Charles Bloom & Co. v. Echo Jewelers

• Decision Date: 01 February 1995
• Citation: 279 N.J.Super. 372,652 A.2d 1238
• Parties: CHARLES BLOOM & COMPANY, Plaintiff-Appellant, v. ECHO JEWELERS and Mark & Richard Wholesale Jewelers, Defendants, and Mark LaMotta and Richard Jados, a/k/a Richard Diadjodos 1 , t/a Echo Jewelers, Defendants-Respondents.
• Court: New Jersey Superior Court — Appellate Division

Page 372

279 N.J.Super. 372

652 A.2d 1238

CHARLES BLOOM & COMPANY, Plaintiff-Appellant, v. ECHO JEWELERS and Mark & Richard Wholesale Jewelers, Defendants and Mark LaMotta and Richard Jados, a/k/a Richard Diadjodos¹, t/a Echo Jewelers Defendants-Respondents.

Superior Court of New Jersey Appellate Division.

Submitted Jan. 3, 1995.

Decided Feb. 1, 1995.

Methfessel & Werbel, Rahway, for appellant (Anthony P. Pasquarelli, of counsel and on the brief).

John Feniak, Union, for respondents (Jill A. Judge, of counsel and on the brief).

Before Judges DREIER, VILLANUEVA and BRAITHWAITE.

The opinion of the court was delivered by

VILLANUEVA, J.A.D.

Plaintiff appeals from a finding of no cause of action against the two individual defendants who allegedly converted plaintiff's diamonds. We reverse and remand to the trial court for further proceedings.

Plaintiff, Charles Bloom and Company, was and is a sole proprietorship engaged in the business of wholesale diamond sales. Defendants, Mark LaMotta and Richard Gziadosz, were the owners and joint operators of a retail jewelry store known as Echo Jewelers. Defendants were the sole shareholders and officers of Echo Jewelers, Inc., which was incorporated on June 2, 1976. Whether or not this entity was a proprietorship or corporation is immaterial as stated infra.

In 1985, plaintiff entered into a business relationship with defendants, Mark LaMotta and Richard Gziadosz (defendants) at Echo Jewelers. Plaintiff would deliver certain diamonds to Echo Jewelers on a "memorandum." Each memorandum contained a description of each diamond submitted to defendants as well as the weight and the wholesale price of the diamonds. The memorandum served as evidence of the terms of delivery of the diamond to Echo Jewelers and stated on its face:

The goods described and valued as below are delivered to you for EXAMINATION AND INSPECTION ONLY and are the property of CHARLES BLOOM AND COMPANY and subject to their order and shall be returned to them on demand. Such merchandise, until returned to them and actually received, are at your risk from all hazards. NO RIGHT OR POWER IS GIVEN TO YOU TO SELL PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF THIS MERCHANDISE regardless of prior transactions. A sale of this merchandise can only be effected and title will pass only if, as and when the said CHARLES BLOOM AND COMPANY shall agree to such sale and a bill of sale rendered therefor.

This is a stock form used in the jewelry business. A memorandum has four copies. A white copy, the original kept by plaintiff, the yellow would go to defendants, the pink copy would be in a numerical binder and the gold copy is for a salesperson who would be with plaintiff. When a memorandum or an item on the memorandum was paid for, plaintiff would return the white copy and defendants would rip it up.

Pursuant to the memorandum, which described the size, weight, and wholesale price of each item delivered by plaintiff to defendants, the parties agreed that title to the diamonds remained in the plaintiff and that the risk of loss remained with defendants until the diamonds were returned to plaintiff or when title passed and only if plaintiff agreed to a sale made by defendants to the third parties. The terms of the memorandum were that Echo Jewelers could not sell or otherwise dispose of the merchandise or pass title unless plaintiff consented to a sale and rendered a bill of sale therefor. It was agreed that plaintiff retained title to the diamonds but gave possession and limited control to the defendants.

Although each memorandum ² was made out to "Echo Jlrs.", defendants signed the memoranda without any reference to their alleged corporate capacity as officers of Echo Jewelers, Inc. Plaintiff claims that the only evidence submitted to it that Echo Jewelers may have been a corporation were occasional checks submitted to the plaintiff as payment for its diamonds issued by Echo Jewelers, Inc. However, the checks were signed by defendants without any indication of their corporate capacity as officers of the corporation. The majority of business transactions between plaintiff and defendants consisted of cash transactions and third party checks which were indorsed by defendants and handed over to plaintiff.

During the course of business between plaintiff and defendants, plaintiff released diamonds on memoranda to defendants at Echo Jewelers. If Echo Jewelers did not sell the diamonds, the diamonds were to be returned to the plaintiff. If Echo Jewelers sold the diamonds, plaintiff prepared an invoice indicating the stones which were sold.

Mark LaMotta acknowledged that if defendants did not sell the diamonds they were to be given back to plaintiff "until they were converted to an invoice."

During the years 1985 to 1990, Echo Jewelers continually accepted diamonds from plaintiff on memorandum. Defendants apparently kept many of the diamonds and incorporated them into jewelry without paying for them. Furthermore, defendants could not disclose the whereabouts of many of the diamonds that were left at Echo Jewelers on consignment.

It was not plaintiff's practice in his dealings with Echo Jewelers to invoice them for items given to them on memorandum. However, beginning on April 5, 1990, plaintiff did invoice Echo Jewelers for the subject memoranda dated in years 1986 and 1987 because when plaintiff asked for the stones defendants said "they wanted an invoice for it. They said 'bill me' ". Plaintiff acknowledged that "these memorandum (sic) were converted into an invoice." Plaintiff made no further deliveries after May 4, 1990. It was then that plaintiff first asked for interest retroactive to 1988.

Throughout the course of dealing while doing business with Echo Jewelers, Mark LaMotta and Richard Gziadosz, plaintiff has continually contended that he was conducting business with Mark LaMotta and Richard Gziadosz individually and not with the corporation Echo Jewelers. Significantly, there is a noticeable absence of recording of transactions between plaintiff and Echo Jewelers, Inc. in the Echo Jewelers, Inc. accounting ledger.

Payments made on behalf of Echo Jewelers were deducted from the outstanding bill rather than a specific memorandum. Plaintiff began assessing a finance charge in 1990 against Echo Jewelers' account. In or around January 1991, plaintiff requested the return of the items delivered under the memoranda. Defendants no longer had the stones, claiming "they got eaten up in the course of doing business ... over the years" by being used in repairs or settings. The last payment that plaintiff received from defendants was on March 29, 1991.

On or about June 26, 1991, plaintiff filed a complaint against defendants Echo Jewelers, Mark LaMotta, Richard Jados, a/k/a Richard Diadjodos, individually and t/a Echo Jewelers and Mark and Richard Wholesale Jewelers seeking damages in the amount of $26,079.10, $18,179.10 representing the value of the converted diamonds and a finance charge of $7,900 (calculated from 1988) together with interest, costs and attorney's fees, for conversion of certain diamonds allegedly submitted to defendants on memorandum "for examination and inspection only." All defendants except Echo Jewelers filed one answer.

On or about January 28, 1992 ³, defendant Echo Jewelers, Inc. filed for bankruptcy. After receiving notice from the Bankruptcy Court that plaintiff was a creditor of Echo Jewelers, Inc., plaintiff met with the trustee appointed by the Bankruptcy Court. At that time, plaintiff discovered that he was not listed as an account payable of Echo Jewelers, Inc. and requested that its debt be excepted from the debtor's general discharge. Despite plaintiff's request, however, the debt was discharged in the bankruptcy proceedings. Plaintiff continued his law suit against defendants personally.

During a non-jury trial at the close of plaintiff's case, all claims against defendants Mark and Richard Wholesale Jewelers were dismissed with the consent of plaintiff. After the trial, the judge, in a letter opinion, ruled that plaintiff had failed to establish a cause of action against defendants Mark LaMotta and Richard Gziadosz and, therefore, they were not personally liable.

The trial court denied plaintiff's request to amplify its findings after plaintiff contended that the judge wrongfully based his opinion on the standard for "piercing the corporate veil," a claim which plaintiff asserts it never raised. The judge did not address the issue of conversion, even when plaintiff's attorney by letter requested him to do so after he rendered his opinion.

I.

Plaintiff appeals arguing that: (1) defendants' act of failing to return diamonds delivered to them by plaintiff on "memorandum" was a conversion; (2) the individual defendants are personally liable for converting the diamonds; and (3) the court erred in failing to apply the totality of the circumstances test provided in the case of Taylor Oil Co. v. Giordano, 210 N.J.Super. 159, 509 A.2d 269 (App.Div.1986), when determining whether or not plaintiff was provided with adequate notice of the corporate status of Echo Jewelers, Inc.

Defendants contend that they were acting lawfully in their corporate capacity as officers of the corporation known as Echo Jewelers, Inc. when they accepted the diamonds on memorandum and therefore are not personally liable to plaintiff. Defendants also argue that plaintiff transferred the memoranda to an account and the defendants received an invoice for the merchandise, thereby creating a sale on credit.

II.

The trial judge erred in finding that this action was "to collect on a debt." Furthermore, he erroneously focused on when corporate officers are personally liable for corporate debt when plaintiff was primarily alleging a bailment and conversion. The judge failed to address these latter issues.

A bailment is created when a diamond dealer and wholesaler consigns diamonds to a jeweler on "memoran...