NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court."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-3932-14T4
IN THE MATTER OF THE GENERAL ASSIGNMENT FOR THE BENEFIT OF CREDITORS OF VILLAGE SUNDRIES & TOBACCO, INC., d/b/a VILLAGE DISTRIBUTORS, TO BARRY W. FROST.
___________________________________
Submitted October 25, 2016 – Decided April 21, 2017
Before Judges Reisner and Rothstadt.
On appeal from Superior Court of New Jersey, Chancery Division, Ocean County, Docket No. 191663.
Ronald Horowitz, attorney for appellants Direct Coast to Coast, LLC and Selective Transportation Corporation.
Trenk, DiPasquale, Della Fera & Sodono, P.C., attorneys for respondent Village Sundries & Tobacco, Inc. (Anthony Sodono, III, of counsel; Michele M. Dudas, on the brief).
Brian W. Hofmeister, attorney for respondent Barry W. Frost.
PER CURIAM Appellants, Direct Coast to Coast, LLC (Direct), and
Selective Transportation, Corp. (Selective), are creditors of
Village Sundries and Tobacco, Inc. (Village), the debtor in this
assignment for the benefit of creditors (ABC) action.1 They appeal
from the Chancery Division's March 18, 2015 order allowing
commissions to Village's assignee, Barry W. Frost, and attorney's
fees to special counsel, Trenk, DiPasquale, Della Fera & Sodono,
P.C. (Trenk). The court previously authorized Frost to retain
Trenk for the purpose of pursuing counterclaims in litigation that
had been filed against Village. Appellants argue the award of a
full commission to Frost was unconscionable "considering that the
[a]ssignee did very little, if anything, in this matter" and that
Frost "did not present any evidence whatsoever of work he performed
for the estate." As to the court's fee award to Trenk, they argue
the application was procedurally defective, as "not a single factor
enumerated by R.P.C. 1.5 [was] addressed . . . by [Trenk's]
[a]ffidavit of [s]ervices." According to appellants, the defects
should have resulted in the denial of the application. Finally,
1 Appellants, who had filed a complaint in March 2011 to recover monies owed by Village, were among approximately thirty creditors who filed claims in this action. The allowed claims totaled in excess of approximately three million dollars.
2 A-3932-14T4 they contend that their counsel was entitled to a fee award. We
disagree and affirm.
The history leading to this dispute can be summarized as
follows. Trenk, as counsel to Village, initiated the ABC on May
31, 2011, establishing Barry W. Frost as assignee.2 At the time
of the assignment, Trenk had been representing Village in a federal
district court matter that was pending in the Southern District
of New York in which Village was named as a defendant (New York
action).3 The Chancery judge in the ABC action entered an order
on April 27, 2012, authorizing Frost to retain Trenk as "special
counsel . . . for the purpose of representing the [a]ssignee in
pursuing counterclaims against [plaintiff] in [the New York
action]." On January 7, 2013, the district court entered a
judgment against Village in favor of the plaintiff in the New York
action in the amount of $558, 179.98 and administratively closed
2 On July 7, 2011, the Chancery Division entered an order authorizing the assignee to retain the law firm of Teich Groh as attorneys for Frost, as assignee. Frost was a partner at Teich Groh until the firm ceased operating on December 31, 2013. A second firm assumed the role of counsel to the assignee.
3 The action was captioned Strategic Funding Source, Inc. v. Petegorsky, Docket No. 11 Civ. 7376.
3 A-3932-14T4 the matter due to the remaining defendants having sought relief
in bankruptcy.4
Frost filed an application in this action on December 1,
2014, seeking approval of his final accounting, allowing payment
of his commissions, approval of fees and costs for payment of
professional administrative claims, and final approval of the
proposed distribution of Village's estate. Appellants filed
objections to the assignee being awarded the maximum commission
allowed under N.J.S.A. 2A:19-43 and to Trenk being awarded the
amount of fees contained in its application. They asserted "the
total [attorney's] fees [and] the total commission should be deemed
as unconscionable if not outrageous." Appellants claimed that the
amount collected by the assignee on the accounts receivable did
not warrant an award of a full commission or counsel fees.
Appellants also challenged the reasonableness of the $400 per hour
rate charged by Trenk.
The Chancery judge considered oral argument on January 28,
2015, and requested additional submissions from counsel. The
additional materials submitted by Frost included copies of Trenk's
detailed billing records, denoting the exact services rendered and
4 It is not clear from the record whether this dismissal was the result of Trenk's efforts.
4 A-3932-14T4 time expended. In addition a certification of counsel was
submitted that included a curriculum vitae (CV) for the attorney
handling the matter. The CV described counsel's experience in the
field of debtor/creditor's rights and related matters.
On March 18, 2015, the Chancery judge rejected appellants
contentions for the reasons stated in an oral decision placed on
the record that day.5 The judge entered an order awarding Frost
the full statutory commission of twenty percent, totaling
$32,098.11. He awarded Trenk $12,811.87 in fees and $19.20 in
costs.
In his decision, the Chancery judge stated he found it
inappropriate to entertain appellants' argument, which he
considered a "blanket objection" that lacked reference to specific
case law and supporting certifications. The judge also found that
due to the poor condition of Village's financial records, counsel
was required to expend more time than would otherwise be necessary
to pursue Village's claims, especially when the time expended was
compared to the amounts recovered. He stated:
[O]n the issue as to the success ultimately achieved versus the percentage of fees -- professional fees and commission[] cost[s] sought, the Court notes that due diligence and a fair, reasonable and appropriate period of
5 Appellants did not provide us with a transcript of that argument. We glean from the judge's decision the nature of the arguments raised by the parties.
5 A-3932-14T4 service for the assignment of the benefit of creditors was necessary.
No one objected to the characterization, representation made on the record . . . on numerous occasions . . . that [Village] did not maintain accurate or even what one might characterize as good, appropriate records. Rather, they were sloppy, they were difficult to ascertain and sort through. . . .
And the fact of the matter is, as is often the case in sometimes modest estate litigation, the hours spent and the fair, reasonable entitlement to fees, costs, [and] commissions do not necessarily equate automatically with the amount recovered. The services were fair[,] reasonable[,] and appropriate, commensurate with the fact of [Village] not keeping records.
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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-3932-14T4
IN THE MATTER OF THE GENERAL ASSIGNMENT FOR THE BENEFIT OF CREDITORS OF VILLAGE SUNDRIES & TOBACCO, INC., d/b/a VILLAGE DISTRIBUTORS, TO BARRY W. FROST.
___________________________________
Submitted October 25, 2016 – Decided April 21, 2017
Before Judges Reisner and Rothstadt.
On appeal from Superior Court of New Jersey, Chancery Division, Ocean County, Docket No. 191663.
Ronald Horowitz, attorney for appellants Direct Coast to Coast, LLC and Selective Transportation Corporation.
Trenk, DiPasquale, Della Fera & Sodono, P.C., attorneys for respondent Village Sundries & Tobacco, Inc. (Anthony Sodono, III, of counsel; Michele M. Dudas, on the brief).
Brian W. Hofmeister, attorney for respondent Barry W. Frost.
PER CURIAM Appellants, Direct Coast to Coast, LLC (Direct), and
Selective Transportation, Corp. (Selective), are creditors of
Village Sundries and Tobacco, Inc. (Village), the debtor in this
assignment for the benefit of creditors (ABC) action.1 They appeal
from the Chancery Division's March 18, 2015 order allowing
commissions to Village's assignee, Barry W. Frost, and attorney's
fees to special counsel, Trenk, DiPasquale, Della Fera & Sodono,
P.C. (Trenk). The court previously authorized Frost to retain
Trenk for the purpose of pursuing counterclaims in litigation that
had been filed against Village. Appellants argue the award of a
full commission to Frost was unconscionable "considering that the
[a]ssignee did very little, if anything, in this matter" and that
Frost "did not present any evidence whatsoever of work he performed
for the estate." As to the court's fee award to Trenk, they argue
the application was procedurally defective, as "not a single factor
enumerated by R.P.C. 1.5 [was] addressed . . . by [Trenk's]
[a]ffidavit of [s]ervices." According to appellants, the defects
should have resulted in the denial of the application. Finally,
1 Appellants, who had filed a complaint in March 2011 to recover monies owed by Village, were among approximately thirty creditors who filed claims in this action. The allowed claims totaled in excess of approximately three million dollars.
2 A-3932-14T4 they contend that their counsel was entitled to a fee award. We
disagree and affirm.
The history leading to this dispute can be summarized as
follows. Trenk, as counsel to Village, initiated the ABC on May
31, 2011, establishing Barry W. Frost as assignee.2 At the time
of the assignment, Trenk had been representing Village in a federal
district court matter that was pending in the Southern District
of New York in which Village was named as a defendant (New York
action).3 The Chancery judge in the ABC action entered an order
on April 27, 2012, authorizing Frost to retain Trenk as "special
counsel . . . for the purpose of representing the [a]ssignee in
pursuing counterclaims against [plaintiff] in [the New York
action]." On January 7, 2013, the district court entered a
judgment against Village in favor of the plaintiff in the New York
action in the amount of $558, 179.98 and administratively closed
2 On July 7, 2011, the Chancery Division entered an order authorizing the assignee to retain the law firm of Teich Groh as attorneys for Frost, as assignee. Frost was a partner at Teich Groh until the firm ceased operating on December 31, 2013. A second firm assumed the role of counsel to the assignee.
3 The action was captioned Strategic Funding Source, Inc. v. Petegorsky, Docket No. 11 Civ. 7376.
3 A-3932-14T4 the matter due to the remaining defendants having sought relief
in bankruptcy.4
Frost filed an application in this action on December 1,
2014, seeking approval of his final accounting, allowing payment
of his commissions, approval of fees and costs for payment of
professional administrative claims, and final approval of the
proposed distribution of Village's estate. Appellants filed
objections to the assignee being awarded the maximum commission
allowed under N.J.S.A. 2A:19-43 and to Trenk being awarded the
amount of fees contained in its application. They asserted "the
total [attorney's] fees [and] the total commission should be deemed
as unconscionable if not outrageous." Appellants claimed that the
amount collected by the assignee on the accounts receivable did
not warrant an award of a full commission or counsel fees.
Appellants also challenged the reasonableness of the $400 per hour
rate charged by Trenk.
The Chancery judge considered oral argument on January 28,
2015, and requested additional submissions from counsel. The
additional materials submitted by Frost included copies of Trenk's
detailed billing records, denoting the exact services rendered and
4 It is not clear from the record whether this dismissal was the result of Trenk's efforts.
4 A-3932-14T4 time expended. In addition a certification of counsel was
submitted that included a curriculum vitae (CV) for the attorney
handling the matter. The CV described counsel's experience in the
field of debtor/creditor's rights and related matters.
On March 18, 2015, the Chancery judge rejected appellants
contentions for the reasons stated in an oral decision placed on
the record that day.5 The judge entered an order awarding Frost
the full statutory commission of twenty percent, totaling
$32,098.11. He awarded Trenk $12,811.87 in fees and $19.20 in
costs.
In his decision, the Chancery judge stated he found it
inappropriate to entertain appellants' argument, which he
considered a "blanket objection" that lacked reference to specific
case law and supporting certifications. The judge also found that
due to the poor condition of Village's financial records, counsel
was required to expend more time than would otherwise be necessary
to pursue Village's claims, especially when the time expended was
compared to the amounts recovered. He stated:
[O]n the issue as to the success ultimately achieved versus the percentage of fees -- professional fees and commission[] cost[s] sought, the Court notes that due diligence and a fair, reasonable and appropriate period of
5 Appellants did not provide us with a transcript of that argument. We glean from the judge's decision the nature of the arguments raised by the parties.
5 A-3932-14T4 service for the assignment of the benefit of creditors was necessary.
No one objected to the characterization, representation made on the record . . . on numerous occasions . . . that [Village] did not maintain accurate or even what one might characterize as good, appropriate records. Rather, they were sloppy, they were difficult to ascertain and sort through. . . .
And the fact of the matter is, as is often the case in sometimes modest estate litigation, the hours spent and the fair, reasonable entitlement to fees, costs, [and] commissions do not necessarily equate automatically with the amount recovered. The services were fair[,] reasonable[,] and appropriate, commensurate with the fact of [Village] not keeping records.
Turning to appellants' objection to Trenk's $400 per hour
rate, the judge found the rate sought was reasonable and
commensurate with those charged by "probate attorneys" throughout
the State of New Jersey. He noted the extensive experience of
counsel in probate matters and observed that, even if he were to
adjust the hourly fee downward to $300, the reduction in overall
fees would be offset by new fees incurred in generating the updated
accounting. He also confirmed that the court carefully reviewed
counsel's submissions to make sure they were accurate in their
calculation of their fee, stating that they had "been double
[-]checked." The judge concluded counsel took fair, reasonable
steps to recover accounts receivable; and, accordingly, "counsel's
6 A-3932-14T4 entitled to compensation for those efforts, for those legal
services rendered, as well as for hiring of [Trenk] . . . and the
cost disbursements rendered on behalf of the client."
This appeal followed.
"[T]he allowance of assignee's commissions and attorney's
fees ordinarily rests within [the trial judge's] sound discretion
and should be upset only if the exercise thereof is manifestly
erroneous." In re Assignment for Benefit of Creditors of Munson-
Lied Co., 68 N.J. Super. 281, 289 (App. Div. 1961). We will
disturb a trial court's allowance of commissions and award of
counsel fees "only on the rarest of occasions[.]" Litton Indus.,
Inc. v. IMO Indus., Inc., 200 N.J. 372, 386 (2009) (quoting
Packard-Bamberger & Co., Inc. v. Collier, N.J. 427, 444 (2001)).
Applying this standard, we conclude the Chancery judge did not
abuse his discretion in awarding Frost the full statutory
commission or Trenk the full amount of the counsel fees and costs
it applied for as special counsel. We affirm substantially for
the reasons expressed by the Chancery judge. We add only the
following comments.
An ABC proceeding "is a state court-administered liquidation
proceeding similar to a Chapter 7 bankruptcy proceeding whereby
an individual, partnership, or corporation in financial distress
can liquidate its assets in an orderly fashion to equitably pay
7 A-3932-14T4 its creditors." 44 New Jersey Practice, Debtor-Creditor Law and
Practice § 3.1, at 109 (Michael D. Sirota & Michael S. Meisel)
(2000) (citing Gilroy v. Somerville Woolen Mills, 67 N.J. Eq. 479
(Ch. 1904)). ABC proceedings in New Jersey are governed by
N.J.S.A. 2A:19-1 to -50. The statute's purpose is to treat all
creditors equally and avoid any disproportionate payments to a
favored creditor. N.J.S.A. 2A:19-2.
In an ABC proceeding, "an individual, partnership or
corporation, known as the 'assignor,' voluntarily assign[s] by
transfer or conveyance all of its assets in trust to an independent
third party, known as the 'assignee.'" New Jersey Practice, supra,
§ 3.1. at 110. The assignee acts in a "dual capacity" pursuant
to powers set forth in N.J.S.A. 2A:19-13 and N.J.S.A. 2A:19-14.
The assignee "'stands in the shoes' of the assignor with general
powers to act in his stead as his 'successor,'" In re Gen.
Assignment for Benefit of Creditors of Brill's Hardware Co., 67
N.J. Super. 289, 292 (Cty. Ct. 1961) (citations omitted), and has
"full power and authority to dispose of all of the assignor's
property . . . as the assignor had at the time of the general
assignment." N.J.S.A. 2A:19-13. The assignee also "represent[s]
the assignor's entire creditor constituency." New Jersey
Practice, supra, § 3.31 supra, at 118. In that capacity, the
assignee has "the same power to set aside conveyances and to
8 A-3932-14T4 recover or reach assets for the benefit of the creditors as a
creditor would have who was the holder of a judgment and levy
against the assignor and his property at the date of the
assignment." N.J.S.A. 2A:19-14.
Compensation for an assignee is left to the court's
discretion, but may not exceed "[twenty percent] on all sums
received by the said assignee." N.J.S.A. 2A:19-43. In determining
the amount, "the court should look to the nature of the
[assignor's] business and its attendant problems." In re Francilli
Carriers, Inc., 77 N.J. Super. 522, 526 (Ch. Div. 1962). "[T]he
[twenty] percent limitation . . . is confined to sums awarded
directly to the assignee and does not include items of expense
paid out of the estate for which court approval is sought, that
is, attorney fees, auctioneer fees and the like. Id. at 526. See
also In re General Assignment for Benefit of Creditors of Shay,
75 N.J. Super. 421, 439-40 (App. Div. 1962).
An assignee's engagement of an attorney to provide
professional services "can only be accomplished by motion and
affidavit seeking a court order . . . ." In re Xaviers, Inc., 66
N.J. Super. 561, 567 (App. Div. 1961). Court approval of the
retention is a condition to any award of counsel fees for services
performed on behalf of the assignee. See Francilli, supra, 77
N.J. Super. at 526. Applications for an award of counsel fees
9 A-3932-14T4 from the assignor's estate must be supported by a certification
of services containing the information required by Rule 4:42-9(b),
including "the factors enumerated by [R.P.C. 1.5(a)]." R. 4:42-
9(b)(emphasis added). However, "an award of counsel fees may be
affirmed even if the affidavit of services is deficient."
Elizabeth Bd. of Educ. v. N.J. Transit Corp., 342 N.J. Super. 262,
272-73 (App. Div. 2001).
Applying these guiding principles, we discern no reason to
vacate the Chancery judge's award of the commission or counsel
fees. Turning first to Frost's commission, the judge properly
considered the nature of Village's business, the involvement of
approximately thirty creditors, and the problems arising from
Village's poor maintenance of its business records. Contrary to
appellants assertions, the fact that the amounts recovered by the
assignee were not substantial in relation to the creditors' claims
and that there were no billing records associated with the
assignees efforts, the assignee was still entitled to a commission
up to the statutory cap.
We are not persuaded otherwise by appellants' reliance on
Munson-Lied. In that case, unlike the present matter, in addition
to the statutory commission, the assignee received an award for
attorneys fees for legal services he performed. Munson-Lied,
supra, 68 N.J. Super. at 578. Here, the assignee was awarded his
10 A-3932-14T4 twenty percent commission separate and distinct from the fees
awarded to Trenk or to other firms that acted as counsel to the
assignee. There was no evidence that the assignee received a
double award.
As to the award of counsel fees to Trenk, although the
information required by Rule 4:42-9(b) was not expressly included
in counsel's certification of services,6 the Chancery judge had
adequate information available to him to assess many if not all
the factors in order to reach his conclusion about Trenk's
entitlement to the fees claimed. Specifically, the judge noted
the time, labor and difficulty of the questions involved, the
results obtained, the length of relationship with the client, the
fee customarily charged in the locality, and the experience,
reputation, and ability of the lawyer or lawyers performing the
services. See R.P.C. 1.5(a)(1),(3),(4),(5),(6), and (7).
Accordingly, while Trenk's application was procedurally deficient,
the judge was able to make findings based upon billing statements,
representations made by counsel, and the resumes of the attorney's
seeking fees that address the necessary factors. Moreover, in
6 Trenk argues that its fee application was not subject to the requirements of Rule 4:42-9(b) because it was seeking fees payable from a fund in court under Rule 4:42-9(a). We disagree. Rule 4:42-9(b) is applicable to all fee applications where the court is called upon to make a determination of the amount based on reasonableness.
11 A-3932-14T4 making his award, the judge limited it to those fees incurred for
services "which benefited [the] creditors." Francilli, supra, 77
N.J. Super. at 529 (allowing fees "to the attorney for the assignor
for his services performed in the successful effectuation of the
assignment in question").7
Finally, appellants aver that if Trenk is entitled to a fee
award, then they too should be compensated for paying legal fees
to their attorneys whose work benefited all the creditors. While
we agree that a creditor's attorney may be entitled to fees where
the attorney renders "valuable services . . . for the benefit of
all the creditors," In re Gen. Assignment, supra, 75 N.J. Super.
at 424-25 (finding "attorney's objections to the commissions,
counsel fees and disbursements operated materially to the benefit
of the estate and the ultimate benefit of the creditors generally
. . . entitl[ing attorney] to the reasonable counsel fee awarded
to him by the trial court"), we find no evidence that such an
application was made to the Chancery judge or that such services
were in fact provided by appellants' counsel in this case. Without
the issue being properly raised before the Chancery judge, we have
7 We discern from the record that some of the fees associated with Trenk's pursuit of the counterclaim in the New York action were for services performed prior to the entry of the order appointing it as special counsel. However, we conclude that the Chancery judge did not abuse his discretion by awarding those fees because they were incurred for the purpose approved by the court.
12 A-3932-14T4 no cause to determine the issue. See Nieder v. Royal Indem. Ins.
Co., 62 N.J. 229, 234 (1973).
Affirmed.
13 A-3932-14T4