On appeal from the Superior Court of New Jersey, Law Division, Mercer County.
Approved for Publication December 9, 1997.
Before Judges Long, Kleiner and Kimmelman. The opinion of the court was delivered by Long, P.j.a.d.
The opinion of the court was delivered by: Long
The opinion of the court was delivered by
On October 18, 1990, plaintiffs, Bradford and Donna Woodrick, filed a complaint in which they alleged that Jack Burke Real Estate, Inc., (Burke) acting as an agent of Fox & Lazo Realtors, made certain misrepresentations to them in connection with the sale of their residence on Cleveland Avenue in Trenton which caused the breach of that contract and which delayed the closing of the Woodricks' purchase of a new home on Fleetwood Drive in Hamilton. The Woodricks asserted claims for negligence, fraud, breach of fiduciary duty, and breach of contract. They also alleged a cause of action pursuant to the Consumer Fraud Act, N.J.S.A. 56:8-1 to 8-20, which allows the recovery of treble damages, attorneys' fees, filing fees and reasonable costs of suit for unlawful trade practices.
After discovery was completed and following the September, 1993 sale of Burke's assets to Fox & Lazo, the attorneys representing Burke withdrew as counsel from the case. Judge Rosemarie R. Williams ordered that Burke obtain new counsel and enter a new appearance within thirty days or the Woodricks would be permitted to seek, ex parte, the entry of a default judgment. Burke failed to comply with the order and apparently abandoned its defense of this lawsuit. Accordingly, Judge David J. Schroth entered a default against Burke on February 25, 1994.
The Woodricks filed a motion for entry of final judgment by default. In that motion, they claimed damages in the amount of $35,072.33, comprised of (1) occupancy charges for the Fleetwood Drive property; (2) interest on a home equity loan needed to finance the down payment on the Fleetwood Drive property; (3) maintenance costs for the Cleveland Avenue property; (4) additional costs of a second closing for the Fleetwood Drive property; (5) depreciation of the Cleveland Avenue property; and (6) lost interest income. On September 9, 1994, a final judgment by default was entered against Burke awarding treble damages in the amount of $105,216.99, with post-judgment interest to accrue thereon, plus reasonable attorneys' fees.
On the same date, Judge Schroth granted the Woodricks' motion to amend the complaint to add Fox & Lazo, Maxine Brimmer and Charles Frank *fn1 as additional defendants in the case. In the Amended Complaint, the Woodricks alleged that Fox & Lazo was liable for Burke's obligations to them under principles of apparent authority or agency as well as under the doctrine of corporate successor liability. Answers were filed and Fox & Lazo moved to vacate the default judgment. The Woodricks opposed this motion and filed a cross-motion for summary judgment, seeking a ruling that Fox & Lazo should be held liable for the judgment against Burke as a successor corporation.
Judge Schroth, finding that it would be "eminently unfair" in the absence of any exceptional circumstances to reopen the case and allow Burke and Fox & Lazo "another bite at the apple," denied Fox & Lazo's motion to vacate the default judgment. Judge Schroth also found that Fox & Lazo's purchase of Burke's assets was a de facto merger, resulting in a mere continuation of the predecessor's business. On that basis, he granted summary judgment in favor of the Woodricks, leaving Fox & Lazo liable for the full amount of the default judgment entered against Burke in 1994 under a theory of corporate successor liability. Final orders incorporating these decisions were entered on June 21, 1996.
On December 20, 1996, an order was entered granting final judgment in favor of the Woodricks against Fox & Lazo in the amount of $105,216.99, with post-judgment interest in the amount of $9,786.94 accrued through November 8, 1996, plus continuing post-judgment interest and costs. The determination of attorneys' fees payable by the defendants was stayed, pending appeal. The Woodricks' claims against Maxine Brimmer and Charles Frank, as well as their claims against Fox & Lazo based on other theories of liability were dismissed, subject to reinstatement in the event that Fox & Lazo was successful in appealing the grant of summary judgment.
Fox & Lazo appeals from the trial Judge's denial of its motion to vacate the default judgment entered against Burke; from the award of treble damages; and from the grant of partial summary judgment in favor of the Woodricks, finding Fox & Lazo liable for the full amount of the judgment under the doctrine of corporate successor liability.
The underlying facts in the case established on the motions are as follows: In 1989, the Woodricks listed their Cleveland Avenue residence for sale with Burke which was then doing business under the trade name of Fox & Lazo Realtors. Upon such listing, the Woodricks were supplied with a Fox & Lazo brochure, promising (among other things) that their Fox & Lazo sales agent would pre-qualify any buyer prior to accepting any agreement to sell and would assist any buyer in obtaining a suitable mortgage. The Woodricks allege that Burke, despite its knowledge of Christine Clark's poor credit history, presented Clark as a person who would be able to obtain a mortgage commitment and recommended that the Woodricks sell their home to her.
On October 3, 1989, the Woodricks entered into a contract to sell their Cleveland Avenue property to Christine Clark for $75,000, with the $3,650 deposit to be held in escrow by the Dollar Mortgage Co. Burke agreed to provide the escrow funds to Dollar Mortgage prior to closing. Subsequently, on October 31, 1989, the Woodricks entered into a contract to purchase a residence located on Fleetwood Drive in Hamilton Square from Robert Chadwick, which agreement was contingent upon the sale of the Woodricks' Cleveland Avenue home to Clark. A joint closing of these two sales was scheduled to take place December 21, 1989.
Dollar Mortgage failed to provide the mortgage funds for Clark's purchase of Woodrick's Cleveland Avenue property at closing. As a result, without the proceeds from the Cleveland Avenue property, the Woodricks were unable to close on the purchase of the Fleetwood Drive residence. The Woodricks allege that, based upon the assurances of Burke that Dollar Mortgage would provide the certified funds by January 4, 1990, they entered into an occupancy agreement with Robert Chadwick for the Fleetwood Drive property under which they accrued charges of $100 per day. The sale of the Cleveland Avenue property to Clark never took place and Dollar Mortgage Co. never returned the deposit monies. The Woodricks allege that Burke failed in its duty to investigate the licensed status of Dollar Mortgage Co. As it turned out, Dollar Mortgage was not a licensed mortgage banker.
When Clark was unable to obtain mortgage financing through other sources, the Woodricks were forced to obtain a home equity loan in the amount of $17,000 in order to close the purchase of the Fleetwood Drive property on March 27, 1990. The Woodricks, who had accrued $9,100 in occupancy charges before the eventual closing, executed an interest-bearing note payable to Robert Chadwick, as well as a Mortgage secured by both properties owned by the Woodricks. Unable to find a buyer for the Cleveland Avenue property, the Woodricks rented it and incurred maintenance costs. The Woodricks claim that the following damages (accrued as of the close of July, 1994) were caused by the negligent or fraudulent actions of Burke:
Occupancy Charges for Fleetwood $12,412.43
(including interest earned and legal fees incurred)
Costs of Maintaining Cleveland Ave. 17,507.30
(including mortgage interest, home equity
loan interest, homeowner's insurance,
property taxes, maintenance and repair costs, less ...