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Debra Ann Lombardi v. Christopher J. Masso

August 26, 2011

DEBRA ANN LOMBARDI, PLAINTIFF-RESPONDENT,
v.
CHRISTOPHER J. MASSO, JOHN M. TORRENCE, MTG PROPERTIES, LLC, JENNIFER LYNCH, AND PRUDENTIAL FOX & ROACH REALTORS, DEFENDANTS-APPELLANTS, AND JAMES GITHENS AND TARA CONSTRUCTION SERVICES, INC., DEFENDANTS.



The opinion of the court was delivered by: Justice Long

SYLLABUS

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

Debra Ann Lombardi v. Christopher J. Masso, et al.

(A-28/29-10) (066488)

Argued March 28, 2011 -- Decided August 26, 2011

LONG, J., writing for a majority of the Court.

In this lawsuit involving a real estate transaction, the Court considers whether the trial judge properly granted summary judgment to the moving defendants.

In 2002, defendants decided to purchase, renovate, and resell a home located in Medford Lakes. According to their plan, defendants Christopher Masso and John Torrence would finance the $180,000 purchase, defendant James Githens would perform the renovations through Tara Construction Company, and defendant Jennifer Lynch, who was a real estate agent, would suggest renovations and marketing strategies and serve as the listing agent. Several of the defendants were related to each other. Lynch was Githens' sister and Masso's cousin by marriage.

In 2003, plaintiff Debra Lombardi viewed the Medford Lakes home, which was practically gutted. Lombardi and her realtor met Lynch and Githens at the house. Githens identified himself as the contractor, explained the plans, and vowed to include Lombardi in the selection of colors and appliances. Defendants accepted Lombardi's $360,000 offer. Githens and Lynch promised that the renovations would be completed before closing. The sales contract, which was signed by Masso and Torrence, indicated that the house was being sold to Lombardi "as is" and that any guarantees, unless set in writing, would be void. However, handwritten into the contract was a notation to "see construction addendum attached." That addendum reflected at least seventy repairs and renovations.

At the closing in July 2003, the house was nowhere near completion. Masso agreed to place $10,000 in escrow to ensure completion of the renovations. Lynch vouched for Masso, and it was at this point that Lombardi first learned that Lynch and Masso were related. It is unclear when Lombardi found out that Lynch and Githens were siblings. The escrow was to be held until August 1, 2003, at which time the renovations, which were attached to the escrow agreement as a punchlist, would be completed and the $10,000 would be released to the Seller. Against her realtor's advice, Lombardi went ahead with the closing. Thereafter, the house remained unfinished. In early August, Githens asked Lombardi to release the escrow funds, claiming that Masso was not providing him with money necessary to complete the work. He provided Lombardi with his $10,000 check as security, and Lombardi signed the form to release the escrow funds. When Githens still failed to complete the work, Lombardi tried to negotiate his check, but it bounced. Lombardi contacted Masso, who expressed surprise that the work was not done and stated that all of the monies had been disbursed. It is unknown who received the escrow money.

Plaintiff filed this lawsuit in January 2004. All of the defendants except Githens and Tara Construction moved for summary judgment on grounds that Githens was an independent contractor hired to renovate the home and was the only party responsible for its condition. They also argued that the home was sold to Lombardi "as is," no misrepresentations were made, and the Consumer Fraud Act did not apply. The trial court granted the motion after finding that Lombardi accepted the property "as is," no agency relationship was established between Githens and the other defendants, defendants did not breach the contract, defendants could not be held liable under the Consumer Fraud Act, and they made no misrepresentations. Lombardi's motion for reconsideration was denied on August 3, 2007. On the same date, the judge conducted a proof hearing and set damages in the amount of $520,000 against Githens, who had defaulted. During the hearing, the judge heard testimony by Lombardi and her expert, and excerpts from Githens' deposition. Following the hearing, the judge wrote a letter to the parties, including the dismissed defendants, informing them that he was going to reconsider, sua sponte, his order granting summary judgment and was scheduling a new hearing on the issue.

At the hearing on November 15, 2007, defendants argued that the judge was without power to reconsider his grant of summary judgment based on what he had heard at the proof hearing. The judge rejected the argument and vacated the grant of summary judgment in favor of defendants. The judge explained that even the original summary judgment record presented genuine issues of material fact regarding agency, breach of contract, misrepresentation, and Consumer Fraud Act violations. He also explained that he had been in error in ruling that real estate professionals are not subject to the Consumer Fraud Act.

The Appellate Division granted defendants' motion for leave to appeal, remanded to the trial court for further findings of fact and conclusions of law, and ultimately reversed the trial court on January 28, 2009. The interlocutory panel did not address the merits of the original grant of summary judgment, and instead held that the judge improperly relied on evidence presented at the proof hearing. The panel reinstated the summary judgment order. Lombardi's motion for reconsideration was denied on June 12, 2009. The final judgment against Githens was entered on July 13, 2009.

On August 28, 2009, Lombardi filed a notice of appeal one day late. Two weeks later, Lombardi filed a motion to extend the time to appeal. The Appellate Division granted that motion, and denied a motion by the defendants to dismiss the appeal. In deciding Lombardi's appeal, the Appellate Division explained that trial courts are free to revisit any interlocutory order for any reason at any time prior to final judgment, and concluded that the law of the case doctrine did not bar the judge from reconsidering the summary judgment order. Finally, the panel held that, based the original record presented to the trial court when it considered the defendants' summary judgment motion, the judge erred in granting summary judgment. The Supreme Court granted certification. 204 N.J. 40 (2010).

HELD: In this case alleging breach of contract and fraud in a real estate transaction, the Appellate Division correctly determined that the trial court's original summary judgment order dismissing several of the defendants was issued in error, the trial judge was well within his discretion in revisiting and vacating the interlocutory summary judgment order, and the law of the case doctrine did not apply to bar reconsideration under these circumstances.

1. In this case, the Court addresses a trial judge's sua sponte exercise of his power to reconsider an interlocutory ruling. The opinion should not be read as approving vexatious, repetitive motions for reconsideration by a disappointed litigant or as limiting, in any way, a judge's power to sanction such conduct. (p. 24)

2. A trial court has the power to review, reconsider and modify its interlocutory orders at any time prior to the entry of final judgment. This power is codified in Rule 4:42-2, which states that an order "which adjudicates fewer than all the claims as to all the parties shall not terminate the action as to any of the claims, and it shall be subject to revision at any time before the entry of final judgment in the sound discretion of the court in the interest of justice." The special power afforded to judges over their interlocutory orders derives from the fact that cases continue to develop after orders have been entered and trial judges continue to think about them. Where a judge later sees or hears something that convinces him that a prior ruling is not consonant with the interests of justice, he has the authority to revisit the prior ruling to right the proverbial ship. However, the judge must provide the parties a fair opportunity to be heard on the subject and, in rendering a new decision, apply the proper legal standard to the facts and explain his or her reasons. Here, during the proof hearing, the judge heard more complete evidence than had been adduced earlier. He advised the parties of his concern and gave them the record of the proof hearing, ample time to prepare, and an opportunity to weigh in on what he was considering. After the rehearing, he wrote an order explaining that he had made legal errors and that there were genuine issues of material fact that had been presented in the original summary judgment record that he had simply missed. The trial judge abided by all of the relevant principles in determining to revisit his summary judgment order. (pp. 18-25)

3. The law of the case doctrine teaches that a decision made in a case should be respected by all other lower or equal courts during the pendency of that matter. It is intended to prevent relitigation of a previously resolved issue. It is only triggered when one court is faced with a ruling on the merits by a different and co-equal court on an identical issue. The doctrine does not apply where, as here, a trial judge is reconsidering his own interlocutory ruling in a case. With regard to Appellate Division's decision on appeal that reversed its own prior interlocutory order reinstating summary judgment, an interlocutory ruling by the Appellate Division generally is not subject to review on direct appeal. Here, however, the interlocutory appellate panel did not perform a merits review, thus preserving for direct appeal the question whether the original grant of summary judgment was correct. Instead, the panel decided only defendants' claim that the judge could not use evidence from the proof hearing in his analysis. The direct appeal, on the other hand, addressed whether the original grant of summary judgment was correct. Although the appellate panel on direct appeal wandered afield in differing with the interlocutory appellate ruling, it was not only empowered to rule on the merits of Lombardi's claim, it was required to do so. (pp. 18-28)

4. There is no merit to defendants' claims relating to irregularities in the filing of Lombardi's appeal. (pp. 28-31)

5. Confining itself to the original summary judgment record because that is the limited issue before it, the Court concludes that there were genuine issues of material fact requiring a trial. Lombardi's claims that defendants conspired to induce her to purchase a wreck of a house, at twice the price they bought it for, by promising renovations that they never intended to complete and, in fact, did not complete, are the subject of conflicting evidence warranting assessment by a jury. (pp. 31-35)

The judgment of the Appellate Division is AFFIRMED.

JUSTICE RIVERA-SOTO, DISSENTING, asserts that every fact that Lombardi adduced to justify vacating the summary judgment was available and known to her before she first responded to defendants' summary judgment motion. He maintains that the consequences of Lombardi's failure to present her best defense to the motion-the entry of summary judgment in favor of defendants-are hers alone and cannot justify upending a properly entered summary judgment secured by parties who fully complied with their obligations.

CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA and ALBIN join in JUSTICE LONG's opinion. JUSTICE RIVERA-SOTO filed a separate, dissenting opinion. JUSTICE HOENS did not participate.

Argued March 28, 2011

On certification to the Superior Court, Appellate Division.

JUSTICE LONG delivered the opinion of the Court.

At the center of this appeal is a straightforward legal question: whether the trial judge properly granted summary judgment to the moving defendants in this action for breach of contract, fraud, misrepresentation, and conspiracy, arising out of a real estate transaction. Unfortunately, that legal question emerges out of what can best be characterized as a procedural swamp.

The trial judge granted summary judgment to five of the seven defendants in December 2006, and denied reconsideration in August 2007. At the same time, he conducted a proof hearing regarding a defaulted defendant. As a result of that hearing, the judge concluded, sua sponte, that the case was more complicated than he had realized, notified the dismissed defendants about his concerns, and scheduled a full hearing for November 2007. After that hearing, in which all parties participated, the judge concluded that he had mistakenly granted summary judgment, pointing out that there were genuine issues of material fact, warranting a trial.

On interlocutory review, the Appellate Division reversed, without addressing the merits of the case. Instead, the panel ruled that the judge could not rely on what he had learned at the proof hearing to revisit the summary judgment order and reinstated that order.

After final judgment, plaintiff filed an appeal as of right challenging the propriety of the original grant of summary judgment. She did not challenge the interlocutory order, although defendants relied on it in defense of the appeal. In its opinion, the panel expressed the view, contrary to that of the interlocutory panel, that the trial judge was within his discretion to reconsider the summary judgment order for any reason in the interests of justice. The panel went on to declare, on the merits, that the summary judgment should not have been granted originally because of the existence of genuine issues of material fact.

Defendants filed a petition for certification in which they claim, essentially, that the interlocutory panel's reinstatement of the summary judgment order should have ended the inquiry. In particular, defendants argue that the interlocutory panel was correct in concluding that the trial judge could not reconsider the prior order based on what he heard at the proof hearing; that the law of the case doctrine prohibited the actions of the trial judge and the direct appeal panel; and that procedural irregularities in plaintiff's filing of the appeal should have barred its review. We granted the petition.

We now hold that the trial judge was well within his discretion in revisiting and vacating the interlocutory summary judgment order; that the law of the case doctrine does not apply to bar reconsideration in the circumstances presented; that plaintiff's appeal was properly considered, despite some missteps in the filing process; and that the Appellate Division correctly determined that the original summary judgment was issued in error. We thus affirm the judgment of the Appellate Division under review.

I. A. 2006 Summary Judgment Record

We turn first to the December 1, 2006, summary judgment record which we view in a light most favorable to plaintiff, the non-moving party. R. 4:46-2(c); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995).*fn1 So viewed, the facts in the record are as follows: In 2002, defendants, John Torrence, Christopher Masso, and James Githens, decided to "flip a property." Masso and Torrence would finance the deal, and Githens, through Tara Construction Services, Inc. (Tara Construction), would complete renovations. Thereafter, Masso, Torrence, and Githens' wife, who had no apparent role in the deal, formed MTG Properties, LLC (MTG) to renovate and sell a house, known as 121 Nokomis Trail, in Medford Lakes, New Jersey.

Defendant, Jennifer Lynch, a real estate agent who is Githens' sister and Masso's cousin by marriage, brought the Nokomis Trail property to MTG's attention and represented MTG in its initial purchase for approximately $180,000. Lynch, who was associated with Prudential Fox and Roach Realtors (Prudential), also proposed renovations and marketing strategies to the group and acted as the listing agent. She received commissions for the purchase and sale of the property.

In 2003, plaintiff, Debra Lombardi, recently divorced, was looking to relocate to the Medford, New Jersey, area, from New York City. She retained Brenda Richmond, of Weichert Realtors, to act as her real estate agent. When plaintiff first visited the Nokomis Trail property with Richmond, it was a wreck --practically gutted. Lynch was present when plaintiff first viewed the house, as was Githens, who identified himself as the contractor for the renovations. Githens explained to plaintiff the plans for the renovations, showed her drawings, and promised to include her in the selection of colors and appliances if she purchased the house. Plaintiff made an offer of $360,000 on the house, which defendants accepted. Githens and Lynch promised plaintiff the renovations would be complete before closing, which was scheduled for June 30, 2003.

Paragraph 14 of the April 22, 2003, sales contract for the house, which was signed by Masso and Torrence individually, stated that the house and property "shall be transferred in the same condition as they now appear . . . . This means that the property is being sold 'AS IS' unless otherwise warranted hereinafter." (Emphasis added). In addition, paragraph 15 of the contract provided: "Seller not liable to buyer after settlement. All warranties, guarantees, representations of seller concerning the property . . . unless otherwise set forth in writing shall be absolutely void after settlement . . . ." (Emphasis added). Paragraph 37F was handwritten into the contract: "See construction addendum attached." That three-page addendum reflected at least seventy repairs and renovations to be completed by the sellers. Included were items such as siding, HVAC systems, floors, windows, steps, sheetrock, lighting, bathroom fixtures and vanities, and a new driveway, to name a few. The addendum, which was signed by Masso and Torrence, stated that the names of the sellers should be changed to MTG Properties.

Plaintiff did not meet Masso until the closing on July 16, 2003. She has never met Torrence. At the closing, the house was nowhere near completion. In fact, Masso left the closing to determine its condition. When he returned, he agreed to place $10,000 in escrow, gave plaintiff a hug and said "he would take care of everything and that he would never let a single mom with twins live in a house in that condition."

Lynch assured plaintiff that Masso's word was good and that "he would not take advantage of family." It was at that point that plaintiff first learned that Lynch and Masso were related. It is unclear when she found out that Lynch and Githens were siblings; what is clear is that she did not know of their relationship when she entered into the contract to buy the house. Plaintiff's real estate expert, Dominic Natale, expressed the opinion that, under N.J.A.C. 11:5-6.4, which requires disclosure of "actual or potential conflicts of interest which the licensee may reasonably anticipate," Lynch should have disclosed to plaintiff her relationship to Masso and Githens.

The escrow agreement, which was signed by Christopher Masso, listed MTG as the seller and Tara Construction as MTG's general contractor. Pursuant to the terms of the agreement, the escrow was to be held until August 1, 2003, by which time, "the Seller, by and through its general contractor [Tara Construction], shall complete the punchlist items and review same with buyer." (Emphasis added). The page of outstanding punch-list items, agreed to between plaintiff and Githens, was attached. The escrow agreement further stated that "[u]pon receipt of notice from Buyer and Seller, Escrow agent shall release the escrow amount to the Seller and this Agreement shall be cancelled and all rights and obligations of the parties under this Agreement shall automatically terminate." (Emphasis added). Thus, the agreement contemplated the completion of all the punch-list items by the seller, MTG, and required consent from both plaintiff and MTG for the release of the escrowed funds.

Despite the escrow agreement, Richmond advised plaintiff not to close on the house. When plaintiff elected to go forward with the closing, Richmond asked her to sign a waiver, releasing herself and Weichert Realty from any liability. The waiver provided that Richmond advised plaintiff "not [to] proceed with the closing on the . . . property at this date due to the amount of work that is still not completed at the time of settlement." Plaintiff signed the waiver.

After the closing, the house remained unfinished. Githens worked on it sporadically but failed to pay the subcontractors and failed to purchase supplies. As a result, little work was completed. Lynch told plaintiff, "she would take care of it, she would speak with him, speak with Chris [Masso] and assured [her] that this work would get done." When plaintiff visited the property with Masso and Lynch to show them its unfinished condition, Masso said he would give Githens one more chance to finish the project. Failing that, he would get another contractor.

In early August 2003, Githens approached plaintiff and asked her to release the escrow funds. He claimed that Masso was not providing him the money necessary to complete the renovations and that he could not finish the job without the escrow funds. He told plaintiff that if she released the money "he would be able to continue working on the house." Githens provided plaintiff a check for $10,000 as security to cover the escrow, and plaintiff signed the form to release the funds. When Githens still failed to complete the work, plaintiff attempted to negotiate his check, but it bounced.

Plaintiff then contacted Masso who expressed surprise that the work had not been completed. At that time, Masso stated that all the monies had been "dispersed." To the contrary, Githens contended that he made it clear to Masso that he had "no more money" and "couldn't do any more work." Githens also said he did not receive the money plaintiff placed in escrow, which was released to MTG Properties. At some point, Masso told Githens not to contact him further, and it is unknown who received the escrow money. With the house still completely unfinished, plaintiff filed suit.

B.

Procedural History

Plaintiff filed a Superior Court complaint on January 13, 2004. The complaint asserted claims against Masso, Torrence, MTG, Githens, Tara Construction, Lynch, and Prudential based on "uncompleted and improperly completed construction work." Included were claims for breach of contract, "legal and equitable fraud," "intentional misrepresentation and/or fraud," Consumer Fraud Act (CFA) violations under N.J.S.A. 56:8-1 to -20, negligence, and conspiracy. The complaint separately alleged breach of warranty against Githens and breach of fiduciary duty against Lynch and Prudential. Prudential's liability was derivative, based on the agency of Lynch.

All defendants, except Githens and Tara Construction, moved for summary judgment. The gravamen of their motion was that Githens was an independent contractor hired to renovate the property and was the only party responsible for its condition. Defendants further argued that: the contract was for the property "as is" and created no further obligation; once the escrow was paid, all parties were released from liability; no misrepresentations were made by them; and the CFA did not apply. In granting the motion, the trial judge found that: plaintiff accepted the property "as is"; no agency relationship was established between Githens and the other defendants; defendants did not breach the contract; no facts supported piercing the corporate veil; defendants made no misrepresentations prior to entering the contract or thereafter; and defendants could not be held liable under the CFA. He issued an order to that effect on December 1, 2006. In August 2007, plaintiff sought reconsideration, which was denied as untimely and without merit on August 3, 2007.

C.

The Proof Hearing

On the same date, the trial judge conducted a proof hearing and set damages in the amount of $520,000, plus $122,425 in counsel fees,*fn2 against Githens, who had defaulted.*fn3 The proof hearing spanned several days during which the court heard live testimony from plaintiff and her damages expert, along with excerpts from Githens' November 29, 2005, deposition. Plaintiff's testimony at the proof hearing was a more detailed version of what was in the summary judgment record. Also, some of the excerpts from Githens' deposition that were submitted were different from those that were provided at the summary judgment phase. On August 6, 2007, the trial judge wrote a letter to all parties, including the dismissed defendants, advising them that he felt it necessary to reconsider his original order granting summary judgment, as a result of what he had heard at the proof hearing. The judge concluded that:

The dynamics of this case appear[] to be far more complicated than the various briefs, certification and perhaps my prior decisions may demonstrate. Thus, in the interest of justice, a second argument will be very important.

Fairness dictates that all of the parties have an opportunity to review the proof hearing proceeding and to make any additional submissions necessary.

The judge notified all parties, including the dismissed defendants, about his concerns and scheduled a hearing on the issue. The parties were provided with audiotapes of the proof hearing, the exhibits, and ...


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