MAJESTIC CONTRACTING LLC v. QUICK TITLE SEARCH LLC

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

MAJESTIC CONTRACTING, LLC.,

Plaintiff-Respondent,

v.

QUICK TITLE SEARCH, LLC,

ACCURATE ABSTRACTS, THOMAS

MCDERMOTT, and JOHN T. COLATRELLA,

Defendants,

and

OCEAN COUNTY CLERK,

Defendant-Appellant.

__________________________________

March 26, 2015

Submitted January 12, 2015 Decided

Before Judges Sabatino and Simonelli.

On appeal from the Superior Court of New Jersey, Law Division, Ocean County, Docket No. L-1967-12.

Berry, Sahradnik, Kotzas & Benson, P.C., attorneys for appellant (Mary Jane Lidaka, on the brief).

Levin, Shea & Pfeffer, P.A., attorneys for respondent (Steven I. Pfeffer, on the brief).

PER CURIAM

Pursuant to Rule 2:2-3(a), third-Party defendant Ocean County Clerk (Clerk) appeals from the January 17, 2014 Law Division order, which granted the motion of plaintiff Majestic Contracting, LLC (Majestic) for leave to file notice of late claim pursuant to N.J.S.A. 59:8-9. We reverse.

We derive the following facts from the record. In September 2006, Majestic entered into a contract to purchase property located in Toms River. Majestic retained defendant Quick Title Search, LLC (Quick Title) to do the title work which, in turn, retained defendant/third-party plaintiff Accurate Abstracts (Accurate) to do a title search. On September 14, 2006, Accurate conducted a title search, which did not reveal a mortgage lien on the property. In reliance thereon, Majestic purchased the property and released $500,000 to the seller.

Majestic subsequently learned there was a mortgage lien on the property. On June 22, 2012, Majestic filed a complaint in the Law Division against Quick Title and Accurate for failing to detect the mortgage.

Accurate learned that on July 24, 2006, the Clerk correctly recorded the mortgage in the mortgage book, but incorrectly indexed it by lot and block numbers taken from a property description instead of the tax lot and block number. Consequently, on November 29, 2012, Accurate filed and served on all parties a third-party complaint against the Clerk for contribution, alleging it did not detect the mortgage because the Clerk negligently "failed to properly index" it. In an answer filed on January 14, 2013, the Clerk generally denied the allegation without qualification and asserted defenses under the New Jersey Tort Claims Act, N.J.S.A. 59:1-1 to 12-3, including the failure to timely file a notice of claim pursuant to N.J.S.A. 59:8-8.

In answers to the Clerk's interrogatories, dated June 25, 2013, Accurate reasserted the Clerk's alleged liability for incorrectly indexing the mortgage, and on July 16, 2013, Accurate supplied confirming documents. In answers to Accurate's interrogatories, dated September 20, 2013, the Clerk admitted the mortgage was incorrectly indexed. Majestic did not file a notice of claim within ninety days after receiving the interrogatory responses and documents. Instead, over ninety days later, on December 23, 2013, Majestic filed a motion for leave to file a notice of late claim pursuant to N.J.S.A. 59:8-9. Invoking the discovery rule, Majestic argued it was not aware until it received the interrogatory responses and documents "that, in fact, Accurate . . . was relying upon the [Clerk's] alleged mis-indexing of the open mortgage[.]"

The Clerk countered, as he does in this appeal, that Majestic was on notice as of November 29, 2012 that its damages were potentially attributable to the Clerk and that Majestic showed no extraordinary circumstances under N.J.S.A. 59:8-9 for failing to timely file a notice of claim.

In granting the motion, the judge first found that the Clerk's incorrect indexing of the mortgage constituted extraordinary circumstances for Majestic's failure to timely file a notice of claim. The judge then chided the Clerk for filing a general denial in January 2013 and then later admitting the mistake in September 2013. The judge ultimately permitted Majestic to file a notice of late claim, concluding that Majestic did not discover its damages were attributable to the Clerk until it received the Clerk's September 20, 2013 interrogatory answers admitting the mortgage had been incorrectly indexed. This appeal followed.

The decision to grant permission to file a notice of late claim is left "'to the sound discretion of the trial court, and [its decision] will be sustained on appeal in the absence of a showing of an abuse thereof.'" D.D. v. Univ. of Med. & Dentistry of N.J., 213 N.J. 130, 147 (2013) (alteration in original) (quoting Lamb v. Global Landfill Reclaiming, 111 N.J. 134, 146 (1988)). "Although deference will ordinarily be given to the factual findings that undergird the trial court's decision, the court's conclusions will be overturned if they were reached under a misconception of the law." Ibid. We conclude the judge mistakenly interpreted the law in this case.

A claimant must file a notice of claim within ninety days of the accrual of the cause of action. N.J.S.A. 59:8-8. The purposes of the notice are as follows

(1) to allow the public entity at least six months for administrative review with the opportunity to settle meritorious claims prior to the bringing of suit; (2) to provide the public entity with prompt notification of a claim in order to adequately investigate the facts and prepare a defense; (3) to afford the public entity a chance to correct the conditions or practices which gave rise to the claim; and (4) to inform the [public entity] in advance as to the indebtedness or liability that it may be expected to meet.

[Velez v. City of Jersey City, 180 N.J. 284, 290 (2004) (quoting Beauchamp v. Amedio, 164 N.J. 111, 121-22 (2000)) (internal quotation marks omitted).]

A person is forever barred from bringing an action against a public entity or public employee unless he or she complies with the notice requirements. N.J.S.A. 59:8-8(a). However, N.J.S.A. 59:8-9 alleviates the harshness of the ninety-day requirement by authorizing a Superior Court judge to permit the filing of a notice of claim beyond the ninety-day limit for a period of up to one year after the accrual of the claim, provided the movant shows there are sufficient reasons constituting extraordinary circumstances for the failure to timely file a notice of claim and there is no substantial prejudice to the public entity. N.J.S.A. 59:8-9; see also D.D., supra, 213 N.J. at 147; McDade v. Siazon, 208 N.J. 463, 475 (2011).

A claim against a public entity accrues on "the date of the incident on which the negligent act or omission took place." Beauchamp, supra, 164 N.J. at 117. The discovery rule may toll the date of accrual for purposes of computing the ninety-day period set forth in N.J.S.A. 59:8-8(a) only "'[u]ntil the existence of an injury (or, knowledge of the fact that a third party has caused it) is ascertained.'" McDade, supra, 208 N.J. at 475 (quoting Beauchamp, supra, 164 N.J. at 122). "The test for the application of the discovery rule is 'whether the facts presented would alert a reasonable person, exercising ordinary diligence, that he or she was injured due to the fault of another.'" Ibid. (quoting Caravaggio v. D'Agostini, 166 N.J. 237, 240 (2001)).

In deciding whether to apply the discovery rule on a motion for leave to file a notice of late claim, the court must first determine when the claim accrued. Ibid. The court must then determine whether a notice of claim was timely filed, and if not, it must then determine whether extraordinary circumstances exist justifying a notice of late claim. Ibid. "The court's inquiry is fact-specific; it 'leaves it for a case-by-case determination as to whether the reasons given rise to the level of 'extraordinary' on the facts presented.'" Id. at 477 (quoting Lowe v. Zarghami, 158 N.J. 606, 626 (1999)). "The inquiry focuses on the reasonable diligence of the plaintiff in investigating the claim and determining the identity of the tortfeasor." Ibid. If the court determines there were no extraordinary circumstances, the court need not address substantial prejudice. See, e.g., D.D., supra, 213 N.J. at 135; Blank v. City of Elizabeth, 318 N.J. Super. 106, 114-15 (App. Div), aff'd as modified, 162 N.J. 150 (1999); O'Neill v. City of Newark, 304 N.J. Super. 543, 550 (App. Div. 1997).

Here, the judge incorrectly focused on the Clerk's conduct in setting the accrual date and finding extraordinary circumstances to justify a notice of late claim. The focus must instead be on Majestic's own conduct and whether it acted with reasonable diligence to investigate once it knew about Accurate's claim against the Clerk. The record does not reflect that Majestic conducted any prompt investigation after Accurate filed the third-party complaint in November 2012 to determine whether its damages were attributable to the Clerk. Although Majestic was not obligated to presume that the allegations in Accurate's third-party complaint against the Clerk were true, Majestic likewise could not have reasonably relied on the Clerk's general denial to presume they were untrue. At a minimum, the third-party complaint should have alerted Majestic to at least investigate the allegation, and it failed to do so. Accordingly, Majestic failed to establish extraordinary circumstances to justify a notice of later claim.1

Reversed. The matter is remanded to the trial court for completion of the litigation.

1 We do not address how, if at all, our disposition concerning Majestic might affect claims asserted against the Clerk by Accurate or any other parties.