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Rebish v. Great Gorge

Decided: April 27, 1988.

CLAUDETTE REBISH F/K/A CLAUDETTE MALOOLY, ON BEHALF OF HERSELF AND ON BEHALF OF OTHERS SIMILARLY SITUATED, PLAINTIFF-APPELLANT,
v.
GREAT GORGE, A NEW JERSEY CORPORATION; THRIFT CREDIT CORP., A NEW YORK CORPORATION; "JOHN DOE" (BEING FICTITIOUS NAME, INDIVIDUALLY AND COLLECTIVELY FOR OFFICERS AND DIRECTORS OF GREAT GORGE); "RICHARD ROE" (BEING A FICTITIOUS NAME, INDIVIDUALLY AND COLLECTIVELY FOR OFFICERS AND DIRECTORS OF THRIFT CREDIT CORP.), DEFENDANTS-RESPONDENTS



On appeal from Superior Court, Law Division, Morris County.

Pressler, Muir, Jr., and Skillman. The opinion of the court was delivered by Muir, Jr., J.A.D.

Muir

The issues raised here are whether the trial court properly denied plaintiff's application for class certification and properly dismissed Counts Two, Three, Four and Five of plaintiff's amended complaint.*fn1 Plaintiff alleges error in the denial and the dismissals. We conclude the trial court properly denied the class certification application and properly dismissed Counts Four and Five, but should not have dismissed Counts Two and Three.

The facts relevant to the application for class certification are generally undisputed. Sometime around 1965, defendant Great Gorge sold 5% debenture bonds at $1000 each to 330 New Jersey residents. The bonds had a due date of July 1, 1980, but interest was payable each year commencing July 1, 1966. They contained a clause subordinating bond principal and interest payments to any present or future senior indebtedness or secured obligations of Great Gorge. They further contained provisions limiting interest payable to the amount of net earnings of the company in the prior year. As an alternative to receiving interest, bondholders could elect to receive free skiing and preferred lift lines at the local skiing facility until October 1970 or until the bond was redeemed, whichever later occurred.

At about the same time, defendant sold 5% debenture bonds at $1500 each to 500 New Jersey residents. These bonds had a due date of July 1, 1983, with interest payable annually commencing July 1, 1969, and every September 1 thereafter. These bonds contained the same provisions as the $1000 bonds.

In 1983, plaintiff's trial counsel,*fn2 on behalf of another client, sought payment on two $1500 bonds with accrued interest. On

August 5, 1983, counsel for Great Gorge responded by letter indicating the company was in default on its senior indebtedness and that it had no funds to satisfy the bonds. He further stated that bankruptcy, the only alternative if bondholders demanded payment, would, due to the size of the senior indebtedness, wipe out all bondholders. The letter requested bondholder restraint in seeking redemption.

Trial counsel then filed a complaint, venued in Bergen County, on behalf of Rudolph Zika seeking payment of principal and interest on the two bonds. Following a trial court denial, without prejudice, of plaintiff's motion for class certification and an interlocutory appeal in which we found a class action available under R. 4:32-1(b)(3), Judge Ciolino, on January 17, 1986, granted plaintiff leave to file an amended complaint and to maintain a class action on behalf of all $1000 and $1500 bondholders. Subsequently, on January 27, 1986, the originally scheduled trial date, Zika appeared in court and advised Judge Ciolino that he had discharged trial counsel orally on December 18, 1985, and confirmed the discharge by a letter trial counsel admitted receiving on January 1, 1986. The letter identified trial counsel's "persistent efforts to convert his complaint into a class action suit" as one ground for the discharge.

Thereafter, on March 3, 1986, counsel for defendant and trial counsel, who represented himself as "attorney for the proposed class," appeared before Judge Ciolino. At that time, the Judge ordered the class certification vacated ab initio. In doing so, he cited the Rule of Professional Conduct 1.16(a) requiring a lawyer to withdraw from representation if the client discharges him. Judge Ciolino characterized trial counsel's action as offensive. At the hearing, trial counsel repeatedly asserted that he should be permitted to continue the class action despite Zika's discharge of him.

On August 4, 1986, trial counsel filed the amended complaint in this action, venued in Morris County. Almost identical in content to the proposed amended complaint in the Zika proceeding,

it alleged, in Count I, the sale of the $1000 and $1500 bonds and sought $1,080,000 in damages on ...


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