July 25, 2008
WAYNE FERRARO, PLAINTIFF-APPELLANT,
347 PARK AVENUE, LLC, MILLINGTON REALTY, LLC, MARC JACOBS, INDIVIDUALLY, AND STEPHEN I. WEICHERT, ESQ., DEFENDANTS-RESPONDENTS.
On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-4112-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued May 7, 2008
Before Judges Wefing, Parker and Koblitz.
This appeal arises from the sale of a multi-unit apartment building. Plaintiff Wayne Ferraro appeals from four orders: two entered on March 26, 2007, one dismissing the legal malpractice complaint against his closing attorney, defendant Steven I. Weichert, Esq., for failure to provide an affidavit of merit; and the other dismissing the complaint against the purchaser of the property, 347 Park Avenue LLC (Park Ave.); and two orders entered on June 6, 2007, denying reconsideration of the dismissal for each defendant and ordering $3,253 in sanctions against Ferraro's counsel for filing frivolous litigation.*fn1
Ferraro owned a nine-unit apartment building at 347 Park Avenue in Orange. On April 19, 2002, he contracted to sell the property to Millington Realty, LLC (Millington) for $280,000. Plaintiff agreed to take back a mortgage for the full purchase price. Marc Jacobs signed the contract on behalf of Millington. After entering into the contract, Millington assigned it to Park Ave. The contract indicated the property was being sold "as is." Paragraph thirteen stated in its entirety:
13. Building and Zoning Laws. The Buyer intends to use the Property as a 9 family apt. bldg. The Seller states that this use does not violate any applicable zoning ordinance building code or other law. The Seller will obtain and pay for all inspections required by law. This includes any municipal "Certificate of Occupancy."
If the Seller fails to correct any violations of law at the Seller's own expense, the Buyer may cancel this contract.*fn2
Seller will make no corrections of any violations, the property is being sold as is.
In December 2002 the sale had still not closed and Park Ave., the only remaining plaintiff, filed a chancery action for specific performance forcing the sale of the property. Ferraro retained defendant Weichert to represent him in that action. After Ferraro moved for summary judgment, Weichert, on behalf of Ferraro, negotiated a settlement. The parties entered into a stipulation of settlement on March 26, 2004.
The stipulation provided that the sale would occur for the original contract price on or before March 29, 2004. Paragraph five of the stipulation provided that:
5. Seller shall specifically be obligated to pay for abatement of all violations necessary to obtain a Certificate of Occupancy. All such monies advanced by Plaintiffs or their agents, employees or assigns shall be deducted from the purchase price before amortization of the financing agreement.
Thus, paragraph five of the stipulation of settlement directly contradicted paragraph thirteen of the original contract for sale which had called for a sale of the property "as is." Additionally, the stipulation of settlement, in paragraph ten, indicated that if Ferraro failed to adhere to any term, judgment would be entered against him upon submission of a certification by Park Ave.'s counsel.
On March 30, 2004, Weichert appeared on Ferraro's behalf to close title with a "closing authorization" signed by Ferraro. The parties entered into an escrow agreement, pending receipt of a temporary certificate of occupancy (CO) and the execution of the HUD-1 statement. Among other obligations, Ferraro was to turn over all rental security deposits for the building. The escrow agreement called for all mortgage payments to be paid into the escrow account after deduction of costs necessary for abatement of violations in connection with obtaining the final CO. Thus, both the escrow agreement and the stipulation of settlement specifically called for deducting all costs necessary for abating city issued violations from the $280,000 purchase price.
Ferraro failed to comply with the agreement in that he did not provide a temporary CO or execute the HUD-1 statement, nor did he turn over the security deposits. After application by Park Ave., on May 13, 2004, the chancery court entered judgment against Ferraro transferring ownership of the property and specifically permitting the buyer to deduct from the sale price the cost of abating the violations in order to obtain a final CO. Park Ave. represented that the abatement of those violations ultimately cost over $300,000.
Ferraro appealed the order for judgment on June 25, 2004, but the appeal was dismissed on November 15, 2004, for failure to file a timely brief. Nonetheless, Ferraro did not comply with the order of judgment. The chancery court ordered Ferraro to comply on November 15, 2004. On March 17, 2005, Ferraro was found to be in violation of litigant's rights. The chancery court released security deposits for three of the apartments and a previously-ordered counsel fee from the closing escrow proceeds. The court directed that the remaining balance of the escrow was to be released to Park Ave. to be credited against the abatement repairs made to date. The court also ordered Ferraro to pay counsel fees to Park Ave.'s counsel. Ferraro did not oppose the applications for either the November 15 or the March 17 order.
Ferraro retained new counsel who sent a letter to Weichert on January 20, 2006, asking for clarification as to why Ferraro had received no money from the sale of the property and requesting the HUD-1 closing statement. On February 1, 2006, Weichert replied to the letter explaining that the buyer was entitled to deduct the cost of needed repairs from the sale price and agreeing to provide the entire file when it was received from storage.
On May 12, 2006, Ferraro's new counsel filed a verified complaint in the Law Division against Park Ave., Millington, Marc Jacobs and Weichert, Ferraro's former attorney. The complaint alleged fraud, unjust enrichment, breach of contract, and conversion against all defendants, and legal malpractice against Weichert alone. In the complaint, Ferraro stated that he had requested but not received Weichert's file, and was thus not required to file an affidavit of merit pursuant to N.J.S.A. 2A:53A-28. Ferraro finally received Weichert's file on February 12, 2007, more than 120 days after the answer was filed, and therefore beyond the permissible time to file an affidavit of merit. N.J.S.A. 2A:53A-27.
In his complaint, Ferraro claimed that he was suffering from Lyme disease and had a cognitive impairment that was well known to the defendants. He annexed to the complaint a doctor's letter from December 2003 indicating that when the doctor saw Ferraro in 1992, Ferraro "was not capable of making financial decisions" due to depression, pain and exhaustion. Ferraro claimed that through the entire chancery court process he believed that the sale was "as is" and that he had no obligation to make repairs. Ferraro complained that he sold a nine-unit apartment building without a mortgage and received no money for it.
On September 8, 2006, and again on October 16, 2006, Park Ave.'s counsel wrote to Ferraro's new counsel advising that the Law Division complaint was frivolous as a result of the stipulation of settlement and order for judgment in the chancery action.
On March 5, 2007, both Weichert and Park Ave. filed motions to dismiss the verified complaint: Weichert for failure to file an affidavit of merit under N.J.S.A. 2A:53A-27 and Park Ave. for lack of jurisdiction in the Law Division since the matter had been fully litigated in the chancery court. Ferraro initially did not file opposition to these motions due to his counsel's confusion over the return date. The trial court granted both motions unopposed. After Ferraro filed a motion for reconsideration, the trial court considered the opposition filed. After reconsideration, the trial court again granted both motions to dismiss.
Weichert's motion to dismiss was granted because no affidavit of merit had been filed. The trial court found that Weichert had not failed to produce necessary documents to obtain an affidavit of merit. The only document specifically requested was the HUD-1, which the trial court found did not exist. Although Weichert did not turn over his file in a timely manner, the trial court found that no document in Weichert's file met the statutory definition of "having a substantial bearing on preparation of the affidavit." Ferraro also did not present a sworn statement indicating that any particular document which he had requested but not received had a "substantial bearing on preparation of the affidavit" as required by N.J.S.A. 2A:53A-28. Ferraro claimed that Weichert inappropriately advised him to sign the settlement which required Ferraro to fund all repairs needed to obtain a CO. No particular document from Weichert's file was necessary to substantiate this claim.
Additionally, the trial court was concerned that Ferraro waited a year to receive Weichert's file without filing a motion to force its production. We agree with the trial court's conclusion that this factual situation does not fit within the safe harbor exception provided by the statute.
Upon reconsideration, the trial court also granted Park Ave.'s motion to dismiss the complaint. The trial court found that the matter had been thoroughly litigated in the chancery court. Principles of collateral estoppel prevent the relitigation of the issues raised by Ferraro. Thus, transferring the new Law Division action, on the court's own motion, to the Chancery Division pursuant to Rule 4:3-1(4)(b) would not have been appropriate. Collateral estoppel provides "that when an issue of ultimate fact has once been determined by a valid and final judgment, that issue cannot again be litigated between the same parties in any future law suit." State v. Redinger, 64 N.J. 41, 45 (1973). To assert the defense of collateral estoppel, five elements must be satisfied:
(1) the issue to be precluded is identical to the issue decided in the prior proceeding;
(2) there was a full and fair opportunity to litigate the issue in the prior proceeding;
(3) a final judgment on the merits was issued in the prior proceeding;
(4) determination of the issue was essential to the prior judgment; and
(5) the party against whom issue preclusion is sought was a party to, or in privity with, a party to the prior proceeding. [Pivnick v. Beck, 326 N.J. Super. 474, 485 (App. Div. 1999), aff'd, 165 N.J. 670 (2000).]
After the chancery court had enforced the settlement and Ferraro's appeal was dismissed for lack of prosecution, the issues with regard to the sales contract between Ferraro and Park Ave. had been resolved. All five elements of collateral estoppel were satisfied. Ferraro's attempt to start a new action in the Law Division seeking the same relief that had been denied him in the chancery court was barred.
The trial court also assessed Ferraro's counsel with Park Ave.'s attorney fees and costs for filing frivolous litigation. Park Ave. complied strictly with the provisions of R. 1:4-8(b) by warning Ferraro's counsel of its intention to request sanctions, providing time to withdraw his complaint, and filing the motion for sanctions in a timely manner. Ferraro's counsel does not dispute the reasonableness of the counsel fees awarded. He should have known the complaint against Park Ave. was not "warranted by existing law or by a non-frivolous argument for the extension, modification, or reversal of existing law or the establishment of new law". R. 1:4-8(a)(2). Ferraro's counsel should have known that he could not seek relief in the Law Division after Ferraro's failure to diligently pursue appellate review of the chancery decision.
We have carefully considered the arguments advanced by the parties and affirm substantially for the reasons expressed by Judge Marie Simonelli in her oral opinion of June 6, 2007.