THE ESTATE OF STANLEY J. WARNER VS. KITTY FAN KOO (C-000205-16, BERGEN COUNTY AND STATEWIDE)

• Court: New Jersey Superior Court Appellate Division
• Decided: October 25, 2018
• Docket: A-1367-16T3
• Status: Unpublished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NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court."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-1367-16T3

THE ESTATE OF STANLEY J. WARNER,

Plaintiff-Appellant,

v.

KITTY FAN KOO and FASHION PROPERTIES, a New Jersey partnership,

Defendant-Respondents. ________________________________

Argued May 30, 2018 – Decided October 25, 2018

Before Judges Koblitz and Suter.

On appeal from Superior Court of New Jersey, Chancery Division, General Equity, Bergen County, Docket No. C-000205-16.

Jan Alan Brody argued the cause for appellant (Carella, Byrne, Cecchi, Olstein, Brody & Agnello, attorneys; Jan Alan Brody, of counsel and on the brief).

David M. Watkins argued the cause for respondents (Law Office of David M. Watkins, attorneys; David M. Watkins, on the brief). The opinion of the court was delivered by

SUTER, J.A.D.

Stanley J. Warner (Warner) appeals the October 27, 2016 letter order that

granted summary judgment to defendants, Kitty Fan Koo (Koo) and Fashion

Properties (F.P.), and dismissed his verified complaint and order to show cause. 1

In his verified complaint, Warner claimed he was a partner with Koo in F.P., but

she would not provide information about it or make distributions; she wo uld not

allow a review of F.P.'s books and records; and she prevented his participation

in the business. He sought to dissolve F.P., appoint a receiver, disassociate Koo

from F.P., restrain further distributions, prepare an accounting from January

1993 to present, access F.P.'s books and records, and award him compensatory

and punitive damages and attorney's fees. We affirm the trial court's dismissal

of the verified complaint. 2

Warner and Koo formed F.P. in 1987 without a written partnership

agreement. Warner contends they agreed to share equally any profits and losses

1 Warner died while this appeal was pending. We granted his estate permission to substitute as appellant on April 4, 2018. We continue to refer to plaintiff as Warner. 2 The court denied Warner's request for preliminary injunctive relief. He did not appeal that denial. A-1367-16T3 2 from F.P. Additionally, Warner contends he and Koo were equal shareholders

in a corporation named Fashion Properties, Inc., that purchased a commercial

building in Carlstadt, New Jersey, for $5.2 million in 1986. Fashion Properties

transferred ownership of the Carlstadt property to F.P., which then mortgaged it

for $3.5 million. F.P. assigned the rents it collected from the property's

commercial tenants to pay the mortgage. The mortgage has been satisfied.

Warner and Koo were married in 1991, but divorced in January 1994.

They entered into a property settlement agreement (PSA) as part of their divorce,

but neither was able to produce a copy of the agreement. Koo claimed her copy

was destroyed in Hurricane Sandy; Warner claimed he did not retain a copy.

Neither Koo's prior attorney, Avron R. Vann, nor the accounting firm of

Druckman and Hill, LLP, appears to have retained a copy beyond their

scheduled document retention policy.

Warner alleged that after the divorce in January 1994, he had no access to

F.P.'s books and records. He claimed Koo did not share financial information

about the partnership, did not issue Schedule K-1's (K-1), 3 or pay him

distributions or profits. Koo did not dispute this. Warner claimed that in "late

3 A Schedule K-1 is a form that reports each partner's share of taxes on the business' income. A-1367-16T3 3 2012/early 2013," Koo's attorney asked him to endorse a $200,000 insurance

claim check relating to the Carlstadt property, but he refused. Warner claimed

that in April 2013, Vann asked him to sign a "[d]issolution of [t]rade [n]ame"

form to have Warner's name removed from the records on file with the Bergen

County Clerk as a co-owner of F.P, but again Warner refused. Three years later,

Warner's attorney wrote to Koo demanding access to the books and records of

F.P. and to "account for all rents, profits, proceeds, insurance payments and all

other monies in respect of the Carlstadt Property."

When the deadline specified in the attorney's letter was not met, Warner

filed an order to show cause against Koo and F.P. seeking to proceed summarily

under Rule 4:67 or for preliminary injunctive relief. The accompanying verified

complaint alleged in count one that Koo and F.P. violated the Uniform

Partnership Act (Partnership Act), N.J.S.A. 42:1A-1 to -56, by denying him

equal rights in the management of F.P., denying access to its books and records,

denying an accounting of profits, and breaching her fiduciary duty of loyalty to

him. Count two against Koo alleged that she breached her fiduciary duty to

Warner by denying him information about F.P. and that it was intentional,

willful and malicious. Count three against Koo alleged a breach of the

partnership agreement involving F.P. Count four against Koo alleged an

A-1367-16T3 4 intentional, willful and malicious conversion of Warner's property. Warner

requested a final judgment dissolving F.P., appointing a receiver to wind up its

affairs, dissociating Koo from F.P., restraining any further distributions or

payments, directing an accounting of F.P.'s business from January 1993 to

present, access to all of its books and records, damages and attorney's fees.

Koo filed a cross-motion to dismiss the verified complaint under Rule 4:6-

2, or for summary judgment, and filed an answer. Koo alleged that Warner was

not a partner in F.P. She claimed that he "relinquished all of his right, title and

interest in [F.P.]" in the PSA. After the divorce, "Warner was completely

uninvolved in [F.P.]," in contrast to his "very active" involvement before the

divorce. She agreed he did not receive any financial distributions, participate in

its ownership, operation or management, and did not receive income tax returns

or reports including any K-1's. She alleged he did not "file any personal income

tax returns reporting any income from [F.P.]." Koo claimed that Warner did not

make any claim of ownership about F.P. after the divorce or request any

information about the company. Koo stated "Warner knew he had transferred

and relinquished his entire ownership interest in [F.P.] and he was no longer

entitled to participate in any manner, whatsoever, in [F.P.]."

A-1367-16T3 5 Koo argued that Warner's claims in the verified complaint were released

by him in 2005 when he signed a "[g]eneral [r]elease" that settled a lawsuit filed

in 1999 by his corporation, Warner Licensing Company, Inc. (Licensing),

against her company, Fashion Franchises Limited (Limited), and Koo over use

of a trademark. In that general release, Warner "release[d] and discharge[d]"

Limited and Koo and their "subsidiaries, affiliates, employees, officers,

shareholders, directors, attorneys, heirs, executors, administrators, legal

representatives, successors and assigns" from "all actions, causes of action, suits

. . . and demands whatsoever, in law . . . or equity, known or unknown, for[e]seen

or unfor[e]seen" that Warner (including his heirs, executors or administrators)

"ever had, now have or hereafter can, shall or may have for, upon, or by reason

of any matter" from the "beginning of the world" to the date of the release,

December 8, 2005. She claimed it was "unthinkable" he would not have

included in that litigation a cause of action about F.P.'s ownership or funds, if

he believed he was a partner. Warner was a "sophisticated and knowledgeable

business entrepreneur;" they had been business partners in a number of different

companies.

F.P.'s accountant, Stuart M. Feuerstein, submitted a certification in which

he alleged that from "tax year 1992 and thereafter, the tax returns prepared and

A-1367-16T3 6 filed for [F.P.] did not reflect Warner as a partner." Rather, they identified Koo

as the owner of ninety percent of F.P. 4 He confirmed K-1's were not issued to

Warner after 1992, that Warner did not request their preparation for him or call

to discuss anything about F.P.'s business.

Warner denied as "patently false" that he had relinquished any rights or

interest in F.P. He claimed there was no reason to include F.P. in the PSA,

because it did not constitute a marital asset. He noted that Vann's supporting

certification did not mention the PSA or provide a copy of it. Warner alleged

for the first time that because of his poor health and the stress of the divorce, he

and Koo had agreed that after the divorce they would "limit [their] interactions

going forward." Thereafter, Koo "undertook full responsibility for th e day-to-

day operation and management of the partnership." However, he claimed he did

not relinquish any rights or interest in F.P. Warner continued to claim he was

treated as a partner because in late 2012 or early 2013, Vann asked him to sign

an insurance check for F.P. and in April 2013, he was asked to agree to remove

his name as a partner, both of which he declined to do.

4 The owner of the other ten percent was not identified. A-1367-16T3 7 Warner asserted that the 2005 release did not apply. He was not a party

to the 1999 litigation involving the license, nor was F.P. a party. The claims in

that litigation had nothing to do with his partnership interest in F.P.

In reply, Koo claimed that Warner's allegation about the $200,000

insurance check was a "complete fabrication." In his certification, Vann agreed

the claim "[was] a figment of [Warner's] imagination." However, Koo

acknowledged Warner was asked to update the Bergen County Clerk's records

to confirm that he was not a partner in F.P.

The trial court granted Koo's cross-motion for summary judgment on

October 27, 2016. The court found that the claims were extinguished by the

statutes of limitations, stating "when there's a complete freeze out of an

individual, when a party who had been co-manager of this business goes from

that to having no rights, only the rights of a stranger in the business, you can't

in my view wait [twenty-two] years to bring those claims." He also found that

Warner's claims were barred by laches.

It's because of the decades that have passed and the mist of time that has passed that we can't regroup and find out what exactly was in the property settlement agreement, so I'm left with the fact that I'm not going to have that. But that’s exactly why you have laches . . ..

A-1367-16T3 8 Further, the court found that Warner had not "taken . . . one step consistent

with rights that he's been deprived of year after year since 1993." Warner

presented no evidence to support his claim.

Once the parties got divorced, he acted only consistent with someone who was not a partner and never consistent with someone who is a partner. Took not one-step suggestive of being a partner for [twenty-two] years. No evidence he sought to look at any books and records. No evidence he visited businesses. No evidence that he complained about the fact that he wasn't getting any K-1's, complained about the fact that he wasn't getting distributions. He only acted like somebody who was no longer a partner, and he was treated exactly that way by Ms. Koo.

Warner's "disinterest" provided the court with a record sufficient to conclude,

"no, it's too late for purposes of statute of limitations, for purposes of laches, for

these long ignored, indifferent claims . . . to now be brought forward."

The court considered the 2005 release, and found "the release

unambiguous that Ms. Koo has released any and all claims." The court also

found that "[t]he release does not specifically talk about releasing [F.P.], but the

release does not carve out [F.P.] either and does read rather broadly that Kitty

Koo and her affiliates and such are all released."

On appeal, Warner contends the trial court erred by granting summary

judgment because there were disputed issues of fact about his partnership

A-1367-16T3 9 interest in F.P. He claims the court improperly drew inferences against him as

the non-moving party on the summary judgment motion and should have

allowed him time for discovery. He argues his claims were not barred by any

statute of limitations or by laches, and the court erred in dismissing his claims.

He argues the court erred in holding the 2005 release applied because it had

nothing to do with F.P. and it expressly did not address any claims after the date

that it was signed.

We review a trial court's orders granting or denying summary judgment

under the same standard employed by the motion judge. Globe Motor Co. v.

Igdalev, 225 N.J. 469, 479 (2016). The question is whether the evidence, when

viewed in a light most favorable to the non-moving party, raises genuinely

disputed issues of fact sufficient to warrant resolution by the trier of fact, or

whether the evidence is so one-sided that one party must prevail as a matter of

law. Templo Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co., 224 N.J. 189,

199 (2016) (citing R. 4:46-2(c)); see also Brill v. Guardian Life Ins. Co. of Am.,

142 N.J. 520, 540 (1995). Our review is plenary. Bhagat v. Bhagat, 217 N.J.

22, 38 (2014). We review issues of law de novo and accord no deference to the

trial judge's legal conclusions. Nicholas v. Mynster, 213 N.J. 463, 478 (2013).

A-1367-16T3 10 We agree with the trial court that Warner's causes of action in the verified

complaint for breach of fiduciary duty, breach of contract and conversion were

barred by applicable statutes of limitations. N.J.S.A. 2A:14–1 provides:

[e]very action at law . . . for taking, detaining, or converting personal property . . . for any tortious injury to the rights of another . . . or for recovery upon a contractual claim or liability, express or implied, not under seal . . . shall be commenced within [six] years next after the cause of any such action shall have accrued.

That statute expressly references contract claims as having a six year

statute of limitations. The statute of limitations for a breach of fiduciary duty

which results in purely economic loss is controlled by the substantive law

governing the relationship and is typically six years. Balliet v. Fennell, 368 N.J.

Super. 15, 22 (App. Div. 2004). In addition, the six-year statute generally

governs conversion claims. See Weiss v. Stelling, 130 N.J.L. 235, 237 (E. & A.

1943); Dynasty Bldg. Corp. v. Ackerman, 376 N.J .Super. 280, 288 (App. Div.

2005).

A claim accrues, for statute of limitations purposes, on "the date on which

'the right to institute and maintain a suit' first arose." Cty. of Morris v. Fauver,

153 N.J. 80, 107 (1998) (citations omitted). Generally, "a wrongful act with

consequential continuing damages is not a continuing tort," and does not

A-1367-16T3 11 lengthen the statute of limitations. Russo Farms v. Vineland Bd. of Educ., 144

N.J. 84, 114 (1996).

We find no error in applying the six-year statute of limitations here to

dismiss the breach of fiduciary duty, breach of contract and conversion claims.

Assuming, as Warner says, that he was a partner in F.P., he did not dispute that

the last K-1 he received was in 1992 or that he did not ask for, or receive, any

information about F.P. from the divorce in 1994 until his attorney's letter in 2016

requesting information. These causes of action accrued in 1994 when he claims

he was shut out of the company. He failed to act on them for twenty-two years,

which warranted application of the statutes of limitations to bar these claims.

We agree with the court that laches applied to these claims as well.

"Laches is an equitable doctrine, operating as an affirmative defense that

precludes relief when there is an 'unexplainable and inexcusable delay' in

exercising a right, which results in prejudice to another party." Fox v. Millman,

210 N.J. 401, 417-18 (2012) (quoting Fauver, 153 N.J. at 105). It can be applied

"in the absence of the statute of limitations." Lavin v. Hackensack Bd. of Educ.,

90 N.J. 145, 151 (1982). Its application "is a matter within the sound discretion

of the trial court." Mancini v. Twp. of Teaneck, 179 N.J. 425, 436 (2004)

(quoting Garrett v. Gen. Motors Corp., 844 F.2d 559, 562 (8th Cir. 1988)).

A-1367-16T3 12 The court did not abuse its discretion in dismissing the breach of contract,

breach of fiduciary duty and conversion claims based on laches.

The key factors to be considered in deciding whether to apply the doctrine are the length of the delay, the reasons for the delay, and the 'changing conditions of either or both parties during the delay . . . .' The core equitable concern in applying laches is whether a party has been harmed by the delay.

[Chance v. McCann, 405 N.J. Super. 547, 567 (App. Div. 2009) (quoting Knorr v. Smeal, 178 N.J. 169, 180- 81 (2003)).]

There is no dispute that Warner delayed making a claim for twenty-two

years. He said based on his health and the stress of the divorce that he and Koo

agreed to limit their interactions going forward. He did not certify that he and

Koo agreed he would not ask for or receive any information about the company,

that he did not need a K-1, or that he did not want distributions of profits.

Warner's health was good enough in 1999 for his company to sue Koo in the

licensing case. That litigation continued for five years. These claims could have

been the subject of a lawsuit had Warner chosen to do so. Warner, however,

took no action in late 2012/ early 2013 when he claims he was asked to sign an

insurance check for the partnership, or in 2013 when he was asked to sign a form

to be filed with the clerks' office that he no longer was a partner in F.P.

A-1367-16T3 13 Koo has been prejudiced by the passage of time. Koo's copy of the PSA

was destroyed in flooding from Hurricane Sandy. Her attorney and accountant

certified that their firms retained documents for specified timeframes. Now,

Warner has passed away. This would require Koo to litigate against his estate

based on representations he made in certifications, without the ability for cross -

examination or meaningful discovery.

Warner relies on Todd v. Adm'rs of Rafferty, 30 N.J. Eq. 254 (Ch. Div.

1878). That case involved the early application by a trial court of the discovery

rule in the context of a fraud by one partner against another. We choose to rely

on more recent authority in our application of the statutes of limitation and of

laches in this case.

We do not find factual issues about whether Warner continued as a partner

of F.P. after the divorce precluded summary judgment on Warner's claim in

count one of his verified complaint alleging violations of the Partnership Act.

The trial court recognized there were factual issues when it declined to order

preliminary restraints, stating:

I don't grant injunctions when the material facts are in dispute. The plaintiff says he's a member of . . . the partnership. The defendant says he's not . . . the plaintiff says he surrendered his interest as part of a divorce degree. He says he did not. To the extent that's

A-1367-16T3 14 . . . a material issue, it mitigates dispositively against granting any sort of injunctive relief.

However, that said, Warner simply delayed too long in asserting any claim of

violation of the Partnership Act. He did not file a claim in 1999 when his

company sued Koo in the licensing matter. He knew that he was not getting K-

1's or information about the partnership. He knew that he was not getting any

distributions. Thus, we agree with the trial judge that any such claim also is

barred by laches.

Affirmed.

A-1367-16T3 15