August 2, 2013
KERYN BROWN, Plaintiff-Appellant,
JORGE LOPEZ, STANLEY M. VARON, WILLIAM R. LINDSLEY, WEST HOBOKEN REALTY, LLC, STEVEN CARRACIO, AND LUIS VELASCO, Defendants-Respondents. JORGE LOPEZ, Plaintiff-Respondent,
KERYN BROWN, Defendant-Appellant.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued October 23, 2012
On appeal from Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-2425-09.
Frank J. Nostrame argued the cause for appellant.
Meredith Kaplan Stoma argued the cause for respondent Stanley M. Varon (Morgan Melhuish Abrutyn, attorneys; Ms. Stoma, of counsel; Jeffrey S. Leonard, on the brief).
Iram P. Valentin argued the cause for respondent William R. Lindsley (Kaufman Dolowich Voluck & Gonzo, LLP, attorneys; Mr. Valentin, of counsel and on the brief; Edward Patrick Abbott, on the brief).
Thomas J. Wall argued the cause for respondents Steve Caraccio, Louis Velasco and Jorge Lopez.
Before Judges Messano and Kennedy.
Plaintiff appeals from orders for summary judgment dismissing her complaint against defendants, as well as an order for summary judgment entered against her in a consolidated matter for possession of her former home and holding her responsible to pay $32, 000 in "rent" on the property. Plaintiff argues that material issues of fact existed which should have precluded the grant of summary judgment.
Plaintiff owned a two-family home in Jersey City for many years. In 2005, the mortgagee obtained a judgment of foreclosure against the property. Plaintiff thereafter listed the property for sale and hired defendant attorney Stanley M. Varon (Varon) to represent her. In February 2007, defendant realtor Jorge Lopez (Lopez) acquired title to the property after entering into a series of agreements with plaintiff. At that time, Varon represented plaintiff and defendant attorney William R. Lindsley (Lindsley) represented Lopez. Prior to the closing of title, plaintiff gave mortgages on the property to Lopez's associates, defendants Steven Carracio (Carracio) and Luis Velasco (Velasco), to secure pre-closing loans they allegedly made to plaintiff to finance renovations and to bring the mortgage up to date. At closing, plaintiff was given a use and occupancy agreement to sign in order to remain on the property. Lopez filed a complaint for possession of the property after plaintiff fell behind in her "use and occupancy" payments.
Thereafter, plaintiff filed a complaint in the Law Division alleging that Lopez acquired title through fraudulent representations (count one) and violated the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to —184 (count two); that Varon was negligent and caused her to "los[e] title to her home for less than adequate compensation" (count four); that Lindsley, as "settlement agent" at closing, paid "excessive, unjustified and inappropriate" charges from funds that were otherwise due to plaintiff (count five); and that Carracio and Velasco received money at the closing to pay off mortgages for which neither paid any consideration, thereby violating the CFA (count six).
As noted above, Lopez had filed a complaint against plaintiff in the landlord/tenant section of the Special Civil Part in which he alleged that she owed $5700 in back rent as of May 1, 2009. Plaintiff successfully moved to transfer the Special Civil Part action to the Law Division, where the two actions were then consolidated.
Our review of a motion court order granting or denying summary judgment is de novo, and we apply the same standard as the motion court in determining whether there are any genuinely disputed issues of material fact sufficient to warrant resolution of the disputed issues by the trier of fact. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J.Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). Our analysis requires that we first determine whether the moving party has demonstrated that there are no genuine disputes as to material facts, and then we decide "whether the motion judge's application of the law was correct." Atl. Mut. Ins. Co. v. Hillside Bottling Co., 387 N.J.Super. 224, 230-31 (App. Div.), certif. denied, 189 N.J. 104 (2006). In so doing, we view the evidence "in the light most favorable to the part[y] opposing summary judgment." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995). We accord no special deference to the motion judge's conclusions on issues of law. Zabilowicz v. Kelsey, 200 N.J. 507, 512 (2009).
Following are the salient facts viewed in a light most favorable to plaintiff. Plaintiff and her husband purchased the property on July 15, 1981. She obtained sole title to the property in 1998 as part of a divorce settlement. Thereafter, plaintiff occupied the second floor while a tenant lived on the first floor.
On November 6, 2001, plaintiff secured a mortgage loan from Countrywide Mortgage Company (Countrywide) in the amount of $117, 000 to finance some repairs to the home. During the repairs, a water line burst and caused extensive damage to the first floor, and the tenant moved out. Plaintiff fell behind on her mortgage payments, and Countrywide filed a foreclosure action, which plaintiff did not oppose. A judgment of foreclosure was entered on November 10, 2005.
After being served with the final judgment of foreclosure, plaintiff retained Varon, and listed her home for sale at $399, 999 with Liberty Realty. According to plaintiff, she retained Varon to provide "help with [her] home." Varon stated that when he was retained, plaintiff wanted either to sell the property or make an arrangement whereby she could continue to live in the home. Plaintiff turned down an offer to buy her property for $379, 000 at some time prior to February 2006.
Lopez, a local real estate broker, became interested in buying the property and met with plaintiff. The substance of their discussions is unclear, but plaintiff understood that Lopez would "teach [her] the business of real estate" and she and Lopez would become "business partners" in the property. Plaintiff recalled that Lopez would arrange some financing to effect repairs and plaintiff would retain an "interest" in the property which would allow her to continue to occupy two floors of the renovated home. Lopez was to obtain an interest in the other two floors in the home.
Lopez met with Varon and plaintiff on several occasions to discuss the transaction. Under the first written contract, dated February 1, 2006, Lopez and another realtor, John Pineda, agreed to buy the property for $225, 000. The contract specified that the property was being sold "as is" and gave the buyers a right to an inspection.
Lopez then concluded that the property needed repairs to qualify for mortgage financing and that some money had to be paid to Countryside to avoid a foreclosure sale. Lopez then told Varon that his friend and fellow realtor, Caraccio, was willing to put up $74, 000 for repairs and to pay a portion of the Countryside mortgage. Lopez stated that Varon drew up an "addendum" to the contract, whereby plaintiff's daughter would be given a fifty percent interest in the property at closing. Lopez and Pineda would also receive a fifty percent interest at closing of title, and would "lend" plaintiff $74, 000 to reinstate her Countrywide mortgage and to effect repairs to the property prior to closing. The $74, 000 loan, which was to be secured by a second mortgage, would be payable at closing. Further, after closing of title, plaintiff would be permitted to remain as a tenant of the first floor for one year at a monthly rental of $650.
On February 27, 2006, Caraccio wired $42, 467.81 to Varon's trust account, to be used to bring plaintiff's mortgage current and out of foreclosure. The next day, Varon wired that money to Countryside. Also on February 28, 2006, plaintiff signed a mortgage note prepared by Varon in which she agreed to repay Caraccio $74, 000, as well as a mortgage, which was then recorded with the County Register of Deeds. Caraccio claimed he gave various checks to Lopez over time to pay for repairs to the property, totaling $31, 532.19.
Lopez claimed he paid that money over time to Pineda for repairs to the property, but had no receipts for the cost of the repairs nor a separate contract for the work with Pineda. Lopez claims he "lost [his] file" on the transaction and thus had no access to many documents and records that had been in the file.
Varon's understanding was that Caraccio was "doing some remediation to the premises" and that Caraccio, Lopez and plaintiff had some agreement about the repairs, but he did not know the details of their agreement. He said plaintiff "never asked" him to prepare any written agreement with Lopez and Caraccio, and never discussed her understanding that she and Lopez were to be "business partners."
Lopez stated that over the course of time, he found that the cost of repairs exceeded his estimates and that, together with paying carrying costs on the property, he needed more money. Accordingly, he arranged a series of loans to plaintiff from another of his friends, Velasco, to whom plaintiff gave two further mortgages on her property, for $79, 243 and $22, 861.22. The record is not clear regarding how much money Velasco actually paid toward the project. Plaintiff denied she had received any loans from Velasco, and Varon asserted he first learned of the putative mortgage loans at closing.
Lopez said the money provided by Caraccio and Velasco was used to repair the premises and to renovate the third floor and basement, paint the interior, install new windows, finish floors and renovate the second floor bathroom. However, the record does not reflect the cost of these improvements. In August 2006, an appraisal of the property reported a fair market value of $460, 000.
Plaintiff entered into a second contract of sale dated July 28, 2006, listing Lopez as the buyer and the sales price as $430, 000. The contract made no mention of plaintiff retaining an interest in the property. Further, the contract stated the property was being sold "as is" and did not obligate plaintiff to undertake any repairs or renovation of the property. The record is unclear why this contract was entered into, but it is reasonable to infer, in part, that plaintiff's daughter no longer was interested in being part of the transaction. It is also unclear who drafted the contract.
On February 6, 2007, the closing took place between plaintiff and Lopez at Lindsley's law office. Lindsley prepared the required Real Estate Settlement Procedures Act (RESPA) form, also known as the HUD-1, which indicated that Lopez was financing the purchase with two purchase money mortgages totaling $428, 930.94. Further, the RESPA listed the payoff figure for the remainder of the Countrywide mortgage as $131, 531.15; the payoff figure for the Caraccio mortgage as $74, 000; and the payoff figures for the Velasco mortgages as $79, 243 and $22, 861.22. These mortgages, together with a federal tax lien of $106, 808.32, a municipal lien of $2540, and "settlement charges to seller" of $42, 126, 67, exceeded the purchase price by $29, 811.65.
Varon reviewed the RESPA with plaintiff. After some discussion with Lopez, Velasco agreed to accept a payment reduction on his mortgages by a sum equal to the amount the RESPA showed plaintiff owed at closing. Also, plaintiff signed a "use and occupancy" agreement pursuant to which she could remain on the property through September 30, 2007, for a payment of $600 each month. The agreement further gave her the option to buy the property from Lopez for $497, 000 at any time prior to September 30, 2007.
At the closing, plaintiff never spoke to Lindsley and had no conversation with him at any time.
On January 7, 2011, the first motion judge granted summary judgment in favor of Lindsley. He concluded Lindsley had no duty to plaintiff because she was not his client, he made no misrepresentations to plaintiff, and the mortgages and liens were all recorded and appeared in an abstract of title. He added that Varon was present with plaintiff throughout the closing, and that Lindsley was thus "too remote" to plaintiff to incur any liability to her.
A second motion judge granted Varon's motion for summary judgment on October 6, 2011, and explained that, while plaintiff's malpractice expert found that Varon violated the rules of professional conduct in representing plaintiff, there was no evidence that plaintiff had sustained damages. Caraccio and Velasco moved for summary judgment on the same grounds, which the motion judge granted on December 2, 2011.
On January 12, 2012, Lopez filed a motion to dismiss all claims and to enter judgment for unpaid rent and for possession. Plaintiff opposed the motion on the grounds that she was entitled to a hearing on the issues of whether she was a tenant and whether there was rent due. The motion judge granted Lopez's motion and entered Lopez's proposed order granting a judgment of $32, 300 for back rent on February 28, 2012. A warrant of removal was issued on March 16, 2012, and plaintiff was evicted.
This appeal followed.
We address initially plaintiff's appeal from summary judgment in favor of Lopez, Caraccio and Velasco. We shall thereafter consider plaintiff's challenges to summary judgment in favor of Varon and Lindsley.
In granting summary judgment for Lopez, Caraccio and Velasco, the motion judge impliedly accepted as undisputed that the contract between Lopez and plaintiff was an arms-length transaction that accurately memorialized the parties' understanding; that Caraccio and Velasco advanced all the money set forth in the mortgage notes; that all the money was utilized for the partial satisfaction of the Countryside mortgage, as well as carrying charges and repair or renovation costs on the property; and that all those charges and costs were properly chargeable to plaintiff under the contract.
Not only did plaintiff dispute these facts, but also the record is far from clear that any of these claims can be considered as established fact. Plaintiff stated during her deposition that Lopez and she were to be "business partners" in the transaction, and that she was supposed to retain an interest in a renovated property, entitling her to occupy two floors. Plaintiff, giving her testimony the benefit of all favorable inferences, did not intend to divest herself of her asset, owe almost $30, 000 at closing, solely finance the rehabilitation of the property to the satisfaction and benefit of Lopez, and then become a paying, short-term occupant of her own home. Yet, that is what happened here.
Moreover, nothing in either the February 2006 contract or the July 2006 contract obligated plaintiff to either renovate the property or bear the entire financial burden of renovating the property. Yet, plaintiff was required to bear the entire burden of renovating the property at no cost to Lopez. The source of that obligation is not only unclear, but is positively belied by the contract documents.
Further, the record does not support Velasco's and Caraccio's claims that they, in fact, advanced to plaintiff the sums referenced in the mortgages or that such sums were actually paid out in renovation costs. Both claim that they paid the money to Lopez, who then was supposed to utilize the money for repairs and renovations. No records support these claims, however. In fact, Lopez claims that he "lost the receipts" for various costs he paid for the work, and, later, "lost [his] file" on the transaction.
The motion judge appeared to find that the contract reflected plaintiff's agreement with Lopez to present Lopez at closing with a property completely renovated to Lopez's satisfaction without regard to cost. Such a finding is utterly contrary to plaintiff's testimony and flies in the face of logic. As noted, the record also does not support Velasco or Caraccio's claims about the money they allegedly provided for the project. Accordingly, we conclude that on this record, giving plaintiff the benefit of all favorable inference, summary judgment should not have been granted dismissing plaintiff's CFA claims against Lopez, Velasco and Caraccio.
Given the limited issue which the motion judge addressed in granting summary judgment, and given the limited record before us, we need not address the applicability of the CFA in this case. Lopez, Caraccio and Velasco do not contend that the CFA does not apply, but merely claim they engaged in no "unlawful practice." Again, giving plaintiff the benefit of all favorable inferences, we disagree.
Under the CFA an "unlawful practice" is defined as:
The act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice; . . . .
Our courts have noted that the CFA "should be liberally construed to accomplish its dual objectives of deterrence and protection." 539 Absecon Boulevard, L.L.C. v. Shan Enters. Ltd. P'ship, 406 N.J.Super. 242, 274 (App. Div.) (citing Lettenmaier v. Lube Connection, Inc., 162 N.J. 134, 139 (1999)), certif. denied, 199 N.J. 541 (2009). However, the CFA's remedial purpose is not limitless; it "does not cover every sale in the marketplace[, ]" as its "applicability hinges on the nature of a transaction, requiring a case by case analysis." Papergraphics Int'l., Inc. v. Correa, 389 N.J.Super. 8, 13 (App. Div. 2006).
While the facts in the record do not reflect the typical CFA claim relating to the sale of real estate, see, e.g., Gennari v., 148 N.J. 582, 604-08 (1997) (finding CFA applicable to claims made by purchasers of real estate against contractor and realtor), plaintiff clearly was told by Lopez that she was to be his "business partner" in the property and that he would arrange financing to rehabilitate the property and pay off liens, following which plaintiff and he would be equal owners of the property. Lopez then enlisted Caraccio and Velasco in a scheme to wrest the property from plaintiff. Clearly, this fits the definition of an unlawful practice.
In O'Brien v. Cleveland, 423 B.R. 477, 483-84 (Bankr. D.N.J. 2010), the bankruptcy court considered application of the CFA in circumstances analogous to the case before us. There, the defendant offered plaintiffs an "unconventional financing" plan to prevent their home from being sold at a sheriff's sale. The plaintiffs agreed to deed their home to defendant, who would then "arrange financing to satisfy the existing mortgages on the property to save it from foreclosure[, ]" giving plaintiffs an option to buy the property back once the mortgage was satisfied. Ibid. The court determined that this transaction fell within the purview of the CFA, and ultimately found that defendant had engaged in an "unconscionable commercial practice" pursuant to N.J.S.A. 56:8-2. Id . at 483.
Here, Lopez is not a casual participant in the business of real estate: he held a realtor's license, was greatly experienced in real estate transactions and sought out plaintiff upon discovering her home was in foreclosure. He then promised to make her a "partner" with him in saving the home from a foreclosure sale, representing that he had the expertise and connections to fulfill his promises, and that they would each own a one-half interest in the property thereafter. It is hardly a stretch to find such unfulfilled promises fall within the statutory definition of N.J.S.A. 56:8-2.
Turning to the other defendants, we conclude that summary judgment should not have been granted in favor of Varon. The elements of a prima facie case of malpractice are (1) the existence of an attorney-client relationship creating a duty of care upon the attorney; (2) the breach of that duty; and (3) damages proximately caused by that breach. Conklin v. Hannoch Weisman, 145 N.J. 395, 416 (1996) (citing Lovett v. Estate of Lovett, 250 N.J.Super. 79, 87 (App. Div. 1991)). Plaintiff bears the burden of proving a breach of that duty and a causal connection to any losses claimed. Lovett, supra, 250 N.J.Super. at 88.
As we noted earlier, Varon asked for no proof at closing that the consideration for the mortgage amounts allegedly advanced by Velasco and Caraccio were actually paid; failed to explain or even note that the contract did not obligate plaintiff to pay for a completely renovated property at closing; failed to require or examine any documents pertaining to the renovation costs or the obtaining of necessary construction permits; failed to memorialize the parties' purported agreement respecting renovations; failed to draft a contract that reflected plaintiff's purported understanding of the transaction; and counseled plaintiff to enter and close upon a real estate transaction that required her to expend more than the equity in the home in transferring title to Lopez. These acts, if found by the factfinder at trial, support not only malpractice, but damages, as well.
Finally, there is nothing in the record to support the conclusion that Lindsley knowingly assisted Lopez in defrauding plaintiff or that he made any misrepresentations to her. In Petrillo v. Bachenberg, 139 N.J. 472 (1995), the New Jersey Supreme Court considered the question of whether the attorney for a seller of real estate owes a duty to a potential buyer. The Court held that "attorneys may owe a duty of care to non-clients when the attorneys know, or should know, that non-clients will rely on the attorneys' representations and the non-clients are not too remote from the attorneys to be entitled to protection." Id . at 483. Here, there is no dispute that the liens shown on the RESPA were reflected in the title report. Plaintiff cannot demonstrate, therefore, that Lindsley made any misrepresentations to her at the closing, given that Lindsley "didn't have any conversation with [plaintiff] at all" at closing or, indeed, at any other time.
Consequently, we affirm summary judgment as to Lindsley, and we reverse and remand as to defendants Lopez, Caraccio, Velasco and Varon.