Before Judges Kestin, Wefing and Steinberg.
The opinion of the court was delivered by: Steinberg, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
On appeal from the Superior Court of New Jersey, Law Division, Essex County.
These inter-related appeals arise out of a common transaction and were argued together. We therefore consolidate them for the purposes of this opinion. In A-6535-97, plaintiff Davin, L.L.C. sought to eject defendants Ahmad Daham and Mohammad Issa Hamid from the property that is the subject of this dispute. It appeals from the denial of its motion for summary judgment and the grant of defendants' cross-motion for summary judgment dismissing plaintiff's complaint. In A-6636-97, defendants appeal from an order denying their motion for summary judgment and granting the cross-motions for summary judgment of third-party defendants, Robert Jaffe, Esquire, Donald A. Goins, Esquire, and Goins and Goins which resulted in a dismissal of their malpractice claim. We affirm in part, and reverse in part.
Plaintiff sought to eject defendants from a store in which they operate a bagel shop and delicatessen. The store is in a four-unit commercial shopping center located at 469 Franklin Avenue, Nutley, New Jersey. The shopping center was owned by William J. Kress, Jr. and Maryann Kress (Kresses), who are not parties to this appeal. The Kresses controlled a corporation, Franklin Seafood, Inc. (FSI), which operated a retail store in one of the units in the shopping center.
On September 29, 1988, the Kresses obtained a construction loan for $562,500 from Nutley Savings & Loan Association (Nutley) to build the shopping center. The loan was secured by a construction mortgage on the property. The Kresses defaulted on the loan. Nutley was also having financial difficulties, was ultimately declared insolvent, and was placed into receivership by the Resolution Trust Corporation (RTC) which succeeded to Nutley's assets and liabilities. In June 1993, MIF Realty, L.P., a partnership and subsidiary of GE Capital, acquired the note and mortgage from RTC. In December 1993, Valley National Bank (Valley National) acquired the note and mortgage by assignment from MIF Realty for $375,000.
Under the terms of a letter agreement dated November 23, 1993, Valley National had agreed to act as the servicing agent for Thomas P. Infusino regarding the purchase of the loan from MIF Realty. That agreement authorized Valley National to commence foreclosure proceedings immediately following its acquisition of the note and mortgage. The letter agreement also obligated Valley National to convey title to the shopping center to Infusino should Valley National ultimately acquire title to the shopping center, provided Infusino had satisfied his payment obligations to Valley National. Infusino apparently wanted the property because it was next door to a supermarket he operated, and he wanted to use it to expand the parking area, or the supermarket itself. In fact, in February 1992, Infusino had negotiated with the Kresses for the purchase of the shopping center.
The agreement was amended on February 28, 1995, to include Vincent LoCurcio, Jr. as a "co-borrower" with Infusino. The November 23, 1993 letter agreement was presented to the Board of Directors of Valley National for its consideration. On November 29, 1993, the Board of Directors unanimously approved the transaction. Infusino, who was a member of Valley National's Board of Directors at the time, abstained from the vote.
On February 7, 1994, Valley National instituted a foreclosure action. Thereafter, on March 7, 1994, Valley National filed a notice of lis pendens in the Office of the Register of Essex County. On May 3, 1994, the Kresses transferred title to the shopping center to FSI. Jaffe prepared the deed. On May 27, 1994, the Kresses, represented by Jaffe, filed an answer and counterclaim in the foreclosure action. On October 15, 1994, while Valley National's motion for summary judgment in the foreclosure action was pending, the Kresses filed a Chapter 11 bankruptcy petition. Jaffe prepared the petition. Consequently, the foreclosure action was placed on the inactive list.
Presumably because of the transfer of the shopping center by the Kresses to FSI, Valley National moved to restore the foreclosure action to the active list. The Kresses, represented by Jaffe, successfully sought to remove the foreclosure action to the federal court. Valley National then successfully moved to dismiss the Kress' bankruptcy petition and to remand the foreclosure action to the Chancery Division. Two days before Valley National's motion for summary judgment was to be argued, Jaffe filed a Chapter 11 petition for FSI, and requested the Chancery Division to stay the motion for summary judgment. That application was denied, and the Kresses answer and counter-claim was stricken. Finally, Valley's application for relief from the automatic stay regarding FSI was granted, and a final judgment of foreclosure was entered on December 8, 1995. On March 26, 1996, Valley National was the successful bidder at the sheriff's sale.
Pursuant to its repurchase and service agreement with Infusino and LoCurcio, Valley National assigned its interest in the bid to Davin Corporation (Davin). The sheriff accordingly issued a deed to Davin, which, in turn, transferred its interest in the shopping center to plaintiff, which is controlled by Infusino, LoCurcio, and their sons, David Infusino and Vincent LoCurcio, III.
Meanwhile, on June 30, 1995, approximately thirteen months after the Kresses filed an answer and counter-claim to the foreclosure complaint, they entered into a lease with defendants for the premises in question. The lease was prepared by Jaffe. The twenty-sixth paragraph of the lease contained a covenant of quiet enjoyment.
Apparently neither Jaffe nor the Kresses advised defendants of the pending foreclosure. According to defendants, in order to operate a retail bagel shop, they made substantial expenditures involving, among other things, the installation of fixtures, equipment, and improvements. It took approximately four months to complete the work. By affidavit, defendants contend that there were numerous contractors working on the premises and their activities were visible to the public. They contend that they spent in excess of $125,000 in material and labor.
A-6636-97 involves defendants' third-party complaint filed against Jaffe, Donald C. Goins, Esquire, and Goins and Goins, P.A. Defendants had engaged Donald C. Goins (Goins) to represent them in the lease transaction with the Kresses. Goins reviewed the proposed lease, prepared a proposed addendum to that lease and forwarded it Jaffe. The lease and addendum were ultimately signed by the parties. Throughout the negotiations Jaffe never mentioned to defendants or Goins that the property was in foreclosure, and also never advised them of the circumstances surrounding the foreclosure. Moreover, as we have indicated, the lease contained a covenant of quiet enjoyment. Goins never recommended to defendants that they obtain a title search. In their third-party complaint, defendants alleged that Goins committed professional malpractice. They also alleged that Jaffe knew or should have known that they would be relying upon the truthfulness of "the contents, information and representations as set forth in the subject lease agreement". They further alleged that Jaffe owed an unspecified duty to them and negligently discharged that duty.
In the ejectment action, plaintiff and defendants filed cross-motions for summary judgment. The motion judge granted defendants' motion, denied plaintiff's motion, and entered an order dismissing the complaint. Regarding the third-party complaints, the motion judge denied defendants' motions for summary judgment against Jaffe and Goins, and granted summary judgment in ...