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A.S.C. Corp. v. Venino

December 27, 2007


On appeal from the Superior Court of New Jersey, Chancery Division, Ocean County, Docket No. OCN-C-98-05.

Per curiam.


Argued December 3, 2007

Before Judges Parrillo and Graves.

Defendant, Richard O. Venino, Jr., appeals from an order denying his application for attorneys' fees and costs pursuant to the Frivolous Litigation Statute, N.J.S.A. 2A:15-59.1, and Rule 1:4-8. We reverse.

By way of background, in October 2001, defendant, an attorney, represented Theodore Karras, the seller of eighty-three tax sale certificates in Lakewood in a putative transaction with plaintiff, A.S.C. Corporation, the buyer. Karras ultimately dismissed defendant as his attorney in February 2002 and the transaction was completed with Karras' new attorney. Subsequently, on December 15, 2003, plaintiff instituted a tax foreclosure action involving seven of the Karras properties.

One of these properties was located at Lot 2, Block 456 in Lakewood. Its owner of record was the Estate of Hyman Kaplowitz (estate). In December 2002, defendant began representing Oak Branch Realty, LLC (Oak Branch) in its efforts to purchase this property (the Oak Branch property) from the record owner. To that end, in June 2003, defendant contacted the estate, also represented by counsel, and commenced negotiations. As ordered by the estate, the property was appraised at $25,000. In February 2004, defendant ordered a title search, which indicated that there were no foreclosure actions or lis pendens filed on the property, N.J.S.A. 2A:15-6. In June 2004, defendant successfully negotiated the sale and Oak Branch purchased the property for $20,000. On August 17, 2004, on behalf of Oak Branch, defendant paid all of the outstanding taxes on the property, which amounted to $3092.80, and requested a redemption from the Lakewood tax collector. At this point, defendant was told that there was a foreclosure action pending on the property. Plaintiff refused to accept payment or consent to the redemption of the tax sale certificate. On October 20, 2004, the Lakewood tax collector issued an executed certificate of redemption for the outstanding taxes due on the property.

Oak Branch never intervened in plaintiff's foreclosure action and plaintiff never moved therein to bar Oak Branch's redemption of the tax sale certificate. Instead, plaintiff simply eliminated the Oak Branch property from the proceeding and a final judgment of foreclosure as to the six remaining Karras properties was entered on April 11, 2005.

In the meantime, on December 16, 2004, plaintiff filed a complaint against defendant alleging various causes of action purportedly arising under N.J.S.A. 54:5-89.1, the so-called "heir hunting" statute, including, among other things, tortious interference with contract and prospective economic advantage, misappropriation and fraud in connection with the purchase of the Oak Branch property. Plaintiff claimed that defendant had used information that he learned in his representation of Karras to interfere with plaintiff's ability to foreclose upon the Oak Branch property. Defendant answered, asserting, among other things, that he was an attorney representing a client in the transaction at issue. He also filed a notice pursuant to Rule 1:4-8, the rule prohibiting frivolous litigation, demanding that the complaint be withdrawn.

On June 17, 2005, plaintiff filed an amended complaint adding causes of action related to the original claims including unfair competition, civil conspiracy, intentional or malicious harm and unjust enrichment.*fn1 On August 4, 2005, defendant filed an answer to the amended complaint and a second notice and demand pursuant to Rule 1:4-8.

An appraisal ordered by plaintiff on September 22, 2005, valued the Oak Branch property at $70,000. Evidently, however, plaintiff's appraiser appraised the wrong property as evidenced by the photographs and maps where the appraiser indicated the Oak Branch property's location on a developed street. In fact, according to defendant, the area where the Oak Branch property was located had never been developed and there were no streets. Notwithstanding the appraisal, plaintiff considered the value of the property to be $140,000, claiming that the size of the actual lot was double the lot that was appraised. This, despite the fact that defendant, as part of discovery, served plaintiff with a copy of the original appraisal of $25,000, in October 2005. Although plaintiff's substituted counsel -- its third one in this matter -- would later claim he was not aware of that earlier appraisal until May 2006, it is undisputed that the report was in the file. Upon learning of defendant's appraisal, and following defendant's motion for summary judgment filed on July 10, 2006, plaintiff's counsel dismissed the complaint with prejudice in October 2006.

Defendant thereafter moved for attorneys' fees under N.J.S.A. 2A:15-59.1. The motion judge denied the application essentially finding that plaintiff had not been aware of the appraisal for $25,000, that plaintiff's appraisal had been for $70,000, and that the complaint was grounded in a disagreement as to the value of the property. The court further found that as soon as plaintiff's counsel became aware of the appraisal, the case was dismissed indicating that it was not meant to be harassing or malicious, but was based on a true belief that there was a violation of the statute. The court stated that "there was a disagreement as to the value of the property," and the record supported "the fact that the plaintiff rightfully or wrongfully believed that the property had a greater value." We disagree. Plaintiff's underlying claims were clearly and plainly not grounded in either law or fact.

A decision whether to award attorneys' fees rests with the discretion of the court and is ordinarily reviewed on an abuse-of-discretion standard. Packard-Bamberger & Co. v. Collier, 167 N.J. 427, 443-44 (2001). An abuse of discretion is shown "when a decision is 'made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis.'" Flagg v. Essex County Prosecutor, 171 N.J. 561, 571 (2002) (quoting Achacoso-Sanchez v. Immigration & Naturalization Serv., 779 F.2d 1260, 1265 (7th Cir. 1985)). When, however, the trial court misperceives or misapplies the applicable law, the discretion of the trial judge is not involved and a decision based on misapplication or misperception of applicable law is not entitled to deference. Kavanaugh v. Quigley, 63 N.J. Super. 153, 158 (App. Div. 1960). The trial court's understanding of whether the original complaint was supported by the statute is reviewed de novo. Toll Bros., Inc. v. Twp. of W. Windsor, 173 N.J. 502, 549 (2002).

The Frivolous Litigation Statute, N.J.S.A. 2A:15-59.1, allows attorneys' fees and costs to prevailing parties based on frivolous complaints, upon a finding that either one of two conditions are met: 1) the action was commenced or maintained in bad faith, or 2) the action "was without any reasonable basis in law or equity and could not be supported by a good faith ...

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