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Baxt v. Liloia

March 13, 1995

SHERWOOD BAXT AND SAIDA BAXT, PLAINTIFF-APPELLANTS,
v.
GERALD A. LILOIA AND ANTHONY J. SYLVESTER, DEFENDANTS-RESPONDENTS.



On appeal from the Superior Court, Chancery Division, Hudson County and the Law Division, Bergen County.

Approved for Publication April 11, 1995

Before Judges Dreier, Wefing and Braithwaite. The opinion of the court was delivered by Wefing, J.A.D. Dreier, P.j.a.d. (Concurring)

The opinion of the court was delivered by: Wefing

WEFING, J.A.D.

This case is a companion matter to another decided today, The Summit Trust Company v. The Grove Mercantile Center, et al. Understanding the issues presented by this appeal requires reference to the record of that matter, a foreclosure action premised upon a default on a certain construction loan from The Summit Trust Company (Summit) to The Grove Mercantile Center (Grove).

Plaintiff Sherwood Baxt was a general partner in Grove; he and Saida Baxt were defendants in the foreclosure action. Other Grove partners and foreclosure defendants were Paul Hartman and Paul Baxt. Among the issues presented in the foreclosure action was a counterclaim asserted by defendants against Summit on a theory of lender liability.

The foreclosure complaint was filed in March 1991. After a period of discovery, the attorneys for Summit filed a motion for summary judgment. Within the motion, Summit contended it and Grove had negotiated a modification agreement which extended the original loan for one year and that in conjunction with the modification agreement, Grove had executed a release of all claims against Summit. Such a release, if given, removed any basis for Grove's counterclaim on a lender liability theory. Summit's attorneys, in preparing the motion for summary judgment, included, within the moving papers, a copy of the release executed by Grove general partner, Paul Hartman. Mr. Hartman's signature was neither witnessed nor notarized and the document could not be recorded. N.J.S.A. 46:16-2.

The attorneys for Grove in the foreclosure action were perplexed when they received this motion. During discovery prior to Summit's motion being filed, Grove's attorneys inspected the bank's documents and noted that, while Summit's files contained a copy of the modification agreement executed on behalf of the bank, the files did not contain a copy of the modification agreement executed by Grove. Mr. Hartman informed Grove's attorneys that, although the signature on the document in the moving papers looked like his, he had no recollection of either signing the document or giving it to the bank. In addition, Grove's attorneys noted that Summit's answer to Grove's counterclaim made no mention of a release.

Upon receipt of the motion, Grove's attorneys commenced discovery on the limited issue of how the executed copy of the modification agreement got into the bank's file. They conducted depositions of two bank representatives; the depositions of each individual took two days to conclude. We note merely that the depositions did not proceed entirely smoothly; we do not find it necessary to set forth the extensive colloquy between counsel.

At least one deposed witness recalled receiving a faxed copy of the modification agreement signed by Mr. Hartman. The document annexed to the summary judgment, however, bore no indication of having been faxed. Furthermore, Mr. Hartman's telephone bills contained no record of such a fax.

Before resumption of the final day of deposition on this issue, Grove's attorney reviewed Grove's entire file which it had earlier produced to the bank in discovery. During the review, she discovered a misfiled folder which contained the original modification agreement and three copies, all executed by Mr. Hartman.

During that final day of depositions, Summit's attorneys admitted they obtained the executed copy of the modification agreement attached to Summit's motion for summary judgment from the Grove files during document inspection and directed bank personnel to place it within the bank's files.

Thereafter, plaintiffs filed this two-count complaint; defendants are the attorneys who represented Summit in the foreclosure action. The first count sought damages for tortious concealment of evidence and the second was premised on an alleged breach of the Rules of Professional Conduct. The complaint was consolidated with the pending foreclosure action in Hudson County.

In December 1992, defendants moved to dismiss the complaint. The application was denied as to the first count and granted as to the second. The Chancery Judge who heard defendants' motion concluded that the question whether defendants' conduct constituted an ethics violation was a collateral issue over which the court did not have "primary jurisdiction;" he thus dismissed the second count.

Thereafter, the foreclosure action was settled and the matter, on which the first count remained outstanding, was transferred to the Law Division in Bergen County where it had been originally filed. The foreclosure ...


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