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Fagas v. Scott

Decided: June 11, 1991.


Villanueva, J.s.c.


After plaintiff instituted a complaint solely to eject defendant from her home, defendant filed an answer, a ten-count counterclaim and a third-party complaint. Plaintiff prevailed on all issues*fn1 at the trial and now seeks to be reimbursed for her legal fees and litigation expenses under N.J.S.A. 2A:15-59.1, the so-called frivolous litigation statute (the "act"). Defendant denies that plaintiff is entitled to recovery under the act and contends that the act is unconstitutional because it violates the Supreme Court's exclusive rule-making power over procedure under the New Jersey Constitution. Defendant also contends that the act is void for vagueness and violates due process.

The Court holds that plaintiff is entitled to recover her reasonable attorneys fees and litigation costs under the act, which is constitutional.

Procedural History and Preliminary Statement.

Plaintiff Irma Fagas and defendant Peter J. Scott lived together in Fagas' solely-owned home in a non-marital, fully informed, intimate social relationship. For almost five years plaintiff permitted defendant to live with her in her home, which she supported almost exclusively. Defendant voluntarily paid for substantial improvements to the home and paid considerably less of the expenses than plaintiff paid. When the relationship ended in September 1989, plaintiff asked defendant to leave her home, but he refused to do so.

In order to eject defendant from her home plaintiff was required to apply to the court. On November 16, 1989, plaintiff, upon notice to defendant, applied for an order to show cause with temporary restraints. The sole relief she sought was to eject defendant immediately from her home. Plaintiff sought no money, no property and no airing of the parties' problems and affairs.

When defendant received plaintiff's complaint and demand for ejectment, he filed defenses and counterclaims to prevent his removal from her home.

On the presentation of her proposed order to show cause plaintiff showed that she was the sole owner of her house, she had a probability of success on the merits, she would suffer immediate and irreparable harm unless defendant was removed from her home and defendant, a man of enormous wealth*fn2 who had the financial ability to relocate from plaintiff's home at any moment, would suffer no hardship if ordered to vacate. Despite the above showings, the judge refused to grant plaintiff's application for interim relief on the sole ground that he did not have the authority to make a ruling of ejectment, pendente lite,

in an emergent application and in the absence of a plenary hearing.

Plaintiff, believing that she was entitled to an order of ejectment immediately, sought leave to appeal to obtain accelerated relief pursuant to R. 2:9-8. The matter was heard on an emergent basis by the Appellate Division, which granted leave to appeal and held that the trial court did have authority to make an emergent ruling for ejectment. The trial court was ordered to hold a hearing to determine whether a preliminary injunction should be issued to eject defendant from plaintiff's home. On December 6, 1989, the matter was heard by a Law Division judge, but he refused to grant relief to plaintiff.

In the first count of his counterclaim defendant-counterclaimant alleges that plaintiff agreed with him to jointly purchase 495 Longview Road, South Orange, where they would cohabit. He alleges a joint-expense agreement by which he incurred numerous expenses including paying for improvements to the home. He seeks a one-half interest in the home and an accounting and reimbursement for half of the joint expenses during their relationship.

The second count alleges estoppel and seeks specific performance of the alleged agreement to be a one-half owner of plaintiff's house.

The third count alleges fraud and seeks to have a constructive trust imposed on the house.

The fourth count is for unjust enrichment and quasi -contract.

The fifth count seeks a partition of the property.

Four counts were for notes totalling $105,376.25 executed by Bene New Hope, Inc., plaintiff's corporation, which were not signed individually by plaintiff nor endorsed by her.

The third-party complaint against plaintiff's corporation dealt solely with these notes. Defendant obtained partial summary judgment against the corporation for the principal with the determination of interest, if any, to await a final hearing.

Plaintiff was compelled to amend her complaint to respond affirmatively to meet defendant's allegations. R. 4:7-1. Plaintiff claims that if there were a joint-expense agreement, she is entitled to: reimbursement (not defendant, as he claimed in his accountings); quantum merit and/or unjust enrichment to meet defendant's similar claim; the value of securities wrongfully withheld by defendant; funds from a jointly-held corporation, Salbin & Sachsel, claimed by defendant; and the fair market rental value of the space defendant occupied in plaintiff's house against her will.

At the 12-day trial, the court found that defendant had malicious motives, was unfair, desired to destroy plaintiff, stole from plaintiff, and had a plan to get from the court system, which he knew that he was improperly burdening, what he had not been able to get from plaintiff by contract. The court found that defendant never believed that he owned one-half of the home, defendant's statements that there was an agreement to share or reimburse expenses were false, defendant purposely harassed and humiliated plaintiff during the litigation and he kept the litigation going for the purpose of remaining in rentfree premises.

The court evicted defendant from plaintiff's home, ruled in plaintiff's favor on all other claims and awarded her damages of $42,640.75 ($8,533.75 for rent and $34,107 for the stock dividend reinvestment program), plus interest. The court awarded defendant $4,948.98 interest against Bene New Hope, Inc. on the third-party complaint. The court reserved decision on plaintiff's application for relief under the act. Plaintiff claims that defendant's defense of her action for ejection was frivolous, was continued in bad faith and was asserted solely

for the purpose of harassment, delay and malicious injury and that all other defenses and counterclaims were frivolous.

Although defendant gave the Attorney General notice of his motion to declare the act unconstitutional, pursuant to R. 4:28-4, the Attorney General declined to intervene at this stage.

Defendant-Counterclaimant's Contentions.

In response to plaintiff's motion for reimbursement of legal fees and litigation expenses, defendant-counterclaimant raises the following issues: (1) in the exercise of sound discretion, the court should deny any award under the act; (2) none of his claims or defenses were legally or equitably insufficient; (3) the case was litigated by him in good faith believing that the facts and law were as set forth by his attorney in the trial brief and proposed findings of fact and conclusions of law; (4) since plaintiff was not the prevailing party, she does not qualify for counsel fees under the act; (5) plaintiff's affidavit of services is not sufficiently detailed to allow an allocation; (6) plaintiff can recover only for those services which were reasonably necessary because of frivolous claims or defenses and only for a period after defendant's appearance in court; (7) the attorneys' fees sought are not reasonable; (8) counsel fees must be reasonably proportionate to the matters involved; (9) court-awarded counsel fees may not exceed the amount agreed upon between claimant and her attorney; (10) attorneys' fees incurred in preparing motion for attorneys' fees and litigating the propriety and quantum of the fees are not recoverable; (11) "reasonable litigation costs" are limited to transcript expenses and statutory witness and filing fees; and (12) the act is unconstitutional because it: (a) infringes upon the Supreme Court's constitutionally exclusive power to define and regulate the standards for reasonable legal fees; (b) denies due process of law under both the United States and New Jersey Constitutions because counsel fees are awarded on grounds never pleaded, confronted or tried; and (c) is void for vagueness.


Plaintiff is Entitled to Recover Reasonable Attorneys' Fees and Litigation Costs Pursuant to N.J.S.A. 2A:15-59.1.


The Act.

The act, N.J.S.A. 2A:59-1*fn3 provides:

a. A party who prevails in a civil action, either as a plaintiff or defendant, against any other party may be awarded all reasonable litigation costs and reasonable attorney fees, if the judge finds at any time during the proceedings or upon judgment that a complaint, counterclaim, cross-claim or defense of the nonprevailing person was frivolous.

b. In order to find that a complaint counterclaim, cross-claim or defense of the nonprevailing party was frivolous, the judge shall find on the basis of the pleadings, discovery, or the evidence presented that either:

(1) The complaint, counterclaim, cross-claim or defense was commenced, used or continued in bad faith, solely for the purpose of harassment, delay or malicious injury; or

(2) The nonprevailing party knew, or should have known, that the complaint, counterclaim, cross-claim or defense was without any reasonable basis in law or equity and could not be supported by a good faith argument for an extension, modification or reversal of existing law.

c. A party seeking an award under this section shall make application to the court which heard the matter. The application shall be supported by an affidavit stating in detail:

(1) The nature of the services rendered, the responsibility assumed, the results obtained, the amount of time spent by the attorney, any particular novelty or difficulty, the time spent and services rendered by secretaries and staff, other factors pertinent in the evaluation of the services rendered, the amount of the allowance applied for, an itemization of the disbursements for which reimbursement is sought, and any other factors relevant in evaluating fees and costs; and

(2) How much has been paid to the attorney and what provision, if any, has been made for the payment of these fees in the future.

There is nothing to suggest that an award of fees under the act should be made in all but exceptional cases, as was the intent of Congress in enacting 42 U.S.C.A. § 1988. See Teitelbaum v. Sorenson, 648 F.2d 1248, 1251 (9 Cir.1981). Gregg v. Township Committee of the Township of Hazlet, 232 N.J. Super. 34, 37,

556 A.2d 348 (App.Div.1989); Zarcone v. Perry, 581 F.2d 1039, 1041-1042 (2 Cir.1978), cert. den. 439 U.S. 1072, 99 S. Ct. 843, 59 L. Ed. 2d 38 (1979).

On the other hand, in Iannone v. McHale, 245 N.J. Super. 17, 583 A.2d 770 (App.Div.1990) the Appellate Division stated:

We thus construe N.J.S.A. 2A:15-59.1 in view of the concern that while baseless litigation must be deterred, nevertheless the counsel-fee sanction mode of deterrence should not be permitted to generate even more litigation, the right of access to the courts should not be unduly infringed upon, honest and creative advocacy should not be discouraged and the salutary policy of litigants bearing, in the main, their own litigation costs, should not be abandoned. Hence the counsel-fee sanction must not be made available for every litigation infraction. [ Id. at 28, 538 A.2d 770].


Purpose of the Act.

In Chernin v. Mardan Corp., 244 N.J. Super. 379, 582 A.2d 847 (Ch.Div.1990), the court stated:

The design of the statute is to discourage the advancement of frivolous positions through the imposition of attorney's fees upon the nonprevailing party. Evans v. Prudential Property & Cas. Ins. Co., 233 N.J. Super. 652, 657-659, 559 A.2d 888 (Law Div.1989). The statute should "deter and ultimately eliminate the filing of nonmeritorious claims and defenses." Somerset Trust Co. v. Sternberg, 238 N.J. Super. 279, 285, 569 A.2d 849 (Ch.Div.1989). [ Id. 244 N.J. Super. at 382, 582 A.2d 847].

The Appellate Division in addressing N.J.S.A. 2A:15-59.1 emphasized that a finding of frivolousness must be based on the record already made in the matter.*fn4 Factual assertions ("collateral evidential forays into states of mind and non-record facts and circumstances") are not to be considered. Iannone v. McHale, supra, 245 N.J. Super. at 29, 583 A.2d 770. Since the court must consider the evidence presented before it, all the papers submitted and the parties' credibility already judged, this is easy. The court delivered a lengthy decision with detailed findings of fact, many of which bear directly on the frivolousness of defendant's defenses and counterclaims,

whether defendant acted in bad faith, whether defendant intended to harass, delay or cause malicious injury, and, finally, whether defendant, in the court's opinion, knew or should have known, that his defenses and counterclaims were without reasonable basis in fact, law or equity.


Factual Findings.

Despite defendant's contention that his actions do not warrant an award, this court believes that his oppressive, egregious conduct, particularly daily harassment of plaintiff for more than one year by continuing to live in her house, mandate an award. If the facts herein do not justify recovery of plaintiff's attorneys fees and litigation costs, there could never be an award made under the act.

This court has noted plaintiff's substantial suffering at the hands of defendant. While all plaintiff desired was an end to her relationship with defendant and his departure from her home, she was required to suffer painful, lengthy and costly litigation, which she could not afford emotionally or financially. On the other hand, defendant could well afford the enormous legal fees. Continuation of this litigation was solely within his control, as he pressed the fabricated and frivolous claims. Plaintiff initiated her action against defendant only to have him evicted from her home. If defendant in good faith thought that he had bona fide claims, he could have moved out and then instituted legal action for them.

The irony of this case is that because defendant in bad faith refused to leave plaintiff's house and continued to harass plaintiff by his daily presence in her house and by engaging in costly litigation, she is now forced to leave her house -- if she can sell it. It would have been easier for plaintiff to have had defendant removed from her house by the court if they had been married. Plaintiff had rejected defendant's requests to marry him, both before and after plaintiff purchased her home

in 1984. Defendant's first motion made on December 1, 1989 was to transfer this matter from the Law Division to the Chancery Division, Family Part, which, of course, was denied. Such a motion had no basis in fact, reality, law or equity.

This court is not "constrained", as the Appellate Division was in Iannone v. McHale, supra, with quashing "important litigation going to the heart of the democratic process upon which all our institutions depend." 245 N.J. Super. at 32, 583 A.2d 770. The court herein is not faced with election contests litigation or with the rights of United States citizens to democratic processes; rather this is a private litigation in which an ungrateful gigolo wrongfully and maliciously abused, not only his prey, but also the court system in an attempt without any reasonable basis to show he was in the right, and continued to take advantage of an already tormented victim.

The court, in its oral decision transcribed onto 151 pages, cited continued instances of bad faith, intent to harass, desire for delay and purposeful malicious injury by defendant.

The court described the bad faith:

[Peter Scott] was . . . an ingrate. He was unloving . . . He was devious. He was conniving. He was two-faced. He was selfish. He was lonely; he was untrustworthy; he was a thief having taken valuable papers of the plaintiff . . . .

Here he was worth millions and attempting to take advantage of Mrs. Fagas. There are so many examples I'm not going to mention them all, but there are literally dozens . . . Probably the most horrendous, unbelievable instance of someone being cheap, chintzy, unfair, was with reference to the Club Med situation, where over $6,000.00 was paid to take Mrs. Fagas' mother and one of her children and Mr. Scott for a nice party on her 55th birthday. Actually, that should have been paid for by Mr. Scott, instead it wasn't paid by Mr. Scott. Instead he generously gave her two silk undershirts worth something like $42.00 as his "loving" birthday party to her, and then he comes into Court with his accounting and he wants to charge her $140.00, $142.00, some amount for some dinner that they had during this vacation period. That's not strange. That's crazy. That's weird. That's not anything that a gentleman, a reasonable businessman would do, or a loving partner would do. That type of action the Court cannot understand. Not only that; probably a couple of hundred in this particular proceedings.

The Court finds beyond a reasonable doubt, although that's not the standard, that at no time, [were] Mrs. Fagas' dealings with Mr. Scott, ever motivated by the desire to derive or obtain anything financial from him. Yet on the other hand, it appears that almost all of Mr. Scott's actions were so designed.

The Court finds that Mr. Scott never at any time prior to the beginning of this litigation, ever made any claim to the Plaintiff that he had an ownership in the house, or that he was entitled to money under a joint expense agreement. And that his testimony -- that is Mr. Scott -- that he believed all along that there was an unspoken agreement giving him ownership -- is not only incredible, it's false.

In September 1989, plaintiff asked defendant to leave her home. Although he knew that he had no interest in the home or right to remain in her home or in her life, solely through this litigation he was able to delay leaving this comfortable, "price-is -right" (as defendant stated to witness Peter Polow) home.

The court also found that the injury defendant imposed on plaintiff was malicious, "what he did . . . to the Plaintiff, Mrs. Fagas, is inexcusable to ruin her life for the last [year], and more particularly probably for the rest of her life." Defendant knew what he was doing and did it purposely. The court found:

What's happened to her as I can observe has probably had greater affect on her state of mind than either the divorce she went through or the death of a husband. All of which Mr. Scott can be thankful for, or happy for, or be proud of. That he has been able to destroy a person who gave him so much happiness.

Finally, this court found that defendant knew or should have known that his counterclaims and his defenses were without any reasonable basis in law or equity. The court found that defendant knew that he did not have an ownership interest in plaintiff's home and that all through their relationship he was constantly trying to figure out a way, which he knew he never achieved, to acquire a one-half interest in her home.

One of defendant's theories for claiming a one-half interest in the house was his idea of avoiding the tax consequences to plaintiff of selling her Redmond Road house if defendant were permitted to acquire a present interest in the acquisition of the Longview Road house. Defendant's request was flatly rejected by plaintiff and her attorney. Nonetheless, defendant granted plaintiff a purchase money mortgage loan at bank rates for one-half of the purchase price of $425,000, even though plaintiff had already arranged for such a mortgage from her bank. Then, shortly after the closing, defendant demanded the return of his money, almost two years before the mortgage and note were due. This court stated that it:

The court found that all of defendant's claims were false and that he knew at the time he filed his defenses and counterclaims that no such agreements existed:

Mr. Scott never at any time prior to the beginning of this litigation, ever made any claim to the Plaintiff that he had an ownership in the house, or that he was entitled to money under a joint expense agreement. And that his testimony -- that is Mr. Scott -- that he believed all along that there was unspoken agreement giving him ownership -- is not only incredible, it's false.

The court found that when plaintiff asked defendant to leave her home before she instituted this litigation, he knew that he did not own any share of the home:

But, when Mrs. Fagas asked Mr. Scott to leave his first reaction was to say he loved the house and he'd like to purchase it from her, and Mr. Scott and Mrs. Fagas discussed the last purchase price, or proposed asking price for the house, which was $885,000.00. And the Defendant, Mr. Scott, begged Mrs. Fagas to please give him some time in order to try to put together an offer to purchase

the house from her as close to this price as possible, and at no time ever after Mr. Scott had been asked to leave did Mr. Scott ever say to Mrs. Fagas that he believed he already owned any portion of this home on Longview.

Defendant claimed that an agreement existed between the parties to share expenses, to reimburse each other for expenses, to keep an accounting of expenses and to account and even out such expenses. The court found that defendant knew no such agreement ever existed:

Now there have been allegations of a joint expense agreement. The Court finds there was never any joint expense agreement, as is manifested by the fact that was never discussed or agreed with Mrs. Fagas. Not only that, no money or no statement was ever rendered to Mrs. Fagas until after this litigation began, and not only that, there was not a proper accounting because Mr. Scott never made any bona fide attempt to find all the expenses which were paid for, nor did he credit all the expenses which were paid by Mrs. Fagas.

The court found that defendant, who had always kept in his computer "compulsively detailed records of expenditures divided into these various codes," made a claim that an agreement existed between the parties to defeat plaintiff's ejectment action with false claims and to assert false counterclaims against her.

This court found that defendant's claim for a portion of the installment payments being paid to plaintiff for the sale of the Irma's Bag Livingston and Salbin & Sachsel businesses had no factual basis:

In addition, it's uncontroverted that from April 1987 until the assertion by the Defendant of his Counterclaim against the Plaintiff in this litigation, December 1989, a period of two years and eight months, the Defendant knew Plaintiff was receiving these installments, and made no objection or statement with reference thereto. And he never indicated in any fashion he felt he was entitled to receive any portion of this. Plaintiff had not concealed any facts to the Defendant, and he in fact negotiated the agreement, and the testimony clearly shows that the parties knew and agreed that all these payments were due and to be payable to, and to be held by and for Mrs. Fagas and that is [uncontroverted].

Plaintiff did not seek to humiliate or dishonor defendant. Plaintiff sought merely to live peacefully in her own home, free from insults, dishonor and freeloading. Defendant's defense to plaintiff's simple request for him to leave her home and defendant's oppressive and malicious counterclaims were asserted in bad faith, to further harass and take advantage of plaintiff, to

delay what defendant knew would be his eventual eviction from plaintiff's home, to obtain revenge on plaintiff, and "to destroy a person who gave [defendant] so much happiness. Probably more so than anybody in his life, including his children from what [the court has] gathered in this proceeding."

Defendant is an educated and sophisticated businessman. He was experienced in dealing with lawyers, with courts, and with litigation. The court found him to have a "brilliant" mind, but "devious," "conniving," "untrustworthy," "vengeful," "psychotic," "a pathological liar," "a criminal," and "ungrateful."

Defendant knew or should have known prior to filing his answer and counterclaim that they were false and without any reasonable legal or equitable basis. He did not need discovery to determine the truth. He knew that he was causing enormous legal fees to himself and plaintiff (he knew precisely the extent of plaintiff's finances and could therefore use this against her*fn5) and knew and understood that he was clogging the court system with this litigation,*fn6 which he acknowledged during trial.


Interpretation of the act.


The statute should be interpreted as stated. It applies to actions filed with malicious intent and with lack of factual support as well as actions filed which are insufficient in law.

Defendant relies upon his trial brief and proposed findings of fact and conclusions of law to establish that it "represents a

bona fide belief in the validity of both the legal arguments and their soundness as well as in the factual version they distilled from the record of the evidence." However, much of it was predicated on fabricated facts and is therefore frivolous.

Defendant contends that, both in text and context, the term "frivolous," as applied to the merits and as distinguished from motives, is confined to legal insufficiency.

Under the former practice "frivolous" meant legal insufficiency, and "sham" described factual insufficiency. See Chief Justice Brogan's opinion in National Surety Corporation v. Clement, 133 N.J.L. 22, 42 A.2d 387 (E. & A.1945), where the dichotomy between the two terms was expounded.

Defendant's contention that this court's findings merely treated his positions as factually unsubstantiated, i.e., as "sham" is erroneous. Defendant further contends that, by a parity of reasoning, counsel fees in the instant case must be denied unless, on the facts as pleaded, and supported by evidence, defendant's claims and defenses were legally insufficient, i.e., "without any reasonable basis in law or equity . . . ."

Defendant's claims and defenses were "frivolous," i.e., fabricated to fit an otherwise proper cause of action.

"A claim or defense is frivolous or groundless where no rational argument can be advanced in its support, or it is not supported by any credible evidence, or a reasonable person could not have expected its success, or it is completely untenable." 20 C.J.S., Costs, § 128 at 109.

Defendant asks this court to ignore the clear wording and intent of the act. Section (b) of the act provides that a court may find a ...

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