June 24, 2008
ESTATE OF HELEN V. PARR, PLAINTIFF-APPELLANT,
BUONTEMPO INSURANCE SERVICES, JOSEPH BUONTEMPO, SUN LIFE FINANCIAL, DEFENDANTS-RESPONDENTS, AND AMERICAN INVESTORS LIFE, WALNUT STREET SECURITIES, INC., SAMMONS SECURITIES COMPANY, L.L.C., DEFENDANTS.
On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, L-2500-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued June 2, 2008
Before Judges Parrillo, S.L. Reisner and Baxter.
Plaintiff Estate of Helen V. Parr appeals from two trial court orders dated May 1, 2007, dismissing plaintiff's amended complaint against defendants Buontempo Insurance Services, Joseph Buontempo, and Sun Life Financial.*fn1 We reverse and remand.
Plaintiff contended that between 1998 and 2002, Joseph Buontempo, a registered securities broker and financial advisor, induced Helen Parr, an elderly woman, to make investments which yielded Buontempo high commissions but which were inappropriate to Parr's age and financial circumstances.*fn2 Plaintiff also contended that Sun Life wrongfully allowed Buontempo to sell its inappropriate investment vehicles to Parr, in violation of its own investment guidelines. Plaintiff's complaint alleged professional malpractice against Buontempo, and breach of fiduciary duty and consumer fraud against all of the defendants.
Defendants filed motions to dismiss the complaint as untimely and on several other grounds. In a written opinion dated September 8, 2006, the motion judge dismissed the Consumer Fraud Act (CFA) and breach of fiduciary duty claims against Buontempo individually. She denied the motions to dismiss the CFA claims against all other defendants, rejecting defendants' contentions that the claims had not been pled with sufficient specificity. She denied the motion to dismiss the malpractice claim, pending a Lopez*fn3 hearing. On December 11, 2006, the judge entered an order dismissing the complaint without prejudice to plaintiff taking Buontempo's deposition to determine whether plaintiff could obtain evidence to support its claims concerning the application of the discovery rule.*fn4
After taking Buontempo's deposition, plaintiff filed an amended complaint alleging CFA violations, common law fraud and malpractice. Again, defendants filed a motion to dismiss the amended complaint on statute of limitations and other grounds. In opposing the motions, plaintiff contended that Parr could not have known that her investments were inappropriate, because Buontempo failed to provide her with legally required disclosures about them. Plaintiff also contended that its March 2006 complaint was timely, because the claims for malpractice, common law fraud and Consumer Fraud Act violations did not accrue until, at the earliest, January 2001, when Parr first suffered an ascertainable financial loss on the investments.
With its opposition papers, plaintiff also filed an expert report, explaining in considerable detail why it was malpractice for Buontempo to sell variable life annuities to an elderly client with limited resources, and why the sales constituted fraud in the absence of certain legally-mandated disclosures which Buontempo could not document that he had made to the client. The expert also opined that Sun did not follow its own internal policies or it would not have approved the sales. He further opined that January 2001, when Parr received a year-end statement showing losses in her account, "was probably the first time Mrs. Parr could have possibly recognized that the Sun Life policies were unsuitable for her needs."
The motions were heard before a second judge. In an oral opinion placed on the record on May 1, 2007, the second motion judge dismissed plaintiff's complaint on statute of limitations grounds.*fn5 The judge concluded that plaintiff's causes of action against Sun Life and Buontempo accrued when she purchased the annuities and that her estate had not established grounds to invoke the discovery rule.
Because the motion judge considered evidence outside the pleadings, he converted the motion to dismiss to one for summary judgment. R. 4:6-2 Our review of a trial court's decision granting summary judgment is de novo, employing the same Brill*fn6 standard that the trial court uses to decide the motion. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998).
On this appeal, plaintiff raises the following points for our consideration:
THE DISCOVERY RULE SHOULD APPLY TO THE PLAINTIFF'S TORT CLAIMS, THUS PRECLUDING DEFENDANTS' STATUTE OF LIMITATIONS DEFENSE.
A. Discovery Rule As Applied Consumer Fraud Cases
1. Cause Of Action Under CFA Could Not Have Ripened Before January 2001.
2. The Discovery Rule Must Apply To Fraud Cases As A Matter Of Law.
B. Buontempo's Malpractice As A Continuing Tort
C. Defendant's Policy Argument
THE CONSUMER FRAUD ACT APPLIES TO THE SALE OF VARIABLE ANNUITY POLICIES.
A. Variable Annuities Are Deemed Insurance Policies When Applying The Consumer Fraud Act.
B. No Conflicting Regulatory Scheme Preempts The Application Of The CFA.
THE COURT BELOW SCHEDULED THE LOPEZ HEARING PREMATURELY AND UNFAIRLY PREJUDICED THE PLAINTIFF.
THE COMMON-LAW FRAUD AND CONSUMER FRAUD CLAIMS IN THE FIRST AMENDED COMPLAINT WERE PLED WITH SUFFICIENT SPECIFICITY.
We begin by addressing the statute of limitations issue. Pursuant to the statute of limitations applicable to plaintiff's causes of action, N.J.S.A. 2A:14-1, plaintiff was required to file the complaint "within 6 years next after the cause of any such action shall have accrued." See DiIorio v. Structural Stone & Brick Co., Inc., 368 N.J. Super. 134, 140-42 (App. Div. 2004); Holmin v. TRW, Inc., 330 N.J. Super. 30, 34-35 (App. Div. 2000), aff'd o.b., 167 N.J. 205 (2001). Consequently, the key issue is when plaintiff's fraud and malpractice claims accrued.
A CFA cause of action requires plaintiff to prove an ascertainable loss:
To state a claim under the CFA, a private "plaintiff must allege each of three elements: (1) unlawful conduct by the defendants; (2) an ascertainable loss on the part of the plaintiff; and (3) a causal relationship between the defendant's unlawful conduct and the plaintiff's ascertainable loss." [Dabush v. Mercedes-Benz USA, Inc., 378 N.J. Super. 105, 114 (App. Div.)(citations omitted), certif. denied, 185 N.J. 265 (2005).]
See also Weinberg v. Sprint Corp., 173 N.J. 233, 237 (2002). The same is true of a common law fraud claim. Holmin, supra, 330 N.J. Super. at 35. Likewise, in a malpractice cause of action "damage must be sustained before a cause of action accrues." Mant v. Gillespie, 189 N.J. Super. 368, 373 (App. Div. 1983). See also Grunwald v. Bronkesh, 131 N.J. 483, 492 (1993)("[A] legal-malpractice action accrues when an attorney's breach of professional duty proximately causes a plaintiff's damages."); Vision Mortgage Corp. v. Chiapperini, Inc., 156 N.J. 580, 586 (1999)(A professional negligence claim against a real estate appraiser accrues when the mortgagee learns that its "collateral has been impaired or endangered by the negligent appraisal.").
"It is also clear that the date when a cause of action is deemed to have 'accrued' is 'the date upon which the right to institute and maintain a suit first arises'." Holmin, supra, 330 N.J. Super. at 35. Consequently, "[u]ntil a plaintiff has suffered 'damages,' . . . he cannot maintain a suit for damages based on fraud since his cause of action has not yet accrued. It will accrue only when 'damage' is inflicted." Id. at 36.
We agree with plaintiff that until Parr incurred some damages by reason of defendants' alleged fraud or malpractice, she had no accrued cause of action and could not have filed suit. See Weinberg, supra, 173 N.J. at 237 ("to have standing under [CFA] a private party must plead a claim of ascertainable loss"). On this record, there is no dispute that the first time Parr suffered damages by reason of her investments in the annuities was January 2001, when she received her 2000 year-end statement showing losses in her account. Therefore, the complaint filed March 2006, was within the six-year statute of limitations. Consequently, plaintiff should not have been required to dismiss the initial complaint, take discovery, and re-file, nor should the amended complaint have been dismissed.
While this conclusion makes it unnecessary for us to address the remaining issues appellant raises, we also agree with plaintiff that even if the statute of limitations would ordinarily have run from an earlier date, the discovery rule would toll the running of the statute until January 2001, because that was the first time plaintiff had reason to know she had been injured. See Vision Mortgage, supra, 156 N.J. at 586. That is a different issue from what Parr knew about the wisdom of her investments when she made them.
The question of what Parr knew when she bought the securities is the essence of the fraud and malpractice claims.*fn7
In requiring plaintiff to depose Buontempo about what he did or did not tell Parr when he sold her the securities, the first judge was essentially requiring plaintiff to prove her underlying claims in order to sustain her right to file the complaint. That was error, in the same way it would be error to require a plaintiff claiming lack of informed medical consent to prove that the doctor did not tell her about the risks of a procedure, as a condition of allowing the plaintiff to invoke the discovery rule.
We will not address plaintiff's additional appellate points, because they concern issues which were discussed but not actually decided by the motion judge in his May 1, 2007 opinion. Nor will we address defendant's contentions which were not the subject of any cross-appeal and/or were not raised in the trial court.
We reverse the May 1, 2007 orders dismissing the complaint and remand this matter to the trial court to proceed with pre-trial discovery.
Reversed and remanded.