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Kliever v. Sterlington Properties

August 4, 2009

KATHERINE KLIEVER AND JOHN KLIEVER, PLAINTIFFS-APPELLANTS,
v.
STERLINGTON PROPERTIES, INC., JUDITH I. BASLAW, JEFFREY ROSCOE, AND EAST HILL BUILDERS, DEFENDANTS, AND BOROUGH OF SADDLE RIVER, STEVEN M. HONIG, HONIG & HONIG, AND THE RIDGE AT SADDLE RIVER, LLC, DEFENDANTS-RESPONDENTS.



On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-7636-04.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued February 23, 2009

Before Judges Carchman, R. B. Coleman and Sabatino.

Plaintiffs Katherine and John Kliever*fn1 appeal from a final judgment dismissing their legal malpractice and declaratory judgment action against (1) their former attorney, Steven M. Honig, who represented them in their purchase of a home situated on property burdened with a drainage easement; (2) the Borough of Saddle River (the Borough), which authorized this easement; and (3) The Ridge at Saddle River, LLC (The Ridge), plaintiffs' neighboring property owner who benefits from this easement. After a bench trial and an extensive oral opinion, Judge Lawrence D. Smith concluded that plaintiffs' claims regarding the easement as well as their malpractice cause of action were without merit. We agree and affirm.

I.

Because the issues raised on this appeal from this multi-week bench trial address procedural, factual and legal claims of error, we provide an expansive review of the factual underpinnings of this dispute.

On December 21, 2001, plaintiffs became the owners of a sixteen-room manor home with a pond, bridges, and a five-car garage situated on a two-acre property located in the Borough. Plaintiffs' property is abutted to the north by the Tice property, a 23.2-acre parcel, consisting of three lots situated in both the Borough and Borough of Woodcliff Lake. The closest lot (lot 5) of the Tice property on the Borough tax map, comprising 19.35 acres, is immediately adjacent to plaintiffs' property. The remaining lots (lots 6 and 1) are collectively approximately four acres. The Tice family cultivated an orchard on these three lots. The property immediately to the west of plaintiffs' property is owned by the Tsoukas family.

Plaintiffs' property is burdened with two streams, the St. Gabriel's Brook and the Tsoukas ditch. St. Gabriel's Brook runs along the western border of lot 5 from north to south, enters the northwest corner of plaintiffs' property, makes an abrupt ninety-degree turn due east and then, after a short distance, makes another ninety-degree turn due south. Historically, 13.2 acres of lot 5 drained into St. Gabriel's Brook and onto plaintiffs' property. The Tsoukas ditch traverses the northern portion of plaintiffs' property from west to east and merges with St. Gabriel's Brook at the point where the brook turns east. These two streams are situated within a lengthy, thirty-foot-wide drainage easement dating back to at least 1965 which follows the path of the water. Plaintiffs' property has always been subject to erosion and flooding as a result of the merging waterways and ninety-degree turns.

In 1997, plaintiffs' property was owned by Dr. and Mrs. Salerno. They decided to develop the property with a 4000-square-foot single family home. However, because of the extensive wetlands on the property, the Salernos had to apply to the New Jersey Department of Environmental Protection (DEP) for several wetlands permits. These permits were granted with various conditions, including the requirement that a mitigation pond be constructed on site to collect the water from St. Gabriel's Brook and control the drainage of the property.

The Salernos subsequently submitted an application to the Saddle River Planning Board (the Board) for soil movement on the property for septic excavation, foundation excavation, and the creation of the pond. The Board granted the Salernos' application in a resolution dated May 13, 1997 but imposed the following condition in accordance with the advice of its engineer: "The applicant shall provide an easement by deed 30 feet in width to connect the Tice property to the north/south stream component, leading to the proposed pond. This will remove the Tice drainage from any future detention pond, eliminating the existing 90-degree turn."*fn2 However, notwithstanding the Board's directive, no deed of easement was filed at that time. The following year, the Salernos conveyed the property to defendant Sterlington Properties, Inc.*fn3 and construction of the home eventually began under the supervision of Sterlington's general contractor, defendant Jeffrey Roscoe.*fn4

In March 1999, The Ridge purchased the Tice property and began preparing plans to develop the property as a sixty-eight-unit luxury townhouse community. A site plan submitted to the Borough in 2000 depicted the bulk of the units situated on lot 5.

According to drainage plans submitted to the Borough in 2000, The Ridge proposed to construct a large detention basin in the lower southwest corner of lot 5 to control the drainage from its property. The Ridge originally planned to pipe the water from the basin west directly across its property at a right angle and into St. Gabriel's Brook where it would eventually make its way south onto plaintiffs' property and into their pond.

The Borough, however, directed The Ridge to utilize the north/south easement to which it was entitled (but had not yet been deeded) over plaintiffs' land so as to straighten the path of the water and avoid the two ninety-degree turns on plaintiffs' property. As a result, plans submitted to the Borough in January 2001 explicitly depicted a thirty-six-inch underground pipe, running approximately sixty feet south from the basin to a concrete headwall situated on plaintiffs' property from which water would be discharged to travel the remaining fourteen to twenty feet through the 1965 easement to St. Gabriel's Brook. Roughly fifty-five feet of underground pipe would be on plaintiffs' property, including forty-two feet within the as-yet undeeded easement. The Ridge's project engineer, Arthur Hanson, acknowledged that approximately thirteen feet of pipe and the actual headwall structure itself would be within the 1965 easement.

As described by Hanson, the headwall would have a five-foot-by-five-foot middle section housing the opening of the thirty-six-inch pipe, and two eleven-foot-long wing walls, each of which would gradually taper in height from five feet to one foot. One wing wall would be merely a continuation of the middle section, heading straight off to the east, while the other would be at a forty-five-degree angle heading down towards St. Gabriel's Brook, thereby forming a "v." Rip rap (six-inch graphic stones stacked eighteen inches high) would be placed between the headwall and St. Gabriel's Brook to slow the water after it exited the pipe. Yet, according to Hanson, most of the time the water exiting the pipe would just be a trickle. Hanson indicated that The Ridge intended to camouflage the headwall to some extent with vegetation. As to why the headwall was not included on the Tice property, Hanson noted that it would be ten to fifteen feet high and much more intrusive.

According to Hanson's post-development drainage area map dated November 14, 2000, 17.1 acres of The Ridge's property, comprised of the bulk of lot 5 and a small portion of lot 6 (also part of the Tice property), would drain into the proposed detention basin. Three largely undeveloped acres of lot 5 would drain as before into St. Gabriel's Brook and onto plaintiffs' property. The remaining 3.1 acres would drain away from plaintiffs' property. Hanson acknowledged that the volume of water making its way to plaintiffs' property post-development would be greater than the pre-development volume, but he maintained that the rate at which it would be discharged would be less and in full compliance with DEP regulations.

Hanson stated that, because of the slow discharge rate, forty to sixty percent of any heavy polluting sediments contained in the water would not exit the basin, but would settle on the bottom of the basin for later manual removal. He noted that this percentage complied with DEP regulations. While fine particles and a significant percentage of nutrients, such as fertilizers, would exit the basin. Hanson represented that the resulting water quality would still meet DEP standards. As of trial, The Ridge had obtained approval of a revised preliminary site plan from the Borough, Woodcliff Lakes and Bergen County and received the necessary stream encroachment permit from the DEP and permits to build the detention basin.

Plaintiff, Katherine Kliever, now retired, has an MBA and worked during her prior twenty years of employment as manager of the office for the chairman of ITT, where she was responsible for gathering all relevant information so that the chairman could make knowledgeable decisions. She stated that it was her practice to examine transactions to see where any "pitfalls would be." Katherine further stated that she had previously been involved in the purchase of eight homes.

On August 3, 2001, Katherine, as a potential buyer, toured the home that had been built on Sterlington's property. Roscoe, who escorted Katherine during the visit, pointed out the two streams on the property that were clearly visible from the second floor of the home. Katherine confirmed that she was not bothered by these streams because they were to feed the pond, a property feature she and her husband specifically wanted. Roscoe also told Katherine about the townhouses that were to be built on the Tice property. Katherine informed him that she was aware of the project. However, Katherine claimed that, while she knew about the project, she was unaware that The Ridge was not going to utilize sewers to get rid of storm water.

At the end of the visit, Katherine picked up a sales brochure and requested a site plan. According to Roscoe, Katherine stated that she wanted the plan because she and her husband were very thorough and wanted to know all the details. Roscoe then provided Katherine with a copy of the site plan the next day.

Roscoe claimed that the site plan he gave to Katherine was prepared in early 2001 by Conklin Associates and entitled "Plot Plan & Partial Asbuilt Lot 22 - Block 1202." This plan depicted two drainage easements--the 1965 ditch and a "proposed 30' drainage easement" adjacent to lot 5. It also depicted the landscaping on the site. Roscoe claimed that he advised Katherine to contact either the engineer who had prepared the plan or the Borough Engineer if she had any questions, and she informed him that she already had.

Katherine, however, insisted that Roscoe merely gave her a planting schedule that contained a reference to the 1965 easement but not the proposed new easement. She further indicated that, while the "planting schedule" actually identified the Tsoukas ditch as a "drainage easement 30' wide," she never thought of it as other than a stream. She did not realize before signing the eventual purchase contract with Sterlington that it was a drainage easement.

On August 6, 2001, after consulting with her husband and visiting the property several more times, Katherine negotiated a sales price for the property of $2,325,000. On Roscoe's recommendation, she subsequently retained Honig to represent her and her husband in connection with the purchase of the home. She further claimed that Honig confirmed to her that he was familiar with the property due to his involvement with a prior contract. However, Roscoe denied that Honig had been involved in the earlier transaction.

Katherine met with Honig for the first time on August 10, 2001. She brought with her to the meeting a proposed contract of sale, which contained only a general reference to easements and the landscaping plan. According to Katherine, during the meeting, Honig asked her if she knew about the townhouse development that was going to be built next door, and she said yes. Katherine claimed that she had gleaned this knowledge from newspaper reports and from a real estate broker with whom she had been working. She denied that she went to Borough Hall and looked at any plans. Honig cautioned her about buying next to open land suggesting that "anything can happen."

However, Katherine insisted that she and Honig never discussed the proposed drainage easement, the streams on the property or storm water either at that time or during their subsequent five or six phone conversations. Although Katherine initially conceded that Honig did at some point generally define to her what an easement was, she later insisted that she had no recollection of such a conversation. She maintained that she had "no recollection of [Mr. Honig] ever mentioned the word easement."

According to Honig, however, Katherine brought only the 2001 Conklin Associates plot plan, identified by Roscoe, to their initial meeting. He recalled that he and Katherine specifically discussed this plan, including the pond, the easements and the proposed development on the Tice property, and that he cautioned her about buying next to a vacant lot. He insisted that he told her that a certificate of occupancy would not be granted until the proposed easement was filed. He maintained that Katherine was adamant that she and her husband wanted the property. Katherine's unusually extensive knowledge of the property prompted Honig to think that she had done her own investigation and seen the site plans for The Ridge development. As such, he did not specifically advise her to go to Borough Hall to review the plans on file pertaining to that development. He also knew the plans would still be subject to change.

After this meeting, Honig contacted Sterlington's attorney to inquire about the status of the proposed easement. He subsequently advised Katherine that the easement would be filed before closing. According to Honig, he and Katherine spoke many times about this easement prior to the closing. Honig acknowledged that he did not look at the plans on file for The Ridge development, and he maintained that he had no idea that a detention basin was going to be built on the Tice property. He was aware, however, that the pond was subject to DEP approval and that, as such, safeguards were in place.

Plaintiffs signed a contract to purchase the property from Sterlington on August 28, 2001, for $2,325,000. On November 28, 2001, Sterlington's counsel prepared the deed of easement required by the Board's 1997 resolution from Sterlington, as grantor, in favor of the Borough, as grantee. This deed of easement, which was filed on November 30, 2001, provided that "[t]he purpose of this deed is to create a drainage easement to the Borough of Saddle River to convey the drainage from Lot 5, Block 1202 to the north/south stream component leading to the pond on Lot 22, Block 1202 [plaintiffs' property]." Honig received a copy of the title commitment reflecting this deed of easement on December 4, 2001, and he advised Katherine of his receipt of this document. He also procured a December 5, 2001, survey of plaintiffs' property for mortgage purposes, which depicted this easement.

Plaintiffs closed on the property on December 18 and December 21, 2001. According to Katherine, the word "easement" was not uttered during the closing. Katherine denied that Honig gave her a copy of the survey at the closing or showed her the title commitment dated December 3, 2001. She maintained that she only received the closing statement and the mortgage documents.

Honig, however, recalled that he went over both the survey and the earlier plot plan at closing and that he pointed out to Katherine that the easements were in the same location on both documents. He claimed that he gave multiple copies of the survey to her. They discussed the new easement, and he specifically told her that the easement would accept drainage from the Tice development, although he made no mention of the detention basin of which he was unaware. Roscoe, who was present at the closing, also insisted that the easement was discussed.

Honig claimed that Katherine expressed no concerns. He recalled that, at the request of Sterlington's counsel, Katherine acknowledged the existence of the new easement and the presence of a bypass pipe on the property previously installed by Roscoe, by signing off on a copy of a portion of the plot plan that depicted both features. Although Katherine admitted that she signed off on a copy of a portion of this plot plan, she maintained that she thought that she was simply confirming that a bypass pipe had been removed. However, she insisted that when Sterlington's counsel asked her to sign "just for the record" and Honig offered no comment, she signed the paper that was thrust at her as she was walking out the door. She admitted that she was given a copy of this document to take home, but stated that she never looked at it again.

The precipitating event that prompted further action occurred in June 2002, when plaintiffs discovered that the water in their pond had turned brown. Katherine met with the Borough Engineer who advised her that soil remediation was taking place on the Tice property. Katherine requested that the Borough stop the silt from polluting her pond but received no relief. She consulted an attorney who asked to see the survey of and any other documents pertaining to her property. She subsequently wrote to Honig in early July, asking for the original purchase contract, the closing statement, the title commitment and any DEP surveys or permits in his possession.

By fax dated July 10, 2002, Honig advised her that he did not have the "original DEP documents or surveys" but that Conklin Associates could provide them. He did forward to her a copy of the 2001 deed of easement and a 2001 letter from the title company advising that the easement was being added to the title commitment. She did not receive a copy of the final title policy from Honig until September 2002. She also secured from Conklin a copy of the "As-Built Survey Plan" dated December 6, 2001, which depicted the 2001 easement.

At trial, Katherine denied that she ever saw, until trial, the December 5, 2001 survey prepared for her and her husband in connection with their mortgage. She believed that she was intentionally deceived from the beginning by Sterlington and Honig and that Honig had in no way protected her interests. Both she and John indicated that they would not have bought the home had they known of the easement and the effect it would have on their property.

Following Katherine, the judge heard from a series of experts. Attorney Dennis Gonski, an expert in title matters, opined on behalf of plaintiffs that easements are read literally and are restrictively construed. He claimed that if the at-issue easement was to receive drainage from lot 6, it should have said so. He further asserted that the language of the easement did not authorize the proposed construction within its bounds. He conceded, however, that the 1997 resolution requiring the easement did mention the future detention basin. Yet, Gonski found this to be more proof that the easement language should have been more specific or complete.

Attorney Juan Ryan, The Ridge's title expert, challenged Gonski's opinion and concluded that it was irrelevant that drainage from lot 6 was not specifically mentioned in the easement. He stated that it was clear from all of the plans on file that there was one drainage plan encompassing both of the Tice lots. Ryan found it incomprehensible that the Board would have approved an integrated drainage plan and then acquired an easement that benefited only lot 5. Ryan further maintained that, even if the easement were construed as limited to lot 5, drainage from lot 6 could still be included as long as there was no substantial, unreasonable impact on plaintiffs' property.

Barry Krauser, a real estate appraiser, opined on behalf of plaintiffs that the purchase price of the home in December 2001 accurately reflected its fair market value at that time without the 2001 easement. Krauser did not believe that the 1965 easement in any way affected the value of the property but claimed that the existence of the 2001 easement with the proposed large concrete structure would have an unspecified negative effect on the value of the property.

In his report dated October 16, 2005, Krauser also valued plaintiffs' property as of December 21, 2001, with the 2001 easement. However, because Krauser relied upon an excluded report dated October 14, 2005, prepared by plaintiffs' engineering expert John Thonet, in preparing this valuation, he was not permitted to testify regarding this lower valuation. The reduction urged by Krauser was not for a general loss in value due to the easement, but for the cost to remediate ("cure") the property as per Thonet. In his report, Krauser noted that he was assuming that The Ridge would gain all necessary approvals to move ahead with its development at some point in the future. He also made the "extraordinary assumption" that the costly and complex "cure" proposed by Thonet would be approved and permitted by all necessary governing bodies. Krauser conceded, in his report, that a reevaluation would be necessary if these events did not come to pass.

Real estate appraiser Joseph Perna opined on behalf of defendants that he agreed with Krauser that plaintiffs' property was worth $2,325,000 in December 2001. He likewise agreed with Krauser's conclusion (to which Krauser did not testify) that plaintiffs' property had increased in value to $3,500,000 as of October 2005. However, Perna maintained that the 2001 easement did not reduce the value of the property. He conceded that the headwall could be unsightly, but insisted that if it were visible only from the more northerly of the two bridges on plaintiffs' property and obscured to some extent with vegetation, it would not be problematic in the way energy or phone towers would be.

Plaintiffs proffered attorney William Voorhees as an expert in legal malpractice. He concluded that Honig had a duty to perform a diligent investigation into the nature and extent of the drainage easement and the neighboring development both prior to the time the contract was signed and when he received the amended title binder in early December 2001. He violated his duty of care when he failed to do so. According to Voorhees, Honig further violated his duty to plaintiffs when he failed to thoroughly explain the easement and its potential disadvantages to them. In Voorhees' view, the easement was a "red flag," i.e., trouble waiting to happen. Voorhees believed that these deviations by Honig denied plaintiffs the opportunity to walk away from the property. He conceded, though, that he was not aware that the property had recently been appraised for fifty percent more than the purchase price.

Attorney Harold Ritvo served as Honig's expert. Ritvo noted that the 2001 easement appeared on the survey commissioned by Honig and presented to plaintiffs at the closing. The easement and its implications were very clearly depicted on this survey. The easement itself was attached to the amendment to the title report, which was also presented at closing.

According to Ritvo, Honig was obligated to advise plaintiffs of the existence of the easement and explain its significance, i.e., that water would be drained through it and that there could be no construction within it other than by the holder. In Ritvo's view, assuming Honig so advised plaintiffs prior to the closing, he satisfied his duty to them. Ritvo acknowledged that if no survey had been ...


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