NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2599-13T4
VICTOR LOURO and
JENNIFER LOURO,
Plaintiffs-Respondents,
v.
FILIPE PEDROSO1 and PEDROSO
LAW FIRM, P.C.,
Defendants,
and
PEDROSO LEGAL SERVICES, LLC,
Defendant-Appellant.
____________________________________
Argued April 15, 2015 – Decided June 4, 2015
Before Judges Ashrafi and O'Connor.
On appeal from Superior Court of New Jersey,
Law Division, Essex County, Docket No.
L-5717-12.
Filipe Pedroso argued the cause for pro se
appellant.
Monique D. Moreira argued the cause for
respondents (Jose B. Moreira, P.C.,
attorney; Ms. Moreira and Jose B. Moreira,
on the brief).
1
The party was incorrectly designated as Felipe Pedroso.
PER CURIAM
Attorney Filipe Pedroso, who is a sole practitioner
operating his law practice in corporate form pursuant to Rule
1:21-1A or -1B, appeals on behalf of Pedroso Legal Services,
LLC, from a judgment of more than $21,000 entered after a jury
trial for the non-payment of office rent. He contends the
judgment should not have included the limited liability company
he formed while the lawsuit was pending but should be only
against Pedroso Law Firm, P.C. The trial court ruled that the
limited liability company was a successor to the professional
corporation that was originally the named defendant and that the
firm under its new name was also liable for the judgment. We
agree and affirm.
Appellant has not provided a full record of the case.2 He
has not provided transcripts of the trial but initially filed
only transcripts of the jury's verdict and the trial court's
post-trial hearing regarding the form of the judgment. After
plaintiffs filed a responding brief in this court, appellant
added a transcript of the testimony of a single witness at the
trial, the prior owner of the building in which the firm's
2
It is the appellant's responsibility to provide this court with
the record relevant to all issues presented on appeal. See R.
2:5-3, 5-4, 6-1.
2 A-2599-13T4
office was rented. Nevertheless, we can deduce the following
from the limited record we have been provided.
On August 1, 2012, plaintiffs Victor and Jennifer Louro
filed a complaint against Pedroso individually and Pedroso Law
Firm, P.C. ("the law firm" or "P.C.") to eject them from
commercial premises at 38 Jefferson Street in Newark.
Plaintiffs had acquired title to the property in May 2012 from a
third party following a foreclosure and a sheriff's sale of the
property. Plaintiffs also sought compensation for unpaid rent
for defendants' continuing use of office space at the property
without paying its fair rental value.
Before the case came to trial, the court issued an order
ejecting Pedroso and the law firm from the premises by the end
of June 2013. Unbeknownst to the court and plaintiffs, Pedroso
established a new limited liability company on July 13, 2013,
which he named Pedroso Legal Services, LLC ("the LLC"). He was
the founder and has always been the sole member of the LLC.
Using the LLC as the new name for his firm, he resumed his
practice of law at 8 Wilson Avenue, which is close to 38
Jefferson Street in the Ironbound section of Newark.
The jury trial was held in December 2013 before Judge W.
Hunt Dumont. Plaintiffs alleged that Pedroso had fraudulently
3 A-2599-13T4
prepared and executed two vastly different leases with the prior
owner of the property, Armando Pena, who is related to Pedroso.
Pena, who testified through a Portuguese interpreter, was
the owner of 38 Jefferson Street from 2001 to 2012. In 2011,
foreclosure proceedings commenced, and Pena eventually lost his
title. Pena testified that Pedroso is his step-daughter's
husband and had rented the first floor of the building for his
law practice. Although Pena acknowledged his signature on
several documents shown to him at the trial, he stated he did
not read English well and did not understand the contents of the
documents. He testified that Pedroso had prepared the documents
and he trusted their contents. He was collecting rent of $1,500
per month from Pedroso's law firm until February 2010. At about
that time, Pena agreed that the law firm's rent would be reduced
to $425 per month in exchange for legal services he was
receiving from Pedroso, which were apparently related to the
pending foreclosure of the property. However, Pena did not
receive any rent payments from Pedroso and his law firm after
February 2010.
The first lease prepared by Pedroso, which was marked as
Exhibit P-1 at the trial, was dated December 1, 2007. It was
for a term of one year and designated the rent for the first-
floor office space to be $2,500 per month. The lease was signed
4 A-2599-13T4
by Pena and by Pedroso as president of "Law Offices of Filipe
Pedroso, P.C." A one-paragraph "Lease Extension" dated November
4, 2008 (Exhibit P-2) continued the rent at $2,500 per month for
another year. The Lease Extension was signed by Pena and by
Pedroso as President of "Pedroso Law, P.C." Plaintiffs alleged
that the 2007 lease and the 2008 lease extension overstated the
rent that the law firm was paying because they were intended to
be used by Pena to apply for financing from a bank.
The second lease prepared by Pedroso (Exhibit P-3) was
dated December 1, 2009, and signed by Pena and by Pedroso as
president of "Pedroso Law, P.C." It was for a term of ten years
and set the rent for the same first-floor office space at $425
per month for the entire ten-year term. According to
plaintiffs, this second lease was intended to defraud a
subsequent purchaser of the property once it became apparent
that the mortgage on the property would be foreclosed. Since we
do not have transcripts of the entire trial, we do not know what
Pedroso's defenses were to plaintiffs' allegations.
By responding to specific questions on a verdict form, the
jury found that the law firm had occupied the first-floor space
at 38 Jefferson Street during plaintiffs' ownership from May 1,
2012, to June 30, 2013, and that the value of that use was
$1,500 per month. The jury also found that plaintiffs had not
5 A-2599-13T4
proven by clear and convincing evidence that Pedroso committed a
fraud against plaintiffs with respect to use of the premises and
the two leases he prepared. Therefore, the jury's verdict for
unpaid rent was only against the law firm and not against
Pedroso personally.
After the trial, plaintiffs submitted to the judge a
proposed form of judgment for $21,000 ($1,500 multiplied by
fourteen months), plus pre-judgment interest and costs, to be
entered against "Pedroso Law Firm, P.C. and any subsequent law
firm created by Felipe Pedroso." Over the next several weeks,
the parties submitted letters disputing whether the judgment
should be entered against any entity other than Pedroso Law
Firm, P.C.
On January 8, 2014, Judge Dumont heard argument regarding
the form of the judgment. He ruled that the judgment would not
be entered against "any subsequent law firm" but that the LLC
would be included as a named defendant against whom the judgment
would apply since it was already in existence and was a
successor of the law firm.
On appeal of that ruling, Pedroso argues that the LLC is a
separate entity that was not named as a defendant in this case
and against which a judgment cannot be entered. He cites cases
for the general proposition that a corporate entity is separate
6 A-2599-13T4
from its parent and its shareholders, and he argues that it is a
violation of the LLC's due process and equal protection rights,
and its rights to fundamental fairness under our State
Constitution, to include it as a judgment debtor in this case.
We find no error in Judge Dumont's careful consideration of
the issue and his ruling that the LLC is a successor to the
business of the law firm and is thus obligated to pay the
judgment.
At the January 8, 2014 hearing, Judge Dumont asked Pedroso
when he formed the LLC, what the purpose was of forming the new
entity, what the nature of its practice is, who owned each
entity, and specifically, why the firm under a new name should
be considered a different party from the firm under its former
corporate name. Pedroso was evasive as to when he formed the
LLC, claiming that he did not want to misstate the date, even
though he must certainly have known he formed it shortly after
his firm was evicted from 38 Jefferson Street just six months
earlier. He admitted that both corporate entities were created
by and owned solely by him, and that he was the only lawyer in
the firm. He did not identify any new or specialized area of
practice for which the entity had been formed. He could not
deny that the office location of the firm under its new name was
7 A-2599-13T4
virtually down the street from the old firm, but he claimed that
the two firms did not share the same clients or client base.
Pedroso argued that the old firm was not doing any business
and that the new firm was seeking to "rejuvenate" his law
practice by seeking new clients through a marketing strategy,
namely, a website and internet contact with clients. He claimed
he was forming "a new image" as Pedroso Legal Services, LLC. He
stated he only included the name Pedroso on the letterhead of
the new firm because attorney ethics rules in this State require
that it be included.3
Remarkably, Pedroso argued that, just as some home building
or remodeling contractors might create separate limited
liability companies for the construction of each individual
house so that they can "isolate" their potential liability, he
can do the same as a lawyer with respect to his law practice.
After he tried to avoid the judge's hypothetical questions about
what liability the new firm had for debts of the law firm for
such things as fees owed to deposition stenographers, he
ultimately claimed that the LLC would have no liability for any
3
The most prominent feature of the letterhead of Pedroso Legal
Services, LLC, is a multi-colored website address in much larger
and bolder type than any other printed material. The letterhead
includes Pedroso's last name but does not include his full name
and gives no indication that he is the only attorney in the
firm.
8 A-2599-13T4
such debts incurred by the law firm. He stated that the firm in
fact had no such debts and that the rent arrears debt of this
case was merely "pending" at the time the LLC was created.
Pedroso argued that any judgment creditor of the old law firm
would have to bring a separate lawsuit against his new law firm,
including the filing and service of a new summons and complaint
against the LLC, in order to obtain a judgment against the LLC.
The trial judge would not countenance such arguments and
made findings fully supported by the record. The judge found
that Pedroso changed the name of his firm as soon as he moved
out of the Jefferson Street office. There was no dispute that
Pedroso was engaged alone in the practice of law and that he
continued to practice after June 2013, although at a new
location and under a new firm name. The judge found there was
nothing significantly different in Pedroso's practice of law
under the former corporate name and under the new LLC. The
judge stated to Pedroso: "Each of these firms were created by
you. There is an identity of interest between them. You're
both located in the Ironbound section of Newark. You are the
sole practitioner of the firm. You're using the letterhead of
the former law firm."4
4
The judge was referring to correspondence the court had
received in December 2013 on letterhead marked "PEDROSO LAW
(continued)
9 A-2599-13T4
Based on these findings, the judge concluded that the LLC
is simply the new name of Pedroso's law firm, which has
continued in business. The judge stated that applying the
judgment to any law firm Pedroso might create in the future
would be too broad a remedy for plaintiffs but that Pedroso
Legal Services, LLC, was an existing successor of Pedroso Law
Firm, P.C., and had full notice of the proceedings. Therefore,
the judgment would also be against the LLC.
The law recognizes that a corporation is a separate entity
from its shareholders, and that the shareholders are generally
not liable for the contractual obligations of the corporate
entity. See State, Dep't of Envtl. Prot. v. Ventron Corp., 94
N.J. 473, 500 (1983). "Except in cases of fraud, injustice, or
the like, courts will not pierce a corporate veil." Ibid.
(citing Lyon v. Barrett, 89 N.J. 294, 300 (1982)). However, the
corporate veil will be pierced "to prevent an independent
corporation from being used to defeat the ends of justice, Telis
(continued)
Professional Corporation." No street address or telephone
number was included on the letterhead, and no full name of any
attorney. Thus, Pedroso was appearing in court on behalf of
himself and the two corporate entities under yet a different
name from his prior or current law firm names. We note as well
that the names of the law firm used for the leases that Pedroso
prepared and signed in 2007 through 2009 are different from
other designations of the law firm. The record does not reveal
whether these other names were actual corporate entities or
Pedroso simply used different firm names on different documents.
10 A-2599-13T4
v. Telis, 132 N.J. Eq. 25 (E. & A. 1942), to perpetrate fraud,
to accomplish a crime, or otherwise to evade the law, Trachman
v. Trugman, 117 N.J. Eq. 167, 170 (Ch. 1934)." Ventron Corp.,
supra, 94 N.J. at 500.
Here, Pedroso believes he can evade the payment of a
judgment for rent arrears on the office space his law firm
occupied simply because he has decided to "rejuvenate" and to
change the "image" of his firm under a new name and at a
different location. The legal profession is not so disdainful
of the rights of creditors that it would allow Rules 1:21-1A and
-1B to be thus misused by a member of the New Jersey bar. The
Rules of Professional Conduct for lawyers in this State do
require general honesty. See RPC 8.4(c).
In Ramirez v. Amsted Industries, Inc., 86 N.J. 332 (1981),
a products liability case, the Court held that a successor
corporation that acquired the assets of a predecessor
corporation can be held responsible for the debts and
liabilities of the predecessor if:
(1) the purchasing corporation expressly or
impliedly agreed to assume such debts and
liabilities; (2) the transaction amounts to
a consolidation or merger of the seller and
purchaser; (3) the purchasing corporation is
merely a continuation of the selling
corporation, or (4) the transaction is
entered into fraudulently in order to escape
responsibility for such debts and
liabilities.
11 A-2599-13T4
[Id. at 340-41.]
Here, Judge Dumont found that the LLC is merely a continuation
of the law firm under its prior corporate identity. Pedroso's
license to practice law in this State was used in conducting the
business of the prior law firm just as it is now used to conduct
the business of the successor LLC. Appellant offered no
credible evidence that the LLC is not a continuation of the law
practice of the prior firm.
Appellant argues that the judgment could not be entered in
the absence of service of process upon the LLC. However, our
courts have permitted the amendment of judgments to correct the
name of the responsible party. In Bussell v. DeWalt Products
Corp., 259 N.J. Super. 499, 503 (App. Div. 1992), certif.
denied, 133 N.J. 431 (1993), after the plaintiff obtained a
$600,000 judgment against DeWalt Products Corporation, it moved
to amend the judgment to name DeWalt's successor, Black & Decker
(U.S.) Inc. Id. at 504. The trial court granted the motion,
finding that Black & Decker was the real party in interest and
had actually defended the lawsuit through its insurance carrier.
Ibid. We affirmed the amendment because Black & Decker had
notice of the lawsuit and participated in the defense. We
noted: "Even if an individual is not named as a party of record,
he may be liable for the judgment if he participated in the suit
12 A-2599-13T4
or had an opportunity to be heard." Id. at 510-11. See also
Louisville & Nashville R.R. Co. v. Schmidt, 177 U.S. 230, 238,
20 S. Ct. 620, 623, 44 L. Ed. 747, 751 (1900) (Where judgment
was entered against an entity that was not named originally in
the pleadings but which had notice and participated in the
litigation, "[t]he mere fact that the proceeding to hold it
liable was by rule does not conflict with due process under the
Fourteenth Amendment . . . .").
In Bohny v. Associated Dyeing & Printing Corp., 12 N.J.
Misc. 259, 260-62 (Sup. Ct. 1934), the court permitted amendment
of the defendant's name in a judgment from that of the prior
corporate entity, which had declared bankruptcy at the time of
the conduct complained of in the action, to a similarly-named
corporate entity, which held all of the previous company's
assets. Describing the second corporate entity as the
"successor in fact, if not in law" of the first, the court noted
that a motion to amend the pleadings "would have been granted as
of course . . . ." Id. at 261.
The reasoning of these cases is similar to the standard
stated in Rule 4:9-3 for relation back of an amendment of a
pleading:
An amendment changing the party against whom
a claim is asserted relates back if . . .
that party (1) has received such notice of
the institution of the action that the party
13 A-2599-13T4
will not be prejudiced in maintaining a
defense on the merits, and (2) knew or
should have known that, but for a mistake
concerning the identity of the proper party,
the action would have been brought against
the party to be brought in by amendment.
Here, the LLC knew through its sole member, Pedroso, that
an action for unpaid rent was pending and that Pedroso had
changed the name and corporate form of his law firm while that
action was pending. There is no issue as to the notice the LLC
had of plaintiffs' lawsuit and of the jury's verdict. Although
it is somewhat inaccurate to describe the naming of the original
defendant law firm as a "mistake," Pedroso's actions in founding
a new corporate entity to replace the existing defendant provide
the equivalent justification for allowing the amendment of the
judgment to include the LLC as a successor defendant.
In sum, Judge Dumont rejected Pedroso's arguments for good
reason, found that Pedroso Legal Services, LLC, was a
continuation of Pedroso's law practice under the name Pedroso
Law Firm, P.C., and correctly determined that the judgment
should apply to the successor law firm.
Affirmed.
14 A-2599-13T4