On appeal from the Superior Court of New Jersey, Law Division, Atlantic County, L-444-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted September 17, 2007
Before Judges Parrillo and Sabatino.
Plaintiff Peter Fotinos appeals the Law Division's dismissal of his action for breach of contract against defendants, Apothotia, Inc., Vasilios N. Diamantis and Maria Diamantis. The dismissal was based upon plaintiff's failure to list his claims against defendants as a potential asset in Chapter 7 bankruptcy filings in advance of the trial date in the Law Division. As part of his appeal, plaintiff also seeks review of the Law Division's subsequent orders declining to restore his lawsuit after he had reopened the bankruptcy case and had amended his petition to include these contract claims. We reverse and remand for the disposition of plaintiff's contractual claims on their merits, but on appropriate terms and conditions.
Defendants own*fn1 and operate a diner in Egg Harbor Township. The individual defendants are husband and wife. According to plaintiff's complaint, he performed various renovations and construction work at the diner at defendants' request, as well as home improvements at the individual defendants' residence. Plaintiff claims that defendants did not pay him in full for his work, breaching their alleged promises to do so.
In January 2005, plaintiff filed a one-count complaint for breach of contract against defendants, seeking a balance due of $88,006.37. Defendants filed an answer and counterclaim. Defendants admitted in their pleadings that plaintiff had provided "a few, very small and very minor repairs" to their diner and their residence, but that they had paid him in full, with the possible exception of services having a value of no more than about $100. The counterclaim alleged that plaintiff's persisting demands for payment constituted fraud.
The discovery period in the litigation ended in October 2005, and the case was arbitrated in November 2005. Defendants rejected the arbitration award, and the matter was consequently listed for a trial de novo on February 21, 2006. The record does not reflect that defendants ever questioned plaintiff's standing during the discovery phase of the case or at the arbitration. Their affirmative defenses did not raise such a defense or make any reference to bankruptcy proceedings.
In any event, it is undisputed that prior to bringing the instant lawsuit, plaintiff and his wife had filed a Chapter 7 bankruptcy petition in the United States Bankruptcy Court for the District of New Jersey in July 2003. The schedules attached to their petition omitted this claim against defendants as a potential account receivable.*fn2 The bankruptcy resulted in the discharge of the debts of plaintiff and his wife on October 31, 2003, without any reference to plaintiff's potential recovery from defendants.
Shortly before the present case was called for trial, defendants' counsel obtained a copy of plaintiff's Chapter 7 petition and learned that plaintiff's contractual claims against his clients were not listed in the attached schedules. This revelation prompted an oral application by defense counsel on the day of trial to dismiss plaintiff's claims with prejudice. Defendants argued that plaintiff's claims were barred because they all related to alleged services that had predated the October 2003 bankruptcy discharge date.
The Law Division judge granted the defendants' application, signing an order that same day, February 21, 2006, dismissing the complaint with prejudice.*fn3 The judge ruled that plaintiff could not proceed with his lawsuit because he lacked an order from the Bankruptcy Court authorizing him to proceed with the claim, and that he should have obtained such an order prior to the Law Division trial date. In the absence of such an order, the judge reasoned, the claim would have belonged to the former bankruptcy trustee, not to plaintiff individually, and any recovery would have had to be included in plaintiff's bankruptcy estate for possible distribution to creditors.
Sixteen days after the lawsuit was dismissed, plaintiff's counsel wrote the Law Division judge a letter on March 9, 2006. The letter informed the judge that plaintiff's bankruptcy counsel was attempting to reopen the bankruptcy case and amend the petition to include the omitted claim against defendants. The letter further requested that the judge revise his February 21, 2006 order and delete its "with prejudice" language. Counsel stated that it was his understanding from the February 21, 2006 court session*fn4 that the judge was not foreclosing plaintiff's right to attempt to reopen the petition and pursue his claims against defendants "to the extent permitted under the Bankruptcy Code and authorized by the trustee." The judge responded to plaintiff's counsel in a short letter on March 13, 2006, which stated:
Thank you for your letter of March 9, 2006. My recollection is that I indicated [on February 21, 2006] should your client's position change, that you can avail yourself of the ...