motion and entered judgment in favor

of plaintiffs for $22,000, the exact amount plaintiffs paid to

resolve the adversary proceeding. The court also entered an

order awarding counsel fees to plaintiffs, allocated as follows:

$19,000 in counsel fees with $8,000 and $2,000 applied to the

Minnesota bankruptcy action and $9,000 for prosecution of the

present action.

In granting summary judgment, the motion judge found

incredible Ilya's certification that the funds used to purchase

the two checks belonged to or were owed to Ilya,1 noting that

1 While the majority is correct that defense counsel's quotation of that certification in his brief differs from the copy of the certification in the record, counsel may well have been quoting from a different certification filed in a related bankruptcy (continued)

3 A-0897-12T1 defendants never went to Minnesota to challenge the bankruptcy

trustee's position that the checks were assets of the debtor.

The court also found there were no genuinely disputed issues of

fact as to whether defendants breached the settlement agreement.

The court expressed: "They were supposed to pay $75,000. The

Court finds the $75,000 wasn't paid. Start from the initial

agreement. This isn't a novation. It's not an assignment.

It's none of that. They guaranteed they will be paid $75,000,

and they weren't paid $75,000." The present appeal followed.

Our review of a trial court's grant or denial of a motion

for summary judgment is de novo. Agurto v. Guhr, 381 N.J.

Super. 519, 525 (App. Div. 2005). Under our de novo standard of

review, we employ the same standard as that of the trial court.

Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162,

167 (App. Div.), certif. denied, 154 N.J. 608 (1998). Our

analysis requires that we first determine whether the moving

party has demonstrated there are no genuine disputes as to

material facts, and then we decide "whether the motion judge's

application of the law was correct." Atl. Mut. Ins. Co. v.

(continued) matter involving Auto Point that was mentioned during oral argument. Moreover, plaintiffs' counsel never disputed that plaintiffs had been aware of Ilya's financial circumstances, notwithstanding that both defense counsel and the court referenced this fact during oral argument.

4 A-0897-12T1 Hillside Bottling Co., 387 N.J. Super. 224, 230–31 (App. Div.),

certif. denied, 189 N.J. 104 (2006). In so doing, we view the

evidence in the "light most favorable to the non-moving

party[.]" Brill, supra, 142 N.J. at 523 (1995). Because our

review of issues of law is de novo, we accord no special

deference to the motion judge's legal conclusions. Zabilowicz,

supra, 200 N.J. at 512. Even where, as here, both parties move

for summary judgment, that relief may not be granted so long as

a trial remains necessary to resolve disputed issues of material

fact, O'Keeffe v. Snyder, 83 N.J. 478, 487 (1980), particularly

where issues of credibility remain, D'Amato v. D'Amato, 305 N.J.

Super. 109, 114-15 (App. Div. 1997).

Every theory of liability plaintiffs assert presumes the

funds they had to return to the bankruptcy estate were

legitimately subject to return, that is, that the transactions

were legitimately avoidable — but this is only so if the funds

actually belonged to Auto Point. 11 U.S.C.A. § 548(a). The

majority accepts as true for purposes of summary judgment that

Povolotsky was holding funds owed to Ilya, but maintains it was

"evident from the bankruptcy pleadings" that the funds

Povolotsky actually sent were drawn from accounts owned by Auto

Point. Ante at ___ (slip op. at 13). Because Auto Point never

owed Ilya any money, at least as the majority interprets Ilya's

5 A-0897-12T1 certification, the money Povolotsky sent could not have been

Ilya's and must have belonged to Auto Point. Ante at ___ (slip

op. at 13).

However, the only evidence plaintiffs have thus far

presented that the money even originated from Auto Point's

accounts is an untested allegation in a complaint from another

matter. The majority may treat that allegation as established

fact, but neither of the checks in the record names Auto Point

as the remitter, one explicitly names Povolotsky personally, and

the other bears no name for the remitter. Ilya certified that

Povolotsky, not Auto Point as the majority itself points out,

was to send him the money. Plaintiffs may well have settled the

bankruptcy matter in good faith, in light of the trustee's

evidence, but they have not shared any of that evidence here,

save the checks, which reveal no connection to Auto Point on

their face. One may certainly reasonably infer from the

bankruptcy complaint, as the majority does here, that the reason

the trustee's investigation turned up these particular

transactions is that the money at some point had been drawn from

Auto Point's accounts. But that inference is not favorable to

defendants, and it is disputed by the balance of the record.

Ilya certified that he and Povolotsky had a business

relationship, that Povolotsky operated Auto Point, that

6 A-0897-12T1 Povolotsky "was holding more than $75,000.00 of money owed to

[him] from prior dealings," and that he requested Povolotsky

send the checks to Margolis. One may reasonably infer from

those circumstances that the funds Povolotsky used to buy the

checks were those owed to Ilya. Moreover, even if the funds

were drawn from Auto Point's accounts, an unfavorable inference

not permitted on summary judgment, Ilya never specified,

notwithstanding the majority's assertion to the contrary, who

owed him the money, only that Povolotsky was the one who was

holding it. Given that Ilya claimed the money was owed from

prior business dealings, it would not be unreasonable to infer

that the money was owed by Auto Point, Povolotsky's business.2

Finally, even if we draw the contrary inference, again, not one

permitted on summary judgment, that the money was owed

personally by Povolotsky, it would not be inconceivable that

Povolotsky, whom the majority, after all, characterizes as a

"scoundrel," ante at ___ (slip op. at 21), might have

intermingled his own funds with those of his corporation. Of

course, one could also reasonably conclude, as the majority

does, that Povolotsky personally owed money to Ilya, and that

2 In that case, the transfer may yet have been avoidable, 11 U.S.C.A. § 547(b)-(c), but the record is not yet sufficient to resolve that issue, and the trustee never pleaded that ground for relief.

7 A-0897-12T1 Ilya asked him to use that money to buy the checks, but that he

used Auto Point's funds instead. One could even decline to

credit Ilya at all and conclude that neither Povolotsky nor Auto

Point ever owed him any money in the first place.

The point to all of this is that these are all reasonable

inferences, but not all of them inexorably lead to the ultimate

conclusion the majority reaches, namely that the funds were Auto

Point's, not Ilya's. Because the facts here are not so one-

sided as to demand that conclusion, the task of weighing them

must be left to the trier of fact. See Gilhooley v. Cnty. of

Union, 164 N.J. 533, 545 (2000) (stating that "it was not the

court's function to weigh the evidence and determine the outcome

but only to decide if a material dispute of fact existed" and

that "[o]nly when the evidence is utterly one-sided may a judge

decide that party should prevail as a matter of law" (citing

Brill, supra, 142 N.J. at 540)). Our task, for summary judgment

purposes, is to accept the inferences favorable to defendants

that may reasonably be drawn from Ilya's certification, which

clearly raise a genuine dispute as to a central material fact in

this case.

The trial court should not have rejected Ilya's

certification on credibility grounds, see D'Amato, supra, 305

N.J. Super. 109 at 114-15 (explaining that credibility issues

8 A-0897-12T1 must always be reserved for the trier of fact), and, at that,

merely because defendants failed to participate in a proceeding

to which they had never been made a party. The case on which

the majority relies, Shelcusky, supra, 172 N.J. at 199-202, is

not to the contrary. It authorizes use of the sham affidavit

doctrine on summary judgment to reject an affidavit that

contradicts the affiant's own prior statements or position so as

to invent a dispute of material fact. Ibid. That was not the

case here, and the trial court never recognized it as such, but

explicitly made a credibility evaluation. The judgment must be

reversed for that reason alone.

Moreover, plaintiffs' breach of contract claim should have

been dismissed. Margolis could not pursue such a claim, because

it was never a party to the settlement agreement. Parkway Ins.

Co. v. N.J. Neck & Back, 330 N.J. Super. 172, 186-87 (Law Div.

1998). Globe could do so, but, for the following reasons, the

record was sufficient to establish as a matter of law that

defendants complied with the explicit terms of the agreement,

contrary to plaintiffs' allegations.

It is well settled that the "'settlement of litigation

ranks high in our public policy.'" Brundage, supra, 195 N.J. at

601 (quoting Jannarone v. W.T. Co., 65 N.J. Super. 472, 476

(App. Div.), certif. denied, 35 N.J. 61 (1961)). This strong

9 A-0897-12T1 public policy is based upon "'the notion that the parties to a

dispute are in the best position to determine how to resolve a

contested matter in a way which is least disadvantageous to

everyone.'" Ibid. (quoting Peskin v. Peskin, 271 N.J. Super.

261, 275 (App. Div.), certif. denied, 137 N.J. 165 (1994)).

Thus, courts give effect to the terms of a settlement wherever

possible and honor them "'absent compelling circumstances.'"

Ibid. (quoting Nolan v. Lee Ho, 120 N.J. 465, 472 (1990)).

Settlement agreements are generally governed by principles

of contract law. Thompson, supra, 190 N.J. at 379. Therefore,

they may be entered freely and enforced like all other

contracts. Pascarella, supra, 190 N.J. Super. at 124-25. In

interpreting a contract, the focus is on "'the intention of the

parties to the contract as revealed by the language used, taken

as an entirety; and, in the quest for the intention, the

situation of the parties, the attendant circumstances, and the

objects they were thereby striving to attain are necessarily to

be regarded.'" Lederman, supra, 385 N.J. Super. at 339 (quoting

Biovail Corp. Int'l v. Hoechst Aktiengesellschaft, 49 F. Supp.

2d 750, 774 (D.N.J. 1999)). "'[C]ourts should interpret a

contract considering the objective intent manifested in the

language of the contract in light of the circumstances

surrounding the transaction.'" Id. at 340 (quoting Biovail

10 A-0897-12T1 Corp., supra, 49 F. Supp. 2d at 774) (internal quotation

omitted).

Significantly, our Supreme Court has held that "the legal effect of a release on other parties should be determined by the intent of the parties to the release, with due consideration being given to whether the compensation paid was fully adequate." Cartel Capital Corp. v. Fireco of N.J., 81 N.J. 548, 559 (1980). Similarly, we have observed that "a release of a defendant will release him only in respect of those claims by those parties as are actually or intended to be encompassed thereby." Goncalvez v. Patuto, 188 N.J. Super. 620, 629 (App. Div. 1983). "[A] release is merely a form of contract and the general rules that apply to contract interpretation apply to releases." Domanske v. Rapid-American Corp., 330 N.J. Super. 241, 246 (App. Div. 2000).

[Sweeney v. Sweeney, 405 N.J. Super. 586, 596-97 (App. Div.), certif. denied, 199 N.J. 519 (2009).]

Contractual interpretation, such as of the settlement

agreement at issue here, is a legal matter ordinarily suitable

for resolution on summary judgment. Celanese Ltd. v. Essex

Cnty. Improvement Auth., 404 N.J. Super. 514, 528 (App. Div.

2009). The touchstone for interpretation is the parties' shared

intent in reaching the agreement, Pacifico v. Pacifico, 190 N.J.

258, 266 (2007), and, so long as that intent is evident from the

contract's clear, unambiguous terms, the agreement will be

enforced as written. Karl's Sales, supra, 249 N.J. Super. at

493.

11 A-0897-12T1 To the extent any ambiguity exists, that is, to the extent

that a contractual term is susceptible of more than one

reasonable interpretation, Powell v. Alemaz, Inc., 335 N.J.

Super. 33, 44 (App. Div. 2000), a court may discern the parties'

intent from evidence bearing on the circumstances of the

agreement's formation, Conway v. 287 Corporate Ctr. Assocs., 187

N.J. 259, 269 (2006), and of the parties' behavior in carrying

out its terms, Savarese v. Corcoran, 311 N.J. Super. 240, 248

(Ch. Div. 1997), aff'd, 311 N.J. Super. 182 (App. Div. 1998).

The required factual inquiry to resolve any such ambiguity

typically precludes summary judgment unless the evidence is so

one-sided as to compel judgment as a matter of law for one party

or the other. Great Atl. & Pac. Tea Co., Inc. v. Checchio, 335

N.J. Super. 495, 502 (App. Div. 2000).

The agreement here plainly provided that defendants would

have to timely pay the settlement amount by certified or

attorney trust account check, that Julia would guarantee the

obligation if payment were not made in that manner, and that

only "[u]pon full payment in accordance" with the terms of the

agreement, would the stipulation of dismissal be filed. The

parties do not dispute that defendants timely presented two

cashier's checks totaling the full amount of their settlement

obligation and that plaintiffs filed the stipulation of

12 A-0897-12T1 dismissal. The checks were honored, and the funds were neither

counterfeit nor stolen.

Ordinarily, cashier's checks are the functional equivalent

to cash, Parks v. Commerce Bank, 377 N.J. Super. 378, 380 (App.

Div. 2005), and "[u]nless otherwise agreed, if a certified

check, cashier's check, or teller's check is taken for an

obligation, the obligation is discharged to the same extent that

discharge would result if an amount of money equal to the amount

of the instrument were taken in payment of the obligation."

N.J.S.A. 12A:3-310(a). Moreover, Margolis accepted the checks

notwithstanding that one clearly listed someone other than

defendants as the remitter, and Globe filed the stipulation of

dismissal, confirming its understanding that defendants had

satisfied the terms of the agreement. See Savarese, supra, 311

N.J. Super. at 248 (intent of parties may be discerned from

their behavior in carrying out the agreement). In other words,

defendants satisfied those terms no matter whose funds were used

to pay the settlement. Consequently, the primary dispute here,

ownership of the funds, is not one of material fact with regard

to this particular theory of liability, and defendants should

have been granted summary judgment on the breach of contract

claim.

13 A-0897-12T1 Nor, for that matter, may plaintiffs pursue their

indemnification claim specifically against Julia as guarantor.

The settlement agreement explicitly provided that Julia's

obligation in that capacity was only triggered insofar as Ilya

failed to timely deliver payment by certified or attorney trust

account check. Because he discharged that obligation, Julia

may no longer be called upon to satisfy the terms of the

settlement agreement as guarantor. See Ctr. 48 Ltd. P'ship v.

May Dep't Stores Co., 355 N.J. Super. 390, 405 (App. Div. 2002)

(explaining that a "guarantor is not bound beyond the strict

terms of its promise and its obligation cannot be extended by

implication").

That said, both defendants may still have liability here.

The trier of fact could find, for example, that defendants

arranged the transfer knowing that the funds would likely be

subject to recovery in an impending bankruptcy with the

intention that Globe thereby unknowingly risks losing the benefit

of the agreement. In that case, defendants could be liable for

breach of an implied covenant of good faith and fair dealing,

Sons of Thunder, Inc. v. Borden, Inc., 148 N.J. 396, 420 (1997),

despite their compliance with the express terms of the

settlement agreement, Wilson v. Amerada Hess Corp., 168 N.J.

14 A-0897-12T1 236, 244 (2001).3 If it is found, based upon any additional

evidence presented, defendants knowingly misrepresented to Globe

there would be no such risk, with the intention that Globe

reasonably rely on that misrepresentation in order to agree to

the settlement, defendants could be liable for fraud. Gennari

v. Weichert Co. Realtors, 148 N.J. 582, 610 (1997).

Moreover, even in the absence of bad faith or fraud on

defendants' part, there remains a common-law claim for

indemnification. Ilya was undisputedly the one who arranged the

transfers, and both defendants were beneficiaries of those

transfers insofar as they satisfied their settlement

obligations. If the evidence establishes the transfers were

fraudulent and plaintiffs accepted them in good faith,

plaintiffs could equitably call at least upon Ilya for

indemnification, particularly under the peculiar circumstances

of this case. See Ramos v. Browning Ferris Indus. of S. Jersey,

Inc., 103 N.J. 177, 190 (1986) (noting that "one who in good

faith and at the direction of another commits a tort is allowed

indemnity against the person who caused him to act"); see also

3 To be sure, this course of conduct would also constitute a breach of contract, 1266 Apartment Corp. v. New Horizon Deli, Inc., 368 N.J. Super. 456, 461 (App. Div. 2004), in the sense that the breach is of a covenant implied in the contract, Wilson, supra, 168 N.J. at 244. But our courts also recognize breach of the implied covenant as a separate cause of action, see id. at 240, 244, and plaintiffs pleaded it as such here.

15 A-0897-12T1 Promaulayko v. Johns Manville Sales Corp., 116 N.J. 505, 511

(1989) (explaining common-law indemnity as an equitable

doctrine). Alternatively, defendants could be held liable for

unjust enrichment to the extent that they received the benefit

of the transfers, and the trial court concludes that it would be

inequitable to permit them to keep that benefit without

remunerating plaintiffs. Callano v. Oakwood Park Homes Corp.,

91 N.J. Super. 105, 108-09 (App. Div. 1966).

Plaintiffs have advanced all of these claims. Whether any

would prove successful in a trial, of course, would depend on

whether the funds were actually subject to recovery in the

bankruptcy action. Further, to the extent any of the theories

of liability advanced here sound in equity, recovery would be

premised upon plaintiffs' good faith and the reasonableness of

their settlement with the bankruptcy trustee. Worthy of note in

this regard is that Margolis appears to have had significant

basis upon which to avoid liability in the adversary proceeding

as a "mere conduit" of the funds to its client, rather than as

an "initial transferee" liable to the estate under the

bankruptcy code, Gropper v. Unitrac, S.A. (In re Fabric Buys of

Jericho, Inc.), 33 B.R. 334, 336-37 (Bankr. S.D.N.Y. 1983), even

if, as the case may be here, it kept its fee and remitted only

the balance to Globe, Kirschenbaum v. Leeds Morelli & Brown P.C.

16 A-0897-12T1 (In re Robert Plan of N.Y. Corp.), 456 B.R. 150, 159-60 (Bankr.

E.D.N.Y. 2011). For reasons not apparent in the record, it did

not pursue this defense in the adversary proceeding.

Consideration of its failure to do so, along with the weighing

of any equities, would be relevant to any award of attorney's

fees to it, as well.

In sum, I dissent, as the judgment in plaintiffs' favor

should be reversed, and the matter remanded for dismissal of

plaintiffs' breach of contract claim, as well as their

indemnification claim against Julia as guarantor, and for

further proceedings on their remaining claims.

17 A-0897-12T1