October 8, 2009
D&EACUTE;COR HOMES, INC., PLAINTIFF-RESPONDENT,
AUDREY NEVITSKY, DEFENDANT/THIRD-PARTY PLAINTIFF-APPELLANT,
COLDWELL BANKER REAL ESTATE SERVICES, INC., ANITA GATTO, INDIVIDUALLY, PAUL G. GIBLIN, JR., ESQ., INDIVIDUALLY, LAW OFFICES OF GIBLIN & GIBLIN, RALPH DAY, INDIVIDUALLY, THIRD-PARTY DEFENDANTS-RESPONDENTS.
On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-8561-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 21, 2009
Before Judges Lisa and Alvarez.
Audrey Nevitsky appeals from the November 21, 2008 order denying her motion to reinstate her answer (which included a counterclaim) and third-party complaint, and the December 22, 2008 order denying her motion for reconsideration. Nevitsky's pleadings were stricken for failure of her or her attorney to appear at a mandatory civil arbitration. See R. 4:21A-1; R. 4:21A-4(f). Nevitsky argues that the trial judge erred in entering the orders because she made the requisite showings of good cause for failure to appear, and the presence of a meritorious defense as to the claim against her and a meritorious basis for the claims she asserted against other parties. We agree with Nevitsky and reverse.
Nevitsky purchased a home from Décor Homes, Inc. for $1.41 million. The closing was conducted on September 14, 2005. However, Décor Homes had not obtained a certificate of occupancy (CO). Accordingly, Nevitsky could not occupy the home. It was represented to her that the CO would be obtained within about two days. As security, and to provide an incentive to Décor Homes to promptly obtain the CO, $5000 of the settlement proceeds was withheld from Décor Homes and placed in escrow. However, about a three-month delay occurred and a CO was not issued until December 12, 2005.
Nevitsky refused to authorize release of the $5000 to Décor Homes. She contended that the expenses she incurred as a result of the three-month delay greatly exceeded $5000. She contended she incurred expenses for rental and hotel fees, attorney's and engineering fees associated with the need to obtain a variance required for the issuance of a CO, and costs associated with the removal of the paver patio that had been installed.
Décor Homes filed this action against Nevitsky demanding return of the $5000. In its complaint, Décor Homes set forth the closing date, the absence of a CO at that time, the agreement regarding the $5000 escrow, and the three-month delay culminating with the issuance of a CO on December 12, 2005. Nevitsky admitted those allegations. As a result, those facts are established by the pleadings and they are not disputed.
Nevitsky retained counsel different than the attorney who represented her at the closing. She filed an answer and counterclaim against Décor Homes. She also filed a third-party complaint against the attorney who represented her at the closing, the real estate agency and one of its individual agents, and an individual associated with Décor Homes. She made various claims against these parties. We need not describe them in detail. We merely comment that they included a claim of legal malpractice against her prior attorney, and claims against the other parties including breach of contract, misrepresentation, and a consumer fraud act violation.
In due course, all parties adverse to Nevitsky filed responsive pleadings. On October 11, 2006, Nevitsky moved to transfer the case from the Special Civil Part to the Law Division. In support of the motion, it was represented to the court that Nevitsky incurred damages as outlined above, which were in excess of the jurisdictional limit of the Special Civil Part. The motion was not opposed by any party. An order was entered on November 3, 2006 granting the motion, which the court found "meritorious on its face."
Discovery was conducted. The arbitration hearing was first scheduled for November 13, 2007. With the consent of all parties, it was postponed until December 11, 2007, and further postponed until May 6, 2008. On that date, Nevitsky's attorney failed to appear. It was later learned that Nevitsky's attorney had ceased practicing law, closed her office, terminated her telephone and email services, placed her house up for sale, and, it is believed, relocated to Australia. None of this was known to Nevitsky.
No arbitration hearing was held and no arbitration award was rendered. The trial court entered two orders on May 6, 2008, one suppressing Nevitsky's answer (which included a counterclaim against Décor Homes), and the other dismissing her third-party complaint.
Upon learning that her litigation attorney had absconded, Nevitsky hired her present counsel. Unable to contact Nevitsky's prior attorney and to obtain a substitution of attorney, the new attorney filed an appearance of counsel together with a motion to reinstate Nevitsky's answer and third-party complaint. The motion was opposed, and an order was entered on November 21, 2008 denying the motion. The basis for denial was that, in the absence of a substitution of attorney, prior counsel was still the attorney of record and the newly-retained attorney was not authorized to file a motion on Nevitsky's behalf.
The newly-retained counsel moved for reconsideration. In doing so, counsel explained to the court the circumstances of prior counsel absconding. The motion again sought reinstatement of Nevitsky's pleadings, arguing substantively that the negligence of Nevitsky's prior counsel established good cause, that there was no prejudice to any other party, and that a meritorious defense to Décor Homes' claim existed and that Nevitsky's affirmative claims were meritorious. The facts and circumstances relating to the merits of Nevitsky's defense and claims were set forth in a certification of counsel, which included undisputed facts as we have set forth and a recapitulation of the allegations contained in Nevitsky's pleadings. The certification also contained a hearsay conclusory statement that because of the three-month delay in obtaining a CO, Nevitsky incurred more than $23,000 in extra living expenses and other damages to her house in excess of $150,000.
The judge denied the motion. The judge acknowledged that attorney negligence could provide a basis for the required good cause showing, and that the dismissal here was attributable to the negligence of Nevitsky's prior attorney. However, the judge found an absence of a meritorious defense or a meritorious basis for Nevitsky's affirmative claims. The judge stated that "Ms. Nevitsky's moving papers do not provide a meritorious defense. The papers neither explain why Ms. Nevitsky has [a] valid defense against Plaintiff nor assert the validity of her claims against the Third-Party Defendants."
Rule 4:21A-4(f) provides:
(f) Failure to Appear. An appearance on behalf of each party is required at the arbitration hearing. If the party claiming damages does not appear, that party's pleading shall be dismissed. If a party defending against a claim of damages does not appear, that party's pleading shall be stricken, the arbitration shall proceed and the non-appearing party shall be deemed to have waived the right to demand a trial de novo. Relief from any order entered pursuant to this rule shall be granted only on motion showing good cause and on such terms as the court may deem appropriate, including litigation expenses and counsel fees incurred for services directly related to the non-appearance.
In this case, Nevitsky was both a defendant and an affirmative claimant. By the terms of the rule, her non-appearance properly resulted in dismissal of her affirmative claims. However, with respect to the claim by Décor Homes against her for return of the $5000 escrow, the arbitration should have proceeded and the arbitrator should have rendered whatever award was deemed appropriate, which then could have been submitted to the court for reduction to judgment. Although the record before us is unclear, it appears that this was not done. At oral argument, counsel who were involved in the arbitration proceeding could not say otherwise. Thus, it is unclear what has happened to the $5000 that was being held in escrow. Décor's complaint was apparently dismissed, thus constituting the final judgment. We are not aware of any order entered by the court authorizing return of the $5000 to Décor Homes.
In any event, we now turn to the standard for relief from a dismissal occasioned by non-appearance at an arbitration hearing. A party seeking such relief must show good cause and a meritorious defense or a meritorious basis for any affirmative claims. SWH Funding Corp. v. Walden Printing Co., 399 N.J. Super. 1, 9-12 (App. Div. 2008).
Good cause is a flexible concept in this context, and requires a fact-sensitive consideration of the circumstances of each case. Del. Valley Wholesale Florist, Inc. v. Addalia, 349 N.J. Super. 228, 232 (App. Div. 2002). The standard is analogous to that required for vacating a default judgment, and as such it "should be viewed with great liberality, and every reasonable ground for indulgence is tolerated to the end that a just result is reached." Ibid. (citations omitted). Carelessness or inadvertence of counsel may constitute the required good cause, as long as the delay does not prejudice any adverse party and a rational application under the circumstances presented favors a determination that provides justice to the litigant seeking relief. SWH Funding, supra, 399 N.J. Super. at 10 (citations omitted). In such circumstances, and applying this standard, absent demonstrable prejudice, "it is neither necessary nor proper to visit the sins of the attorney upon his [or her] blameless client." Ibid. (citations omitted).
We agree with the trial judge's determination that good cause was established here. Nevitsky's prior attorney terminated her law practice and disappeared from the area. That attorney was negligent in failing to attend the arbitration hearing, seek a further postponement, inform Nevitsky of the need to obtain new counsel, or take such other action as would protect Nevitsky's litigation interests. No adverse party has demonstrated any prejudice by the delay of several months after the dismissal, leading up to the application by Nevitsky's new attorney to reinstate her case.
We part company with the trial judge regarding a meritorious defense and claims. To satisfy this requirement, a litigant need only set forth a "good faith assertion of a meritorious defense" or a meritorious basis for his or her affirmative claims. Id. at 11-12 (citations omitted). Nevitsky satisfied that standard here. It is undisputed that there was a three-month delay in obtaining a CO, which precluded Nevitsky from occupying the home she had purchased during that time. When Nevitsky moved to transfer the case to the Law Division, she asserted that her affirmative claims exceeded the jurisdictional limit of the Special Civil Part. No party took issue with that assertion and no opposition was filed by anyone. In granting the motion, the trial court found the basis for Nevitsky's assertion "meritorious on its face."
The same conclusion pertains in the procedural posture that brings this case to us. If there were nothing more to support the assertion of a meritorious defense and claims than counsel's hearsay statements, we might view the matter otherwise. However, there is more, including the undisputed facts established by the pleadings, the prior unopposed finding that Nevitsky had meritorious claims exceeding the jurisdictional limit of the Special Civil Part, and the consequences that would naturally flow from the events that occurred at and in the aftermath of this closing. Those events included the absence of a CO, the establishment of an escrow that might well be found to have been inadequate under the circumstances, the need for a variance to obtain a CO, a protracted delay to accomplish that end, and the potential that misrepresentations were made by various parties. The threshold for setting forth a good faith assertion that a party's litigation positions are meritorious was satisfied here.
Finally, Rule 4:21A-4(f) authorizes the imposition of terms as a condition of reinstatement, "including litigation expenses and counsel fees incurred for services directly related to the non-appearance." On remand, any party may seek relief under this provision, which will be decided in the trial court's sound discretion.
Reversed and remanded for further proceedings.
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