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St. Anargyroi, Xix, Inc. and Mivila Corporation v. Atlantic Title Agency

May 30, 2012


On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-10056-09.

Per curiam.


Argued March 13, 2012

Before Judges Messano and Guadagno.

St. Anargyroi XIX, Inc. (St. Anargyroi) agreed to sell its business, the Forum Diner, liquor license and leasehold interest in certain real property for $3.3 million to Leigh and Kevin Ormes, acting on behalf of their company, Woo, LLC (Woo). Consistent with the parties' initial and supplemental agreements, St. Anargyroi was to assign its interests to Mivila Corporation (Mivila).*fn1 A contract, executed in February 2006, provided that at closing, in addition to other consideration, plaintiffs would receive a promissory note in the amount of $1.9 million, and a second promissory note for $200,000, with both notes secured by a second mortgage subject only to a $600,000 first mortgage in favor of Oritani Savings Bank (Oritani). Oritani's $600,000 mortgage was cross-collateralized by a mortgage on commercial property in Upper Saddle River owned by 17 Properties, LLC (17 Properties); the Ormeses were the sole shareholders of 17 Properties. As additional collateral, plaintiffs were to receive a mortgage on the Upper Saddle River property, subordinate only to Oritani's mortgage.

The closing did not take place until March 23, 2007. The Ormeses and their corporate entities were represented by Aline Grossman (Grossman), an attorney with Schepisi & McLaughlin, P.A. (S&M) (collectively, defendants). The Ormeses represented at closing that plaintiffs' mortgage on the Upper Saddle River property was secondary only to the Oritani mortgage, and they executed certain guarantees as part of the closing documents. A pre-closing title search did not reveal any existing mortgages on the Upper Saddle River property.

After closing and upon a default in payments due under the notes, plaintiffs learned that the Upper Saddle River property was also encumbered by a separate $3,000,000 mortgage in favor of Oritani. That mortgage was made pursuant to an agreement signed by Leigh Ormes on behalf of 17 Properties that was witnessed and notarized by Grossman.

In March 2008, plaintiffs filed suit against Woo, 17 Properties, the Ormeses, another corporate entity they controlled, Route 4 Holdings, Inc., and defendants (the First Action). For purposes of this opinion, we need only consider the causes of action alleged against defendants, specifically: professional negligence against Grossman; fraud in the inducement against Grossman; and respondeat superior liability against S&M.

Following some discovery, in May 2009, defendants moved to dismiss because plaintiffs failed to file an affidavit of merit pursuant to N.J.S.A. 2A:53A-27 (the AMS). While that motion was pending, Mrs. Ormes and the various corporate entities filed for bankruptcy.

Plaintiffs opposed defendants' AMS motion, arguing that no affidavit of merit was required based on the allegations in the complaint. They also contended that defendants were equitably estopped from now seeking an affidavit, particularly since no Ferreira*fn2 conference had been held. Nevertheless, in June 2009, plaintiffs served an affidavit of merit executed by an attorney, Gary L. Falkin.

It is undisputed that on October 26, 2009, before the motion was decided and at the apparent urging of the motion judge, plaintiffs and defendants executed a consent order dismissing the complaint without prejudice. Critically, the order also provided:

[A]ny party may assert any claim which was previously asserted or proposed to be asserted by way of a filed Motion for Leave to file an Amended Pleading in a cross-claim, counterclaim or third party complaint previously filed or proposed to be filed in this . . . matter . . . in response to Plaintiffs['] . . . re-filed complaint . .

Plaintiffs . . . will have 120 days to file a new pleading with the appropriate parties with the Complaint for statute of limitations purposes relating back to the filing of the [i]nitial Complaint . . . .

Defendants . . . will retain the right to renew the motion to dismiss based upon the [AMS], based upon the facts of the presently pending motion with [the motion judge] retaining jurisdiction over that particular motion . . . .

On November 10, 2009, plaintiffs filed another complaint (the Second Action). In relevant part, this complaint alleged intentional and negligent misrepresentation by Grossman. On January 29, 2010, Grossman moved to dismiss the complaint based on plaintiffs' initial failure to file an affidavit of merit; she also sought summary judgment. After oral argument on March 5, 2010, the judge reserved decision.

On July 16, 2010, plaintiffs moved to amend their complaint. The proposed amended complaint sought to add an additional count against Grossman alleging fraud, and counts against S&M for intentional and negligent misrepresentation, and fraud. The judge held a second round ...

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