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Joseph Nuzzo and Susanne Nuzzo v. Robert M. Horvath


August 29, 2011


On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L-1776-06.

Per curiam.


Argued March 7, 2011

Before Judges A.A. Rodriguez, Grall and LeWinn.

The multi-party suit that gives rise to the appeal and cross-appeals was dismissed, improperly we conclude, on the ground that plaintiffs' claim for damages was not ripe. We therefore reverse and vacate that order. But because the trial court also granted several defendants summary judgment, we review those judgments and an order denying certain attorney defendants leave to file third-party complaints.

The litigation involves a dispute over responsibility for repair of a dam that has a foundation resting, in part, on two residential properties. Those properties were purchased, respectively, by plaintiffs Joseph and Susanne Nuzzo in 1988 and defendant Peter Lorenz in 1999. Deeds in their chains of title address responsibility for maintaining the dam. Although the dam retains a pond abutting both properties, neither plaintiffs nor Lorenz altered, repaired or maintained it after taking possession.

Responsibility for the dam became an issue in 2004, when the New Jersey Department of Environmental Protection (DEP) directed the owners, first plaintiffs and then Lorenz, to submit for its approval plans to remove or repair and maintain the dam.

Plaintiffs filed their complaint in this action on June 23, 2006. They asserted that until DEP contacted them, they did not know the dam was on their property or that they had any responsibility for it. Accordingly, plaintiffs sought damages, essentially indemnification for costs of compliance with DEP's directives, from all who provided services in connection with their purchase of the property. They alleged that their realtors, defendants Coldwell Banker Relocation Management Services, Inc. through its agent, Roslyn Zencker, made an affirmative misrepresentation in violation of the Consumer Fraud Act, N.J.S.A. 56:8-1 to -20, and breached their contract. They also alleged negligence and breach of contract on the part of their lawyers, defendants Joseph J. Rosta, Jr., of Rosta & Kollar; their surveyor, defendant Robert M. Horvath; and their title insurers, defendants Title USA Insurance Corporation of New York and Nations Title Insurance of New York, Inc. The realtors, attorneys, surveyor and title insurers denied the allegations and filed cross-claims for contribution. Subsequent motions to file third-party complaints and join DEP were denied, but just prior to entry of the order dismissing the case, the court granted the attorneys leave to file a third-party complaint against James Kehoe of Equitable Title & Abstract Co.

In addition, plaintiffs sought to recover a share of the expense of the dam from Lorenz on a theory of unjust enrichment. Lorenz denied liability and counterclaimed for a declaratory judgment quieting title by resolving the question of ownership and responsibility for the dam based on the deeds. In addition, he sought damages for plaintiffs' alleged trespass and encroachment. Plaintiffs were granted leave to file an amended complaint for declaratory relief.


These are the facts pertinent to all issues raised on appeal other than those related to the title insurer and the attorneys, which are discussed in part III.

Plaintiffs first looked at the exterior of the property offered for sale by Willard E. and Carol Gourlay when they were given its listing by Zencker. The following day, Zencker accompanied them to an open house. According to plaintiffs, when Mr. Nuzzo asked about the dam, Zencker told them it was not on the property, and they believed her.

Plaintiffs entered into a contract to purchase for $285,000, and they retained Rosta to represent them in connection with that transaction. Rosta contacted James Kehoe of Equitable Title & Abstract Co., who subsequently obtained a commitment for title insurance from Title USA effective May 2, 1988 and a survey dated June 23, 1988 from Horvath. Horvath certified the survey's accuracy to plaintiffs, Title USA and Rosta. That survey does not show the dam.

Thereafter, a title commitment and a policy were issued. Although the commitment and the title insurance policy both excepted coverage for "conditions and restrictions" that the title insurer described by reference to three deed books where the "similarly worded" conditions and restrictions were set forth, Rosta did not alert plaintiffs to any potential liability with respect to the dam. In his view, the title commitment did not contain anything that gave him reason to suspect that his clients were responsible for the dam. In fact, the deeds found at the pages in the deed books referenced by the title insurer state that the dam shall be maintained by the owner of the property. Plaintiffs nonetheless proceeded to purchase the property for $285,000 and have owned it since.

DEP inspected the dam in 2004, ironically in response to a report from plaintiffs that the water level in the pond was low. By letter of June 28, 2004, DEP advised plaintiffs that the dam's low-level outlet was malfunctioning. The letter further "order[s]" plaintiffs to retain an engineer to inspect the dam "and submit plans and specifications for either the repair or removal of the structure." By July 2004, DEP had identified Lorenz as a second "owner" of the dam and "request[ed]" him to submit his deed and survey. DEP explained that it construes its regulations applying to the "owner" of a dam to include the owner of "any portion of the dam embankment." That interpretation results in each owner becoming a "joint owner." See N.J.A.C. 7:20-1.2 (defining "owner and/or operator" of a dam as whoever owns, operates or maintains it). In August 2004, DEP advised plaintiffs that it was now deeming them "part" owners of the dam.

In September 2004, plaintiffs requested a second survey from Horvath. That survey, dated September 29, 2004, shows the dam. After plaintiffs received that survey, DEP advised plaintiffs and Lorenz, by letter of January 6, 2005, that it would treat them as "joint owners" and that they should cooperate to submit the required inspection, specifications and plans.

Plaintiffs retained an expert who submitted an inspection report in June 2005 indicating that repairs were needed. By letter of October 7, 2005, DEP informed plaintiffs and Lorenz that "the necessary repairs identified in [that] inspection report should be implemented as soon as possible," but after filing an application for and obtaining a permit. It is not clear on this record whether plaintiffs obtained an estimate of the cost of repairs they were directed to make. But DEP also identified studies that plaintiffs had to have done and directed them to submit an operation and maintenance manual, a safety-compliance schedule and proposed plans for removing the dam or bringing it into compliance with DEP standards. As we understand it, removal and repair were options for a long-term solution that did not countermand the direction to do immediate repairs.

In response, plaintiffs submitted a series of reports and plans. By February 14, 2008, their expert presented a plan for removal at an estimated cost of $305,000; and three alternate plans for repair, with estimated costs of $285,000, $290,000 and $480,000. The expert set forth the assumptions underlying the estimates and broke down the expenses - specifying costs for components ranging from engineering studies, support services and permitting fees to bidding and construction. The expert also qualified the estimate with reference to factors that could influence cost, and he clearly indicated that his estimates included a fifteen-percent contingency. Some of the costs did not vary with the plan selected.

DEP has not yet directed plaintiffs to pursue a specific long-term plan. There is no evidence that plaintiffs have incurred any expense to date beyond what they paid their experts to respond to DEP's requests.


On the foregoing facts, the trial court's order dismissing the case must be vacated. As noted at the outset of this opinion, the trial court dismissed plaintiffs' complaint and Lorenz's counterclaim on the ground that they were not ripe for adjudication. The trial court reasoned that because DEP had not yet ordered either plaintiffs or Lorenz to take any action, their damages were uncertain.

The trial court's conclusion is contradicted by the record. See State v. Locurto, 157 N.J. 463, 471 (1991) (discussing our review of a trial judge's findings of fact on a motion). DEP directed plaintiffs to obtain inspections and to submit expert reports, proposals and an application for a permit to make the repairs recommended by plaintiffs' inspector. DEP also directed them to make the immediate repairs recommended by their expert. With the exception of the demand to apply for a permit and make the immediate repairs, plaintiffs complied with all of those demands. In addition, DEP has advised Lorenz to cooperate with plaintiffs in those endeavors.

Regardless of the outcome of any future challenge to DEP's authority to compel either the immediate repairs or a long-term solution, plaintiffs have already incurred measurable damages. The expense of complying with DEP's demands to date is a consequence of their status as "owners" of the property on which one of the dam's embankments is located. See N.J.A.C. 7:20-1.11. Moreover, at least until Lorenz's title dispute is resolved, the expense already incurred is a consequence of their status as "operators" of the dam due to covenants in their chain of title obligating them to maintain the dam. See ibid. Even if we were to assume that plaintiffs cannot prove the full extent of their damages with sufficient certainty until DEP makes a decision, we could not conclude that there is no real controversy as to the damages that have been incurred to date.*fn1

The trial court therefore erred in dismissing plaintiffs' complaint.


The trial court also erred by dismissing Lorenz's counterclaim. That counterclaim raised allegations wholly independent of DEP's actions - trespass, encroachment and a request for declaratory judgment establishing the parties' respective obligations for the dam under their respective deeds. Lorenz's claim based on the deeds was for declaratory relief - plaintiffs' obligation to maintain the dam under the deeds in their chain of title. The claims related to trespass and encroachment in the past do not depend on the dam's future. Furthermore, regardless of whether DEP prevails in or abandons its efforts, the question of day-to-day responsibility for maintenance and repair of the dam under the parties' deeds remains.

Thus, the uncertainty of the extent of the obligation DEP may impose is immaterial to Lorenz's request for declaratory relief. Moreover, the trial court's expressed concern over interference with a matter to be determined by DEP is misplaced. The Supreme Court has held that one who is obligated by DEP to take action, the cost of which is not known, may obtain what is "[i]n essence . . . declaratory relief" in the form of a judgment stating another's obligation to indemnify him. T & E Industries, Inc. v. Safety Light Corp., 123 N.J. 371, 397-98 (1991). The Court relied on a principle of restitution providing for indemnification of one who "'has discharged a duty which is owed by him which as between himself and another should have been discharged by the other.'" Ibid. (quoting Restatement of Restitution § 76 (1937)). Thus, the trial court could and ought to have resolved the questions between the property owners.

For the foregoing reasons, we vacate the order dismissing the counterclaim. To avoid any confusion on remand, we note that the trial court granted plaintiffs leave to file an amended claim seeking declaratory relief against Lorenz on the record on October 3, 2008. Although it is not clear whether plaintiffs filed that amended complaint, for the reasons stated above, they should be permitted to do so.


For these reasons, as well as those given by the trial court, we affirm the trial court's order denying motions to join DEP in this action. The arguments presented do not have sufficient merit to warrant further discussion in a written opinion. R. 2:11-3(e)(1)(E).


Plaintiffs also seek reversal of the grant of summary judgment in favor of Lorenz on their claim of unjust enrichment. The trial court subsequently entertained a motion for reconsideration that effectively reverses that grant of summary judgment; the July 9, 2008 order provides that the claim is dismissed without prejudice and permits the filing of an amended complaint. The court addressed the claim again on October 3, 2008, and noted that its validity was largely dependent upon the resolution of the quiet-title action and could be addressed when that issue was resolved. In this circumstance, there is no reason to consider the initial ruling; we are confident that the trial court will address an appropriate application to file an amended complaint.


Having determined that the case was improperly dismissed and having addressed the claims between the property owners, we turn to the orders granting summary judgment. In this part, we address the judgments entered in favor of the surveyor and the realtors.


Horvath, the surveyor, is entitled to summary judgment on plaintiffs' claims.*fn2 That is so because the claims against the surveyor were extinguished by a statute of repose. N.J.S.A. 2A:14-1.3 provides:

No action whether in contract, in tort or otherwise to recover damages for any deficiency in a survey of real property performed under contract for any purpose other than for any improvement to real property shall be taken against any person performing or furnishing such survey more than 10 years after the performance or furnishing of such survey.

This statute limits the time "within which a judicial remedy may be sought," making it a statute of repose. Rosenberg v. Town of N. Bergen, 61 N.J. 190, 201 (1972) (discussing N.J.S.A. 2A:14-1.1, a ten-year statute of repose applicable to actions for damages based on "any deficiency in the . . . surveying, supervision or construction of an improvement to real property"). Statutes of repose provide a "substantive right" - a right not to be required to defend against claims that are within the statute's scope. Cyktor v. Aspen Manor Condominium Ass'n, 359 N.J. Super. 459, 470 (App. Div. 2003). In effect, statutes of repose "do[] not bar a cause of action; . . . rather, [they] prevent what might otherwise be a cause of action, from ever arising." Rosenberg, supra, 61 N.J. at 199.

Pursuant to N.J.S.A. 2A:14-1.3, the ten-year period prior to repose for a damage claim based on a "deficiency" in the June 23, 1988 survey commenced "after the performance or furnishing of such survey" and expired on June 23, 1998. Regardless of the claim's merit, it had been extinguished for eighteen years when plaintiffs filed their complaint on June 23, 2006. Plaintiffs' argument that the statute does not apply because the survey was incomplete is inconsistent with the statute, which applies to claims alleging any "deficiency" in a survey.

Plaintiffs offer two arguments to establish an exception to the statute. Both are unpersuasive and lack sufficient merit to warrant more than brief discussion. R. 2:11-3(e)(1)(E).

Plaintiffs contend the surveyor "revived" his liability by responding to their 2004 request for a second survey. We recognize that in producing the second survey, which amended the first to show the dam, the surveyor implicitly admitted prior error. Nevertheless, although a second survey, if negligently prepared, could give rise to a new claim, it could not breathe life into an already extinguished one.

Plaintiffs also argue that Greczyn v. Colgate-Palmolive, 183 N.J. 5, 7 (2005), authorizes exceptions to the statute of repose when warranted by the circumstances of a particular case. The Supreme Court held in Greczyn that "when plaintiff's injury and the filing of her lawsuit occur within the period of repose, utilization of our fictitious-party practice allows a previously unknown, although functionally identified, [defendant] to be named after the expiration of the period of repose." Ibid. Because neither the injury nor the filing of plaintiffs' lawsuit occurred within ten years of the survey's completion, Greczyn has no direct relevance here. Moreover, the Court's reasoning provides no support for an exception that would, in effect, operate to toll a statute of repose. Id. at 9-11.


We reverse the grant of summary judgment in favor of the realtors. There is a material question of fact that precludes entry of judgment in their favor as a matter of law. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 529 (1995).

N.J.S.A. 56:8-2 provides that "[t]he act, use or employment by any person of any . . . misrepresentation . . . in connection with the sale or advertisement of any merchandise or real estate, . . . whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice." An assertion of fact about a property, not puffery, is a violation if the facts are false and material to the transaction. Gennari v. Weichert Co. Realtors, 148 N.J. 582, 605-07 (1997). Proof that the false statements were made with "knowledge of the falsity of the misrepresentation, negligence, or the intent to deceive" is not required. Ibid.

Here, plaintiffs testified at their depositions that Zencker told them the dam was not on their property. There is no evidence in the record rebutting that testimony. Accordingly, at minimum, there was a question for a jury to resolve that precluded entry of summary judgment in the realtors favor. Brill, supra, 142 N.J. at 529.

The realtors argue for affirmance on the ground that plaintiffs cannot establish that the alleged misrepresentation was a proximate cause of their injury. Their theory is that plaintiffs' consultation with the attorneys prior to closing is an intervening cause. We have considered those arguments and found them without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). Accordingly, we vacate the grant of summary judgment to them.



Plaintiffs and the attorneys urge us to vacate the grant of summary judgment in favor of the title insurers on plaintiffs' claims of breach of contract and negligence. The attorneys also argue that the court erred in denying their application to file a third-party claim against the title insurers. We affirm both determinations.

The negligence claims against the title insurers were properly dismissed. Title insurance protects the insured against loss from defects in title by "insuring . . . the correctness of searches relating to the title." N.J.S.A. 17:46B-1a. Thus, "a title company's liability is limited to the policy" and "the company is not liable in tort for negligence in searching records." Walker Rogge, Inc. v. Chelsea Title & Guar. Co., 116 N.J. 517, 535 (1989). A negligence theory of liability is only viable if the title insurer has assumed a duty beyond issuing a contract of insurance. Id. at 531, 541-42 (discussing negligence based on issuance of an affidavit of title apart from the title insurance and remanding for consideration of negligence because of evidence that the title insurer assisted in calculation of a per acre purchase price based on misstated acreage).

In this case, there is no evidence that the title insurers did anything other than issue a policy of title insurance. Accordingly, the title insurer was entitled to summary judgment on plaintiffs' negligence claim.

We turn to consider liability under the contract. Title insurers are obligated to conduct "a reasonable examination of the title" so as to make "a determination of insurability of title in accordance with sound underwriting practices for title insurance companies." N.J.S.A. 17:46B-9. Nevertheless, "[t]he expectation of the insured that the insurer will conduct a reasonable search does not necessarily mean that the insurer may not limit its liability in the title commitment and policy." Walker Rogge, supra, 116 N.J. at 541.

Courts read contracts of title insurance like any other contract of insurance. Id. at 529. They do "not write for the insured a better policy of insurance than the one purchased" but construe the policy liberally "against the insurer and in favor of the insured." Ibid. Exceptions to a policy of title insurance - "[d]efects not covered by title insurance," In re Opinion 682 of the Advisory Comm. on Prof'l Ethics, 147 N.J. 360, 366 (1997) - are construed "strictly against the insurer." Amidano v. Donnelly, 260 N.J. Super. 148, 154 (App. Div. 1992), certif. denied, 133 N.J. 435 (1993). To effectively exclude defects, exceptions must be "clearly and unambiguously" stated. Id. at 153.

When there is no ambiguity as to whether a defect falls within a stated exception, summary judgment is appropriate. Id. at 153. If, however, the exception is ambiguously phrased, the principle of "reasonable expectation" applies, and coverage generally presents a question of fact that must be tried. MacBean v. St. Paul Title Ins. Corp., 169 N.J. Super. 502, 509 (App. Div. 1979). The fact-finder must determine whether "a reasonable purchaser of insurance would understand that" there is no coverage for the defect. See ibid.; cf. Amidano, supra, 260 N.J. Super. at 154-56 (discussing and applying the principle to a policy of title insurance and concluding that summary judgment should have been awarded to the insured because the exceptions were drafted in a way that suggested that the defect in issue was covered by the policy).

In Amidano, we implicitly recognized that an exception incorporating a limitation on the insured's use of the property by reference to deed book and page number is adequate to give notice that the limitation, as described in the public record, is not covered by the policy. The policy exceptions included "[e]asements as contained in Deed Book Z-39 Page 484 and Book 2237 Page 943" and "[r]estrictions as contained in Deed Book 2237 Page 943." 260 N.J. Super. at 153 (description of the type of easements added by the court in brackets excluded). We concluded the exceptions' "careful description of easements which [the title insurer] excepted from coverage by reference to the recorded instruments creating them, justifies a reasonable policyholder conclusion that title was insured against easements other than those specific easements, although subject to the exceptions for encumbrances in other named categories." Id. at 155. Thus, we viewed the references to deed books and pages as being sufficiently clear not only to give notice of those restrictions but also to give rise to a reasonable expectation that other similar easements not so identified would be covered by the policy.

Measured against the foregoing standards, the title insurers were entitled to summary judgment. The policy advised plaintiffs that they were not "insured against loss, costs, attorney's fees and expenses resulting from" the exceptions stated in schedule B. Exception six of schedule B provides: "Subject to conditions and restrictions as set forth in Deed Book 2524 page 386 and similarly worded in Deed Book 2582 page 564 and Deed Book 2813 page 431."

The first referenced deed, Deed Book 2524 page 386, is by Stephen I. and Victoria B. Cowan to Bill Newson Jr. Builders, Inc. It describes the property as created by subdivision of Lot 2-1 in Block 38. It includes a metes and bounds description of a property containing "1.840 acres of land more or less." It indicates that the property is "further described as Lot 2-1B in Block 38." The second page of that deed states the condition that "[t]he dam controlling flow of water to the lake shall be maintained and repaired by the owner of Lot 2-1B, Block 38." Thus, this deed gave notice that the owner of the lot conveyed by the Cowans to Bill Newson, Jr. Builders, Inc. - Lot 2-1B in Block 38 - is obligated to maintain and repair the dam.

The second deed referenced in exception six, Deed Book 2582 page 564, links the property conveyed by the Cowans to the property plaintiffs eventually purchased from the Gourlays.

That deed reflects a conveyance by Bill Newson, Jr. Builders, Inc. to Willard E. Gourlay. Like the Cowans' deed to the builder, this deed describes the lot as one created by a subdivision of Lot 2-1 in Block 38. It also provides a metes and bounds description of a property containing 1.840 acres more or less, and it indicates this property is "further described as Block 38, Lot 2-21" on the tax map, which is the number of the lot and block plaintiffs purchased, Lot 2.21, Block 38. The second page of that deed lists the same condition regarding the dam stated in the Cowans' deed to the builder.

The second page of this deed includes one additional paragraph. It immediately follows the paragraph stating the maintenance and repair obligation of the owner of Lot 2-1B, Block 38 and states: "Being the same lands and premises conveyed to Bill Newson Jr. Builders, Inc., by Stephen I. Cowan and Victoria B. Cowan, his wife, by deed . . . in Book 2524, of Deeds, page 386."

The third deed referenced in exception six to the title insurance policy, Deed Book 2813 page 431, is from Willard E. Gourlay, single, to Willard E. Gourlay and Carol Gourlay, his wife. It refers to the property as Lot 2.21, Block 38, provides a metes and bounds description of a 1.840 acre more or less property. That deed states the same condition as the previous two. The paragraph of this deed that follows the repair and maintenance obligation of the owner of Lot 2-1B refers to that property as being the same as the one conveyed by Bill Newson Jr. Builders, Inc. to Willard E. Gourlay.

On these facts, summary judgment was properly entered in favor of the title insurers. Any potential for confusion based on change in the lot numbers reflected on tax maps is eliminated by the first two deeds referenced. To the extent that plaintiffs and the lawyers argue that the reference to these deed books and pages was not sufficient to defeat a reasonable expectation of coverage, the argument is based on a misperception of the scope of that principle.

In our view, the principle of reasonable expectations does not require more than a reference to a "condition" in a page of a deed book. First, that conclusion is consistent with Adimano. Second, an ordinary buyer of residential property would reasonably expect that the insurer would not cover loss due to conditions set forth at the specified page of the specified deed book, regardless of the nature of that condition. Third, title insurers do not replace lawyers; they may not practice law.

N.J.S.A. 17:46B-13. In fact, title insurers are required to give an insured notice that the insured is entitled "to review the [title] commitment . . . , before transfer of title, with an attorney at law." N.J.S.A. 17:46B-9; see Walker Rogge, supra, 116 N.J. at 529 (noting that lawyers who review title insurance policies are "virtually essential for the protection of the rights" of the purchaser because of the unavoidable technicalities of the policies). A title insurer who attempted to describe a condition or its significance, rather than leaving that responsibility to a lawyer, would arguably be engaging in the unauthorized practice of law.

For all of the foregoing reasons, we affirm the grant of summary judgment in favor of the title insurers and the denial of the attorneys' motion to file a third-party complaint against the title insurers.


We turn to consider the attorneys' claim that the trial court erred in denying their motion for summary judgment. Based on our discussion in the preceding section of the importance of the role that attorneys have in real estate transactions, we cannot conclude that the attorneys were entitled to judgment on plaintiffs' malpractice claim as a matter of law. They admittedly received a title commitment that included exception six, and the deed from Willard E. Gourlay to Willard E. Gourlay and his wife. That deed, referenced in exception six as Deed Book 2813 page 431, states an obligation to maintain the dam. A fact-finder could reasonably conclude that failure to conduct further inquiry in this circumstance breached the standard of care owed by the attorneys to plaintiffs.


We summarize our conclusions. The order dismissing the complaint and counterclaim is reversed and vacated. The orders entering judgment in favor of the surveyor and title insurers, and the order denying the attorneys leave to file third-party complaints are affirmed. The order denying leave to join DEP in this action is affirmed. The order granting summary judgment to the realtors is reversed. The order denying the attorneys' summary judgment on the malpractice claim is affirmed.

Affirmed in part; reversed in part; and remanded for further proceedings.

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