PER CURIAM.
Defendants Medardo Perez and 4921 Bergenline Corp. (Bergenline) appeal from the trial court's order denying their motion to vacate an earlier order dismissing their counterclaim and third-party complaint filed in response to a foreclosure action in Hudson County. The court held defendants' claims were barred by the doctrine of res judicata, as they were essentially the same claims that the Chancery Division in Bergen County dismissed in a final, unappealed order. The court also held that defendants lacked standing to assert their claims, which belonged to a separate business entity, RC Associates, a limited liability company. We agree and affirm.
We discern the following facts from the record.
In 2009, RC Associates constructed residential condominiums on land in Weehawken it acquired from Perez and third-party defendant Rolando Cribeiro. RC Associates utilized a construction company that Cribeiro controlled, C & P Builders, Inc. (C&P). In 2007, Mariner's, with whom Cribeiro had a prior relationship, provided a construction loan of over $2 million to RC Associates. The loan was secured by a mortgage on the Weehawken property.
Also in 2007, Bergenline borrowed $1.5 million from Mariner's to refinance the mortgage on the property it owned at 4919-4921 Bergenline Avenue in West New York. Perez utilized some of the net proceeds of Bergenline's West New York loan to purchase some of the parcels in the Weehawken project. He provided a personal guaranty of the West New York mortgage loan. He also executed an assignment of rent from Bergenline's tenant, a commercial bank.
Perez alleged that unbeknownst to him or Dolan, Cribeiro obtained a modification of the Weehawken loan to RC Associates, securing $250,000 in additional credit. Perez alleged that Cribeiro, also without Perez's knowledge, obtained a separate $300,000 mortgage loan encumbering other property that RC Associates owned. Perez alleged Cribeiro forged his and Dolan's signatures in order to obtain these additional loans, and then utilized the loan proceeds for purposes that did not serve the interests of RC Associates. Perez asserted that third-party defendants Fred Daibes, Joseph A. Dominguez and Steven P. Oria — all Mariner's officers — were aware of the forgery and permitted the additional, unauthorized borrowing.
Perez alleged that he discovered the additional borrowing when the condominium units were sold. At the closing of each unit, the gross proceeds of sale were paid to Mariner's, which then deducted pro-rated amounts due on the loans. Perez also alleged that Mariner's wrongfully paid to Cribeiro, instead of RC Associates, receipts from the closings that exceeded the amounts due on the loans. Perez claimed between $1.3 and $1.6 million in such "profits" were diverted from RC Associates.
Perez asserted that as a result of these various misdeeds, he was deprived of his anticipated share of RC Associates' profits from the Weehawken project. He asserted that he intended to transfer those funds to Bergenline, to pay the mortgage loan on the West New York property. As he was unable to do so, Bergenline defaulted on the West New York mortgage loan.
On November 6, 2010, Mariner's filed its foreclosure action in connection with the Bergenline mortgage loan in Hudson County. Mariner's also sued Perez on the personal guaranty, and began collecting rent from Bergenline's tenant, pursuant to the assignment of rent.
Nine days later, Perez filed a separate nine-count complaint in the Chancery Division in Bergen County against Mariner's, Cribeiro, C&P, the three officers, and Dolan. He set forth the alleged misdeeds in connection with the Weehawken project loans, which we have already described. Perez asserted that the defendants converted monies that belonged to Perez and RC Associates. However, it was evident from the pleadings that Perez's asserted property interests were secondary to those of the limited liability company.
Perez sought relief based on claims of legal fraud by the bank officers (count one) and negligent hiring by Mariner's (count two). He asserted against the officers and Mariner's claims of negligence (count three), and breach of good faith and the implied covenant of good faith and fair dealing (counts four and five); fraudulent scheme to convert RC Associates' and Perez's assets (count six); civil conspiracy (count seven); and violation of the New Jersey Racketeer Influenced and Corrupt Organizations Act,
In lieu of an answer, Mariner's moved to dismiss on behalf of all the defendants. Among other arguments, movants argued that the complaint set forth claims that belonged solely to RC Associates, and Perez lacked standing to assert them. Perez cross-moved to restrain Mariner's' collection of rent from Bergenline's tenant pending adjudication of the Bergen County case.
The trial court granted Mariner's' motion. In a written opinion filed April 1, 2011, the court interpreted the complaint to allege, essentially, that the defendants "fraudulently diverted profits rightfully earned by R.C. Associates." The court concluded, "While Plaintiff claims a direct cause of action, if profits were diverted from R.C. Associates, the cause of action resides with [R.C. Associates]." Citing
The court also held that dismissal of the action precluded the cross-motion to restrain Mariner's' rent collection. "Additionally, in any event the Court finds that any application to restrain the bank from exercising its rights under the Assignment of Rents should be properly filed within the context of the previously filed Hudson County mortgage foreclosure action."
Perez did not appeal from the dismissal, nor did RC Associates file a complaint on its own behalf. Instead, Perez and Bergenline renewed the Bergen County allegations in their counterclaim and third-party complaint in the Hudson County foreclosure action. They again sought relief based on claims of legal fraud by the bank officers and, this time, added claims against Mariner's for fraud (count one). In all other respects, they asserted against the officers and Mariner's the identical claims raised in the Bergen County action, using virtually identical language. They alleged negligent hiring, negligence, breach of good faith and the implied covenant of good faith and fair dealing, fraudulent scheme to convert RC Associates' and Perez's assets, civil conspiracy, and violation of the New Jersey Racketeer Influenced and Corrupt Organizations Act. They likewise also sought an accounting from Mariner's, the officers, and Cribeiro.
Mariner's' foreclosure complaint was ultimately dismissed after Bergenline satisfied the loan by refinancing. Mariner's then filed a motion in June 2012 to dismiss the counterclaim and third-party complaint, arguing that it was barred by res judicata based on the Bergen County dismissal, and that Perez and Bergenline lacked standing to assert claims that belonged to RC Associates. Judge Hector R. Velazquez granted the motion as unopposed by order entered July 13, 2012.
Perez then moved to vacate the July 13 dismissal order. He argued that his non-opposition resulted from the misdirection of the motion papers. He contended he had standing, and res judicata did not bar his claims.
Judge Velazquez then heard the matter on the merits, and denied the motion. He reasoned, in a written opinion:
This appeal followed.
We review de novo a trial court's order dismissing an action on res judicata grounds.
We add the following brief additional remarks. We recognize that limited liability companies and corporations, although they share the attribute of limited liability, are distinct legal entities, invested with different characteristics to satisfy different policy goals. Consequently, we should not mechanistically import principles of law governing corporations to the law governing limited liability companies.
On the issue of standing, the New Jersey Limited Liability Company Act (LLC Act),
The LLC Act provides that a member may sue "in the right of a limited liability company to recover a judgment in its favor" — that is, in the company's favor — only if the "managers or members with authority to do so have refused to bring the action" or asking them to do so would "not likely ... succeed."
We have held that a court, in its discretion, may dispense with adherence to the requirements of a derivative action in cases involving closely-held corporations.
We conclude that Judge Velazquez correctly determined that Perez asserted various wrongs to RC Associates that resulted in the diversion of profits owed to RC Associates, as the owner of the Weehawken condominium project. Although Perez claims he suffered injury — based on his interest in his share of those profits — the claims belonged to RC Associates. He lacked standing to assert those claims directly.
Moreover, as the trial court found, the Bergen County court definitively addressed the issue of standing. Perez was collaterally estopped from raising the issue anew in the Hudson County matter.
While the court dismissed the Bergen County complaint without prejudice, it did so apparently only to preserve RC Associates' ability to assert the claims. The court adjudicated the merits of Perez's claims.
Perez argues that even if he did not have standing in the Bergen County case, he had standing to assert the counterclaim and third-party complaint in the Hudson County case because he was challenging the validity of the mortgage at issue. We disagree. The counterclaim and third-party complaint address the alleged forgery, and other alleged misdeeds pertaining to the lending on the Weehawken project. The allegations simply do not address the validity of the West New York mortgage.
Perez also asserts a variety of procedural arguments in support of his appeal. In particular, Perez misreads the Bergen County decision in asserting that the court in that case authorized Perez to file his claims in the foreclosure action. The court simply opined that relief regarding the assignment of rents should be sought in the context of the foreclosure action.
The balance of Perez and Bergenline's arguments lack sufficient merit to warrant discussion in a written opinion.
Affirmed.