June 3, 2011
SOON Y. CHUNG, PLAINTIFF-APPELLANT,
YOUNG HEE JANG, DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Law Division, Special Civil Part, Bergen County, Docket No. DC-27765-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted March 29, 2011
Before Judges Waugh and St. John.
Plaintiff Soon Y. Chung appeals from an order dismissing her complaint with prejudice and an order directing her to pay defendant Young Hee Jang's counsel fees in the amount of $2,000 as a sanction for frivolous litigation. After reviewing the record and applicable law, we affirm.
In March 2007, IBC Realty acted as a broker and plaintiff's husband as the IBC salesperson for a house sale. Plaintiff alleges that her husband received a commission of $13,750 for that sale. Two years later, her husband wrote a check for $6,000, payable to defendant, drawn on the couple's joint bank account. On the memo line of the check, plaintiff's husband wrote a notation that the payment was for "comm. Air Purifier." Plaintiff characterizes the components of the check as being a $4,500 commission payment for the 2007 real estate sale and a $1,500 reimbursement for equipment replacement. Plaintiff contends that the commission payment by her husband to defendant violated plaintiff's rights under the Real Estate Licensing Act, N.J.S.A. 45:15-1, which states in pertinent part, that "[n]o person shall engage either directly or indirectly in the business of a real estate broker, broker-salesperson or salesperson . . . without being licensed so to do as hereinafter provided." She asserts that, in 2009 when the payment was made by her husband, defendant lacked such a license.
Plaintiff filed a complaint in the Special Civil Part, alleging that defendant's receipt of the alleged "commission," in violation of N.J.S.A. 45:15-1, was wrongful, and that plaintiff is entitled to the return of the funds paid out of her joint bank account.
On October 21, 2009, defendant's attorney sent a letter to plaintiff's attorney, in compliance with Rule 1:4-8(b)(1), demanding that the complaint be dismissed. A default judgment was entered against defendant on November 9, 2009, but upon defendant's application, the matter was reinstated.
On the trial date, defendant moved to dismiss the complaint based on plaintiff's lack of standing. The judge took testimony, and the plaintiff admitted that:
The real purpose of this litigation is not to collect money. I wanted to prevent my husband from conducting an illegal business in secret. At first I only found out about this one transaction with this house right after that and I have no idea about various telephone numbers.
The motion judge ruled that plaintiff lacked standing and dismissed the complaint with prejudice. The judge gave the defendant an opportunity to respond in writing to defendant's motion for attorney's fees, but the record does not indicate any response. On June 1, 2010, the judge entered the order dismissing the case and ruled that the litigation was frivolous pursuant to N.J.S.A. 2A:15-59.1. Plaintiff was ordered to pay defendant $2,000 in attorney's fees as a sanction. Plaintiff now appeals from that order.
On appeal, plaintiff contends that the judge erred in dismissing her complaint and awarding counsel fees. We disagree.
In assessing the dismissal of a complaint under Rule 4:6-2(e),*fn1 the trial judge must "'search . . . the complaint in depth and with liberality to ascertain whether the fundament of a cause of action may be gleaned even from an obscure statement of claim, opportunity being given to amend if necessary.'" Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989) (quoting Di Cristofaro v. Laurel Grove Mem'l Park, 43 N.J. Super. 244, 252 (App. Div. 1957)); see also Banco Popular N. Am. v. Gandi, 184 N.J. 161, 165 (2005). The review must be performed in a manner that is "generous and hospitable." Printing Mart, supra, 116 N.J. at 746. The judge's role is simply to determine whether a cause of action is "'suggested'" by the complaint. Ibid. (quoting Velantzas v. Colgate-Palmolive Co., 109 N.J. 189, 192 (1988)).
To the extent that the trial court's decision implicates legal principles, we independently evaluate those legal assessments de novo. See Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995); Finderne Mgmt. Co., Inc. v. Barrett, 402 N.J. Super. 546, 573 (App. Div. 2008), certif. denied, 199 N.J. 542 (2009).
Our review of the trial court's decision to award sanctions is limited to determining whether the award of such sanctions constituted an abuse of discretion. Ferolito v. Park Hill Ass'n, 408 N.J. Super. 401, 407 (App. Div.), cert. denied, 200 N.J. 502 (2009). "Reversal is warranted when 'the discretionary act was not premised upon consideration of all relevant factors, was based upon consideration of irrelevant or inappropriate factors, or amounts to a clear error in judgment.'" Ibid. (quoting Masone v. Levine, 382 N.J. Super. 181, 193 (App. Div. 2005)).
Plaintiff argues that the trial court incorrectly found that she lacked standing to sue defendant. She contends that she has exhibited a "slight additional private interest," since her joint checking account was debited, and that this interest is enough to establish standing under New Jersey State Chamber of Commerce v. New Jersey Election Law Enforcement Commission, 82 N.J. 57 (1980). Plaintiff's claim is void of any indication of anyone suffering any modicum of harm other than her, and fails to address any public interest that would be furthered by her claim. As such, the standard upon which she has relied is misplaced. The standard in New Jersey State Chamber of Commerce is an "exception to conventional requirements of standing" reserved for situations in which a plaintiff's particular private interests "coincide with a strong public interest." Id. at 69. Where "the harm to others has been demonstrated," plaintiff would have standing even if plaintiff was "able to show only slight or indirect injury to [herself]." Id. at 68.
At the motion hearing, plaintiff agreed with the trial judge's statements that "[her] complaint has to do with her husband allegedly [giving] money to [defendant]" and "that the reason [plaintiff is] complaining about it is that [plaintiff's] husband, not [plaintiff], but [plaintiff's] husband should not have given it to [defendant] because [defendant] does not have a real estate license." This information led the judge to conclude that plaintiff had "absolutely no standing to sue [defendant]. . . . [Defendant] did not go into [plaintiff's] bank account and take money from you fraudulently of any kind. These [were] all acts of [plaintiff's] husband."
Defendant was given a properly issued check from a joint bank account. The Multiple-party Deposit Account Act, N.J.S.A. 17:16I-1, defines a "Joint account" as "an account payable on request to one or more of two or more parties whether or not mention is made of any right of survivorship, and regardless whether the names of the parties are stated in the conjunctive or in the disjunctive." N.J.S.A. 17:16I-2(d). An "Account" is statutorily defined as being "any deposit or credit account with a bank, including a demand, time, savings, passbook, share draft, or like account, other than an account evidenced by a certificate of deposit." N.J.S.A. 12A:4-104(a)(1). A "Customer" is defined as "a person having an account with a bank or for whom a bank has agreed to collect items, including a bank that maintains an account at another bank." N.J.S.A. 12A:4-104(a)(5). Her husband was a customer of a bank at which he held a joint account with plaintiff. Her husband had the right to issue a check to defendant and that payment does not give rise to a valid cause of action by plaintiff.
The judicial remedy sought by plaintiff is to prevent her husband from conducting an illegal business in secret. She was attempting to assert a private cause of action to enforce the Real Estate Licensing Act. We therefore address whether there can be a private cause of action concerning a violation of the Real Estate Licensing Act and its implementing regulations, or whether such enforcement is limited to actions brought by the New Jersey Real Estate Commission or the Attorney General under the statutory scheme for regulating professional and occupational activities.*fn2
The Legislature allocated the enforcement provisions for the Real Estate Licensing Act, as well as other professional-and-occupational statutes, to the Uniform Enforcement Act (UEA), N.J.S.A. 45:1-14 to -27. The Legislature determined that "effective implementation of consumer protection laws and the administration of laws pertaining to the professional and occupational boards . . . require uniform investigative and enforcement powers and procedures and uniform standards for license revocation, suspension and other disciplinary proceedings by such boards." N.J.S.A. 45:1-14. The UEA specifically authorizes the Consumer Affairs Director, the various boards and commissions, and the Attorney General to take enforcement action. Available remedies include revocation or suspension of licenses, orders to cease and desist from engaging in unlicensed or improper activities, and the imposition of fines and related costs. See N.J.S.A. 45:1-21 and -22 (suspension or revocation of licensure and other remedies with respect to licensees); N.J.S.A. 45:1-23 (injunctive relief and civil penalties for unlicensed practice).*fn3
The Real Estate Licensing Act and the UEA do not specifically provide for private enforcement actions. Our courts "have been reluctant to infer a statutory private right of action where the Legislature has not expressly provided for such action." R.J. Gaydos, Ins. v. Nat'l Consumer, 168 N.J. 255, 271 (2001). In determining whether a statute permits "an implied private right of action" we must consider the following factors: whether "plaintiff is a member of the class for whose special benefit the statute was enacted"; "any evidence that the Legislature intended to create a private right of action under the statute"; and whether "it is consistent with the underlying purposes of the legislative scheme to infer the existence of such a remedy." Id. at 272 (citing Cort v. Ash, 422 U.S. 66, 45 L. Ed. 2d 26, 95 S. Ct. 2080 (1975)). The Court generally does not infer a private right of action "where the statutory scheme contains civil penalty provisions." Id. at 274 (citations omitted). Plaintiff was not party to the underlying real estate transaction.
Plaintiff is not a "member of the class for whose special benefit the statute was enacted." The purpose of the Real Estate Licensing Act is to protect members of the public from unskilled practitioners and unscrupulous practices. See N.J.S.A. 45:1-18.1 ("The regulation of certain professions or occupations . . . is necessary to protect the health, safety and welfare of the residents of this State.").
Also, we find nothing in the language or history of the Real Estate Licensing Act that would support a finding that the Legislature "intended to create a private right of action" to enforce the licensing requirements.
Plaintiff's cause of action would not be consistent with the underlying purposes of the legislative scheme. The UEA's structure calls for a "uniform" approach to investigation and enforcement through the regulatory process it establishes. In addition, the UEA allows the Attorney General, but not individuals, to commence actions in the Superior Court for injunctive relief and the imposition of penalties with respect to unlicensed activities. It is clear to us that a private cause of action would be patently inconsistent with the approach embodied in the UEA.
Although we do not disagree with the judge's basis for dismissing the action based on a lack of standing, we rest our decision on our finding that plaintiff had no cause of action or "implied private cause of action" to enforce the Real Estate Licensing Act. Consequently, we affirm the dismissal of her complaint.
Plaintiff also contends that sanctions for frivolous litigation should not have been imposed because her action lacked the bad faith required for such a sanction. We disagree.
N.J.S.A. 2A:15-59.1 addresses the frivolous conduct of litigants and provides that a plaintiff or defendant who prevails in a case "may be awarded all reasonable litigation costs and reasonable attorney fees . . . if the judge finds at any time during the proceedings or upon judgment that a complaint, counterclaim, cross-claim or defense of the non-prevailing person was frivolous." N.J.S.A. 2A:15-59.1(a)(1). Frivolous conduct exists where the trial judge finds "on the basis of the pleadings, discovery, or the evidence presented" that either:
(1) The complaint, counterclaim, cross-claim or defense was commenced, used or continued in bad faith, solely for the purpose of harassment, delay or malicious injury; or
(2) the non-prevailing party knew, or should have known, that the complaint, counterclaim, cross-claim or defense was without any reasonable basis in law or equity and could not be supported by a good faith argument for an extension, modification or reversal of existing law. [N.J.S.A. 2A:15-59.1(b) (emphasis added).]
N.J.S.A. 2A:15-59.1 and Rule 1:4-8 represent limited exceptions to the general approach of the "American Rule" for civil justice, whereby litigants are expected to bear their own counsel fees. Traditionally, our courts have strictly adhered to the American Rule because "sound judicial administration will best be advanced by having each litigant bear his own counsel fees." First Atlantic Federal Credit Union v. Perez, 391 N.J. Super. 419, 425 (App. Div. 2007) (citing Gerhardt v. Continental Ins. Co., 48 N.J. 291, 301 (1966)). We have approached fee-shifting requests under the frivolous litigation statute and associated court rule restrictively, because "the right of access to the court should not be unduly infringed upon, honest and creative advocacy should not be discouraged, and the salutary policy of the litigants bearing, in the main, their own litigation costs, should not be abandoned." Gooch v. Choice Entertaining Corp., 355 N.J. Super. 14, 18 (App. Div. 2002) (citation omitted); see also Belfer v. Merling, 322 N.J. Super. 124, 144 (App. Div. 1999); Venner v. Allstate, 306 N.J. Super. 106, 113 (App. Div. 1997).
Plaintiff argues that a showing of bad faith is required by statute in order for a sanction such as attorneys fees to be awarded. However, N.J.S.A. 2A:15-59.1 states that attorneys' fees may be awarded if the litigant's complaint was instituted in bad faith or if the non-prevailing party "knew, or should have known, that the complaint . . . was without any reasonable basis in law or equity and could not be supported by a good faith argument for an extension, modification or reversal of existing law" (emphasis added).
Plaintiff's complaint failed to form a basis for a cause of action on her part to object to the purported business practices of her husband. Additionally, the statute that her complaint relied upon N.J.S.A. 45:15-1, evidences no intent to protect plaintiff from the perceived harm she suffered, which amounts solely to a person to whom she has no connection allegedly receiving a portion of a real estate commission without a license. Plaintiff stated, "[T]he reason why I came to this court . . . was not to collect money. I wanted to prevent my husband from conducting an illegal business in secret. . . . My original purpose of this litigation was to stop my husband from conducting an illegal business." This demonstrates that plaintiff knew, or should have known, that her complaint lacked any reasonable basis in law or equity.
Rule 1:4-8(b) allows avoidance of the attorney-fee sanction where, after given notice and demand pursuant to Rule 1:5-2, the adverse party withdraws the offending paper within twenty-eight days of service. Pressler & Verniero, Current N.J. Court Rules, comment on R. 1:4-8(b) (2011). Although notice and demand in compliance with the rule was given, plaintiff did not withdraw her complaint within the twenty-eight day period and therefore does not qualify for the rule's protection.
We will not disturb the judge's exercise of discretion in finding that plaintiff's complaint was frivolous, and the concomitant order that plaintiff pay the attorney's fees.
Plaintiff also argues that the doctrine of unclean hands should bar an award of attorney's fees. We disagree.
The doctrine of unclean hands is an "equitable principle that a court should not grant relief to one who is a wrongdoer with respect to the subject matter in suit," and its application is left to the court's discretion. Borough of Princeton v. Bd. of Chosen Freeholders, County of Mercer, 169 N.J. 135, 158 (2001). This maxim of equity is applied when "the misconduct is connected with the matter in litigation." Feldman v. Urban Commercial, Inc., 78 N.J. Super. 520, 533 (Ch. Div. 1963), aff'd, 87 N.J. Super. 391 (App. Div. 1965).
Defendant's actions amounted to receiving a check from a joint bank account issued by one of the persons named on the account. We see no basis to overturn the motion judge's exercise of discretion.