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Fernicola v. Duchess


March 28, 2008


On appeal from Superior Court of New Jersey, Chancery Division, Monmouth County, Docket No. C-5-07.

Per curiam.


Argued January 30, 2008

Before Judges Cuff, Lihotz and Simonelli.

In this matter, we review the Chancery Division's order, which dismissed plaintiff's action for lack of subject matter jurisdiction and applied the principles of comity to stay the first-filed New Jersey matter, pending resolution of the issues between the parties in a second suit, also initiated by plaintiff for equivalent relief in the State of Florida. Plaintiff argues subject matter jurisdiction rests in New Jersey because the outcome affects New Jersey real estate. He also asserts that comity favors preference for the first-filed action, which was in New Jersey. Therefore, the trial court erred in dismissing this action. We reject plaintiff's arguments and affirm.

Plaintiff, John A. Fernicola is the son of decedent, Jean A. Fernicola, late of Clearwater, Florida, and the brother of defendant, Judith M. Duchess of Tampa, Florida. Jean died testate on March 26, 2006. Judith was Jean's named personal representative. On September 1, 2006, Judith submitted Jean's will to probate in Pinellis County, Florida, and sought to qualify as the administrator of her estate. Judith certified the approximate value of the estate was $499,776. Jean did not name John as a beneficiary in her will. The probate court approved Judith's petition and issued letters of administration.

John lives in Ocean County. Pursuant to the terms of a judgment entered in another litigation, Jean transferred realty known as Block 86, Lots 1, 2, 3, 4, 11 and 12, located in the Borough of Point Pleasant Beach (the property) to John. On May 18, 1989, the date of the transfer, John executed a $600,000 note secured by a mortgage on the property to Jean. The property is commonly known as the Bel Aire Motel.

The terms of the original note and mortgage were modified on October 7, 1993, by a recorded modification agreement, which reduced the interest rate and correspondingly, the monthly payment paid by John to Jean. In his actions filed in Florida and New Jersey, John alleges that a second oral modification agreement was reached with Jean, further reducing the amount due under the mortgage note.

John maintains that on April 2, 1996, he and Jean agreed to reduce the principal balance by $151,000. That sum represented Jean's share of attorney's fees and costs expended by John to defend and resolve a 1993 lawsuit brought by Jersey Central Power and Light Company (JCPLC) against John and Jean for pirated electric services benefiting the property from 1979 to 1991, along with Jean's share of the settlement paid in 2003. John has not itemized these expenditures or stated the amount of Jean's asserted proportionate share.

On December 14, 2006, John filed a statement of claim as a creditor of Jean's estate. In that claim, John suggested the estate owed him approximately $200,000. Judith, on behalf of the estate, objected to John's claim. As provided by Florida Probate Rule 5.496 and section 733.705 of the Florida Probate Code, John, as a creditor, was required to file an action on his claim within thirty days of being served with the objection to the claim.

John filed a New Jersey Chancery Division complaint on January 4, 2007. Then, on January 16, 2007, John filed an action in Florida. He alleged the identical causes of action and prayers for relief sought in his New Jersey matter. In each of these suits, John requested that Judith, as the administrator of Jean's estate, correct the note and mortgage to properly reflect the current status of the principal, interest and duration of the amended principal balance consistent with the 1996 oral agreement with Jean. John states that the uncertainty as to the amount owed creates a cloud on the property's title.

The original note executed in 1989 included a provision for the payment of 9% interest on the principal balance and was amortized over thirty years. John's monthly payment was $4,827.75. The 1993 modification agreement reduced the interest rate to 4 1/2% over a term of twenty-two years. The monthly payment was correspondingly reduced to $3,584.32. The alleged oral modification agreement further reduced the monthly payment to $2,600. John states, since 1996 he paid Jean $2,600 each month; after Jean's death, Judith accepted the $2,600 monthly payments.

Judith vehemently disputes the veracity of John's agreement modification claims and asserts that Jean never orally modified the note or monthly payment. Judith produces correspondence authored by Jean in 1999 and 2000, which reiterated that John's monthly mortgage obligation was $3,584.32. Jean's letters mention that John did not consistently make payments as required, but was paying $2,600 per month.

Judith did not answer the New Jersey complaint. Instead, she filed a motion to dismiss for lack of subject matter jurisdiction or stay the New Jersey suit pending disposition of the same issues in Florida. The Chancery judge's order stated: "Defendant's motion to dismiss or stay the [plaintiff's] complaint for lack of subject matter jurisdiction pursuant to [Rule] 4:6-2(a) is hereby granted; matter to be litigated in Florida."

John argues it was error to dismiss the New Jersey complaint for lack of subject matter jurisdiction because both his residence and the realty situs are located in New Jersey. Addressing the issue of comity, John maintains the first-filed New Jersey action must move forward. Alternatively, if the New Jersey suit is not found to be the first-filed action, then special equities necessitate that New Jersey proceed with the litigation.

When similar actions are filed in two different state court systems, the legal principles of comity govern when a court should defer to allow the matter to be determined in another jurisdiction. "The determination of whether to grant a comity stay or dismissal is generally within the discretion of the trial court," Sensient Colors, Inc. v. Allstate Ins. Co., 193 N.J. 373, 390 (2008), reviewable based upon an abuse of discretion standard.

"Comity is practiced when a court of one jurisdiction voluntarily restrains itself from interfering in a matter falling within the purview of a court of another jurisdiction." Thompson v. City of Atl. City, 190 N.J. 359, 382 (2007). The Supreme Court has recently articulated the justification for the principle as follows:

If we are to have harmonious relations with our sister states, absent extenuating circumstances sufficient to qualify as special equities, comity and common sense counsel that a New Jersey court should not interfere with a similar, earlier-filed case in another jurisdiction that is "capable of affording adequate relief and doing complete justice." O'Loughlin [v. O'Loughlin], 6 N.J. [170,] 179 (1951); see also Thompson[, supra, at 382]. The litigation of substantially similar lawsuits in multiple jurisdictions with opposing parties racing to acquire the first judgment is not only wasteful of judicial resources, but anathema in a federal system that contemplates cooperation among the states. Thus, any comity analysis should begin with a presumption in favor of the earlier-filed action. [Sensient Colors, Inc., supra, 193 N.J. at 387 (parallel citations and footnotes omitted).]

The general rule provides that a first-filed action, involving substantially the same parties, the same claims, and the same legal issues, takes precedence over a later-filed action, in the absence of special equities. Yancoskie v. Del. River Port Auth., 78 N.J. 321, 324 (1978); Am. Home Prods. Corp. v. Adriatic Ins. Co., 286 N.J. Super. 24, 37 (App. Div. 1995); see also Sensient Colors, Inc., supra, 193 N.J. at 391-93 (the Supreme Court reviewed and adopted Am. Home Prods. paradigm and determined the parties' respective burdens of proof as to each element). This concept assumes the court has proper subject matter jurisdiction to hear the case. Yancoskie, supra, 78 N.J. at 324.

The Florida Probate Code, at section 733.702(1), specifies the time for a creditor's presentation of a claim. A creditor must file a claim in an established probate proceeding in order to bind the estate's personal representative and beneficiaries. Ibid. Jean suggests the Florida probate action and John's claim qualify as the first-filed action when analyzing which state should proceed to rule on the dispute.

John urges that his probate claim was not a legal action for comity purposes and, therefore, his New Jersey suit must continue as the first-filed action. John's claim against the estate was met with the estate's objection to payment. When an objection to a claim is filed pursuant to Florida Statute section 733.705(2), the mandates of the Florida Probate Code required the claimant to initiate litigation to resolve his claim. Fla. Stat. § 733.705(5) (2007).

Although the probate code does not dictate that a creditor's action to resolve the estate's liability to pay claims must be filed in Florida, it is the likely result considering the requirements of subject matter jurisdiction. The "exclusive original jurisdiction . . . . relating to the settlement of the estates of [Florida] decedents . . . and other jurisdiction usually pertaining to courts of probate" specially rests with the Florida Circuit Court. Fla. Stat. § 26.012(2)(b) (2007). Thus, Florida, not New Jersey, has subject matter jurisdiction to determine the claims made against a Florida decedent's estate.

Additionally, we note the record is insufficient to discern whether personal jurisdiction has been satisfied to allow the New Jersey action to proceed against the Florida estate and its personal administrator. Perhaps this explains why John, after filing this complaint in New Jersey, thereafter filed a second action, mirroring the first, in the Circuit Court of the Sixth Judicial Circuit in and for Pinellas County, Florida.

Assuming arguendo that John's filed claim against the estate is not the initialized action for purposes of comity, we next examine the question: when may a court decline to proceed under the first-filed action rule?

As noted above, the existence of special equities may warrant one state's overriding interest in the determination of litigation. Am. Home Prods., supra, 286 N.J. Super. at 40-41. Courts have articulated various bases presenting special equities, including "when it would cause 'great hardship and inconvenience' to one party by proceeding in the first-filed action and no unfairness to the opposing party by proceeding in the second-filed action." Sensient Colors, Inc., supra, 193 N.J. at 389 (quoting O'Loughlin, supra, 6 N.J. at 180-81). This concept, which incorporates forum non conveniens factors, Am. Home Prods., supra, 286 N.J. Super. at 41, applies to the matter at hand.

This dispute centers on the viability of John's claim that the estate is indebted to him. If he is successful in his action, there may be a corresponding reduction in the amount of the mortgage debt, which is an estate asset inuring to the benefit of Jean's heirs. The treatment of John's claim however, is governed by Florida's probate statutes, which define the interests, rights, and responsibilities of the estate, the personal representative, and claimants. John has voluntarily submitted to the jurisdiction of the Florida court, and he will be adequately afforded the opportunity for relief in that action. Thus, based upon all of these facts, particularly the special interest in the proper administration of its decedent's estates, requires that Florida proceed to resolve this dispute.

We reject John's analysis that the New Jersey action must continue because his suit seeks to quiet title or that any action to foreclose his interest in the realty must be filed in New Jersey. This is not a quiet title action. No party disputes John's ownership of the property or the validity of the initial encumbrance. Further, no foreclosure has commenced. Simply put, the controversy is whether Jean allegedly agreed to pay sums emanating from the defense and settlement of the JCPLC matter. If so, how much Jean agreed to pay, and whether these sums may offset the mortgage note John now owes to Jean's estate, must be decided.

In conclusion, we find no misapplication of discretion by the motion judge in imposing a comity stay and dismissing John's New Jersey action.



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