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Sklodowsky v. American Developers of New Jersey

July 16, 2008

PAUL G. SKLODOWSKY, PLAINTIFF,
v.
AMERICAN DEVELOPERS OF NEW JERSEY, DEFENDANT/THIRD PARTY PLAINTIFF-APPELLANT/ CROSS-RESPONDENT,
v.
JOHN F. LUSHIS, JR., TALLMAN HUDDERS & SORRENTINO, THIRD-PARTY DEFENDANTSRESPONDENTS/CROSS-APPELLANTS, AND
JOANNE SKLODOWSKY, THIRD-PARTY DEFENDANT.



On appeal from the Superior Court of New Jersey, Law Division, Hunterdon County, Docket No. L-459-04.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued April 23, 2008

Before Judges Sapp-Peterson, Messano and King.

Defendant, third-party plaintiff, American Developers of New Jersey, LLC (ADNJ), appeals 1) from the motion judge's March 21, 2006, order that granted summary judgment to third-party defendants John F. Lushis, Jr., and his law firm, Tallman Hudders & Sorrentino (THS), on ADNJ's claim of fraud; 2) from an interlocutory order of April 21, 2005, that dismissed with prejudice ADNJ's claim for negligent misrepresentation against Lushis and THS; and 3) from an interlocutory order entered on December 23, 2005, that denied ADNJ's request for discovery from plaintiff, Paul G. Sklodowsky, and Lushis, on the basis that it was subject to the attorney-client privilege. We have considered the arguments raised in light of the record and applicable legal standards. We affirm.*fn1

I.

This lawsuit arose out of an aborted real estate transaction. In November 2003, ADNJ contracted to purchase some forty-two acres of land in Kingwood Township (the property) from plaintiff, the sole record owner. ADNJ tendered its initial deposit of $35,000 and proceeded to conduct the necessary pre-development tests during the contract's 180-day due diligence period. Plaintiff retained Lushis to represent him, and ADNJ was represented by Alan Wohl.

During the due diligence period, it was revealed that an area of the property included wetlands upon which development was prohibited, and further that there was a house located in that area. There is a dispute in the record as to which party first proposed a possible solution that envisioned a "carve out" of the house and the surrounding wetlands from the sale. Nevertheless, on May 11, 2004, Lushis sent a letter to Wohl that referenced a title commitment previously furnished to ADNJ. Lushis wrote,

In reviewing the commitment, we noted that [it] indicates that a deed from "[plaintiff] and spouse, if applicable" will be required. [Plaintiff] is married; the property was purchased during the time of his marriage; and the home on the property has been used by Mr. and Mrs. Sklodowsky as their marital residence. As you know, however, the deed for the property is only in [plaintiff's] name and the Contract of Sale with [ADNJ] only has [plaintiff] as the selling party. As I indicated, whether Mrs. Sklodowsky will execute the deed is unclear.

Although the contract contained an affirmative representation by plaintiff that "no tenants ha[d] any rights to the [p]roperty, and the conveyance and possession [would] be free of any occupancy rights of any tenants or occupancy rights of others," and further permitted ADNJ to cancel the contract and have its deposit returned, it nevertheless decided to proceed to closing. On June 9, 2004, Wohl sent a letter to Lushis and plaintiff indicating that ADNJ was waiving the due diligence contingency, setting an anticipated closing date, and remitting the additional deposit balance of $50,000. Although ADNJ argues it did so because of the significant money it had already invested in the property, Wohl's letter did not indicate such, nor did it express any particular reservation of rights by ADNJ.

On August 30, 2004, Wohl sent Lushis a letter fixing a "time of the essence closing date" in accordance with the contract's terms for September 30, 2004. On that date, plaintiff's wife, third-party defendant Joanne Sklodowsky, failed to appear at the closing, and the parties did not consummate the sale.*fn2

Plaintiff then filed suit claiming ADNJ had breached the contract. ADNJ counterclaimed alleging that plaintiff had breached the agreement and negligently misrepresented his marital status. It sought an adjustment of the purchase price based upon Joanne's retention of her marital rights to the property. In a third-party complaint, ADNJ alleged that Lushis had "fraudulently and willfully withheld" and negligently misrepresented information regarding plaintiff's marital status. ADNJ also claimed that Lushis had "violat[ed] [] his obligations as an attorney," and "violated a duty of good faith that he owed to [ADNJ] . . . ."*fn3 ADNJ subsequently amended its third-party complaint to name THS as a third-party defendant alleging it was vicariously liable for Lushis' conduct.

Lushis and THS moved to dismiss prior to answering. The judge granted the motion as to the negligent misrepresentation count but denied it as to ADNJ's fraud and Petrillo claim. In an extensive written opinion, the judge concluded that ADNJ's negligent misrepresentation claim must fail because, pursuant to § 5.06 of the contract, its sole remedy was limited to cancellation of the agreement absent "the breach of [a] representation or warranty [that] was knowingly and willfully falsely made."

Lushis and THS then answered and discovery ensued, during which ADNJ moved 1) to compel plaintiff to testify regarding his communications to Lushis; and 2) to compel the production of certain documents over which Lushis had asserted a claim of privilege. Lushis and THS also moved to compel production of Wohl's file and to amend their answer and file a fourth-party complaint against Wohl and his firm. The judge granted Lushis' and THS's motion to compel discovery, denied their motion to file an amended pleading, and denied ADNJ's motion to compel. In a thorough written opinion, the judge reasoned that "information about fraud by [plaintiff] can be obtained through a less intrusive source, that avoids a breach ...


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