May 17, 2011
EITZ CHAIM FOUNDATION, PLAINTIFF-APPELLANT,
BETH SHOLOM REFORM TEMPLE AND TEMPLE NER TAMID, DEFENDANTS-RESPONDENTS.
On appeal from Superior Court of New Jersey, Law Division, Special Civil Part, Essex County, Docket No. DC-41491-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued April 11, 2011
Before Judges Grall and LeWinn.
Plaintiff Eitz Chaim Foundation appeals from orders dismissing its complaint without prejudice for failure to provide discovery, denying plaintiff's motion to restore the complaint and dismissing it with prejudice on cross-motion of defendants Beth Sholom Reform Temple (Beth Sholom) and Temple Ner Tamid. R. 4:23-5(a)(1)-(2). Finding no reasonable ground for confusion about plaintiff's discovery obligation, no bona fide dispute as to plaintiff's non-compliance, no exceptional circumstances and no abuse of the judge's discretion, we affirm. Ibid.; St. James AME Dev. v. Jersey City, 403 N.J. Super. 480, 485-86 (App. Div. 2008); Cooper v. Consol. Rail Corp., 391 N.J. Super. 17, 22-23 (App. Div. 2007).
The underlying dispute involves a debt on a series of loans from plaintiff to Beth Sholom made during the period from July 2005 through July 2009. Plaintiff and Beth Sholom also entered into a contract pursuant to which plaintiff purchased real estate from them. The parties intended to resolve the amount due on the several loans at closing by way of credit against the amount due from plaintiff. Temple Ner Tamid was interested in the real estate transaction because of its agreement to consolidate with Beth Sholom and accept all of Beth Sholom's assets. Accordingly, Temple Ner Tamid attended the closing and received the net proceeds from the sale of Beth Sholom's real property.
On August 11, 2009, in connection with the closing on the real estate transaction, Chaim Wolfe, on behalf of plaintiff, executed an acknowledgement certifying that "all loans and debts owed by [Beth Sholom] to [plaintiff] are paid in full based upon the credit in the amount of $581,158.02, which was provided to [plaintiff] in the Settlement Statement for the sale" of the property. On August 20, 2009, plaintiff sent an email advising Beth Sholom of a $12,000 error in the loan amount used at closing, which should have been $542,000, not $530,000. According to plaintiff, the contract for purchase and sale of the property provides for subsequent correction of any error in the amount paid at closing.*fn1 When plaintiff advised Temple Ner Tamid of the $12,000 error in November 2009, Temple Ner Tamid declined to authorize the $12,000 payment.
Consequently, plaintiff filed this complaint in December 2009. Defendants answered in February 2010, asserting reliance on an "accord and satisfaction," and Temple Ner Tamid counterclaimed, alleging malicious prosecution.
On March 4, 2010, defendants served a request for production of documents within sixty days. The following were among defendants' requests:
3. A copy of each and every transaction between the plaintiff and [Beth Sholom] in the six years preceding the filing of this
[c]omplaint; including, but not limited to, all payment memoranda, checks, deposit slips, [etc.].
4. As to each transaction between the plaintiff and defendant, [Beth Sholom], annex hereto a true copy of each and every financial statement of the plaintiff which reflects the transactions by and between the plaintiff and [Beth Sholom].
5. Annex hereto a copy of each and every financial statement issued by or maintained by the plaintiff during the six years preceding the filing of this [c]omplaint.
On March 25, 2010, plaintiff moved to dismiss Temple Ner Tamid's counterclaim and disqualify defendants' counsel on the ground that he was a necessary witness. On April 30, 2010, the judge heard argument and entered an order granting the request to disqualify defendants' attorney and denying the application to dismiss defendants' counterclaim without prejudice.
In addition, on April 30, 2010, defendants' attorney filed a motion to bar plaintiff from producing documents at trial that plaintiff had not supplied in response to defendants' document request. The day before the return date of this motion, plaintiff's attorney wrote to the judge requesting an adjournment of that motion on the ground that plaintiff had not responded because defendants had not yet retained a new attorney. Nevertheless, the judge entered an order granting defendants' unopposed motion on June 3, 2010.
On June 14, 2010, defendants' newly retained attorney, Mr. Dwyer, filed a substitution. On June 18, 2010, plaintiff served that attorney with a response to the document request. Four days later, plaintiff filed a motion for reconsideration seeking an order vacating the June 3, 2010 order suppressing documents not provided in discovery. Mr. Dwyer filed opposition to plaintiff's motion for reconsideration.
Between the April 30, 2010 order of disqualification and the June 14, 2010 substitution of defendants' counsel, the initial attorney served plaintiff with a motion to dismiss plaintiff's complaint for failure to produce discovery. On this record, it is not clear whether that motion was filed.
On July 16, 2010, the court heard oral argument on plaintiff's motion for reconsideration and defendants' opposition. Defense counsel noted that defendants had previously filed two motions: "One was a motion to dismiss because of the failure to produce the discovery and the other was a motion to bar the evidence for the use of trial because of the failure to produce discovery."
The judge granted plaintiff's motion to reconsider on the ground that the motion should have been adjourned. The judge asked the attorneys whether they wished to proceed on the merits of the underlying motion or adjourn that argument, and both agreed to proceed.
Defense counsel explained that plaintiff had not yet provided "critical" documents - the documents related to each loan transaction in the series and plaintiff's financial statements reflecting those transactions. Defense counsel argued for a dismissal without prejudice, or in the alternative, an order barring this evidence. Plaintiff's attorney noted that the motion under reconsideration was a motion to suppress documents, not a motion to dismiss without prejudice. In opposition, plaintiff's attorney simply asserted that the documents provided on June 18, 2010 - a summary of the multiple loans, one $12,000 check, a summary sheet of the transactions but no financial statements - were sufficiently responsive.
On July 16, 2010, the judge entered an order dismissing the complaint without prejudice "for failure to timely produce discovery for reasons in papers by defendants." Thus, plaintiff was obligated to fully comply with the original document request, which was appended to the motion filed on April 29, 2010, granted on June 3 and reconsidered on July 16, 2010.
Subsequently, plaintiff produced additional discovery documents on July 29, 2010, and filed a motion to restore its complaint on September 3. On September 20, more than sixty days after the order of dismissal without prejudice was entered, defendants opposed plaintiff's motion and cross-moved for dismissal with prejudice asserting that plaintiff had not fully complied with its document requests. Defendants had received canceled checks advancing the loans, but plaintiff had not produced the financial statements that defendants contended were needed to calculate interest. Defendants noted that the total credit plaintiff received at closing exceeded the total amount loaned and included interest that had to be calculated to determine whether there was an error.
Plaintiff did not contend that it produced the financial statements. Instead, plaintiff's counsel argued that those statements were not likely to lead to the discovery of admissible evidence. In opposition to the cross-motion, plaintiff also asserted that the order of dismissal without prejudice was entered "sua sponte" and without a motion requesting that relief.
Oral argument on plaintiff's motion to restore and defendants' cross-motion for dismissal with prejudice was heard on October 15, 2010, by a judge who had not heard the prior motions. Plaintiff's attorney questioned the propriety and clarity of the prior order of dismissal. On the merits, plaintiff's attorney acknowledged that the financial statements had not been provided to defendants and contended that plaintiff's non-compliance was justified because the statements were irrelevant. He advised the judge that plaintiff would provide the statements if so ordered.
The judge decided to review the recording of the July 16, 2010 argument to confirm that the issue was "properly raised" and addressed. On October 27, the judge entered an order memorializing his consideration of the recording of the motion hearing and stating these determinations: sixty days had expired since entry of the order to dismiss without prejudice; responsive discovery had not yet been provided; and the complaint should be dismissed with prejudice pursuant to Rule 4:23-5(a)(2).
Plaintiff appealed. The notice of appeal filed on November 29, 2010, states plaintiff's intention to challenge the July 16 and October 27, 2010 orders.
The orders under review involve discretionary determinations. Cooper, supra, 391 N.J. Super. at 22-23. Our review is for abuse of that discretion, and this court does not intervene "'unless it appears that an injustice has been done.'" Id. at 23 (quoting Comeford v. Flagship Furniture Clearance Ctr., 198 N.J. Super. 514, 517 (App. Div. 1983), certif. denied, 97 N.J. 581 (1984)).
With respect to the July 16, 2010 order of dismissal without prejudice, plaintiff reopened the question of sanctions for its discovery violation by seeking and obtaining reconsideration. Plaintiff agreed to proceed on the merits even after it became clear that the sanctions defendants were seeking were a dismissal without prejudice or in the alternative, precluding introduction of evidence at trial. There was no question that plaintiff had notice of defendants' position; plaintiff received a motion for dismissal with prejudice served by defendants' prior attorney after his disqualification.
Under these circumstances, there was no surprise and there was acquiescence. In any event, the question of plaintiff's compliance was the same, and the judge did not disserve the interests of justice by ordering relief without prejudice pursuant to Rule 4:23-5(a)(1). Plaintiff could have but did not ask for an adjournment and insist defendants file a motion pursuant to Rule 4:23-5(a)(1). Moreover, because the order was entered without prejudice and because plaintiff subsequently moved to reinstate its complaint, we fail to see how entry of the July 16, 2010 order had any capacity to produce an unjust result. R. 2:10-2. This case is distinguishable from one where the two-tier process for dismissal based on failure to provide discovery was thwarted; for example, because the party subject to the order of dismissal without prejudice was not served with that order. St. James, supra, 403 N.J. Super. at 483-84.
Finding no basis for disturbing the July 16, 2010 order, we turn to consider plaintiff's objections to the order denying its motion to restore and granting defendants' cross-motion to dismiss with prejudice.
Plaintiff was not entitled to restoration of its complaint because it had not "fully and responsively" responded to the document demand as required by Rule 4:23-5(a)(1). To the extent plaintiff argues that its obligation to provide the financial statements was not clear, there was no reasonable basis for any confusion on that point. The financial statements were referenced in the papers defendants submitted on the motion that led to the June 3, 2010 order and during argument on the motion for reconsideration on July 16, 2010.
We also conclude that the judge did not abuse his discretion in ordering the dismissal of the complaint with prejudice. Rule 4:23-5(a)(2) provides:
If an order of dismissal or suppression without prejudice has been entered pursuant to paragraph (a)(1) of this rule and not thereafter vacated, the party entitled to the discovery may, after the expiration of 60 days from the date of the order, move on notice for an order of dismissal or suppression with prejudice . . . . The motion to dismiss or suppress with prejudice shall be granted unless a motion to vacate the previously entered order of dismissal or suppression without prejudice has been filed by the delinquent party and either the demanded and fully responsive discovery has been provided or exceptional circumstances are demonstrated. [Ibid. (emphasis added).]
The requirements for dismissal with prejudice were met and no extraordinary circumstances justifying non-compliance were shown. Sixty days had passed since entry of the order of dismissal without prejudice; the financial statements were not provided simply because plaintiff's attorney deemed them irrelevant; and no "exceptional" circumstance was shown.
Plaintiff's arguments to the contrary are without sufficient merit to warrant discussion in a written opinion.
R. 2:11-3(e)(1)(E). There was no bona fide dispute about the adequacy of the response; the financial statements were available and withheld. See St. James, supra, 403 N.J. Super. at 486-87 (noting that a bona fide dispute as to the adequacy of the answers must be determined before disposition of either a motion to dismiss with prejudice or a motion to restore the dismissed pleading); Zimmerman v. U.S. Services Auto., 260 N.J. Super. 368, 373 (App. Div. 1992) (finding error in a dismissal with prejudice where there was a bona fide dispute about the adequacy of a response). Although nearly a year and a half had passed since defendants demanded the records pursuant to Rule 4:18-1(a), plaintiff had not moved for a protective order and the question of compliance was straightforward - whether or not plaintiff provided the financial statements defendants demanded.