SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
A-3626-99T5
ALLEN ZAVODNICK,
Plaintiff-Appellant/
Cross-Respondent,
v.
LAWRENCE A. LEVEN,
Defendant-Respondent/
Cross-Appellant,
and
GEORGE RIOS,
Defendant.
__________________________________
Submitted February 27, 2001 - Decided April 27, 2001
Before Judges Skillman, Conley and Landau.
On appeal from Superior Court of New Jersey,
Law Division, Bergen County, Docket No. L-
1902-95.
Orloff, Lowenbach, Stifelman & Siegel,
attorneys for appellant/cross-respondent
(Samuel Feldman, on the brief).
Fuchs, Altschul, Greenberg, Sapin & Leven,
attorneys for respondent/cross-appellant
(Robert Fuchs, on the brief).
The opinion of the court was delivered by
SKILLMAN, P.J.A.D.
The issue presented by this appeal is whether the
enforcement of a judgment creditor's charging lien on a partner's
interest in partnership property and profits, obtained under the
provisions of the Uniform Partnership Law, N.J.S.A. 42:1-1 to -
43, is subject to the limitation on executions provided by
N.J.S.A. 2A:17-56. We conclude that a partner's distributive
share of partnership profits is a "profit" within the intent of
N.J.S.A. 2A:17-56, and that the enforcement of a charging lien on
that profit is subject to the ten percent limitation on
executions provided thereunder. Consequently, a court order is
required for a judgment creditor to collect more than ten percent
of a partner's share of partnership profits.
Plaintiff Allen Zavodnick and defendant Lawrence Leven are
both attorneys. At one time defendant was an associate in a law
practice owned and operated by plaintiff. In May 1988, defendant
and another associate, codefendant George Rios, left plaintiff's
firm, taking a substantial number of case files and client
information cards with them. Plaintiff asserted claims against
both defendants for the work he had performed on the files
removed from his office and a claim against Leven for repayment
of loans. The parties eventually agreed to submit both claims to
arbitration.
The arbitrator awarded plaintiff $140,601 for legal fees
jointly owed to him by both defendants, $76,000 for loans he had
made to Leven, and $10,000 in "special damages," and the Law
Division subsequently entered final judgment confirming the
award. On appeal, we set aside the award of $10,000 in "special
damages" in an unpublished opinion, but affirmed the judgment in
all other respects. Zavodnick v. Leven, A-5380-94T2 (Mar. 28,
1996). Plaintiff has collected the part of the arbitration award
representing his legal work. However, the part of the award
representing repayment of the $76,000 in loans to Leven plus
interest thereon remains unpaid.
Leven is now a partner in a law firm operating under the
name Fuchs, Altschul, Greenberg, Sapin and Leven. Plaintiff
filed a motion to charge Leven's interest in the law firm with
payment of the outstanding amount of the judgment. On November
8, 1999, the trial court granted the motion and directed the law
firm to distribute to plaintiff all sums due to Leven, "except
such monies that are legally exempt from execution under the laws
of the State of New Jersey."
A dispute subsequently developed as to whether this order
required the law firm to distribute to plaintiff all moneys due
Leven or only ten percent of those sums, as provided under
N.J.S.A. 2A:17-56. After an exchange of correspondence between
plaintiff and the law firm debating this legal point, plaintiff
filed a motion in aid of litigant's rights for an order requiring
the law firm to pay him the full amount of a $17,280 distribution
made to Leven subsequent to entry of the November 8, 1999 order
as well as the full amount of all future distributions payable to
Leven. Leven filed a cross-motion seeking clarification or
modification of the November 8, 1999 order. One of the firm's
partners submitted a certification in support of the cross-motion
which stated that all money the firm distributes to plaintiff
constitutes "income derived from net profits."
The trial court concluded that the charging lien did not
entitle plaintiff to collect all money the law firm is obligated
to distribute to Leven until the judgment is satisfied. The
court ruled that the wage execution statute "modifies and limits
the extent to which a judgment creditor can enforce a charging
lien[.]"
Plaintiff appeals from the order memorializing this ruling.
Plaintiff argues that Leven's cross motion resulting in entry of
the order on appeal was filed beyond the time allowed under Rule
4:49-2. Plaintiff also argues that a charging order against a
partner entered in accordance with the Uniform Partnership Law is
not subject to the limitation on executions provided by N.J.S.A.
2A:17-56. Leven cross appeals from the denial of his application
for counsel fees.
We conclude that Leven's motion for clarification of the
terms of the charging order entered on November 8, 1999 was
timely, and that the trial court correctly determined that the
charging order on partnership distributions to Leven is subject
to the limitation on executions provided by N.J.S.A. 2A:17-56.
We also reject Leven's cross appeal from the denial of counsel
fees. However, the language of the order entered by the trial
court is too broad. Accordingly, the case must be remanded for
entry of an amended order that modifies the relief granted to
Leven. Subject to this modification, the order on appeal is
affirmed.
Plaintiff's argument that Leven's motion was untimely is
without merit. The November 8, 1999 charging order provided in
relevant part "[t]hat the partnership . . . [is] . . . directed
to pay to [plaintiff] . . . all monies (or other property) due
now or hereafter to be paid to . . . Leven by said partnership,
except such monies that are legally exempt from execution under
the laws of the State of New Jersey[.]" (Emphasis added). The
order did not indicate what monies due Leven from the partnership
"are legally exempt from execution under the laws of the State of
New Jersey." Plaintiff interpreted the order to mean that the
law firm was required to pay him the full amount of Leven's share
of partnership profits, while Leven and the law firm construed
"monies . . . legally exempt from execution" to include, in
accordance with N.J.S.A. 2A:17-56, any amount in excess of ten
percent of Leven's partnership profits. The resolution of this
dispute obviously required interpretation or clarification of the
November 8, 1999 order. Such a motion may be filed at any time,
without regard to the time limitations on a motion for
reconsideration (R. 4:49-2) or a motion to vacate a judgment (R.
4:50-2). Cf. Securities & Exchange Comm'n v. Hermil, Inc., 838
F.2d 1151, 1153 (11th Cir. 1988) (noting that a court's power to
enforce an order includes "the power to construe and interpret
the language of the original order."). Therefore, we proceed to
the merits of the parties' dispute concerning the scope of the
exemption from execution provided by the Uniform Partnership Law.
The Uniform Partnership Law was approved by the Conference
of Commissioners on Uniform State Laws in 1914, Unif. P'ship Act
§ 1-45 (1914), and enacted in New Jersey in 1919. L. 1919, c.
212.See footnote 11 Section 28 of the Law, which was adopted verbatim in New
Jersey as N.J.S.A. 42:1-28, established a "charging order" as the
method by which a judgment creditor of a partner may enforce the
judgment. FDIC v. Birchwood Builders, Inc.,
240 N.J. Super. 260,
266-67 (App. Div.), certif. denied,
122 N.J. 317 (1990).
N.J.S.A. 42:1-28(1) provided:
On due application to a competent court
by any judgment creditor of a partner, the
court which entered the judgment, order or
decree, or any other court, may charge the
interest of the debtor partner with payment
of the unsatisfied amount of such judgment
debt with interest thereon; and may then or
later appoint a receiver of his share of the
profits, and of any other money due or to
fall due to him in respect of the
partnership, and make all other orders,
directions, accounts and inquiries which the
debtor partner might have made, or which the
circumstances of the case may require.
As one commentator has observed, section 28 contemplated that
"the primary method for satisfying the creditor's judgment shall
be by means of an order diverting the debtor partner's share of
the profits to his creditor in a manner somewhat like that used
in garnishment proceedings." J. Gordon Gose, The Charging Order
Under the Uniform Partnership Act,
28 Wash. L. Rev. 1, 10 (1953);
see also City of Arkansas City v. Anderson,
752 P.2d 673, 681-84
(Kan. 1988).
A judgment creditor's right to enforce a judgment through a
charging order on a partner's share of partnership profits is
subject to a significant limitation. N.J.S.A. 42:1-28(3)
provided:
Nothing in this chapter shall be held to
deprive a partner of his right, if any, under
the exemption laws, as regards his interest
in the partnership.
The Uniform Partnership Law does not contain any definition of
the term "exemption laws." However, this term was obviously
intended to refer to "exemptions" contained in other statutory
provisions, because the Partnership Law itself does not contain
any exemption provisions.
One statutory exemption from execution is set forth in
N.J.S.A. 2A:17-19, which provides in pertinent part:
Goods and chattels, shares of stock or
interests in any corporation and personal
property of every kind, not exceeding in
value, exclusive of wearing apparel,
$1,000.00, and all wearing apparel, the
property of a debtor shall be reserved both
before and after his death, for his use or
that of his family or his estate, and shall
not be liable to be seized or taken by virtue
of any execution or civil process whatever,
issued out of any court of this State.
Plaintiff concedes that its charging order against Leven's
distributive share of his law firm's profits would be subject to
this exemption, because the Partnership Law describes a partner's
interest in the partnership profits as "personal property."
N.J.S.A. 42:1-26.
The issue in this case is whether the "exemption laws" that
N.J.S.A. 42:1-28(3) allows a debtor partner to invoke also
include N.J.S.A. 2A:17-56, which provides:
In no case shall the amount specified in
an execution issued out of any court against
the wages, debts, earnings, salary, income
from trust funds or profits due and owing, or
which may thereafter become due and owing to
a judgment debtor, exceed 10%, unless the
income of such debtor shall exceed the sum of
$7,500.00 per annum, in which case the court
out of which the execution shall issue may
order a larger percentage.
We agree with plaintiff's contention that the law firm's
distributions to Leven do not constitute "wages" or "salary." In
fact, the partner's certification submitted in support of Leven's
cross-motion stated that "[t]he only monies that Mr. Leven
receives from the partnership is income derived from net
profits." However, even though N.J.S.A. 2A:17-56 is part of what
is sometimes referred to as the "wage execution statute," Greate
Bay Hotel & Casino v. Guido,
249 N.J. Super. 301, 302 (App. Div.
1991), it applies by its express terms not only to "wages" but
also to "debts, earnings, salary, income from trust funds" and,
directly pertinent to this case, "profits due and owing, or which
may thereafter become due and owing to a judgment debtor[.]"
Although the distributions to Leven from partnership profits are
not "wages," they are unquestionably "profits due and owing."
Moreover, we perceive no reason why the "exemption laws"
that may be invoked in response to an application for a charging
order under N.J.S.A. 42:1-28 should exclude the limitation upon
executions on "profits" provided by N.J.S.A. 2A:17-56. A
partner's periodic receipt of distributions from a partnership
engaged in a professional practice plays substantially the same
role in the partner's economic life as an employee's wages. The
partner typically depends on such distributions to purchase food,
shelter, and other necessities for himself and his family. If
Leven were an associate rather than a partner in the Fuchs,
Altschul law firm, any wage garnishment clearly would be subject
to the limitations of N.J.S.A. 2A:17-56. Similarly, if Leven
were a sole practitioner, the income that he derived from his
practice would constitute "earnings" within the intent of
N.J.S.A. 2A:17-56. Therefore, we conclude that distributions
from the partnership through which Leven has chosen to practice
his profession are subject to the same limitation on executions
under N.J.S.A. 2A:17-56 as an employee's wages or a sole
proprietor's earnings.
Although the trial court correctly concluded that Leven is
entitled to rely on the exemption from execution provided by
N.J.S.A. 2A:17-56, the language of the court's order must be
modified. That order declares that partnership distributions to
Leven are "subject to state and federal wage execution laws," and
"shall be deemed to be wages and earnings that are in part exempt
from execution under state and federal law[.]" However, as
previously discussed, the partnership distributions are
"profits," not "wages." Moreover, Leven has not shown that there
is any federal law that exempts such distributions from
execution. Accordingly, the fourth, fifth, and sixth decretal
paragraphs of the March 10, 2000 order must be modified to
provide that Leven is only entitled to rely upon N.J.S.A. 2A:17-
56's limitation upon distributions from the partnership for
satisfaction of the judgment held by plaintiff.
Our conclusion that plaintiff's charging lien against
Leven's partnership profits is subject to N.J.S.A. 2A:17-56 does
not necessarily mean that plaintiff is entitled to collect only
ten percent of those profits. N.J.S.A. 2A:17-56 provides that if
a judgment debtor's income exceeds $7,500 per year, "the court
out of which the execution shall issue may order a larger
percentage." If plaintiff seeks relief under this provision, the
trial court will be required to strike an equitable balance
between the interests of the judgment creditor and debtor, taking
into consideration the economic circumstances of Leven and his
family, the size of the judgment, the length of time it has
remained unpaid, the efforts Leven has made to satisfy his
obligations under the judgment,See footnote 22 and any other circumstances the
court finds relevant.
Although Leven cross-appealed from the denial of his
application for an award of counsel fees, he does not present any
argument relating to that denial. Thus, his cross-appeal must be
considered abandoned. See Carter v. Carter,
318 N.J. Super. 34,
42 n.8 (App. Div. 1999). However, Leven argues that he should be
awarded counsel fees for services performed in connection with
this appeal. Leven relies upon what is sometimes called the
Frivolous Litigation Act, N.J.S.A. 2A:15-59.1, which authorizes
an award of counsel fees if the judge finds that "a complaint,
counterclaim, cross-claim or defense of the nonprevailing person
was frivolous." N.J.S.A. 2A:15-59.1a(1). It should be clear
from the preceding discussion that the issue presented by this
appeal is not frivolous. In any event, the Frivolous Litigation
Act does not apply to a frivolous appeal. Cf. Lewis v. Lewis,
132 N.J. 541, 545 (1993) (holding that the statute does not apply
to a frivolous motion because it refers only to a frivolous
"complaint, counterclaim, cross-claim or defense").
Accordingly, as modified, the order of the trial court is
affirmed. The case is remanded to the trial court for entry of
an amended order in conformity with this opinion. On remand,
plaintiff may move for an order directing the partnership to pay
him more than ten percent of Leven's distributive share of
partnership profits.
Footnote: 1 1 A revised Uniform Partnership Law was approved by the Conference of Commissioners on Uniform State Laws in 1997, Unif. P'ship Act §§ 101-1211 (1997), and enacted in New Jersey in 2000. L. 2000, c. 161. The revised law does not appear to have made any substantive changes in the sections of the Uniform Partnership Act involved in this appeal, which were repealed effective December 8, 2000. L. 2000, c. 161, § 60. The successor to the former N.J.S.A. 42:1-28 in the new Partnership Act is N.J.S.A. 42:1A-30. Footnote: 2 2 We note that although the record indicates that the award to plaintiff of $140,601 for work performed on the files removed from his office has been paid, it does not indicate when that payment was made, or whether it was paid by Leven, codefendant Rios, or both defendants.