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Donato v. Hovnanian Enterprises, Inc.

Superior Court of New Jersey, Appellate Division

November 25, 2013

JOHN DONATO, individually, BERNICE DONATO, as Guardian ad litem for JOHN DONATO, JR., and BERNICE DONATO, individually, Plaintiffs- ppellants,


Submitted April 25, 2012

On appeal from Superior Court of New Jersey, Law Division, Passaic County, Docket No. L-636-07.

Law Offices of Charles Shaw, P.C., attorneys for appellants (Charles Shaw, of counsel; Eilish M. McLoughlin and Romain D. Walker, on the briefs).

Golden, Rothschild, Spagnola, Lundell, Boylan & Garubo, P.C., attorneys for respondents (Philip A. Garubo, Jr., of counsel; Ayesha T. Rashid, on the brief).

Before Judges Fuentes, Harris and Koblitz.



Hovnanian Enterprises, Inc., and K. Hovnanian At Wayne V, Inc., (Hovnanian) are the original builders of a number of single-family houses located in the area of Skyview Road in the Township of Wayne. On January 11, 1997, Susan Tannehill purchased one of the new houses on Skyview Road directly from Hovnanian. That same year, Mark and Leslie Kesselhaut purchased their house which is located uphill from Tannehill's property. The Kesselhauts have resided in this house since they bought it in 1997.

In 2003, the Kesselhauts contracted with Magic Gardens Landscaping, Inc., (Magic Gardens) to install an in-ground pool on their property. On December 10, 2003, Tannehill's house was flooded during the construction of Kesselhaut's pool. Magic Gardens' president, Drew Shepherd, admitted that the flood was related to the work his company was doing in connection with the construction of Kesselhaut's pool. Magic Gardens paid Tannehill $4, 000 as compensation for water damage to her home.

On January 22, 2004, Tannehill sold her house to plaintiffs John and Bernice Donato. The record reflects that plaintiffs were informed of the December 10, 2003 flooding incident before the closing of title. John Donato personally visited the property on December 16, 2003, and specifically viewed the basement area. Plaintiffs also retained Foresight Consulting Services, Inc. (Foresight) to perform a pre-purchase inspection of the property and report any problems it detected to plaintiffs before the closing of title. Foresight noted certain cracks in the basement of the property.

Plaintiffs began this legal action in 2008 after enduring two incidents of major flooding in the basement of their home. The first occurred in 2004; the second, in October 2005, involved "approximately 8 inches of standing water" in the basement of the house. Plaintiffs claimed these two incidents caused "irreparable and extensive damage" to their home and to their minor son's personal property.

Plaintiffs initially brought suit against Hovnanian grounded in the following diverse theories of liability: (1) breach of contract; (2) negligence; (3) breach of implied covenant of good faith and fair dealing; (4) violation of an expressed contractual warranty; (5) violation of an implied common law warranty; (6) intentional infliction of emotional distress; (7) negligent infliction of emotional distress; and (8) negligent destruction of John Donato, Jr.'s personal property.

Plaintiffs also sued the Kesselhauts based on a hybrid theory that incorporated principles of common law negligence, civil trespass, and nuisance. They alleged the Kesselhauts wrongfully changed the topography of their property and diverted the natural flow of rainwater, causing the flooding in their basement on the two occasions previously mentioned. Plaintiffs settled their claims against the Kesselhauts before the start of trial against Hovnanian as the only defendant.

Plaintiffs presented their case against Hovnanian before a jury over a three-week period commencing on February 1, 2010 and ending on March 4, 2010. As framed by the trial judge during his final charge to the jury, plaintiffs claimed that Hovnanian "breached a ten-year home warranty by failing to repair major structural defects at their home during the effective period of coverage . . . [and] constructed the grading and drainage system in a negligent manner." As a measure of damages, plaintiffs sought to recover "the cost of repairing the grade of the property and the draining [of] the system, as well as the property damages that they claim to personal property."

After some initial confusion in the manner it delivered its verdict, the jury found Hovnanian "was negligent in the construction of plaintiffs' home, " but that such negligence was not "a proximate cause of the water infiltration causing the flood in the basement of plaintiffs' home." The jury also found in favor of Hovnanian on plaintiffs' claim of breach of warranty. Specifically, the jury found plaintiffs failed to establish that at any time between January 22, 2004 and May 2006 their home had "a major structural defect as defined in the Homeowners Warranty."

This appeal is limited to the following two issues plaintiffs identified in their Civil Case Information Statement (CCIS). First, plaintiffs challenge an interlocutory decision made by the trial court on September 1, 2009, denying their motion to file a third amended complaint to add Magic Gardens and its president Drew Shepherd as defendants. Second, plaintiffs argue the trial court erred when it denied their motion to set aside the jury verdict and order a new trial based on the confusion surrounding the jury's first attempt at reporting its verdict. The court memorialized its decision denying this motion in an order dated April 16, 2010.

Consistent with the limited scope of this appeal, plaintiffs obtained leave from the trial court pursuant to Rule 2:5-3(c)(2) to submit abbreviated transcripts covering only the record developed by the parties that is relevant to the two argument points plaintiffs identified in their CCIS. After reviewing this record, and mindful of prevailing legal standards, we affirm.


We will first address the trial judge's denial of plaintiffs' motion to amend their complaint for a third time.

Plaintiffs filed their original complaint against Hovnanian on February 7, 2007. They filed a second amended complaint on December 30, 2008, to add Foresight as a defendant.[1]

On August 24, 2009, plaintiffs filed a notice of motion on short notice seeking to amend their complaint for a third time to add additional grounds for liability against the Kesselhauts and to add Magic Gardens and its president Drew Shepherd as defendants. By the time plaintiffs' counsel made this motion, there had been 757 days of discovery on the matter and the case was scheduled for trial one week later, on August 31, 2009.

The trial court heard oral argument on plaintiffs' motion on September 11, 2009. Plaintiffs' counsel represented to the trial judge that in July 2009 he had, "for the first time, " received discovery from Magic Gardens that indicated its acceptance of "some responsibility and a sense of liability" in connection with the $4, 000 Magic Gardens paid to Tannehill in 2003 for damages caused to her house in connection with the construction of the Kesselhauts' in-ground pool. In addition to including these two new parties to the case, plaintiffs' counsel believed this information also gave plaintiffs new legal grounds for potential liability against the Kesselhauts. It is important to note that at this time, plaintiffs had not yet settled their claims against the Kesselhauts.

In opposition to the motion, counsel for the Kesselhauts emphasized that the case had been scheduled to be tried one week before plaintiffs filed this motion. Counsel argued that allowing plaintiffs to introduce new theories of liability against his clients at this juncture would be highly prejudicial, because he had prepared his defense based on the evidence and legal theories presented up to that point in time. Counsel elaborated on this issue as follows:

My clients are prejudiced by this because, quite frankly, the plaintiffs have not put forth any type of expert or anything else dealing with our client, and all I see in this case, and it's consistently gone on, is that we get to the end of the line and there's a flurry of activity. And, you know, quite frankly, you know, I'm frustrated on behalf of my clients.

Counsel for Magic Gardens and its president Drew Shepherd noted that none of plaintiffs' proposed experts had indicated that Magic Gardens had done anything wrong or identified it as a potential responsible party. Most importantly, Magic Gardens' counsel noted that "the Donatos knew of my client, knew of the situation in which everything occurred, and my client actually met with [the] Donatos at their house back in early 2004." Counsel thus characterized plaintiffs' factual assertions claiming otherwise as "disingenuous."

Against this backdrop, the trial judge denied plaintiffs' motion to file a third amended complaint. The judge made the following findings in support of his decision.

[T]his matter had 757 days of discovery. There is a November '08 deposition in which I believe certainly the plaintiff implicates Drew [Shepherd the] landlord as a potential party of which he could have sought recovery, did not. This thing should have been tried on 8/31[/09].
I don't know if this is an amendment or if this is an attempt under - - I think it's [Rule] 4:9-1 or whether it's a motion to add a party, which is covered by [Rule] 4:24-2, [2]and that clearly would be out of time because discovery ended on 8/31[/09], and it is 9/11[/09] today, a day we all remember, unfortunately.
But again, this -- there's been plenty of time. Discovery, quite frankly, should have taken place much earlier than it did. I don't know why it took so long to take depositions of people, to get expert reports. There's been two prior amendments that the [c]ourt has allowed. Quite frankly, discovery sounds like it proceeded in a very disjointed, dysfunctional manner. We can't just keep doing depositions and amending after the third or fourth listing because now we feel we have another potentially culpable party. The point of giving almost 800 days of discovery is that, you know, we kept -- and it was five extensions and there were two amendments . . . we provided the plaintiff with really every opportunity to discover additional parties. . . . They took discovery they felt was necessary. . . . there was . . . some knowledge that this individual named Drew, I believe, it's in Mr. Donato's November 2008 deposition, he talks about him. So at that point, maybe it was time to make the amendment.
But I'm going to deny the application, as being untimely and that it would unduly delay the resolution of this matter.

A motion to amend a complaint is governed by Rule 4:9-1. After responsive pleadings have been served, a party may only amend its complaint with the consent of the parties or by leave of court. Ibid. The decision to grant or deny a motion to amend a pleading is left entirely to the sound discretion of the trial judge. Notte v. Merchs. Mut. Ins. Co., 185 N.J. 490, 501 (2006). The motion court is expected to exercise this discretionary authority with great liberality in favor of granting leave to amend. Id . at 501. Indeed, the language of the rule itself requires that leave "shall be freely given in the interest of justice." R. 4:9-1.

Generally, a trial court's decision to deny or grant a motion to amend a pleading should be guided by a two-step analysis: (1) whether the non-moving party would be prejudiced; and (2) whether the amendment would be futile because it is clearly barred by an undisputed legal basis, such as a claim filed outside the time period allotted by the relevant statute of limitations. Bustamante v. Borough of Paramus, 413 N.J.Super. 276, 298 (App. Div. 2010).

However, as implicitly noted in Bustamante, the two-step approach generally applicable in most cases does not exhaustively cover the analytical spectrum. A court may also deny a motion to amend a pleading when it finds the proposed amendment would unduly protract or delay the litigation, or cause undue prejudice to the party opposing the motion. Cutler v. Dorn, 196 N.J. 419, 441 (2008). Similarly, motions to amend a pleading after the case has undergone extensive discovery and is ready for trial are viewed with understandable consternation. "The denial of [a] motion to amend is . . . sustainable when made on the eve of trial[, ] . . . particularly . . . if the motion seeks to add new parties." Pressler & Verniero, Current N.J. Court Rules, ...

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