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Borough of Seaside Park v. Sadej

July 17, 2009

BOROUGH OF SEASIDE PARK, A MUNICIPAL CORPORATION OF THE STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT/ CROSS-APPELLANT,
v.
JESSE AND CARLA SADEJ, DEFENDANTS-APPELLANTS/ CROSS-RESPONDENTS/ THIRD-PARTY PLAINTIFFS-APPELLANTS,
v.
MAYOR AND COUNCIL OF THE BOROUGH OF SEASIDE PARK, INDIVIDUALLY AND AS MUNICIPAL OFFICIALS; JAMES ERDMAN, INDIVIDUALLY AND AS A MUNICIPAL OFFICIAL; MICHAEL MARCINCZYK, INDIVIDUALLY AND AS A MUNICIPAL OFFICIAL; AND JOSEPH JAY DELANEY, JR., INDIVIDUALLY AND AS A MUNICIPAL OFFICIAL, THIRD-PARTY DEFENDANTS-RESPONDENTS.



On appeal from the Superior Court of New Jersey, Chancery Division, Ocean County, C-128-02, and Law Division, Ocean County, Docket No. L-2412-04.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued May 4, 2009

Before Judges Lisa, Sapp-Peterson and Alvarez.

Jesse and Carla Sadej owned a single-family home in the Borough of Seaside Park (Borough). They filed building plans with the Borough for construction of improvements. After most of the construction was completed, the Borough issued stop work orders, asserting that the construction was not in compliance with the filed plans and that zoning violations occurred. It turned out that the plans on file with the Borough (Borough plans) differed from those possessed by the Sadejs (Sadej plans). According to the Sadejs, the Borough plans reflected fraudulent alterations of the plans they had filed.

The Borough initiated this litigation in the Chancery Division, seeking to prevent further construction and require removal of the construction that had been accomplished. The Sadejs counterclaimed, alleging fraud by the Borough's construction code official and zoning officer, as well as a claim against the Borough for violation of 42 U.S.C.A. § 1983. The Sadejs later filed an amended counterclaim and third-party complaint against the Borough, its mayor and council, the construction code official, zoning officer, and Borough administrator, asserting claims for estoppel and malicious prosecution.*fn1

Over several years of the litigation, a series of orders were entered, first by the Chancery judge, and then, after the case was transferred to the Law Division, by two different Law Division judges. Various orders dismissed the Borough's claims of zoning violations and also dismissed the Sadejs' tort claims, because the Sadejs failed to satisfy the timing and notice requirements of the New Jersey Tort Claims Act (TCA), N.J.S.A. 59:1-1 to 12-3, because the claims were time-barred, and on substantive grounds. The trial court also denied the Sadejs' application for counsel fees under the Frivolous Litigation Statute (FLS), N.J.S.A. 2A:15-59.1. The Sadejs appeal and the Borough cross-appeals.

The Sadejs contend that (1) the trial court erred in dismissing their malicious use of process claims on the basis that they were time-barred and on the alternate basis that the record was insufficient to allow those claims to survive summary judgment; (2) the trial court erred in determining that their fraud claims against the individual third-party defendants did not relate back to their original counterclaim pursuant to Rule 4:9-3; (3) their letters of May 1 and 9, 2002 to a Borough official should have been deemed sufficient notice of their fraud claims under the TCA; (4) the trial court erred in determining that improvements to their property resulted in a building coverage zoning violation; (5) they should have been permitted to depose attorneys representing the Borough; and (6) the trial court erred in determining that the Borough is immune from an award of legal fees under the FLS.

On its cross-appeal, the Borough argues that the trial court erred in determining that the Sadejs' improvements to their property did not result in various setback and building height zoning violations.

We agree with the Sadejs that their malicious use of process claim was improperly dismissed. We accordingly reverse on that issue. With respect to counsel fees under the FLS, we remand for further proceedings. In all other respects we affirm on the Sadejs' appeal and the Borough's cross-appeal.

I.

In August 2001, the Sadejs filed five pages of building plans with the Borough, showing expansion of their house, expansion of the frame garage and connection of the expanded garage to the house, and construction of an in-ground pool. On August 21, 2001, the Borough zoning official, Michael G. Marcinczyk, issued a zoning approval. On August 23, 2001, the Borough construction code official, James Erdman, reviewed and approved the plans, and issued a construction permit. He initialed and dated each of the five pages of the plans, wrote the words "Inspector Job Copy" in red ink on the first page of one set of plans, attached a red digging warning sticker to that set of plans, and gave that set of plans to the Sadejs. He retained a duplicate set for the Borough. The Sadejs retained contractors and began construction.

On April 17 and 18, 2002, Erdman issued stop work orders to the Sadejs on behalf of the Borough, ostensibly because the construction "substantially deviated" from the filed building plans. On April 18, 2002, Erdman and Marcinczyk appeared at the site with a police officer, and ordered the contractors off the site. Jesse Sadej (Sadej) unsuccessfully attempted to contact Borough officials regarding the stop work order, and he attempted to address the matter at a Borough council meeting on May 1, 2002, but was prevented from doing so by the Borough attorney.

On May 2, 2002, Borough administrator Joseph J. Delaney, Jr., met with Sadej. Delaney displayed the Borough plans, and Sadej informed him that those plans were not the same as the ones he had filed. Delaney later testified that, upon hearing this information, he expressed surprise to Sadej. According to Sadej, Delaney threatened him by pointing to an undeveloped location on a Borough map, and noting that the prospective builder had gone bankrupt litigating with the Borough about a proposed construction project there. Delaney acknowledged making such a comment, but said it was in response to Sadej's statement that he was prepared to litigate the dispute.

The Borough plans differed from the Sadej plans in several respects. The second, third, fourth and fifth pages of the Borough plans did not have Erdman's initials and date notations on them, while those pages in the Sadej plans did. Most importantly, the fifth page of the Sadej plans had wording and a drawing indicating that the frame garage would be expanded in size and connected to the house, while the wording and drawing on the Borough plans had been altered to eliminate any such expansion or connection. Also, on the fifth page of the Borough plans, the rear yard border behind the frame garage had been altered to reflect a five-foot setback, while the Sadej plans included no such alteration.

On May 8, 2002, the Borough filed its complaint, based upon the allegations in Erdman's certification, which in turn relied upon the Borough plans as support for the alleged zoning and building violations. At their depositions, neither Erdman nor Delaney could explain the discrepancies between the two sets of plans.

On May 9, 2002, Sadej sent a letter to Delaney and to the mayor, council, and police chief, alleging that his building plans had been "fraudulently" altered to support the Borough's position that the Sadejs' construction activities constituted building code and zoning violations. At his deposition, Delaney stated that the mayor and council were made aware of Sadej's allegation of fraud after the May 1, 2002 council meeting.

On July 1, 2002, a planning expert retained by the Borough, John Maczuga, issued a report in support of the Borough's lawsuit, specifying certain zoning violations resulting from the improvements to the Sadejs' property. The Sadejs later countered that report with a certification from their engineering expert, Stephen P. Eid, who concluded there were no violations.

II.

As we stated, the initial filing was in the Chancery Division. The Chancery judge issued an order on May 9, 2002 temporarily restraining further construction. The Sadejs moved to dissolve the temporary restraints, asserting at a hearing on May 16, 2002 that their approved plans differed from those relied upon by the Borough as a basis for the restraints. The judge lifted the restraints, allowing the Sadejs to resume construction, but at their peril.

On May 28, 2003, the Sadejs filed an answer and counterclaim against the Borough based upon allegedly malicious actions performed by its officials. The counterclaim alleged promissory estoppel/detrimental reliance and fraud, and sought a declaration that no further municipal action was required to allow them to complete their improvements and that the Borough, through its officials, had been malicious.

In mid-2003, the Sadejs moved for an order to depose the mayor and council, chief of police, and two members of the law firm representing the Borough.*fn2 Following the July 8, 2003 hearing, the Chancery judge entered an order directing that the mayor and council could be initially deposed through written interrogatories, after which further consideration could be given to oral deposition of specific officials if warranted. The judge denied without prejudice the Sadejs' application to depose the Borough attorneys, subject to further argument concerning the issue of attorney-client privilege.

On October 3, 2003, the Sadejs filed an amended answer, affirmative defenses, and counterclaim, reasserting their claims for declaratory judgment and for estoppel, dropping their fraud claim, and asserting a claim against the Borough under 42 U.S.C.A. § 1983 for the malicious deprivation of their property rights by the Borough's employees.

On May 3, 2004, the Borough moved for partial summary judgment on its claims against the Sadejs. On that date, the Sadejs moved for summary judgment and dismissal of the Borough's complaint, the severance of their counterclaim for trial or transfer of the entire matter to the Law Division, and the production by the Borough of the original building plans they filed. After hearing argument on May 10, 2004, the Chancery judge entered seven orders. The judge granted summary judgment for the Sadejs and entered orders dismissing the Borough's claims regarding building height, rear yard setback and side yard setback zoning violations. The judge also granted partial summary judgment in favor of the Borough, finding that there was a building coverage zoning violation. In its order, the court specifically noted that the issue of the Borough's enforcement action concerning the building coverage violation would proceed to trial where it would be considered "along with defendants' counterclaim, answer and affirmative defenses, including estoppel."

Another order entered on May 10, 2004 directed the Borough to produce the building plans it claimed to have been filed by the Sadejs; the order also reflected that the Borough had withdrawn its claim that the Sadejs were guilty of a front yard setback violation.

On May 13, 2004, the Sadejs filed a second amended counterclaim against the Borough and a third-party complaint against the mayor and council, Erdman, Marcinczyk, and Delaney, "individually and as[]municipal official[s]." In their second amended counterclaim and the third-party complaint, the Sadejs again sought a declaratory judgment and also asserted claims based on estoppel, violation of 42 U.S.C.A. § 1983, fraud, malicious use of process, and "legal process maliciously abused."

The Sadejs moved for reconsideration by the Chancery judge of the order granting partial summary judgment against them on the building coverage zoning violation. After a hearing on June 25, 2004, the judge entered an order on July 16, 2004 denying the motion.

On June 10, 2004, the Borough and individual defendants moved for dismissal of the Sadejs' second amended counterclaim and third-party complaint based, in part, on the alleged failure of the Sadejs to satisfy the notice requirements of the TCA. On July 9, 2004, the Sadejs served a comprehensive TCA notice on Delaney, specifying their claims against the Borough, as well as their claims against the mayor and council, Erdman, Marcinczyk, and Delaney, individually and as municipal officials.

On July 16, 2004, the Chancery judge entered an order transferring the entire matter to the Law Division for a jury trial on all issues.

On October 22, 2004, the Law Division judge, after hearing argument, granted the motion of the Borough and individual third-party defendants dismissing the Sadejs' second amended counterclaim and third-party complaint. The judge determined that these causes of action accrued prior to May 9, 2002, and, consequently, the amended counterclaim and third-party complaint, which was filed on May 13, 2004, was filed beyond the two-year limitations period. The judge also determined that the Sadejs failed to satisfy the TCA notice requirements. The judge entered an order accordingly on November 30, 2004. On January 28, 2005, the judge denied the Sadejs' reconsideration motion. In doing so, the judge added an additional basis for granting summary judgment to the Borough, namely that the Sadejs had not "established a prima facie case of malicious prosecution." Thus, according to the judge, the only remaining issue for trial was whether the Borough was estopped from enforcing the building coverage zoning violation against the Sadejs.

On July 12, 2005, the Sadejs moved to dismiss the Borough's complaint because of its continuing failure to comply with the Chancery judge's order to produce the building plans it claimed to have been filed by the Sadejs. The motion also requested that the court compel the depositions of the two attorneys representing the Borough at the time the complaint was filed.

At a motion hearing on September 16, 2005, the Borough produced the building plans, and that aspect of the Sadejs' motion was "marked settled." Then, after hearing argument, the judge denied the Sadejs' motion to depose the Borough attorneys. The judge entered an order accordingly on September 28, 2005.

On April 2, 2007, the Sadejs moved for summary judgment to estop the Borough from enforcing the building coverage violation previously found by the Chancery judge. On May 3, 2007, the Sadejs filed a motion to recover their counsel fees and costs from the Borough, alleging that the Borough filed its complaint despite knowing the fraudulent nature of the building plans upon which the complaint was based, thus violating the FLS.

That same day, May 3, 2007, the matter came before the second Law Division judge, who, after hearing argument, granted the Sadejs' summary judgment motion, determining that the Borough was estopped from enforcing the violation against the Sadejs. A conforming order was entered on July 9, 2007. The order also directed the Borough to reissue the Sadejs' building permit and zoning approval and authorized the Sadejs to complete their planned improvements without further permits or approvals from the Borough.

On June 22, 2007, the second Law Division judge, after hearing argument on the Sadejs' counsel fee motion, denied the motion. The basis for denial was that municipalities are not subject to liability under the FLS. The judge entered an order accordingly on July 25, 2007. On September 7, 2007, the judge entered a further order denying the Sadejs' reconsideration motion.

The Sadejs appeal from the orders entered on May 9, 2002, July 8, 2003, May 10, 2004, November 30, 2004, September 28, 2005, July 25, 2007, and September 7, 2007.

The Borough cross-appeals from the Chancery judge's order of May 10, 2004, granting partial summary judgment to the Sadejs and finding no violations of the rear yard, side yard, or building height zoning provisions, and from the order of the second Law Division judge on July 9, 2007, granting summary judgment to the Sadejs on estoppel grounds.

III.

We first address the Sadejs' argument that their malicious use of process claims were improperly dismissed. The first Law Division judge dismissed the claims as time-barred and then, on the Sadejs' reconsideration motion, further held that the claims were also subject to dismissal under the summary judgment standard because of ...


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