SUPERIOR
COURT OF NEW JERSEY
APPELLATE
DIVISION
NICHOLAS AND DANA BROWN,
v.
WILLIAM C. MARTUCCI,
__________________________________
|
Submitted February 29, 2012 - Decided
Before Judges Sapp-Peterson and Ostrer.
On appeal from the Superior Court of New Jersey,
Law Division, Special Civil Part, Union County, Docket No. DC-017451-10.
William C. Martucci, appellant pro se.
Mele & Associates, LLC, attorneys for
respondents (Gregg Mele, on the brief).
PER CURIAM
William
Martucci appeals from the final decision of the Special Civil Part, after a
bench trial, awarding $10,000 to plaintiffs. The Browns claimed that Martucci fraudulently induced them
to purchase shares in a company that they claimed became worthless. Rather than decide the merits of plaintiffs'
fraud claim, the court sua sponte determined that plaintiffs' investment was a
loan and required Martucci to repay it with costs, but no interest. We are compelled to reverse, based on
the court's failure to allow cross-examination and to otherwise observe the
formalities of a trial, and the lack of any evidential support in the record
for the court's finding that the $10,000 payment was a loan.
I.
Defendant fraudulently induced
Plaintiff to enter into a $10,000 investment contract, where the
"investment" had no real value.
Defendant, and other parties presently unknown, did not provide any required
investment documentation whatsoever and have retained Plaintiff's investment
after numerous demands for return of same.
The matter was tried on February
24, 2011. Plaintiffs were
represented by counsel. Martucci
appeared pro se.
We glean the
following from the trial record.
According to Nicholas Brown (Brown), the sole witness for plaintiffs,
Martucci was a family friend.
Martucci allegedly induced plaintiffs to invest $10,000 in a company
called First Unity, Inc., which purportedly was engaged in a business involving
automatic teller machines. Admitted
into evidence was a January 21, 2005 check in the amount of $10,000 drawn on
plaintiffs' joint checking account by Dana Brown, payable to First Unity, which
plaintiffs delivered to Martucci.
However, sometime in 2006, plaintiffs received a certificate indicating
they owned 10,000 shares in a different company, Ammpro. The stock certificate was not placed in
evidence.
Brown testified
that he registered the shares with E-Trade, which valued his shares at $800,
according to an E-Trade document that the court reviewed, but was not admitted
into evidence. Brown alleged that
Martucci promised substantial returns on his investment. "We were told we would make, you
know, [$]20 to 30,000 which was still, you know an acceptable
return." Brown claimed that Martucci
told him that he was an owner of Ammpro.
Martucci admitted
that he proposed to plaintiffs that they invest in First Unity; he stated he
was an investor himself; and he forwarded to them an investor
questionnaire.
So when I was
speaking to her [Dana Brown], and I had told her that there was an opportunity
that I thought might be good because they — to make a few dollars, that I, my
family and friends were investing in it.
And along with myself being part of the investment group, I asked her if
she would be interested and she said she would. I said, well, I said if you want to, I'll send you out this
paperwork and because they're requiring this questionnaire to show that you're
either accredited or non-accredited investor. And I sent her the paperwork. They filled it out, sent the check back with the $10,000 and
I passed that on to the people who own the company.
Martucci admitted
that he personally received plaintiffs' $10,000 check and alleged he passed it
on to the owners of First Unity.
Martucci claimed that First Unity then merged into Ammpro. He denied receiving any remuneration in
connection with plaintiffs' investment.
He also testified that he told plaintiffs the investment was a
gamble. He asserted that
plaintiffs completed an investor questionnaire that disclosed investment
risks. He later testified that he
did not personally invest in First Unity or Ammpro, but his daughters did.
The
court actively participated in the examination of witnesses. The court interrupted plaintiffs'
counsel's opening statement and engaged in a colloquy with him about
plaintiffs' position on issues in the case. At various points, the court allowed plaintiffs' counsel to
clarify the witness's responses to questions.
During his
examination of the witness, the judge expressed his view of the evidence. For example, when Brown testified that
he could not trade his stock, plaintiffs' counsel, although not a sworn
witness, repeated Brown's testimony, eliciting agreement from the court, and
sparking an informal discussion among Brown, his attorney, and the court about
the value of plaintiffs' stock.
When Brown testified that there was no market for his stock, the court
responded, "Well, I wouldn't buy it."
As
plaintiffs' counsel began to elicit testimony from Brown regarding the investor
questionnaire, the court suggested that plaintiffs' counsel call Martucci as a
witness to explain the document.
Brown then left the stand without any opportunity by Martucci to
cross-examine him.
Plaintiffs'
counsel questioned Martucci about how he solicited plaintiffs' investment,
eliciting the explanation we have quoted above. Counsel's questioning consumed two pages of transcript. Then, the court interceded, and
conducted virtually the balance of the examination of Martucci.
During his
examination of Martucci, the judge indicated that he was already convinced that
plaintiffs' stock was worthless.
He did so by stating to Martucci:
"But its stock is worthless," "If I had five shares
today, how much would I get for it? . . .
You get nothing for them[,]" and "Would it surprise you to
tell you that there's no value?"
The court also
disclosed that it had drawn conclusions about whether Martucci had made false
misrepresentations, and the nature of plaintiffs' reliance.
THE COURT:
Right. You see the problem
here, sir, is you were dealing with something that you don't have a firm
knowledge of. That's the problem.
MR. MARTUCCI: Correct.
THE COURT: You should have never done what you
did.
MR. MARTUCCI: But
I did it as a —
THE COURT:
I know you were trying to be a nice guy.
MR. MARTUCCI: And
then but —
THE COURT:
But what you did was completely misleading. You told that gentleman and your daughter that this was
going to be a good investment and you had no right to do that because you just
don't have the knowledge.
. . . .
Q [BY THE COURT]: That's
— you gamble.
A [MARTUCCI]: It
could be wrong — absolutely.
Q [BY THE COURT]: Yeah,
but they thought that you knew what you were doing.
A [MARTUCCI]: I
don't think they knew that. I
explained to them that it's a gamble.
Q [BY THE COURT]: Well, I don't think —
A [MARTUCCI]: That's
what I told them.
Q [BY THE COURT]: I think they had a lot of respect for you for no good reason
and they were foolish too, to be perfectly blunt with you.
A [MARTUCCI]: But
all these are not — all these things are not — have nothing to do with me. I don't own these companies. I have — I don't — I never benefited
from any of this.
Q [BY THE COURT]: You may not have benefited but
what you did was very wrong. You
don't talk about things that you don't understand.
In attempting to
determine whether plaintiffs signed the investor questionnaire, the court
engaged in factual inquiries of plaintiffs' counsel, instead of fact witnesses. In the midst of the court's examination
of Martucci, Brown interrupted without a question posed to him, at which point
the court began directing questions to Brown.
After the court
and plaintiffs' counsel had concluded questioning Martucci, plaintiffs did not
formally rest. Nor did the court
expressly advise Martucci that he was entitled to present a defense — as he had
been called to the stand by the court during plaintiffs' case and questioned by
the court and plaintiffs' counsel.
Rather, the court simply asked Martucci, "All right, what
else?" Martucci then
addressed an aspect of the questionnaire and stated he was as much a victim as
plaintiffs. When he began to refer
to settlement discussions, plaintiffs' counsel objected.
The court then
interrupted plaintiffs' counsel's objection and, apparently unexpectedly,
announced its decision.
THE COURT: This is what I'm going
to do because this is a situation where maybe the plaintiff learned
something. But you should have
learned something too.
MR. MARTUCCI: I did.
THE COURT: Never talk about things
that you really don't understand, you understand? And never tell anybody to invest in something that you have
no idea how it works because you don't.
An IPO is like gambling. It's the same thing like a Hedge Fund
where what you're doing is you're gambling. You're saying that a certain asset is going to gain in value
because of certain situations which are complex situations.
You had no right to do that
because you're not a licensed broker; nothing. You're just an ordinary guy thinking that you're Santa
Claus, but you're not.
So what I am going to find is that
this $10,000.00 was given to you as a loan and that you have to return it to
him. And so he's going to get a
judgment against you for $10,000.00, with costs of —
.
. . .
THE COURT: $57.00.
Now the reason I'm doing that is I want you to learn a lesson, that you
shouldn't be doing this kind of stuff.
This is wrong. You got to
get a license and other things about stock market to understand it. You got to get degrees. Even [Geithner] doesn't understand all
of this stuff and maybe you know who he is. He's Secretary of [the] Treasury of the United States of
America. It's complex.
So good luck and have a nice day
all of you.
Martucci appeals the court's decision.[2] He argues the court's conduct during
the trial denied him due process, as he was deprived the opportunity to cross
examine plaintiff, and, at the court's direction, compelled to testify as part
of plaintiffs' case in chief. He
also argues there was no basis for the court's finding that the transaction
between plaintiff and Martucci was a loan. Lastly, he argues that plaintiffs' complaint should have
been dismissed on statute of limitations grounds.[3]
II.
We exercise a limited scope of review of a court's
determinations in a non-jury trial.
Seidman v. Clifton Sav. Bank, S.L.A., 205 N.J. 150, 169
(2011). We may disturb the trial
judge's factual findings and legal conclusions only if they are "so
manifestly unsupported by or inconsistent with the competent, relevant and
reasonably credible evidence as to offend the interests of
justice[.]" Ibid.
(internal quotations and citations omitted). Put another way, we inquire whether substantial evidence
supports the trial judge's findings and conclusions. Ibid.
Applying that
standard, we are compelled to reverse, as there is no evidence in the record to
support the court's finding that plaintiffs loaned Martucci $10,000. Moreover, the trial court cites none. Cf. R. 1:7-4 (requiring
findings of fact). Plaintiffs
claimed they were victims of fraud.[4] The court made no clear findings and
legal conclusions regarding that claim.
However, we are
also obliged to address the irregular manner in which the trial was conducted,
which denied Martucci due process and provides an independent basis for
reversing the judgment and remanding for a new trial. We begin with the court's role in examining witnesses.
A judge is
authorized to ask questions of witnesses.
N.J.R.E. 614. We
review the court's decision to examine witnesses under an abuse of discretion
standard. State v. Medina,
349 N.J. 108, 130-31 (App. Div.), certif. denied, 174 N.J.
193 (2002) (bench trial). A court
may examine witnesses to clarify testimony, aid the court's understanding,
elicit material facts, and assure the orderly and expeditious conduct of the
trial. Ibid. Concerns about the impact of the judge
as questioner also "are less acute in the context of a bench trial, where
judges serve as fact finders and have more latitude in questioning
witnesses." State v.
Taffaro, 195 N.J. 442, 451 (2008).
Nonetheless, even
in a bench trial, "a trial judge must take special care to craft questions
in such a manner to avoid being perceived as an advocate." L.M.F. v. J.A.F., 421 N.J.
Super. 523, 537 (App. Div. 2011) (referring to court's questioning in a non-jury
domestic violence trial).
"There is a point at which the judge may cross that fine line that
separates advocacy from impartiality.
When that occurs there may be substantial prejudice to the rights of one
of the litigants." Ridgewood
v. Srell Inv. Corp., 28 N.J. 121, 132 (1958) (jury trial).
We have no doubt
that the trial judge was engaged in a good faith search for the truth. We also recognize that in cases involving
pro se parties, the court's involvement as questioner is often required, to
assist parties in presenting essential facts in support, or in defense of a
claim. Cf. J.D. v.
M.D.F., 207 N.J. 458, 481 (2011) (referring to judge's obligation in
a domestic violence case involving unrepresented parties to "sift[]
through their testimony").
However, in this case, plaintiffs were represented by counsel. Yet, even before plaintiffs' counsel
had the opportunity to present his case, the court prematurely and unnecessarily
intervened and dominated the examination of Brown and Martucci. As the court began to form conclusions
about the facts, the court assumed the role of advocate in his questioning. In so doing, the court deprived
Martucci of a fair trial.
Also, a court may
not, in the interests of expedition or because it believes sufficient facts
have been elicited, deny a party the opportunity to cross-examine a
witness. Ibid.; Peterson
v. Peterson, 374 N.J. Super. 116, 124-25 (App. Div. 2005). The error is particularly harmful when
the denial pertains to the principal witness against the party. Thus, the court's denial here of any
opportunity by Martucci to cross-examine Brown was error.
Other procedural
errors were committed. It was
inappropriate for the court to make findings of fact before the trial was
complete. The court should not
have considered plaintiffs' E-Trade statement without plaintiffs offering it
and the court admitting it into evidence.
The court's question to
Martucci, "All right, what else?" did not adequately inform Martucci
of his opportunity to present his defense case. It is also unclear that either party had completed the
presentation of their case when the court decided to render its decision.
We also address Martucci's
argument that plaintiffs' complaint should have been dismissed on statute of
limitations grounds. The record does
not reflect Martucci asserted this affirmative defense before the trial court,
in which case it would have been waived.
Williams v. Bell Tel. Lab. Inc., 132 N.J. 109, 118-19
(1993). However, as it is unclear
from the record that either side had completed its presentation when the court delivered
its decision, Martucci on remand shall be permitted to raise the defense, and
the court shall determine the applicable limitations period. Compare N.J.S.A. 49:3-71 (action for deceit under Uniform
Securities Law shall be brought within two years after "the contract of
sale or the rendering of the investment advice, or more than two years after
the time when the person aggrieved knew or should have known of the existence
of a cause of action, whichever is later"), with N.J.S.A.
2A:14-1 (six year statute of limitations for common law fraud action).
Finally,
because the original judge accorded weight to the testimony and may be
committed to his findings, upon remand the matter should be assigned to a
different judge. J.L. v. J.F.,
317 N.J. Super. 418, 438 (App. Div. 1999).
Reversed
and remanded. We do not retain
jurisdiction.
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[1] The court
obtained a copy of the complaint, which was not included in either party's
appendix.
[2] We have not
been provided with a formal order of judgment.
[3] Martucci's
pro se brief does not include "appropriate point headings," as
required by Rule 2:6-2(a)(5).
See Almog v. Israel Travel Advisory Serv., Inc., 298 N.J.
Super. 145, 155 (App. Div. 1997), appeal dismissed, 152 N.J. 361, cert.
denied, 525 U.S. 817, 119 S. Ct. 55, 142 L. Ed. 2d 42
(1998). However, in the interests
of justice, we consider his arguments.
[4] Given the
conclusory nature of plaintiffs' pleading, it is unclear whether they intended
to prove legal or equitable fraud.
Cf. R. 4:5-8(a) (requiring that fraud be pled with
particularity); R. 6:3-1 (applying R. 4:5-8 to Special Civil
Part). The elements differ. See Jewish
Center of Sussex County v. Whale, 86 N.J. 619, 624-25 (1981).
