ROBERT ZIENUIK v. RUDOLPH MICKLES

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2385-13T2

ROBERT ZIENUIK,

Plaintiff-Respondent,

v.

RUDOLPH MICKLES,

Defendant/Third-Party

Plaintiff-Appellant,

v.

LAW OFFICES OF MICHAEL D.

MILLER AND MICHAEL D. MILLER,

ESQUIRE,

Third-Party Defendants.

_____________________________________

May 12, 2015

Submitted May 5, 2015 Decided

Before Judges Fasciale and Hoffman.

On appeal from Superior Court of New Jersey, LawDivision, CamdenCounty, DocketNo. L-3013-11.

Andrew K. de Heer, attorney for appellant.

Helmer, Conley & Kasselman, P.A., attorneys for respondent (Michael D. Miller, of counsel and on the brief).

PER CURIAM

Defendant Rudolph Mickles appeals from a November 8, 2013 order holding him and his attorney, Andrew K. de Heer, in contempt of court for failure to comply with a November 16, 2012 order confirming an arbitration award, and a January 17, 2014 order denying reconsideration. We reverse.

Plaintiff and defendant (the "parties") entered into a business relationship to purchase a building and lease it to various tenants. They agreed that title to the building would be in defendant's name because he had good credit. Plaintiff, a plumber, contributed approximately $4000 towards the purchase and he used his plumbing skills to renovate the building before they leased it.

The parties were involved in three lawsuits pertaining to their partnership, the building, and the rental income. In February 2008, plaintiff filed the first lawsuit (the "first lawsuit") in the Special Civil Part ("SCP") seeking an accounting of the partnership records and his share of the rental income. A judge conducted a bench trial, determined that the parties would split profits from the building equally, and awarded plaintiff $15,000, representing plaintiff's share in the value of the building, rather than his share of the alleged rental income. Defendant did not appeal; instead, he paid plaintiff $15,000 thereby satisfying the judgment.

In August 2009, plaintiff filed his second lawsuit in the SCP (the "second lawsuit") seeking substantially the same relief that he requested in the first lawsuit. Defendant filed a counterclaim alleging that the second lawsuit was therefore frivolous. In June 2010, plaintiff voluntarily dismissed the second lawsuit without prejudice on the condition that defendant would obtain an appraisal of the building and then agree to divide the "assets" equally (the "agreement"). Defendant did not honor the agreement by getting the appraisal or otherwise splitting the "assets" equally.

In June 2011, plaintiff filed this lawsuit (the "third lawsuit") in the Law Division. Like the previous litigation, plaintiff sought an accounting of the partnership records and rental income from the tenants. Plaintiff also alleged breach of the agreement, seeking to compel the appraisal of the building and formally dissolve the partnership between the parties.

In August 2011, defendant filed an answer to the complaint in the third lawsuit. He included a third-party complaint against plaintiff's counsel, Michael D. Miller ("plaintiff's counsel"), alleging primarily malicious abuse of process, similar to the counterclaim that he had included in his answer to the complaint in the second lawsuit. Plaintiff's counsel sent a letter to de Heer on September 14, 2011, stating that he considered the third-party complaint to be "baseless," and that the "actions to this point [constitute] an ethical violation. My very strong suggestion to you is that you immediately withdraw the third[-]party complaint . . . ."

On August 6, 2012, plaintiff arbitrated the third lawsuit without defendant or de Heer attending the proceeding. The arbitrator awarded plaintiff $29,900 in rental income generated between October 2008 to July 2012, dissolved the partnership, and awarded plaintiff's counsel $5000 as a sanction against de Heer for purportedly filing the alleged frivolous third-party complaint. De Heer filed an untimely trial de novo on September 14, 2012.

On November 16, 2012, the judge entered an order confirming the arbitration award. The order referred to defendant's obligation to have the property appraised and list the building for sale with a realtor. In December 2012, defendant appealed from the November 16, 2012 order, but we dismissed that appeal for failure to file a brief.

On October 23, 2013, plaintiff filed an unopposed motion to find defendant and de Heer in contempt of court for failing to comply with the November 16, 2012 order. Plaintiff argued that they failed to obtain an appraisal of the building and otherwise comply with the arbitration award.

On November 8, 2013, the judge entered the order under review. He placed defendant and de Heer in contempt of court for failure to comply with the November 16, 2012 order; sanctioned de Heer $1000 for filing the third-party complaint; awarded plaintiff $10,400 in additional rental income allegedly generated since the November 16, 2012 order; granted plaintiff's counsel $1500 in legal fees related to the motion; and added $82.74 in post-judgment interest.

On November 29, 2013, de Heer filed a motion for reconsideration of the November 8, 2013 order.1 On January 17, 2014, the judge conducted oral argument. De Heer argued that the judge failed to comply with Rule 1:10-2 (establishing the procedure for summary contempt proceedings). He maintained that the judge sanctioned him improperly.

The judge found that plaintiff's counsel properly served de Heer with the motion to hold him and defendant in contempt of court, and denied the motion for reconsideration stating that de Heer "raised no new facts [and] no new law." The judge also ordered defendant to get the building appraised "immediately," and the judge gave plaintiff the authority to "execute any documents necessary to effectuate an appraisal" and list the property for sale.2

On appeal,3 defendant argues that the judge (1) lacked jurisdiction to issue the November 8, 2013 contempt order because his appeal from the November 16, 2012 order was pending; (2) failed to follow the procedures mandated by Rule 1:10-2, improperly sanctioned him for filing the third-party complaint, and erroneously awarded fees to plaintiff's counsel; and (3) failed to apply the doctrine of res judicata, which would have barred the court from entering the November 16, 2012 order.

I.

We review summary contempt proceedings de novo. R. 2:10-4. As to the November 8, 2013 order holding de Heer in contempt of court, we note that the judge did not refer to any court rule,4 statute, or case authorizing such a holding. The court is required to state its conclusions of law, R. 1:7-4(a), and failure to do so inhibits appellate review. Rather than remanding for further findings and conclusions of law, we elect to address the arguments related to the order holding defendant and de Heer in contempt. R. 2:10-5.

A.

We fully understand and appreciate the level of frustration experienced by plaintiff's counsel and the court as to defendant's and de Heer's failure to appear at the arbitration, file a timely trial de novo, oppose the contempt motion, follow through with the appeal from the November 16, 2012 order, and otherwise demonstrate reasonable efforts to appraise the building for sale. However, contempt proceedings must comport with the procedures outlined in R. 1:10-2, even if the order is issued under the court's inherent contempt of court powers. Amoresano v. Laufgas, 171 N.J. 532, 556-58 (2002). We agree that the judge did not follow the procedure for summary contempt proceedings outlined in Rule 1:10-2(a), which provides in pertinent part that

[e]very summary proceeding to punish for contempt other than proceedings under [R.] 1:10-1 shall be on notice and instituted only by the court upon an order for arrest or an order to show cause specifying the acts or omissions alleged to have been contumacious. The proceedings shall be captioned "In the Matter of . . . Charged with Contempt of Court."

[(Emphasis added).]

The court did not issue an order to show cause specifying the purported contumacious behavior. Compliance with the rule is mandatory, not optional.

B.

We consider next the sanctions on de Heer for filing the third-party complaint. We review a trial court's decision to sanction a party for filing and pursuing frivolous claims under an abuse of discretion standard. In re Estate of Ehrlich, 427 N.J. Super. 64, 76 (App. Div. 2012), certif. denied, 213 N.J. 46 (2013). We have recently reaffirmed that this "is demonstrated if the discretionary act was not premised upon consideration of all relevant factors, was based upon consideration of irrelevant or inappropriate factors, or amounts to a clear error of judgment." Ibid. (internal citation and quotation marks omitted). Such is the case here.

Rule 1:4-8 imposes the responsibility upon the attorney signing a pleading to ensure the legal viability of the cause of action. Any adverse party may seek sanctions in accordance with the provisions of Rule 1:4-8(b), providing in part that an application for sanctions requires a certification which shall

(i) state that the paper is believed to violate the provisions of this rule, (ii) set forth the basis for that belief with specificity, (iii) include a demand that the paper be withdrawn, and (iv) give notice, except as otherwise provided herein, that an application for sanctions will be made within a reasonable time thereafter if the offending paper is not withdrawn within 28 days of service of the written demand.

[Ibid.]

No such certification was provided to the judge or on this appeal.

The Frivolous Litigation Statute further discourages individual litigants from pursuing frivolous claims. The statute provides

A party who prevails in a civil action, either as plaintiff or defendant, against any other party may be awarded all reasonable litigation costs and reasonable attorney fees, if the judge finds at any time during the proceedings or upon judgment that a complaint, counterclaim, cross-claim or defense of the nonprevailing person was frivolous.

[N.J.S.A. 2A:15-59.1a(1).]

In Estate of Ehrlich, we explained the differences in standards applicable when the frivolous sanction is based on Rule 1:4-8, which applies to the attorneys and their duty to scrutinize the pleading to raise only good faith legal claims, and N.J.S.A. 2A:15-59.1b(2), which involves the party/client

To award costs to a prevailing party for a frivolous claim, the statute requires a showing that "the nonprevailing party either brought the claim in bad faith for harassment, delay, or malicious injury; or 'knew, or should have known that the complaint [or] counterclaim . . . was without [any reasonable] basis in law or equity . . . .'" (quoting N.J.S.A. 2A:15-59.1(b)(2)).

Rule 1:4-8 also permits an attorney to be sanctioned for asserting frivolous claims on behalf of his or her client. An assertion is deemed frivolous when "'no rational argument can be advanced in its support, or it is not supported by any credible evidence, or it is completely untenable.'" Where a party has a reasonable and good faith belief in the claims being asserted, reallocation of attorneys' fees and expenses will not be awarded. Moreover, "a pleading will not be considered frivolous for purposes of imposing sanctions under Rule 1:4-8 unless the pleading as a whole is frivolous." Thus, when some allegations are later proved unfounded, a complaint is not rendered frivolous if it also contains non-frivolous claims.

[Estate of Ehrlich, supra, 427 N.J. Super. at 77 (alterations in original) (emphasis added) (internal citations omitted).]

This standard is intended to address the tension created by the public policy to discourage frivolous litigation and the need to create a legal environment free of intimidation, where lawyers can argue for the expansion of the boundaries established by precedent. We have not awarded counsel fees as a sanction under this Rule in cases where there is a reasonable, good faith basis to believe that the complaint had merit. S & R Assocs. v. Lynn Realty Corp., 338 N.J. Super. 350, 364 (App. Div. 2001).

Here, plaintiff's counsel did not comply with Rule 1:4-8(b) seeking sanctions against de Heer for filing the third-party complaint when he issued the September 14, 2011 letter. Furthermore, the judge did not give his conclusions of law supporting the award of sanctions against de Heer, and did not address whether the third-party complaint as a whole was frivolous, especially because plaintiff's first two counts of the second and third lawsuits were essentially identical to the first lawsuit that resulted in the $15,000 judgment. Therefore, there is an insufficient basis to sanction de Heer or defendant under the rule or statute on this record.

C.

As to the award of $10,400 in the November 8, 2013 order, earmarked for "additional damages for lost rentals ([sixteen] months) during the period of defendant's appeal of the November 16, 2012 [o]rder," plaintiff did not introduce credible evidence that defendant continued to rent the building earning rent to which plaintiff may be entitled. As a result, we set aside that part of the November 8, 2012 order awarding $10,400 without prejudice.

D.

Turning to the award of fees to plaintiff's counsel, we conclude that the judge did not cite any rule, statute, or case authorizing such an award. In other words, he did not comply with Rule 1:7-4(a). As a result, we are unable to meaningfully determine whether he abused his discretion. On this record, such an award is therefore unwarranted, and we set aside the counsel fee award without prejudice.

II.

After reviewing the record and the briefs, we conclude that defendant's first and third arguments are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). We add the following brief remarks.

With regards to the first argument, that the court lacked jurisdiction to enter the November 8, 2013 order, we note that when plaintiff had filed his contempt motion, defendant's appeal from the November 16, 2012 order had remained dismissed. Thus, there was nothing pending before us depriving the court of jurisdiction to hear plaintiff's motion to hold defendant and de Heer in contempt of court.

Finally, as to the third argument, raised for the first time on this appeal, that res judicata barred the court from entering the November 16, 2012 order confirming the arbitration award, the soundness of the November 16, 2012 order is not before us. The time to make that argument was before the court in the second lawsuit or on appeal from that order. Although defendant had initially appealed from the November 16, 2012 order, he failed to file a brief resulting in dismissal of that appeal.

Reversed.

1 On December 11, 2013, we denied defendant's motion to vacate our October 2013 order dismissing his appeal from the November 16, 2012 order.

2 We cannot tell on this record if plaintiff executed any documents to obtain the appraisal and list the property for sale.

3 On September 24, 2014, we also denied plaintiff's motion to dismiss defendant's pending appeal.

4 We note that Rule 4:23-2(b)(4) is inapplicable because the purported contumacious behavior is unrelated to a discovery violation.