PETER MOCCO VS. JAMES J. LICATA VS. ARMANDO J. MOLINA, ESQ. (L-7709-13, ESSEX COUNTY AND STATEWIDE) ( 2018 )

NOT FOR PUBLICATION WITHOUT THE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-5041-14T2
PETER MOCCO, LORRAINE MOCCO
and FIRST CONNECTICUT
HOLDING GROUP LLC IV,
Plaintiffs-Appellants/
Cross-Respondents,
and
LIBERTY HARBOR HOLDING LLC,
THE ATRIUM AT HAMILTON PARK
URBAN RENEWAL ASSOCIATES
LLC, FULTON'S LANDING URBAN
RENEWAL COMPANY LLC,
FIRST CONNECTICUT HOLDING
GROUP LLC II, FIRST
CONNECTICUT HOLDING GROUP
LLC III, FIRST CONNECTICUT
HOLDING GROUP LLC X, FIRST
CONNECTICUT HOLDING GROUP
LLC XI, FIRST CONNECTICUT
HOLDING GROUP LLC XIII,
8-10 CLIFTON PLACE CORP.,
HAMILTON PARK HEALTH CARE
CENTER LTD., LIBERTY HARBOR
MARINA, INC., STONEHYRST
INVESTMENTS, LLC and
A-1 SELF-STORAGE, INC.,
Plaintiffs,
v.
JAMES J. LICATA and HERBERT
BLAKE,
Defendants-Respondents/
Cross-Appellants,
and
DANIEL SHEPRO,
Defendant-Respondent,
and
CYNTHIA LICATA, EMP WHOLE
LOAN 1, LLC, EMP WHOLE
LOAN 2, LLC, BROADVIEW
FUNDING CORP., TITAN
MANAGEMENT, LP, TITAN
FUNDING, LP, IRA SAFERSTEIN,
OLIVIER COJOT-GOLDBERG,
MICHAEL VRANOS, ANDREW VRANOS,
SWJ HOLDINGS, LLC, STEPHEN
PODELL, WILLIAM MOURNES,
PROSKAUER ROSE LLP, DALE
SCHREIBER, COBRA/VENTURA
EQUITIES LLC, DARE
INVESTMENTS, LLC, CHICAGO
TITLE INSURANCE COMPANY,
HORIZON TITLE AGENCY, INC.,
EAST COAST INVESTMENTS, LLC,
ELLIOT BUCHMAN, SKY LAND
INVESTMENTS, LLC, GREGORY
CRANE, ADVERTISING MANAGEMENT
AND CONSULTING SERVICES, INC.,
RICHARD COAN, TRUSTEE FOR
FIRST CONNECTICUT CONSULTING
GROUP and RONALD CHORCHES,
TRUSTEE FOR JAMES J. LICATA,
Defendants,
and
CENTRUM FINANCIAL SERVICES,
INC., U.S. BANK, NATIONAL
2 A-5041-14T2
ASSOCIATION, FIRST MUTUAL
BANK and WELLS FARGO, N.A.,
Defendants/Third-Party
Plaintiffs-Respondents/
Cross-Appellants,
v.
ARMANDO J. MOLINA, ESQ.,
GORDON DUVAL, ESQ., and DUVAL
HAWS & MOODY, PC,
Third-Party Defendants,
and
SHEPRO & BLAKE, LLC,
Third-Party Defendant/
Respondent.
Argued May 8, 2018 – Decided June 5, 2018
Before Judges Yannotti, Carroll, and Mawla.
On appeal from Superior Court of New Jersey,
Law Division, Essex County, Docket No. L-7709-
13.
James A. Scarpone argued the cause for
appellants/cross-respondents (Scarpone &
Vargo, LLC, attorneys; James A. Scarpone and
John B. Nance, on the briefs).
Joseph P. Tucker argued the cause for
respondents/cross-appellants Centrum
Financial Services, Inc., U.S. Bank, National
Association, First Mutual Bank and Wells Fargo
Bank, N.A. (Fidelity National Law Group and
Chiesa Shahinian & Giantomasi, PC, attorneys;
Paul H. Schafhauser, on the brief).
Herbert S. Blake, respondent/cross-appellant
pro se.
3 A-5041-14T2
David J. Montag argued the cause for
respondents Daniel Shepro and Shepro & Blake,
LLP (Milber Makris Plousadis & Seiden, LLP,
attorneys; David J. Montag, on the brief).
PER CURIAM
Plaintiffs Peter Mocco, Lorraine Mocco, and First Connecticut
Holding Group IV (FCHG IV) appeal from a June 5, 2015 Chancery
Division judgment following a thirty-nine day bench trial.
Defendants Centrum Financial Services, Inc., U.S. Bank National
Association, First Mutual Bank and Wells Fargo, N.A. (lenders),
Herbert Blake, and James J. Licata each cross-appeal from the
judgment. Licata's appeal was dismissed for lack of standing.
For the following reasons, we affirm.
The underlying facts are thoroughly addressed in the trial
judge's lengthy opinion, which we incorporate by reference here.
We summarize the essential facts before addressing the parties'
claims on appeal.
In the early 1990's, Peter Mocco owned real estate in Jersey
City and North Bergen, and experienced financial difficulties.
Mocco owed First Union Bank (First Union) approximately $44 million
on a loan secured by Mocco's properties. Mocco retained First
Connecticut Consulting Group (FCCG), an entity established by
Licata, to negotiate with First Union to achieve a discounted
4 A-5041-14T2
payoff of the loans. First Union agreed to sell the debt to FCCG
for $22 million.
Licata obtained financing to purchase the First Union debt
through an entity called EMP Whole Loan I (EMP). EMP required
FCCG or other Licata-owned entities to obtain title to the
properties, which would be pledged to secure repayment of the EMP
loan. Licata then created a series of special-purpose entities
to hold title to the properties. The entities were identified as
First Connecticut Holding Group (FCHG) I through XIII.
Licata and EMP agreed Licata and his wife Cynthia Licata1
would share equal ownership of the FCHG entities. Mocco had a
pending bankruptcy action at the time. The bankruptcy court
approved the sale of the Mocco properties to the FCHG entities.
Sometime before September 25, 1996, Mocco and Licata entered
into a Three-Page Agreement (TPA), which created a straw-man
relationship between Mocco and Licata. The TPA provided Mocco
could regain ownership of the properties when the outstanding
debts were retired. The first closing on the EMP/First Union
transactions took place on September 25, 1996.
1
We refer to Cynthia Licata by first name only throughout this
opinion so as to differentiate her from James J. Licata. By doing
so, we intend no disrespect.
5 A-5041-14T2
FCCG then cast a vote in favor of Mocco's plan of
reorganization at a hearing before the bankruptcy court. Mocco
did not reveal the TPA to the bankruptcy court or the creditors.
Moreover, the attorney who appeared on behalf of Mocco informed
the bankruptcy court there was no relationship between FCCG and
Mocco.
In June 1997, properties owned by FCHG V, VII, VIII, IX, and
XII were transferred to FCHG IV. As a result of these transfers,
FCHG IV became the owner of twenty-two multi-unit apartment
buildings in Jersey City and North Bergen. FCHG IV then borrowed
funds from Transatlantic Capital to refinance the EMP loans. The
Transatlantic loan was secured by the FCHG IV properties.
In April 1999, Peter and Lorraine Mocco filed the underlying
complaint in the Chancery Division against Licata and others to
compel the re-conveyance of certain properties, including the
properties of FCHG IV. The Moccos filed notices of lis pendens
related to their claims, but they did not renew the notices, and
they lapsed in 2004.
In September 2001, a Chancery Division judge entered an order,
which enjoined any party from transferring or encumbering any of
the FCHG entities or properties pending further order of the court.
In 2002, Licata filed a bankruptcy petition in Connecticut on his
own behalf and on behalf of certain entities, including FCHG II,
6 A-5041-14T2
III, X, XI, and XIII. FCHG IV was not included in the bankruptcy
filing.
Licata then entered into agreements with SWJ Holdings, Inc.
(SWJ), under which Licata agreed to sell and transfer certain
assets to SWJ. In return, SWJ agreed to transfer certain interests
to Cynthia, including a one-hundred percent interest in FCHG IV.
In June 2005, SWJ was the successful bidder at an auction to
purchase the Licata assets. The bankruptcy court approved the
sale of the properties. The Moccos did not object to the sale;
however, in July 2005, they filed a motion to clarify the intent
of the bankruptcy court's order approving the sale, which was
denied.
In March 2006, the bankruptcy court approved the sale of the
Licata properties free and clear of all liens, claims, and
encumbrances pursuant to 11 U.S.C. § 363(b). The properties were
then sold or transferred to SWJ, and SWJ transferred one-hundred
percent of the membership interests in FCHG IV to Cynthia.
In May 2006, Cynthia sold the FCHG IV properties to SWJ for
$31.2 million. The lenders advanced a purchase money mortgage
loan of $15 million to SWJ, secured by three mortgages on FCHG IV
properties. Horizon, the agent for Chicago Title Insurance
Company, issued title policies to the lenders.
7 A-5041-14T2
In this action, the Moccos sought an order declaring them the
owners of the FCHG IV properties, and the lenders' mortgages null
and void. The lenders' counterclaim sought contribution,
indemnification, and equitable relief relating to the mortgages.
The trial judge found: (1) the Moccos are the owners of the
properties of FCHG IV; (2) the May 26, 2006 deed conveying the
properties owned by FCHG IV to SWJ was null and void; (3) a
$1,776,118.53 equitable lien would be imposed in favor of Chicago
Title on the FCHG IV properties; and (4) the mortgages held by the
lenders would be declared null and void upon satisfaction of the
equitable lien.
In their appeal, plaintiffs argue: (1) Horizon and the lenders
had actual notice of their ownership claims to the FCHG IV
properties; and (2) the trial judge erred by imposing an equitable
lien in favor of Chicago Title because the Moccos were not unjustly
enriched by retaining their own properties. Plaintiffs also
challenge Shepro and Blake's standing in this appeal.
In their cross-appeal, the lenders argue: (1) the doctrine
of unclean hands precluded the Moccos from asserting their claims;
(2) the TPA between Licata and Mocco is invalid and unenforceable;
(3) judicial estoppel barred the Moccos from asserting their claims
due to the misrepresentations they made in the bankruptcy
proceedings; and (4) the FCHG IV properties were sold free and
8 A-5041-14T2
clear of all liens and encumbrances in the bankruptcy. The lenders
also challenge plaintiffs' standing.
In his cross-appeal, Blake asserts the trial judge barred him
from participating in the trial for lack of standing because the
trial addressed solely the issue of ownership of FCHG IV. Blake
argues his inability to contest the facts at trial exposed him to
a malpractice claim because he provided financial and advisory
services to his client SWJ. Blake urges us to reverse the judge's
determination regarding standing, or alternatively, declare the
judgment under review is not res judicata as to him.2
I.
We begin by reciting our standard of review.
Final determinations made by the trial court
sitting in a non-jury case are subject to a
limited and well-established scope of review:
"we do not disturb the factual findings and
legal conclusions of the trial judge unless
we are convinced that they are so manifestly
unsupported by or inconsistent with the
competent, relevant and reasonably credible
evidence as to offend the interests of
justice[.]"
[Seidman v. Clifton Sav. Bank, S.L.A., 205
N.J. 150, 169 (2011) (alteration in original)
(quoting In re Tr. Created By Agreement Dated
Dec. 20, 1961, ex rel. Johnson, 194 N.J. 276,
284 (2008)).]
2
Blake asserts other arguments, namely, recusal of the trial judge
and challenges to the Mocco's ownership of the FCHG IV properties.
However, we do not reach these arguments because Blake lacks
standing.
9 A-5041-14T2
"[W]e do not weigh the evidence, assess the credibility of
witnesses, or make conclusions about the evidence." Mountain
Hill, LLC v. Twp. of Middletown, 399 N.J. Super. 486, 498 (App.
Div. 2008) (quoting State v. Barone, 147 N.J. 599, 615 (1997)).
"[I]n reviewing the factual findings and conclusions of a trial
judge, we are obliged to accord deference to the trial court's
credibility determination[s] and the judge's 'feel of the case'
based upon his or her opportunity to see and hear the witnesses."
N.J. Div. of Youth & Family Servs. v. R.L., 388 N.J. Super. 81,
88 (App. Div. 2006) (citing Cesare v. Cesare, 154 N.J. 394, 411-
13 (1998)).
Our task is not to determine whether an alternative version
of the facts has support in the record, but rather, whether "there
is substantial evidence in support of the trial judge's findings
and conclusions." Rova Farms Resort, Inc. v. Inv'r Ins. Co., 65
N.J. 474, 484 (1974); accord In re Tr. Created By Agreement, 194
N.J. at 284. Legal conclusions, however, are reviewed de novo.
Manalapan Realty v. Twp. Comm. of the Twp. of Manalapan, 140 N.J.
366, 378 (1995).
A.
We address the arguments as to standing first. Under New
Jersey's standing rules, "[e]ntitlement to sue requires a
sufficient stake and real adverseness with respect to the subject
10 A-5041-14T2
matter of the litigation [and a] substantial likelihood of some
harm visited upon the [party] in the event of an unfavorable
decision[.]" In re Adoption of Baby T, 160 N.J. 332, 340 (1999)
(citations omitted). This is so because "[a] lack of standing by
a [party] precludes a court from entertaining any of the
substantive issues presented for determination." Ibid."Ordinarily, a litigant may not claim standing to assert the
rights of a third party." Jersey Shore Med. Ctr.-Fitkin Hosp. v.
Estate of Baum, 84 N.J. 137, 144 (1980). "However, standing to
assert the rights of third parties is appropriate if the litigant
can show sufficient personal stake and adverseness so that the
[c]ourt is not asked to render an advisory opinion." Ibid. We
review a trial judge's determination regarding standing on a de
novo basis. NAACP of Camden Cty. E. v. Foulke Mgmt. Corp., 421
N.J. Super. 404, 444 (App. Div. 2011).
The lenders contend plaintiffs lacked standing to assert a
quiet title claim under N.J.S.A. 2A:62-1 because they have not
shown "they own and are in peaceable possession of FCHG IV and the
[p]roperties." The trial judge concluded "given New Jersey's
liberal view of standing [the lender's] standing argument [was]
not sufficiently meritorious to merit discussion." We agree.
The lenders sought to collect millions of dollars due under
the mortgages on the FCHG IV properties from plaintiffs.
11 A-5041-14T2
Therefore, Mocco had standing to file the quiet title action
because he was in "peaceable possession of [the property] and
claim[ed] ownership thereof" pursuant to N.J.S.A. 2A:62-1.
Further, Mocco had standing to challenge the validity of the
lenders' mortgages. See EnviroFinance Grp., LLC v. Envt'l Barrier
Co., LLC, 440 N.J. Super. 325, 340 (App. Div. 2015) (holding "[a]
financial interest in the outcome ordinarily is sufficient to
confer standing") (quoting Strulowitz v. Provident Life & Cas.
Ins. Co., 357 N.J. Super. 454, 459 (App. Div. 2003)).
Plaintiffs argue Shepro and Blake lack standing to
participate in this appeal because they have never "asserted any
ownership or lien rights in any of the disputed properties."
Further, Blake did not participate in the trial below and Shepro
participated only as a witness.
The right to appeal is "not necessarily preconditioned . . .
upon participation in the prior proceeding." N.J. Dep't of Envtl.
Prot. v. Exxon Mobil Corp. (Exxon Mobil), ___ N.J. Super. ___, ___
(App. Div. 2018) (slip op. at 29). However, "[o]nly a party
aggrieved by a judgment may appeal therefrom." Howard Sav. Inst.
v. Peep, 34 N.J. 494, 499 (1961). Further, "[i]t is the general
rule that to be aggrieved a party must have a personal or pecuniary
interest or property right adversely affected by the judgment in
question." Ibid.12 A-5041-14T2
The trial judge stated the trial was solely to determine
ownership of FCHG IV. The judge determined Blake had standing to
participate in the damages phase of the trial. We agree.
Neither Blake nor Shepro have a direct pecuniary interest in
the ownership of FCHG IV, the mortgages, or the equitable lien
imposed by the trial judge. Nor did Blake and Shepro have any
liability to the lenders under the mortgages. Moreover,
plaintiffs' claims against Blake individually were for trespass,
slander of title, and fraud in connection with a sale in the
bankruptcy court relating to the FCHG IV properties. The lenders
have not asserted any claims against Blake individually.
Thus, Blake and Shepro lacked standing to assert claims in
this phase of the trial and similarly lack standing on appeal. We
hasten to add neither Blake nor Shepro are bound by the trial
judge's findings during the damages phase of this case.
B.
We next address the arguments raised by plaintiffs relating
to the underlying judgment. Plaintiffs argue Horizon and Centrum
had actual notice of Mocco's ownership claims, and the prior and
pending ownership litigation in the bankruptcy court. Plaintiffs
assert "[d]espite actual notice of these decisions to Horizon and
Centrum, the trial court allowed a full retrial of an expanded
version of the same issues." As we discuss below, because we have
13 A-5041-14T2
affirmed the trial judge's determination on the ownership issue
favorably to plaintiffs, we do not reach plaintiffs' arguments
regarding the scope of the ownership claims trial.
Plaintiffs argue the trial judge erred by imposing an
equitable lien because they were not unjustly enriched. They
claim they did not benefit from the Centrum loan because they did
not receive any of the loan proceeds. Rather, they contend the
trial judge found they had "lost a very substantial amount of
money by virtue of the mortgages being placed on the FCHG IV
properties since May 2006." Plaintiffs also argue the trial
judge's finding they had unclean hands was erroneous.
A court's decision to grant or withhold equitable relief is
reviewed for an abuse of discretion, so long as the decision is
consistent with applicable legal principles. Marioni v. Roxy
Garments Delivery Co., 417 N.J. Super. 269, 275 (App. Div. 2010).
A chancery court possesses broad equitable powers. See Cooper v.
Nutley Sun Printing Co., 36 N.J. 189, 199 (1961) (noting a "court
has the broadest equitable power to grant the appropriate relief").
Because "equity 'will not suffer a wrong without a remedy[,]'"
Crane v. Bielski, 15 N.J. 342, 349 (1954), "a court's equitable
jurisdiction provides as much flexibility as is warranted by the
circumstances[.]" Matejek v. Watson, 449 N.J. Super. 179, 183
(App. Div. 2017). Consequently,
14 A-5041-14T2
[e]quitable remedies are distinguished for
their flexibility, their unlimited variety,
their adaptability to circumstances, and the
natural rules which govern their use. There
is in fact no limit to their variety in
application; the court of equity has the power
of devising its remedy and shaping it so as
to fit the changing circumstances of every
case and the complex relations of all the
parties.
[Ibid. (quoting Sears Roebuck & Co. v. Camp,
124 N.J. Eq. 403, 411-12 (E. & A. 1938)).]
Further, a "court can and should mold the relief to fit the
circumstances[.]" Cooper, 36 N.J. at 199. Notably,
"[t]he jurisdiction of a court of equity does
not depend upon the mere accident whether the
court has, in some previous case or at some
distant period of time, granted relief under
similar circumstances . . . ." And the mere
fact that no precedent exists is no sound
reason for denying relief when the situation
demands and no other principle forbids. Every
just order or rule known to courts of equity
was born of some emergency, to meet some new
conditions, and was, therefore, in its time,
without a precedent. New remedies and
unprecedented orders are not unwelcome aids
to the chancellor to meet the constantly
varying demands for equitable relief.
[Briscoe v. O'Connor, 115 N.J. Eq. 360, 364-
65 (Ch. 1934) (citations omitted).]
Our Supreme Court has stated: "In doing equity, [a] court has
the power to adapt equitable remedies to the particular
circumstances of each particular case." Rutgers Cas. Ins. Co. v.
LaCroix, 194 N.J. 515, 529 (2008) (alteration in original) (quoting
15 A-5041-14T2
Mitchell v. Oksienik, 380 N.J. Super. 119, 130-31 (App. Div.
2005)). Recently, the Court stated: "A 'court [of equity] must
exercise its inherent equitable jurisdiction and decide the case
based upon equitable considerations.'" Thieme v. Aucoin-Thieme,
227 N.J. 269, 287 (2016) (alteration in original) (quoting
Kingsdorf ex rel. Kingsdorf v. Kingsdorf, 351 N.J. Super. 144, 157
(App. Div. 2002)). The Thieme Court further held "[e]quities
arise and stem from facts which call for relief from the strict
legal effects of given situations." Id. at 288 (alteration in
original) (quoting Carr v. Carr, 120 N.J. 336, 351 (1990)).
Generally, "as between two innocent groups equity will impose the
loss on the group whose act first could have prevented the loss."
Zucker v. Silverstein, 134 N.J. Super. 39, 52 (App. Div. 1975)
(citing Cambridge Acceptance Corp. v. Am. Nat. Motor Inns, Inc.,
96 N.J. Super. 183, 206 (Ch. Div. 1967)).
The trial judge addressed the Moccos' argument that Mocco
could not simultaneously be determined to be the owner of FCHG IV
while also being held responsible for the lenders' losses and
subject to an equitable lien, because he could not be unjustly
enriched by possessing his own properties. The judge invoked the
court's broad equitable powers to explain his decision.
The court recognizes that either or both
parties might argue that there is an
inconsistency between the court's initial
16 A-5041-14T2
holding as to Mocco's ownership and the
invalidity of the Centrum mortgage and its
secondary holding that Mr. Mocco is
responsible for part of Centrum's loss. The
difference is that real estate decisions are
based on strict law which compels the
conclusion that a mortgagee who had notice of
colorable adverse claims must be precluded
from recovering, while in a dispute outside
the strict rules governing real estate
ownership and mortgage validity, a court of
equity may consider which party proximately
caused the loss and [had] less clean hands.
The judge set forth a litany of reasons why Mocco was
responsible for the lenders' losses and why the lenders were
entitled to equitable relief. The judge stated:
[T]here were several acts or omissions by Mr.
Mocco which helped lead to the confusion
regarding ownership of FCHG IV, which, in
turn, helped cause the loss herein:
a. Choosing and continuing to use,
as his "consultant" or partner, the
unreliable James Licata. That
decision led to Mr. Mocco emerging
from [b]ankruptcy, but also led to
disastrous consequences to others.
b. Drafting and keeping secret the
[TPA].
c. Drafting and keeping secret
. . . the [e]scrow [a]greement.
d. Drafting extraordinary complex
corporate stock ownership
documents.
e. Not renewing the notices of lis
pendens.
17 A-5041-14T2
f. Not recording [the court's] 2001
order [restraining the sale and
transfer of FCHG IV's assets].
g. Not reminding [the bankruptcy
judge], or Mr. Licata's lawyers,
about [the] 2001 [o]rder.
h. Not appealing [the bankruptcy
court's] denial of [the]
modification motion.
i. Not appealing the [section] 363
order.
j. Allegedly failing to adequately
warn and inform potential buyers
and/or lenders that he owned the
properties. . . .
Some of what Mr. Mocco did leading to
Centrum's loss was intentional. The
intentional actions in many respects caused
more culpability than the unintentional or
negligent acts and omissions. This is for two
reasons. First, negligence normally requires
a duty, and it is not clear that Mr. Mocco
owed a duty to Horizon, Centrum[,] and
Chicago. Second, while the failure to update
the notices of lis pendens was wrong as a
matter of law, at least four of the other
allegedly negligent acts—not recording [the]
2001 order, not reminding [the bankruptcy
judge] or Mr. Licata's lawyers of [the 2001]
order, not appealing [the bankruptcy judge's]
denial of the modification motion, and not
appealing the [section] 363 order—could be
characterized as legal judgment calls. The
intentional decisions, however, cannot be as
easily dismissed.
After addressing in detail the role of Horizon and the
lenders' agent in committing negligent acts or omissions leading
18 A-5041-14T2
to the lenders' loss, the judge apportioned the parties' share of
the liability. He stated:
One can argue that Mr. Mocco's actions
proximately caused the loss since Mr. Mocco's
actions set in motion the chain of events[,]
which led to the confusion[,] which led to the
loss. On the other hand, the [l]enders
through their agent, Horizon, had the last
clear chance to avoid the loss. This court,
as the fact finder, concludes that [fifty
percent] of the proximate cause is
attributable to Mr. Mocco and [fifty percent]
attributable to the [l]enders.
The trial judge determined the lenders' loss totaled
$3,552,237.06, representing the lenders' out-of-pocket expenses.
The judge awarded the lenders one-half of this sum, $1,776,118.53.
The imposition of an equitable lien in favor of the lenders
was supported by the substantial, adequate, and credible evidence
in the record. We are satisfied the trial judge did not abuse his
discretion in according the lenders the remedy of an equitable
lien. For the same reasons, we reject the alternative argument
advanced by the lenders in the cross-appeal, namely, that we
increase the amount of the equitable lien commensurate with their
entire out-of-pocket expense.
19 A-5041-14T2
C.
We next address the lenders' challenge to the trial judge's
determination regarding ownership of FCHG IV, which in turn
invalidated the lenders' mortgages on the properties held by FCHG
IV. The lenders argue Mocco's unclean hands should have barred
his ability to seek equitable relief. The lenders contend the TPA
was invalid and unenforceable because it violated the Statute of
Frauds. They also challenge the validity of the TPA based on res
judicata and public policy reasons. The lenders argue "the Moccos
should have been barred by the doctrine of judicial estoppel"
because of misrepresentations made in Mocco's and Licata's
bankruptcy proceedings. The lenders further argue the 363 sale
"was free and clear of any liens, claims or encumbrances with
respect to ownership of [FCHG IV]." The lenders also assert
plaintiffs' failure to renew the lis pendens filed in 1999
constituted lack of notice of the plaintiffs' pending lawsuit. We
address these arguments in turn.
i.
"The essence of the doctrine of unclean hands, '. . . is that
a suitor in equity must come into court with clean hands and he
must keep them clean after his entry and throughout the
proceedings.'" U.S. Bank Nat'l Ass'n v. Curcio, 444 N.J. Super.
94, 113 (App. Div. 2016) (quoting Marino v. Marino, 200 N.J. 315,
20 A-5041-14T2
345 (2009)). However, "[r]elief is not to be denied because of
general iniquitous conduct on the part of the complainant or
because of [his] wrongdoing in the course of a transaction between
him and a third person." United Bd. & Carton Corp. v. Britting,
61 N.J. Super. 340, 344 (App Div. 1960) (quoting 19 Am. Jur.,
Equity, § 473, p. 327). Rather, the doctrine is applied only
where one seeking relief has "acted fraudulently or unconscionably
with respect to the particular controversy in issue." Med. Fabrics
Co. v. D.C. McLintock Co., 12 N.J. Super. 177, 180 (App. Div.
1951); accord Heuer v. Heuer, 152 N.J. 226, 238 (1998); Neubeck
v. Neubeck, 94 N.J. Eq. 167, 170 (E. & A. 1922).
Application of the doctrine of unclean hands is
"discretionary on the part of the court[.]" Borough of Princeton
v. Bd. of Chosen Freeholders, 169 N.J. 135, 158 (2001) (quoting
Heuer, 152 N.J. at 238). Thus, our review of this issue is for
abuse of discretion.
The trial judge found Mocco was "the owner of [one hundred
percent] of the legal and equitable interest in FCHG IV[,]" and
Licata held title to the FCHG properties as his nominee. The
judge relied on (1) the consulting agreement between Mocco and
FCCG; (2) the TPA; (3) the escrow agreement; (4) a September 24,
1996, facsimile from Pieter J. de Jong, Licata's attorney, to
21 A-5041-14T2
Licata;3 and (5) the contract for purchase of real estate4 between
Licata and Mocco, which the judge found "generally support[ed] the
concept that . . . Mocco could buy the property back from . . .
Licata for [one dollar], if he satisfi[ed] the mortgage[.]"
Based on the testimony, the judge also made the following
findings: (1) "Mocco [was] a man whose entire energies [were]
devoted to building, and holding real property[,]" and his "mode
of business ma[de] it unlikely he would give up ownership of the
FCHG IV properties;" (2) "[t]he Moccos ran all the FCHG properties,
collected the rents, paid the mortgages [and] Licata never paid a
dime of the mortgage payments;" (3) the credibility of Brian Opert,
FCCG's executive vice president, was "generally strong" and his
testimony "bolstered . . . Mocco's assertions about . . . Licata's
nominee status;" (4) "the [bankruptcy court's] trial transcript
and the [bankruptcy court] [d]ecisions [led' to the conclusion[]
that . . . Licata held title to the FCHG entities as a nominee;"
(5) "the Mocco-Licata relationship as to FCHG IV, which was
inadvertently omitted from the Licata [b]ankruptcy proceeding" did
not materially differ from their relationship as to the FCHG LLCs
that were the subject of the bankruptcy decisions; (6)
3
We have not been provided with this document.
4
See footnote 3.
22 A-5041-14T2
conversations with Licata, which were taped by Mocco, supported
his contention that Licata was his nominee; (7) "[h]aving someone
else hold his property in a nominee status was a common business
practice for . . . Mocco;" (8) Mocco was a "relatively straight-
forward, honest witness, at least on this issue" and his testimony
was "somewhat more believable" than Licata's; and (9) "Mocco [was]
such a tough, uncompromising man that the court [could not] imagine
him giving up the property in question" and did not believe it was
"possible he would have agreed to letting . . . Licata or anyone
else take a portion, let alone a substantial portion, of his
empire[.]"
The lenders' argument as to plaintiffs' unclean hands goes
to the weight of the evidence. The judge's detailed findings
support the conclusion the unclean hands doctrine should not be
applied, and demonstrate the judge did not abuse his discretion.
ii.
The lenders contend the TPA was invalid and unenforceable
because it violated the Statute of Frauds, specifically N.J.S.A.
25:1-11, the writing requirement for conveyance of real estate,
and N.J.S.A. 25:1-13, the enforceability of agreements regarding
real estate. The lenders assert FCCG did not execute the
agreement, which would have required the written consent of its
board members, and it was not signed by Mocco. Further, the
23 A-5041-14T2
lenders contend the agreement failed to specify the nature of the
interest to be transferred, the properties encompassed by the
agreement, or that FCCG or Licata was agreeing to act as Mocco's
nominee. In addition, the lenders claim hand-written changes to
the document were not initialed.
The trial judge declined to address the lenders' argument
regarding the Statute of Frauds because the TPA did not convey
real estate. Moreover, the judge noted "there [was] enough proof
that the Moccos owned the real estate that [he] could rule in
favor of their ownership even if the [TPA] were considered
unenforceable on account of the Statute of Frauds[.]"
We are not persuaded the trial judge abused his discretion.
The lenders focus on the TPA, yet do not challenge the validity
of the escrow agreement. The escrow agreement was executed by the
Moccos and Licatas approximately seven months after Mocco's
bankruptcy reorganization plan was confirmed, and expressly
incorporated the TPA. Assuming the TPA violated the Statute of
Frauds when Licata initially signed it in September 1996, or that
it was rendered ineffective by the confirmation order, the escrow
agreement, executed in May 1997, survived, and provided for the
re-conveyance of the ownership interests in the FCHG LLCs to a
person or entity of Mocco's choosing. For these same reasons, the
lenders' arguments the TPA is void for public policy and the
24 A-5041-14T2
bankruptcy confirmation order was res judicata because it "wiped
out" the TPA, lack merit.
iii.
Judicial estoppel did not bar Mocco from prosecuting his
claim to ownership of FCHG IV by failing to disclose its existence
to the bankruptcy court. The judge determined "Mocco had no duty
to bring FCHG IV into the [b]ankruptcy proceedings."
We review a trial court's decision whether to invoke the
doctrine of "judicial estoppel using an abuse of discretion
standard." In re Declaratory Judgment Actions Filed by Various
Municipalities, 446 N.J. Super. 259, 291 (App. Div. 2016).
"Judicial estoppel is an extraordinary remedy [and] should be
invoked only to prevent a miscarriage of justice." Bhagat v.
Bhagat, 217 N.J. 22, 37 (2014) (citations omitted). "[B]ecause
of its draconian consequences," judicial estoppel is a disfavored
remedy that is "invoked only in limited circumstances[.]" In re
Declaratory Judgment Actions, 446 N.J. Super. at 292.
Under the doctrine of judicial estoppel, "[a] party who
advances a position in earlier litigation that is accepted and
permits the party to prevail in that litigation is barred from
advocating a contrary position in subsequent litigation to the
prejudice of the adverse party." Bhagat, 217 N.J. at 36. "The
purpose of the . . . doctrine is to protect 'the integrity of the
25 A-5041-14T2
judicial process.'" Kimball Int'l, Inc. v. Northfield Metal
Prods., 334 N.J. Super. 596, 606 (App. Div. 2000) (quoting Cummings
v. Bahr, 295 N.J. Super. 374, 387 (App. Div. 1996)).
"Consequently, '[a]bsent judicial acceptance of the inconsistent
position, application of [the doctrine] is unwarranted because no
risk of inconsistent results exists [and] the integrity of the
judicial process is unaffected[.]'" Id. at 607 (quoting Edwards
v. Aetna Life Ins. Co., 690 F.2d 595, 599 (6th Cir. 1982)).
Here, the trial judge declined to apply judicial estoppel
because he found "nothing said or done, or not said or done" by
Mocco during Licata's bankruptcy proceedings "could be considered
inconsistent with any other position taken by [him.]" The judge
also found the lenders had "failed to establish that . . . Mocco
affirmatively stated to the bankruptcy court that he no longer
owned the FCHG entities[.]" Moreover, "there [was] insufficient
proof [the bankruptcy court], the unsecured creditors, or [E]MP
[were] led to believe that . . . Mocco did not own and control the
FCHG IV properties[.]" The judge determined "no one relied on or
even cared about the intricacies of the Mocco-Licata
relationship[.]" The trial judge agreed with the bankruptcy
court's ruling "there [was] no risk of inconsistent results; the
bankruptcy court was not asked to rule and did not rule one way
or the other on the nature of the transferred title[.]"
26 A-5041-14T2
The trial judge correctly determined there was no risk of
inconsistent results between Mocco's bankruptcy matter and this
matter. Our review of the record shows the question of who owned
the FCHG LLCs was not before the bankruptcy court. Thus, the
trial judge did not abuse his discretion by declining to apply
judicial estoppel to bar Mocco's claims. For essentially the same
reasons, we conclude plaintiff's claims are not barred by laches
or estoppel.
iv.
The judge determined Mocco's claims were not barred by the
failure to update the lis pendens for FCHG IV. Whether the failure
to renew the notices of lis pendens bars Mocco's claims is a
question of law. Therefore, our review is de novo. State v.
Robinson, 448 N.J. Super. 501, 516 (App. Div. 2017). Whether
Horizon and/or Centrum had actual notice of Mocco's claims when
the mortgages were executed is a question of fact, requiring us
to uphold the trial judge's finding if it is supported by
sufficient credible evidence in the record. Brunson v. Affinity
Fed. Credit Union, 199 N.J. 381, 397 (2009).
"Under the common law doctrine of lis pendens, the filing of
a lawsuit served as constructive notice to any subsequent purchaser
or lienholder that title to the property was contested." Manzo
v. Shawmut Bank, N.A., 291 N.J. Super. 194, 199 (App. Div. 1996).
27 A-5041-14T2
"[O]ne who acquired the property from a party litigant while the
suit was pending took the property subject to the outcome of the
action, despite having received no actual notice." Chrysler Corp.
v. Fedders Corp., 670 F.2d 1316, 1319 (3d Cir. 1982); accord
Haughwout v. Murphy, 22 N.J. Eq. 531, 545 (E. & A. 1871).
"Our statute providing for the filing of a notice of lis
pendens was adopted to ameliorate the hardship involved in good
faith conveyances where there was no notice of suit in the public
registry." Gen. Elec. Credit Corp. v. Winnebago of N.J., Inc.,
149 N.J. Super. 81, 85 (App. Div. 1977) (citing Wood v. Price, 79
N.J. Eq. 620, 622 (E. & A. 1911)). "The effect of the filing of
a notice of lis pendens is constructive notice of a pending action
concerning . . . real estate, and a purchaser or mortgagee takes
subject to the outcome of the lawsuit." Trus Joist Corp. v.
Treetop Assocs., 97 N.J. 22, 31 (1984); N.J.S.A. 2A:15-7. "The
primary purpose of the notice of lis pendens is to preserve the
property which is the subject matter of the lawsuit from actions
of the property owner so that full judicial relief can be granted,
if the plaintiff prevails." Manzo, 291 N.J. Super. at 200.
A notice of lis pendens is effective for five years from the
date of its filing. N.J.S.A. 2A:15-11. There are no provisions
in the lis pendens statute for renewing or extending a notice of
lis pendens. Manzo, 291 N.J. Super. at 199. However, in Manzo,
28 A-5041-14T2
the court held "the notice of lis pendens affects any party who
obtains an interest in the property during the effective term of
the notice and until the final resolution of the litigation[.]"
Id. at 202.
Here, Centrum acquired its interest in the FCHG IV properties
in May 2006, after the effective term of the notices of lis
pendens, which were filed on November 1, 1999, had expired. Thus,
the notices of lis pendens did not provide Centrum with
constructive notice of Mocco's claims. Nevertheless, the judge
found even though Mocco should have updated the notices of lis
pendens, the "title searchers did report the original notices, and
[Horizon] did know of . . . Mocco's claims[.]" We agree.
The failure to re-file the notices of lis pendens did not bar
Mocco's claims because the lenders had actual notice of the claims.
We have previously stated: "If a purchaser or lienor is faced with
extraordinary, suspicious, and unusual facts which should prompt
an inquiry, it is equivalent to notice of the fact in question."
Howard v. Diolosa, 241 N.J. Super. 222, 232 (App. Div. 1990). "The
efficacy of notice by actual possession applies to a person
proposing to take a mortgage on the property." Clawans v. Ordway
Bldg. & Loan Ass'n, 112 N.J. Eq. 280, 285 (E. & A. 1933). The
intending mortgagee must "inquire of the occupant and ascertain
the rights under which he holds[.]" Id. at 284 (quoting LaCombe
29 A-5041-14T2
v. Headley, 91 N.J. Eq. 63, 66 (E. & A. 1919)). If no inquiry is
made, the mortgagee "is chargeable with notice of such facts as
the inquiry, if it had been in fact made, would have revealed."
Id. at 285.
The trial judge's determination the lenders had notice of
Mocco's claims to ownership of FCHG IV at the time the mortgages
were executed is adequately supported by the record. The record
demonstrates the lenders knew Mocco was collecting the rents for
the property, which at a minimum, required them to inquire further
as to his role and potential ownership interest.
Indeed, Centrum's attorney, Kenneth R. Sauter, received an
email from the broker, which stated:
As we all know, this [M]occo guy allegedly is
the management company. If this is the case,
my understanding of the hold back ($3.5M) was
specifically structured to ensure our position
so that the borrower would have the incentive
to do what is necessary to get control back
of the properties . . . .
In the same email chain, Sauter responded: "I don't know who 'this
[M]occo guy' is. And if the borrower is having trouble getting
the cooperation of 'Mocco,' is that supposed to provide a greater
degree of comfort to the lender?" At trial, Bruce Berreth,
Centrum's president, testified Centrum received the aforementioned
emails before it made the loans and that they "knew what the
situation was."
30 A-5041-14T2
Other emails in evidence directed to and from Berreth also
show he was aware of Mocco's claim to FCHG IV. On May 4, 2006,
Berreth received an email from Aegis J. Frumento, an attorney
Licata had retained to "help facilitate the sale," responding to
the "question concerning substantiation that [the Licatas] own[e]d
[one hundred percent] of [FCHG IV]." Specifically, Frumento
forwarded an email from Shepro dated May 3, 2006. Shepro's email
explained both Cynthia and Mocco might claim ownership of FCHG IV,
and that another attorney "may be holding the [FCHG] IV
[membership] certificates" under an order signed by a Chancery
Division judge at the outset of litigation. Frumento's response
to Berreth was "Mocco may claim they own [FCHG IV] 'in trust' for
him[.]"
On May 21, 2006, Berreth emailed Sauter stating:
Paragraph 3(b) [of the title insurance policy]
excludes things known to us but not of record
or known to the title company. As a result,
it is imperative we can document that they are
aware of any interest claimed by Peter Mocco
. . . . Please be sure David [Cohn5] is aware
of Mocco's potential interest and that we can
verify it if necessary.
5
According to the trial judge, Cohn was "a very experienced title
searcher and officer [of Horizon] and . . . was the principal
title searcher when the loan in question was made."
31 A-5041-14T2
Sauter responded, "I am not sure what title issues may exist
[regarding] Peter Mocco . . . . You will get a clean policy, but
I will expressly review this with David Cohn."
The record demonstrates Centrum had notice of Mocco's claimed
ownership interest in FCHG IV, but believed it was protected by
its title insurance policy. The record also shows Horizon, as
Chicago Title's agent, had notice of Mocco's interests through the
notes from Cohn's telephone conversation with de Jong, and emails
copied to Cohn referencing Mocco's possession of the properties
and his claimed interests.
As the trial judge noted, aspects of the transaction "were
disturbing enough cumulatively to convince a careful title insurer
and/or lender to either make a very extensive inquiry or not to
proceed any further." Indeed, Cohn, two of Licata's associates,
and Shepro signed a confidentiality agreement at the closing
agreeing to keep the closing confidential. No one who testified
at trial was able to explain who requested the confidentiality
agreement or why it was signed. Additionally, Centrum entered
into an "Agreement for Disbursement of Funds After Closing" with
SWJ, which expressly recognized SWJ had been "unable to confirm,
to the satisfaction of the Lenders . . . the leases, rents and
rights to the proceeds of leases and rents arising out of and in
32 A-5041-14T2
connection with the properties which [were] the subject of the
[loans.]" (Emphasis added).
The record amply supports the result reached by the judge
regarding notice to the lenders. Under the circumstances, the
failure to update the lis pendens did not bar relief to plaintiffs.
v.
The lenders assert the bankruptcy court sold plaintiffs'
interest in FCHG IV. We disagree.
Whether the bankruptcy sale barred Mocco's claim to ownership
of FCHG IV in May 2006, is a question of law. Therefore, our
review is de novo. Robinson, 448 N.J. Super. at 516.
Under 11 U.S.C. § 363(b), "a bankruptcy trustee [may] 'sell
. . . property of the estate' after notice and hearing." Parker
v. Goodman (In re Parker), 499 F.3d 616, 620 (6th Cir. 2007).
"Purchasers of the[] assets are protected from a reversal of the
sale on appeal so long as they acted in good faith." Licensing
by Paolo v. Sinatra (In re Gucci), 126 F.3d 380, 387 (2d Cir.
1997). That protection is afforded by 11 U.S.C. § 363(m), which
states:
The reversal or modification on appeal of an
authorization under subsection (b) . . . of
this section of a sale . . . of property does
not affect the validity of a sale . . . under
such authorization to an entity that purchased
. . . such property in good faith, whether or
not such entity knew of the pendency of the
33 A-5041-14T2
appeal, unless such authorization and such
sale . . . were stayed pending appeal.
The Court of Appeals for the Seventh Circuit has commented
regarding the finality of sales approved pursuant to section 363
and stated:
Finality is important because it minimizes the
chance that purchasers will be dragged into
endless rounds of litigation to determine who
has what rights in the property. Without the
degree of finality provided by the stay
requirement, purchasers are likely to demand
a steep discount for investing in the
property.
[In re Sax, 796 F.2d 994, 998 (7th Cir. 1986).]
Here, however, the bankruptcy court expressly stated the 363
sale did not adjudicate the issue of FCHG IV's ownership. The
trial judge made this determination after he reviewed the
transcripts of the bankruptcy proceeding, and concluded "[the
bankruptcy judge] never intended that his orders divested . . .
Mocco of ownership."
Although we have not been provided with the transcripts of
the bankruptcy proceedings on appeal, the trial judge quoted them,
specifically where counsel for the creditors' committee explained
that:
[T]he debtor is selling whatever interest it
has, if it has any interest in the assets that
are listed in the schedules.
To the extent it does not have an interest[,]
34 A-5041-14T2
does not own part or all of the assets . . .
that's not being sold. So what we mean by
that [is] . . . we're not creating any
substantive rights. To the extent that an
asset is transferred to the purchaser . . .
only the debtor's interests in that asset are
being transferred. To the extent that . . .
Mocco or anybody else claims an ownership in
the assets, that ownership is preserved
. . . . There's no transfer of that asset
over somebody else's ownership interest.
When the bankruptcy judge commented Mocco would not "lose
[his] rights by virtue of the sale," counsel for SWJ, responded:
"But they do . . . not lose whatever rights they have in that
asset. However, the sale would be free and clear of encumbrances,
subject to defenses." The bankruptcy judge replied:
That's right. So long as any and all
interests, rights, claims are preserved and
they be prosecuted against the dollar amount
that is collected, or, if it isn't property
of the estate, then it's off this [c]ourt's
jurisdiction, and the bottom line is that all
rights are preserved.
[(Emphasis added).]
The bankruptcy judge also stated the Moccos were "going to be in
the same position after the sale as they were before the sale
insofar as whatever rights, if any, they have."
The trial judge also reviewed the record of a March 8, 2006
hearing before the bankruptcy judge to address the language of the
final 363 sale order, and found it supported the finding the sale
did not affect Mocco's ownership rights. Reciting from the
35 A-5041-14T2
transcript, the trial judge noted Mocco's counsel asked for
language to be added to the order stating Mocco's rights "to and
in the assets being sold shall not be affected by this sale and
shall be determined in future litigation in a non-bankruptcy
forum." An unidentified party then read the language from
Paragraph 17 of the November 16, 2005 order, which had preserved
Mocco's rights, to the bankruptcy judge. The bankruptcy judge
then asked if there was similar language in the proposed order,
and was assured by the attorneys the language would be included.
When counsel for SWJ argued Mocco's rights would be limited,
the bankruptcy judge responded: "I should think that they'd reserve
all of – whatever rights they might have. That's what he's been
asking to do and I think that it's understood that he will be able
to do it." When SWJ's counsel persisted, the judge replied: "Not
subject to anything. I'm telling you, sir, . . . I [cannot] say
this any more clearly. Whoever has a right will continue to have
that right after this order is entered . . . ." This colloquy
demonstrates the bankruptcy court understood its previous orders
addressed Mocco's concern the 363 sale did not affect his ownership
rights to FCHG IV.
Additional support for the trial judge's conclusion Mocco's
claims were not barred by the 363 sale is found in an order entered
by the bankruptcy judge on July 1, 2014. In the order, the
36 A-5041-14T2
bankruptcy judge had denied a motion for contempt filed by SWJ
claiming Mocco had ignored the 363 sale orders by taking action
to "impede [SWJ's] court-ordered fee title interest." The order
stated the bankruptcy court had denied the motion because the June
21, 2005, November 16, 2005, and March 9, 2006, orders "were sales
of property subject to the rights of the Mocco [p]arties as those
rights were previously or are subsequently determined by a court
of competent jurisdiction, including, without limitation [the New
Jersey Superior Court.]"
Also, in an October 9, 2014 order approving the bankruptcy
trustees' settlement with Mocco, the bankruptcy judge noted the
pending New Jersey Superior Court case would determine "whether
the bankruptcy estates or Mocco own[ed] certain [FCHG] LLCs." This
order referred to the assets of the bankruptcy estates, including
"interests" in FCHG IV.
Therefore, we agree with the trial judge's conclusion the
bankruptcy court never intended the 363 sale would terminate
Mocco's rights to FCHG IV. Indeed, the trial judge concluded:
If anything [was] absolutely clear in the
tortured sixteen year history of this case,
it [was the bankruptcy judge] never intended
the [section] 363 sale to transfer anything
other than . . . Licata's claim to the FCHG
IV assets. He never intended to allow a sale
which would transfer all right, title and
interest to the assets, in derogation of . . .
Mocco's rights.
37 A-5041-14T2
The judge further found the 363 sale could not bar Mocco's claim
because he could not be divested of his assets without due process,
which the sale did not afford Mocco.
The trial judge rejected the lenders' argument they had
obtained good title to FCHG IV from Cynthia. The judge found
Mocco gave Licata title to the Holding Group LLCs as nominee and
that Licata could not give Cynthia "any greater rights than he
possessed[.]" The judge also noted Cynthia "never paid any money
for the rights to FCHG IV, never listed herself as the owner of
the FCHG IV properties, never paid any money toward the FCHG IV
mortgage, never knew what properties FCHG IV possessed, and never
claimed ownership of FCHG IV[.]" In addition, the judge noted a
divorce-related separation agreement between the Licatas stated
that Licata, not Cynthia, "kept all the rights to the FCHG
properties involved in the Mocco dispute[.]"
We have no basis to disturb the judge's findings. Our de
novo review leads us to the same conclusion. SWJ purchased only
Licata's claims to ownership of FCHG IV. Therefore, the 363 sale
did not bar Mocco's ownership claims.
For the foregoing reasons, the June 5, 2015 judgment is
affirmed. To the extent that we have not addressed the other
arguments raised in the appeal and cross-appeals, it is because
38 A-5041-14T2
they are without sufficient merit to warrant discussion in a
written opinion. R. 2:11-3(e)(1)(E).
Affirmed.
39 A-5041-14T2