JOSEPH KOENIG VS. HOFFMAN DIMUZIO (L-5180-13, CAMDEN COUNTY AND STATEWIDE)

• Court: New Jersey Superior Court Appellate Division
• Decided: January 4, 2019
• Docket: A-5389-16T2
• Status: Unpublished

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-5389-16T2

JOSEPH KOENIG and LAURIE KOENIG,

Plaintiffs-Respondents,

v.

HOFFMAN DIMUZIO, JOSEPH SLACHETKA, and JAMES CARTER,

Defendants. _____________________________

CADLES OF GRASSY MEADOWS II, LLC,

Appellant. ______________________________

Submitted September 20, 2018 – Decided January 4, 2019

Before Judges Accurso and Vernoia.

On appeal from Superior Court of New Jersey, Law Division, Camden County, Docket No. L-5180-13.

Schumann Hanlon, LLC, attorneys for appellant (David K. DeLonge, on the briefs). Helmer, Conley & Kasselman, PA, attorneys for respondents (Alexander J. Wazeter, of counsel and on the brief).

PER CURIAM

Appellant Cadles of Grassy Meadows II, LLC (Cadles), is a judgment

creditor of plaintiff Joseph Koenig. Cadles levied on Joseph Koenig's interest

in a legal malpractice case that he and his wife, plaintiff Laurie Koenig, brought

against defendants Hoffman DiMuzio, Joseph Slachetka and James Carter

(collectively "defendants"). Plaintiffs settled the malpractice case for $450,000

and sought an order apportioning fifty percent of the settlement amount to each

plaintiff. Cadles cross-moved for an apportionment of the settlement based on

the relative damages suffered by each plaintiff resulting from the alleged

malpractice. The court granted plaintiff's motion and denied Cadles's cross-

motion. Because we are convinced the court erred by applying the wrong legal

standard to determine the apportionment, we reverse and remand for further

proceedings.

The pertinent facts are not in dispute. Joseph Koenig was in the trucking

business for many years and at various times owned three trucking companies,

A-5389-16T2 2 J.K. Enterprises, Koenig Incorporated 1 and Joseph F. Koenig, Inc. Confronted

with financial difficulties in 2007, Joseph Koenig sought to sell eleven trucks to

raise capital, but he could not do so because he did not have the titles to the

trucks. He retained defendants to obtain the titles from the financial institution

that he believed possessed them, but defendants allegedly failed to take any

action on his behalf. He alleged in the malpractice case that defendants' failure

prevented him from selling the trucks and continuing to obtain the credit

required to profitably operate his businesses. He also claimed defendants

permitted several default judgments to be entered against him and his companies

in cases filed by creditors by failing to file answers.

Joseph Koenig and Laurie Koenig married in 2007. The following year,

Joseph Koenig transferred his interests in their marital home and two rental

properties to Laurie Koenig. One of Joseph Koenig's judgment creditors filed

suit, claiming the transfers were made to avoid his creditors. The court

appointed a receiver for the properties who was charged with collecting the

rental income. Joseph Koenig and Laurie Koenig later alleged that they retained

defendants to represent them in the matter, defendants failed to adequately do

1 Koenig Incorporated is also referred to as Koenig Inc. in the papers submitted to the motion court. A-5389-16T2 3 so and that, as a result, they lost rental income and suffered other damages due

to defendants' alleged malfeasance.

In 2009, a Joseph Koenig creditor, The Bank, obtained an $816,109.23

judgment against Joseph Koenig, a $657,247.21 judgment against Koenig

Incorporated and a $158,862.02 judgment against J.K. Enterprises. The

judgment was entered in Atlantic County and subsequently assigned to Cadles.

In December 2013, Joseph Koenig and Laurie Koenig filed a legal

malpractice action against defendants in Camden County. Eleven months later,

Cadles levied on Joseph Koenig, Koenig Incorporated and J.K. Enterprises's

interests in the claims and causes of action in the legal malpractice case. The

case was subsequently settled for $450,000 and structured to separately allocate

$225,000 each to Joseph Koenig and Laurie Koenig. They executed separate

general releases in favor of defendants in exchange for receiving $225,000 each.

Cadles filed a motion in the Atlantic County matter requesting a turnover

of the $450,000 settlement from the Camden County legal malpractice action.

The court entered an order denying the motion without prejudice.

Joseph Koenig and Laurie Koenig filed a motion in Camden County

requesting a plenary hearing to apportion the settlement proceeds. In support of

the motion, their counsel explained that Cadles served a writ of execution

A-5389-16T2 4 against Joseph Koenig during the malpractice action and following the

settlement took the position that Laurie Koenig was not entitled to any of the

settlement proceeds. Counsel certified that Cadles demanded all of the

settlement proceeds be placed in escrow and requested a plenary hearing "for

the court to apportion the net proceeds." Cadles filed a cross-motion to limit

the plenary hearing, arguing it was entitled to levy on the settlement proceeds

apportioned to Joseph Koenig because it had a judgment against him and that a

plenary hearing was required only to apportion the proceeds that were to be paid

to Laurie Koenig under the settlement.

The court held a hearing, but the parties did not call any witnesses. The

parties agreed Cadles was entitled to the net proceeds from the $225,000 paid to

Joseph Koenig and that the only issue presented was whether the remaining

settlement proceeds should be apportioned to Laurie Koenig.2 The parties

stipulated to certain facts and subsequently made written submissions supported

by exhibits.

2 Following deductions for counsel fees and costs, Joseph Koenig was entitled to $137,943.10 as the net proceeds from the $225,000 apportioned to him under the settlement. The proceeds due to Laurie Koenig from the $225,000 apportioned to her under the settlement is $131,276.42. The difference between the two amounts is attributable to fees and costs Laurie Koenig directly paid during the litigation.

A-5389-16T2 5 The court held a second hearing and heard oral argument. Cadles agreed

that its writ of execution "does not purport or intend to reach the rightful

property of Laurie Koenig." Laurie Koenig argued the equal apportionment of

the settlement proceeds was appropriate because the proceeds were for lost

marital income that she and Joseph Koenig would have otherwise received, and

she shared equally in the loss of the income as Joseph Koenig's spouse.

Cadles asserted that the losses claimed in the malpractice action were

primarily attributable to losses suffered by Joseph Koenig's businesses. Cadles

argued that the settlement's equal apportionment of the proceeds was contrived

to limit Cadles' recovery under its writ of execution on Joseph Koenig's

malpractice claims against defendant. Cadles further argued that all but

$68,443.50 3 of the over $1.5 million in damages claimed in the malpractice case

were attributable to defendants' alleged malpractice in representing Joseph

Koenig and his companies, and that the settlement proceeds should be

proportionately allocated on that basis.

3 Approximately $70,000 of the damages claimed were for defendants' alleged malpractice in representing Joseph Koenig and Laurie Koenig in the litigation involving the rental properties that Joseph Koenig transferred to Laurie Koenig in 2008 and the appointment of the receiver. A-5389-16T2 6 In an oral opinion, the court determined the settlement proceeds

constituted the recovery of lost marital income that was subject to an equal

allocation between Joseph Koenig and Laurie Koenig based on the principles of

equitable distribution. The court relied on our Supreme Court's decision in

Landwehr v. Landwehr, 111 N.J. 491, 502 (1988), where it was held that monies

recovered for lost income in a personal injury action by one spouse constituted

marital income subject to equitable distribution in the couple's divorce

proceeding. Here, the court relied on the holding in Landwehr, reasoned that

the settlement proceeds represented a recovery of lost marital income and

concluded that application of equitable distribution principles required an equal

allocation of the settlement monies between Joseph Koenig and Laurie. The

court held the $225,000 due to Laurie Koenig under the settlement was properly

apportioned to her.

The court entered a June 23, 2017 order apportioning fifty percent of the

settlement proceeds to Laurie Koenig and fifty percent to Joseph Koenig, and

directing that Laurie Koenig's share of the settlement proceeds was not subject

to Cadles's writ of execution. This appeal followed.

We review a trial court's interpretation of the law de novo. Serico v.

Rothberg, 234 N.J. 168, 175 (2018). "A trial court's interpretation of the law

A-5389-16T2 7 and the legal consequences that flow from established facts are not entitled to

any special deference." Manalapan Realty, L.P. v. Twp. Comm. of Manalapan,

140 N.J. 366, 378 (1995).

Cadles argues the court erred as a matter of law by deciding the

apportionment of the settlement proceeds based on principles of equitable

distribution. Cadles claims the settlement proceeds should be apportioned on a

pro rata basis consistent with Joseph and Laurie Koenig's respective damages in

the malpractice action. More particularly, Cadles argues that because the

alleged losses suffered directly by the judgement debtor, Joseph Koenig,

constituted 95.83 percent of the damages claimed in the malpractice case, and

Laurie Koenig's alleged damages comprised only 4.17 percent of the damages

claimed, only 4.17 percent of the $450,000 settlement should be apportioned to

Laurie Koenig.4

Based on our review of the record, we agree the court erred by relying on

equitable distribution principles in its effort to apportion the proceeds of the

settlement. "The equitable distribution statute authorizes the Family Part to

distribute assets 'in all actions where a judgment of divorce, dissolution of civil

4 Cadles's calculations are based on its assertion that Joseph Koenig's damage claims in the legal malpractice action totaled $1,573,868.50, and Laurie Koenig's damage claims totaled $68,443.50. A-5389-16T2 8 union, divorce from bed and board or legal separation from a partner in a civil

union couple is entered.'" Thieme v. Aucoin-Thieme, 227 N.J. 269, 283 (2016)

(quoting N.J.S.A. 2A:34-23(h)). The statute's application is limited to disputes

between married and civil union couples and does not apply where, as here, the

dispute over property is between a married couple and a third-party judgment

creditor of one the spouses. Ibid.; see also Kozlowski v. Kozlowski, 80 N.J.

378, 383 (1979) (explaining that the equitable distribution statute then in effect

permitted an award "only in actions for divorce").

Moreover, although "[t]he equitable distribution statute 'reflects a public

policy that is "at least in part an acknowledgment that marriage is a shared

enterprise, a joint undertaking, that in many ways [ ] is akin to a partnership,"'"

Slutsky v. Slutsky, 451 N.J. Super. 332, 358 (App. Div. 2017) (alteration in

original) (quoting Thieme, 227 N.J. at 284), "equitable [distribution] is not

synonymous with equal," ibid. A court's determination of the equitable

distribution of marital or civil union property "requires [an] evaluation of unique

facts attached to each asset" in accordance with the criteria established in

N.J.S.A. 2A:34-23.1. Ibid. Thus, even if we were to assume the principles of

equitable distribution controlled the requested allocation of the settlement

proceeds at issue here, which they do not, those principles would not require an

A-5389-16T2 9 equal apportionment of the settlement proceeds between Joseph Koenig and

Laurie Koenig. See, e.g., Rothman v. Rothman, 65 N.J. 219, 232 n.6 (1974)

(rejecting the notion that, in determining the equitable distribution of marital

assets, a trial court should presumptively assign each spouse fifty percent of

eligible assets); Clementi v. Clementi, 434 N.J. Super. 529, 539 (Ch. Div. 2013)

(noting that "it has long been established that neither party is automatically

entitled to fifty percent of any specific asset" in an equitable distribution award).

We are therefore constrained to vacate the court's determination that

Laurie Koenig's fifty percent share of the settlement proceeds is beyond the

reach of Cadles's writ of execution because it is based on the incorrect legal

conclusion that equitable distribution principles governed the allocation of the

proceeds to Laurie Koenig. The court erred as a matter of law, and its reliance

on Landwehr was misplaced.

We remand the case for further proceedings and do not offer any opinion

as to the merits of the parties' requests for apportionment. In doing so, we

observe that, as a matter of fact, the settlement proceeds have already b een

apportioned by the Koenigs—they each received $225,000 in exchange for their

release of all claims against defendants. Yet the Koenigs and Cadles moved

before the court for an apportionment of the settlement proceeds. The parties'

A-5389-16T2 10 submissions to the motion court and on appeal, however, are bereft of citation

to a court rule, statute or case law authorizing the requested apportionment and

are untethered to any identified legal standard against which their requests for

apportionment may be measured.

Although we review orders and not a motion court's reasoning, Do-Wop

Corp. v. City of Rahway, 168 N.J. 191, 199 (2001), we may properly do so only

where the record allows an understanding of the legal authority relied upon for

the relief sought. Other than the Koenigs' erroneous claim that equitable

distribution principles were determinative of their request for apportionment,

the parties do not cite to any authority allowing the court to grant such a request.

Cadles's argument that it is entitled to a pro rata share of the settlement proceeds

based on the Koenigs' respective damages claims in the malpractice action is

unencumbered by any legal authority that it is entitled to set aside the Koenigs'

agreed upon apportionment of the settlement proceeds. It is not the

responsibility of this court to conjure up sources of legal support authorizing a

party's requests for relief and then determine whether they support the court's

order. The parties' failure to identify the legal authority authorizing the court to

grant the requested apportionment deprived the motion court and this court of a

legal standard against which the validity of the motions can be measured.

A-5389-16T2 11 We do not suggest there is no legal authority supporting a claim to

apportion the settlement proceeds or to set aside the apportionment agreed upon

by the Koenigs in the settlement. We simply note that neither party identified

the legal authority upon which their motions were founded and decide only that

the court's application of equitable distribution principles does not support its

findings and order. On remand, the parties may pursue their respective claims,

but must identify the legal authority supporting their claims and the court's

authority to grant their requests for relief, as well as the legal standard by which

the claims should be measured.

Vacated and remanded for further proceedings consistent with this

opinion. We do not retain jurisdiction.

A-5389-16T2 12