KARL HALLIGAN VS. JOHN O'CONNORÂ (C-55-12, HUDSON COUNTY AND STATEWIDE)
A-3058-15T1
| N.J. Super. Ct. App. Div. | Jul 19, 2017|
Check Treatment NOT FOR PUBLICATION WITHOUT THE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-3058-15T1
KARL HALLIGAN,
Plaintiff-Respondent,
v.
JOHN O'CONNOR and
HARRY HODKINSON,
Defendants-Appellants,
and
H&H REAL ESTATE INVESTMENTS,
LLC,
Defendant.
__________________________________
Argued July 6, 2017 – Decided July 19, 2017
Before Judges Yannotti and Haas.
On appeal from Superior Court of New Jersey,
Chancery Division, Hudson County, Docket No.
C-55-12.
Andrew R. Turner argued the cause for
appellants (Turner Law Firm, attorneys; Mr.
Turner, of counsel and on the brief).
Steven L. Menaker argued the cause for
respondent (Chasan Leyner & Lamparello,
attorneys; Mr. Menaker, of counsel and on the
brief; Kirstin Bohn, on the brief).
PER CURIAM
Defendants John O'Connor and Barry Hodkinson appeal from a
February 26, 2016 Chancery Division order finding them in contempt
for failing to comply with an earlier order of the trial court,
and imposing a $250 sanction on each of them. Defendants also
appeal from the court's March 18, 2016 order requiring them to pay
a total of $1580 in counsel fees and costs to plaintiff Karl
Halligan's attorney in connection with his motion seeking the
contempt adjudication. Finally, defendants appeal from the trial
court's June 21, 2016 order finding them in contempt for failing
to pay the sanctions and counsel fees assessed in the previous two
orders in a timely fashion, and directing each defendant to pay
another $250 sanction to the court and $411.25 in counsel fees and
costs to plaintiff.
On appeal, defendants contend that the trial court abused its
discretion in making these rulings because there was insufficient
evidence in the record to support the contempt adjudications.
Having reviewed the record in light of defendants' arguments and
the applicable law, we agree with defendants' contentions and
reverse all three orders.
2 A-3058-15T1
We derive the following procedural history and facts from the
record developed before the trial court. Plaintiff and defendants
formed H&H Real Estate Investments LLC, (H&H), a limited liability
company (LLC), to act as the holding company for a property and
building they purchased in which they operated a bar and
restaurant. The parties formed a second LLC, Park Avenue Bar &
Grill LLC (Park Avenue), to operate and manage the bar and
restaurant.
Following a number of disputes between the parties concerning
the operation of their businesses, plaintiff sued defendants for
breach of their duties and obligations under the LLCs' operating
agreements, and he sought to dissolve both of the LLCs. Defendants
filed an answer and counterclaim asserting, among other things,
that plaintiff had wrongfully limited their access to the business
property and its books and records.
Following a multi-day trial, the trial judge rendered a
decision on November 14, 2013 requiring plaintiff to cede
managerial control over, and dissociate himself from, the two
LLCs. The judge also ordered the two LLCs, which were not parties
to the lawsuit, to pay plaintiff $793,772.50, representing equity
compensation, salary, and tax reimbursement. On March 18, 2014,
the judge issued a conforming judgment.
3 A-3058-15T1
On March 20, 2014, plaintiff and defendants entered into a
consent order in which they agreed that each individual party was
"barred from selling, mortgaging, renting, leasing, liening,
hypothecating or in any manner whatsoever encumbering the
property" owned by H&H in which the bar and restaurant had been
operated. The next day, plaintiff dissociated himself from the
two LLCs.
In November 2014, defendants filed a motion to vacate the
portions of the March 18, 2014 order that required H&H and Park
Avenue to make monetary payments to plaintiff because neither LLC
had been a party to the lawsuit. At oral argument on March 20,
2015, the trial judge acknowledged this mistake and granted
defendants' motion. The judge also permitted plaintiff to amend
his complaint to add the two LLCs as defendants. The judge signed
a conforming order setting out these rulings on April 6, 2015.
The judge subsequently denied plaintiff's motion for
reconsideration.
On May 8, 2015, the trial judge granted plaintiff's motion
for another order concerning the future sale of H&H's property.
In pertinent part, this order stated:
Effective[] immediately and subject to
further [o]rder of the [c]ourt, Halligan,
O'Connor and Hodkinson (collectively, the
"[p]arties") are restrained and barred from
selling, mortgaging, renting, leasing,
4 A-3058-15T1
liening, hypothecating or in any manner
whatsoever encumbering the property [owned by
H&H in which the bar and restaurant had been
operated].
The order further provided that "[a]ny one of the [p]arties
may move to dissolve or modify the restraints contained in the
[o]rder upon [seven] days['] notice to the other [p]arties[.]"
Significantly, the order only named plaintiff and the two
defendants in their individual capacities. Plaintiff had still
not named H&H, the LLC which owned the property, as a party to the
litigation.1
On August 25, 2015, plaintiff filed a "Revised First Amended
Complaint" that named H&H as a defendant. In this new pleading,
plaintiff sought damages against H&H for breach of contract and
other related claims. The amended complaint also continued to
name O'Connor and Hodkinson as individual defendants, even though
plaintiff was no longer asserting any claims against them.2
Thereafter, the trial judge conducted at least one case
management conference with the parties. Although the judge could
1
By this time, the Park Avenue LLC had filed a petition for
bankruptcy and its assets had been sold.
2
As a trial judge later explained in a June 21, 2016 order and
decision transferring the matter to the Law Division, plaintiff
"represented that the two individual[] [defendants] were named for
consistency in the pleadings, but no[] claims were asserted against
them."
5 A-3058-15T1
not recall the specific conference when this occurred, he stated
at a conference on January 13, 2016 that he had previously approved
a request by H&H to list its property for sale. Perhaps in
connection with that approval, H&H's attorney sent a letter to the
trial judge3 on January 4, 2016 stating "that the building owned
by [H&H was] under binding contract for sale with an anticipated
closing date at the end of February."
At the January 13, 2016 case management conference that
followed, the trial judge asked H&H's attorney if the matter could
be resolved once the property was sold. At that point, plaintiff's
attorney asserted "that whoever signed a contract of sale for that
building has violated" the May 8, 2015 order barring a sale until
further order of the court. In response, H&H's attorney stated
that since plaintiff's attorney was not objecting to the actual
sale of the property, she "hope[d]" the judge "would make the
ruling . . . that we can go forward with the sale of the building."
The trial judge noted that there were no motions currently
pending before him and plaintiff's attorney then stated that he
planned to file an application to hold defendants in contempt of
the May 8, 2015 order. The judge replied that if that occurred,
H&H's attorney would simply file "a motion . . . to approve the
3
The attorney also sent a copy of the letter to plaintiff's and
defendants' attorneys.
6 A-3058-15T1
sale." Thus, the judge suggested, but did not require, that the
parties confer to attempt to resolve the matter before any motions
were filed.
However, plaintiff instead filed a motion on January 19, 2016
seeking an order "[p]ursuant to R. 1:10-3 holding John O'Connor
and/or Harry Hodkinson in contempt" for allegedly violating the
May 8, 2015 order. Plaintiff asked the trial judge to impose a
monetary sanction upon the individual defendants and award him
counsel fees and costs. Plaintiff also requested oral argument
on the motion. Significantly, plaintiff did not seek to have the
sale enjoined.
In a certification attached to the motion, plaintiff's
attorney acknowledged that "[i]t is presently unknown whether
O'Connor or Hodkinson, both of them, or someone else acting at
their direction on behalf of H&H executed the contract, but whoever
it was, is in contempt of the" May 8, 2015 order. The attorney
also conceded that he did not have a copy of the contract of sale.4
H&H did not file a response to this motion, but defendants'
attorney submitted a letter in opposition. The attorney pointed
4
In his appendix on appeal, plaintiff has provided the first page
of what purports to be an "agreement of sale" concerning the
property. This document is undated and lists H&H, rather than the
individual defendants, as the seller. The name of the purported
buyer has been redacted and it is not known whether the agreement
was signed by either defendant.
7 A-3058-15T1
out that the property had not yet been sold and that although
defendants were the two remaining principals in H&H, the LLC owned
the property.
The judge did not conduct oral argument on the motion or a
plenary hearing to resolve the factual disputes raised by the
parties concerning the identity of the individuals or entities
that were responsible for entering into an agreement of sale for
the property. Instead, on February 26, 2016, the trial judge
issued an order granting plaintiff's motion to hold defendants in
contempt. The judge ordered each individual defendant to pay $250
to the court as a sanction, and to pay plaintiff's counsel fees
and costs in connection with the motion.
In a one-page statement of reasons appended to the February
26, 2016 order, the trial judge stated:
After a careful review of the submissions by
both parties, the [c]ourt concludes that the
execution of the sales contract for [the
property] is a clear violation of this
[c]ourt's [o]rder dated May 8, 2015. Pursuant
to that [o]rder, [d]efendants . . . O'Connor,
and Hodkinson were "restrained and barred from
selling, mortgag[ing], renting, leasing,
liening, hypothecating or in any manner
whatsoever encumbering the property."
. . . .
Plaintiff argues that "O'Connor and Hodkinson
have repeatedly demonstrated in the past and
continue to demonstrate at present contempt
for the process of this court and their self-
8 A-3058-15T1
interested disregard of court orders." I
agree.
The trial judge's provided no further explanation for his
ruling. Thus, the judge did not address the fact that he had
previously approved the listing of the property for sale; the
absence of an agreement of sale in the record before him; the fact
that the property had not yet been sold; the role either individual
defendant played in the alleged sale; or the lack of any objection
by plaintiff to the sale of the property.
In a March 18, 2016 order, the trial judge determined the
amount of the counsel fees and costs ($1580) defendants were
required to pay plaintiff's attorney. Defendants then filed a
notice of appeal to this court.
When defendants failed to pay the counsel fees to plaintiff's
attorney within thirty days as required by the March 18, 2016
order, plaintiff filed another motion "pursuant to R. 1:10-3" to
hold defendants in contempt. Plaintiff sought the imposition of
additional monetary sanctions upon each individual defendant, and
payment for the counsel fees and costs he incurred in the
preparation of the motion. Plaintiff again requested oral argument
on the motion.
In opposition to this motion, defendants' attorney submitted
a certification pointing out that defendants had filed a notice
9 A-3058-15T1
of appeal from the February 26, and March 18, 2016 orders. The
attorney explained that he contacted the trial judge to seek a
stay of the two orders pending appeal, but was advised that the
judge had recently retired. Defendants' attorney then spoke to
plaintiff's attorney to request his consent to the entry of a
voluntary stay, but the attorney declined and, instead, filed the
contempt motion. Under these circumstances, defendants' attorney
argued that his clients had not willfully failed to comply with
the two orders.
H&H's attorney also filed a certification in opposition to
plaintiff's motion. The attorney asserted that H&H owned the
property; was not a party to the litigation at the time the May
8, 2015 order was entered; and the property had not been sold.
A new trial judge was assigned to review the motion pleadings.
Without conducting oral argument or a plenary hearing, the judge
entered an order on June 21, 2016, granting plaintiff's motion to
hold defendants in contempt of the February 26, and March 18, 2016
orders. The judge ordered each defendant to pay an additional
$250 to the court and $411.25 in counsel fees and costs to
plaintiff.
The trial judge made no specific findings of fact or
conclusions of law in connection with this ruling. Instead, the
judge merely wrote at the bottom of the order that he was granting
10 A-3058-15T1
plaintiff's motion "for the reasons set forth in [p]laintiff's
April 27, 2016 [c]ertification and May 23, 2016 reply brief." The
judge did not mention any of the contentions raised by defendants
and H&H. By leave granted, defendants later amended their notice
of appeal to include the June 21, 2016 order.
Shortly thereafter, a third trial judge was assigned to the
matter. On August 11, 2016, the judge granted H&H's motion to
sell its property for $1.1 million and to distribute the proceeds.
On August 19, 2016, the judge denied plaintiff's motion for yet
another order holding defendants in contempt for failure to pay
the amounts due under the February 26, March 18, and June 21, 2016
orders.5
On appeal, defendants contend that the trial judges' rulings
are "not supported by the record" and "constitute an incorrect
application of discretion[.]" We agree.
Plaintiff brought his two "contempt" motions against
defendants under Rule 1:10-3, which, in pertinent part, provides
that:
[n]otwithstanding that an act or omission may
also constitute a contempt of court, a
litigant in any action may seek relief by
application in the action. A judge shall not
5
In compliance with the August 19, 2016 order, defendants
subsequently paid plaintiff all amounts due under the three orders,
while reserving their right to have these funds returned if they
are successful on appeal.
11 A-3058-15T1
be disqualified because he or she signed the
order sought to be enforced. . . . The court
in its discretion may make an allowance for
counsel fees to be paid by any party to the
action accorded relief under this rule.
"[A] proceeding to enforce litigants' rights under Rule 1:10-
3 'is essentially a civil proceeding to coerce the defendant into
compliance with the court's order for the benefit of the private
litigant[.]'" Pasqua v. Council, 186 N.J. 127, 140 (2006) (quoting Essex Cty. Welfare Bd. v. Perkins,133 N.J. Super. 189
, 195 (App. Div.), certif. denied,68 N.J. 161
(1975)). Thus, an application for relief under Rule 1:10-3 is distinguishable from "[a] criminal contempt proceeding under Rule 1:10-2[,]" which "is 'essentially criminal' in nature and is instituted for the purpose of punishing a defendant who fails to comply with a court order."Ibid.
(quoting Essex Cty. Welfare Bd.,supra,
133 N.J. Super. at 195
). Accordingly, "[r]elief under R. 1:10-3, whether it be the imposition of incarceration or a sanction, is not for the purpose of punishment, but as a coercive measure to facilitate the enforcement of the court order." Ridley v. Dennison,298 N.J. Super. 373
, 381 (App. Div. 1997).
We review a trial court's imposition of sanctions against a
litigant pursuant to Rule 1:10-3 under the abuse of discretion
standard. Barr v. Barr, 418 N.J. Super. 18, 46 (App. Div. 2011).
"An abuse of discretion 'arises when a decision is made without a
12 A-3058-15T1
rational explanation, inexplicably departed from established
policies, or rested on an impermissible basis.'" Ibid.(quoting Flagg v. Essex Cty. Prosecutor,171 N.J. 561
, 571 (2002)).
Applying these principles, we are constrained to reverse all three
orders sanctioning defendants under Rule 1:10-3.
We turn first to the February 26, 2016, and March 18, 2016
orders which sanctioned defendants $250 each for their "contempt"
of the May 8, 2015 order barring the sale of H&H's property, and
required them to pay plaintiff's attorney $1580 in counsel fees
and costs. There was clearly insufficient evidence in the record
to support the judge's finding that defendants, as opposed to H&H
as a business entity represented by its own counsel, were
individually or collectively responsible for the contract of sale.
As plaintiff's attorney conceded in his certification supporting
the motion, it was not known at that time whether either defendant
"or someone else acting at their direction on behalf of H&H
executed the contract[.]" In addition, the judge did not address
defendants' contention that H&H was not bound by the May 8 order
because the LLC was not even a party to the litigation at the time
the order was entered.
Moreover, it is not clear on this record whether any willful
violation of the May 8 order occurred as the result of the
execution of a contract of sale. In this regard, the trial judge
13 A-3058-15T1
specifically acknowledged that he had earlier approved a request
by H&H to list the property for sale. Even so, the judge did not
address this approval in his sparse written decision.
H&H's attorney also stated at the January 13, 2016 case
management conference that she intended to file a motion with the
court to permit the sale to proceed, which was in keeping with the
literal terms of the May 8 order. Under these circumstances,
there was insufficient evidence in the record to support a
conclusion that either individual defendant willfully violated the
order.
Finally, we again note that orders entered under Rule 1:10-3
are intended to be coercive, rather than punitive. Ridley, supra,
298 N.J. Super. at 381. Here, plaintiff never asked the trial
judge to enjoin the sale of the property and the judge did not do
so on his own motion. Instead, the orders merely imposed monetary
sanctions upon defendants which, on their face, did nothing "to
facilitate the enforcement of the [May 8, 2015] court order."
Ibid. Therefore, we reverse the February 26, 2016, and March 18,
2016 orders.
For similar reasons, we also reverse the second trial judge's
June 21, 2016 order imposing additional sanctions and counsel fees
and costs after defendants failed to pay the initial assessments
within thirty days. As explained in defendants' attorney's
14 A-3058-15T1
certification in opposition to plaintiff's motion, defendants had
filed an appeal to challenge the two earlier orders and were in
the process of seeking a stay pending that appeal when plaintiff
filed another Rule 1:10-3 application. Under these circumstances,
we are unable to conclude that defendants' delay in paying the
sanctions was willfully contemptuous.
Significantly, the trial judge who handled this application
never made such a finding. Indeed, rather than expressly setting
forth the facts which led to his decision, the judge merely stated
that he was granting the motion for the reasons set forth in
plaintiff's pleadings. Such an approach does not constitute
adequate fact finding. In In re Trust Created by Agreement Dated
Dec. 20, 1961, 399 N.J. Super. 237, 253-54 (App. Div. 2006), aff’d,194 N.J. 276
(2008), we held that a trial judge may grant or deny
a motion for the reasons posited by the parties only if "the judge
makes such reliance explicit"; makes "clear the extent of his [or
her] agreement with and reliance on [the] proposed findings of
fact and conclusions of law"; and "supplie[s] a summary of his [or
her] findings in [the] . . . opinion" that clearly demonstrates
"that the trial judge carefully considered the evidentiary record
and did not abdicate his [or her] decision-making responsibility."
Therefore, the June 21, 2016 order must also be reversed.
Reversed.
15 A-3058-15T1