WINBERRY REALTY PARTNERSHIP v. AMERICAN TAX FUNDING LLC

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

WINBERRY REALTY PARTNERSHIP,

JOHN WINBERRY, MARY

LOURDES WINBERRY, CELESTE

WINBERRY AND GREGORY WINBERRY,

Plaintiffs-Appellants/

Cross-Respondents,

v.

AMERICAN TAX FUNDING, LLC,

ATFH REAL PROPERTY, LLC,

Defendants-Respondents/

Cross-Appellants.

February 19, 2015

Argued September 10, 2014 Decided

Before Judges Fuentes, Kennedy and O'Connor.

On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-6348-11.

Russell S. Burnside argued the cause for appellants/cross-respondents(Greenberg Dauber Epstein & Tucker, attorneys; Mr. Burnside and Sheryl L. Reba, on the briefs).

Keith A. Bonchi argued the cause for respondents/cross-appellants(Goldenberg Mackler Sayegh Mintz Pfeffer Bonchi & Gill, attorneys; Mr. Bonchi, of counsel and on the briefs; Matthew S. Maisel, on the briefs).

PER CURIAM

Plaintiffs appeal the Law Division's March 22, 2013 order for summary judgment dismissing the complaint they filed against defendants, alleging that defendants defrauded them and committed other tortious acts by demanding payment of an "illegal $7600 [p]remium" to vacate a judgment of foreclosure entered in 2008 on a property in the Borough of Rutherford formerly owned by plaintiff Winberry Realty Partnership (WRP).1 Defendants appeal the Law Division's May 24, 2013 order denying their motion for counsel fees and costs pursuant to Rule 1:4-8 and N.J.S.A. 2A:15-59.1.

We have considered the arguments of the parties, as well as the facts and the law, and we affirm both orders.

I.

To place this matter in perspective, we begin with the WRP's failure to pay property taxes on residential real estate it owned in the Borough of Rutherford. On October 10, 2002, the Borough, exercising its authority under N.J.S.A. 54:5-19, conducted a public tax sale auction of the lien on the property. Defendant, American Tax Funding, L.L.C. (ATF) was the successful bidder, and on October 11, 2002, ATF acquired the tax sale certificate.

At the auction, the interest rate on the tax sale certificate was bid down from 18% to 0%, and, pursuant to N.J.S.A. 54:5-32, ATF paid $7072.58 for the certificate, together with s $7600 "premium."2 In November 2006, ATF filed a foreclosure complaint and named WRP as defendant.3 John Winberry, one of WRP's four sibling partners, who is not an attorney and was acting pro se, contested the foreclosure, purportedly on behalf of WRP. After filing an answer to ATF's complaint, Winberry failed to appear for two case management conferences. As a result, on August 6, 2007, the Chancery Division struck WRP's answer and declared the matter uncontested.

Sometime later, Winberry filed a pro se motion for relief from the August 6, 2007 order. The return date was rescheduled at Winberry's request. At the rescheduled hearing, Winberry informed the judge he was unprepared to proceed because he had misplaced his file. The judge sua sponte questioned the propriety of Winberry's representation of WRP. After these and other comments, the judge advised he would hear argument in the afternoon. Winberry, however, did not return to the court room due to a panic attack. The hearing was rescheduled.

Finally, on October 31, 2007, the judge rendered an oral decision on the papers, and denied the motion. He determined that WRP's answer did not contest ATF's right to foreclosure, and he returned the matter to the Office of Foreclosure.

By this time, five years after the tax sale, the $7600 premium escheated to the Borough. Final judgment in the foreclosure litigation was entered on July 24, 2008, and WRP's right to redeem the property was foreclosed.

Subsequently, WRP retained counsel and in February 2009, moved to vacate the final judgment. WRP's counsel argued that because Winberry's representation of the partnership was without the other partners' knowledge, he did not represent the partnership. Guided by R. 1:21-1(c)(requiring a business entity be represented by counsel) and persuaded that the other sibling partners were unaware of Winberry's actions, Judge Ellen L. Koblitz, who had not previously handled the case, vacated the foreclosure judgment on the condition that WRP pay to ATFH its costs and expenses. Judge Koblitz said

[WRP] must pay all reasonable costs incurred by [ATFH] in this matter, and [ATFH has] to provide a break-down of those costs. It is not my intention to overly scrutinize the cost, because I think if [ATFH] anticipated that they would be out of pocket those costs and whatever they gained from the sale of the property they would have, but it's in their interest to keep the costs down.

The resulting July 9, 2009 order stated in relevant part

2. [WRP s] right to redeem the tax sale certificate(s) is conditioned upon the following

(a) [WRP's] payment in full of all principal, interest, statutory fees and costs associated with the tax sale certificate(s) within five days of receipt of break down; and

(b) [WRP's] payment of all reasonable out of pocket expenses for the property including but not limited to cleanup, repairs, insurance and brokerage fees within five days of receipt of break down; and

(c) [WRP's] payment of [ATFH's] reasonable attorneys' fees and costs; and

3. [WRP] shall hold [ATFH] harmless for any claims by the contract purchaser or prior tenant of the subject property; and

4. Payment of the amounts indicated in paragraph 2(a) and (b) shall be made on or before five days from receipt of bill; and

5. If payment of the amounts indicated in paragraph 2(a) and (b) does not take place on or before five days after receipt of bill, [ATFH s] Final Judgment of Tax Foreclosure shall be reinstated with prejudice[.]

Accordingly, ATFH submitted to WRP an itemized list of the payments and costs listed as follows: "Lien Redemption: $122,264.66 (as of 8/18/2009) (per diem: $45.40) Property Expenses: $14,854.08 (as of 7/10/2009) Attorneys Fees/Costs: $13,315.00." An attached lien redemption work sheet created by the Borough specifically and clearly identified the $7600 premium.

Thereafter, WRP s counsel submitted the payment under protest and sought clarification from Judge Koblitz "as to the meaning of Paragraph 3 and the basis for the court vacating the Final Judgment . . ." At oral argument on the clarification motion, WRP contested the amount of the "reasonable expenses" owed to ATFH but never contested the premium. At the close of argument, Judge Koblitz ordered that WRP pay defendant "reasonable expenses" of $2,374.08. Later, when asked at a deposition why the premium had not been challenged, WRP's counsel conceded it had not been an issue at that time.

WRP appeared before Judge Koblitz a third time on an unsuccessful motion for reconsideration to contest, among other things, the "reasonable expenses" awarded in the prior motion for clarification, again without contesting the premium. At oral argument on the motion, WRP's counsel told the court, "[t]he only two things we're here for is the paragraphs of your order 2C 2B and 2C, 2B being the hold harmless portion."

With their reconsideration motion denied, WRP appealed to this court, arguing that Judge Koblitz erred in imposing conditions upon vacating the judgment of foreclosure. In affirming Judge Koblitz, we held, "[c]onsidering the dubious merit in [WRP's] contentions, as well as the resulting prejudice that would otherwise be suffered by WRP, Judge Koblitz quite appropriately imposed conditions." ATFH Real Prop., L.L.C. v. Winberry Realty P ship, 417 N.J. Super. 518, 528 (App. Div. 2010), certif. denied, 208 N.J. 337 (2011).

Subsequently, plaintiffs filed a counterclaim against their counsel for malpractice after counsel filed a complaint to recover unpaid legal fees. The counterclaim was dismissed based on plaintiffs' failure to provide an affidavit of merit, as required by N.J.S.A. 2A:53A-27. Plaintiffs also filed the complaint against defendants at issue on appeal.

Following the completion of discovery, the parties filed cross-motions for summary judgment. Judge Robert C. Wilson heard oral argument on these motions on March 22, 2013. WRP argued that ATFH violated the Tax Sale Law, N.J.S.A. 54:5-1 to -137, and asserted causes of action under the Consumer Fraud Act, N.J.S.A. 56:8-1 to -135, along with the common law claims of fraud and negligent misrepresentation based on the inclusion of the premium in the sum required to vacate foreclosure under Judge Koblitz's order. Judge Wilson granted summary judgment in favor of defendants, and stated, in pertinent part

The Entire Controversy Doctrine requires litigants to assert in one action all claims arising from a single controversy. Here the controversy was a tax sale and the foreclosure. See Thomas v. Hardest, 363 N.J. Super. (App. Div. 2003) at 589; and Rule 4:30A. In the present case [WRP] even filed a motion to clarify Judge Koblitz's order after exhausting all Appellate procedures and relief on July 9th, 2009, but never raised a premium reimbursement ruling at that time, which it now seeks to in a separate Law Division action. And again, the plaintiff understood its ability to go back to the Chancery Division in the event that there was a problem with the order that was issued and the decisions that were rendered in that case.

Thereafter, ATF and ATFH sought sanctions and attorneys' fees, but Judge Wilson denied their motion on May 24, 2013.

Plaintiffs now appeal the order for summary judgment arguing they could not have raised their present claims in the foreclosure action because such claims had not yet accrued. Plaintiffs assert their cause of action under the tax sale certificate arose only after they redeemed the property. ATF and ATFH also cross-appeal the May 24, 2013 order denying their motion for counsel fees.

The arguments raised on appeal by plaintiffs are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). The record clearly supports the conclusion that the amount sought by defendants under Judge Koblitz's order included the $7600 premium and that the premium was disclosed before payment was made. Plaintiffs chose to challenge various charges defendants sought in reimbursement at the time they succeeded on their motion to vacate, but never raised any issue respecting the premium. Consequently, we conclude that plaintiffs' complaint is barred by the entire controversy doctrine.

The entire controversy doctrine, set forth in Rule 4:30A, requires parties to raise all transactionally related claims in the same action and precludes the later assertion of claims that are not so joined. K-Land Corp. v. Landis Sewerage Auth., 173 N.J. 59, 69-71 (2002). Specifically, Rule 4:30A states: "Non-joinder of claims required to be joined by the entire controversy doctrine shall result in the preclusion of the omitted claims to the extent required by the entire controversy doctrine[.]" The doctrine reflects "our long-held preference that related claims and matters arising among related parties be adjudicated together rather than in separate, successive, fragmented, or piecemeal litigation." Kent Motor Cars, Inc. v. Reynolds and Reynolds, Co., 207 N.J. 428, 443 (2011); see also Cogdell v. Hosp. Ctr. at Orange, 116 N.J. 7, 23 (1989) (noting "[f]ragmented and multiple litigation" is detrimental to the parties, the judicial system, and the public).

The Supreme Court has stated

Underlying the Entire Controversy Doctrine are the twin goals of ensuring fairness to parties and achieving economy of judicial resources. As this Court has recognized, "[t]he purposes of the doctrine include the needs of economy and the avoidance of waste, efficiency and the reduction of delay, fairness to parties, and the need for complete and final disposition through the avoidance of 'piecemeal decisions.'" Cogdell[, supra], 116 N.J. at 15 . . . (citing 2 State of New Jersey Constitutional Convention of 1947, Committee on the Judiciary Report 11(J) at 1187 (1947)); accord Oliver v. Ambrose, 152 N.J. 383, 392-93 (1998).

[Kent Motor Cars, supra, 207 N.J. at 443.]

The doctrine "requires joinder in one action of all legal and equitable claims related to a single underlying transaction[,]" Manhattan Woods Golf Club, Inc. v. Arai, 312 N.J. Super. 573, 577 (App. Div.), certif. denied, 156 N.J. 411 (1998), "embod[ying] the principle that the adjudication of a legal controversy should occur in one litigation in only one court[,]" Cogdell, supra, 116 N.J. at 15.

Further, the doctrine requires parties to present not only the principal matters to be litigated but also any other aspects of a controversy between them that could be litigated. Vision Mortg. Corp. v. Patricia J. Chiapperini, Inc., 307 N.J. Super. 48, 51-52 (App. Div. 1998), aff'd, 156 N.J. 580 (1999). Commonality of legal issues is not required, but rather, "the determinative consideration is whether distinct claims are aspects of a single, larger controversy because they arise from interrelated facts." DiTrolio v. Antiles, 142 N.J. 253, 271 (1995). See also Garvey v. Twp. of Wall, 303 N.J. Super. 93, 100 (App. Div. 1997) (stating the entire controversy doctrine requires a "factual nexus" between the circumstances underlying the claims asserted and those withheld). Consequently, "all parties involved in a litigation should at the very least present in that proceeding all of their claims and defenses that are related to the underlying controversy." Cogdell, supra, 116 N.J. at 15 (citations omitted).

"'[T]he doctrine is one of judicial fairness and will be invoked in that spirit.'" Higgins v. Thurber, 413 N.J. Super. 1, 11-12 (App. Div. 2010) (quoting Crispin v. Volkswagenwerk, A.G., 96 N.J. 336, 343 (1984)), aff'd 205 N.J. 227 (2011). The entire controversy doctrine does not "'apply to bar component claims either unknown, unarisen, or unaccrued at the time of the original action.'" K-Land Corp., supra, 173 N.J. at 70 (quoting Pressler, Current N.J. Court Rules, comment on 2 on R. 4:30A (2002)).

When "considering fairness to the party whose claim is sought to be barred, a court must consider whether the claimant has had a fair and reasonable opportunity to have fully litigated that claim in the original action." Gelber v. Zito P'ship, 147 N.J. 561, 565 (1997) (internal quotation marks and citations omitted). "'[T]he first forum must have been able to provide all parties with the same full and fair opportunity to litigate the issues and with the same remedial opportunities as the second forum.'" Hernandez v. Region Nine Hous. Corp., 146 N.J. 645, 661 (1996) (quoting Perry v. Tuzzio, 288 N.J. Super. 223, 230 (App. Div. 1996)).

The ultimate authority to control the joinder of parties and claims remains with the court; the parties may not choose to withhold related aspects of a claim from consideration, see, e.g., Hobart Bros. Co. v. Nat'l Union Fire Ins. Co., 354 N.J. Super. 229, 240-41 (App. Div.) (quoting Oltremare v. ESR Custom Rugs, Inc., 330 N.J. Super. 310, 315 (App. Div. 2000)), [certif. denied, 175 N.J. 170 (2002),] nor may they decline to reveal the existence of other parties in an effort to achieve an advantage.

[Kent Motor Cars, supra, 207 N.J. at 446.]

See also Mystic Isle Dev. Corp. v. Perskie & Nehmad, 142 N.J. 310, 323 (1995) (holding application of the preclusive effect of the entire controversy doctrine is left to judicial discretion, to be exercised on a case-by-case basis).

In light of the totality of the facts, we conclude the issues presented in plaintiffs' newest complaint "must be regarded as constituting an element of one mandatory unit of litigation" that has concluded. DiTrolio, supra, 142 N.J. at 268 (citations omitted). Plaintiff "omitted components of the dispute or controversy" which it could and should have presented by "engag[ing] in additional litigation to conclusively dispose of their respective bundles of rights and liabilities" pertaining to the sums required to vacate foreclosure. Ibid.

WRP s prior counsel testified at his deposition that his understanding of the order was that "the redemption would be allowed upon [WRP s] payment of whatever the statutory scheme for the arithmetic computation of the amount due would be, which is computed by and produced by the tax collector."

On July 15, 2009, ATFH's counsel sent a letter to plaintiffs' counsel, breaking down the amount required to comply with the conditions of the orders. The letter stated that the amount would be $122,264.66 and should be paid directly to the Rutherford Tax Collector's office. The Borough's calculations regarding the amount were affixed to the letter, and the $7600 premium was handwritten on the document and was included in the total sum of $122,264.66. On July 22, 2009, WRP s counsel wrote a letter to the tax collector stating that he was paying $122,264.66 pursuant to the court's order, but submitted the payment under protest, reserving the right to appeal. In his subsequent deposition, counsel acknowledged that the handwritten premium was on his copy of the calculations as well

Q: when you looked at [the Borough of Rutherford Lien Redemption Worksheet], did you notice the $7,600 premium refund?

A: I see it's written on here. Yes.

Q: And

A: It's on the copy in my file, too.

On or about July 29, 2009, WRP filed a motion for clarification of the July 9, 2009 order. Specifically, WRP sought clarification of both the condition requiring it to "hold [ATFH] harmless for any claims by the contract purchaser or prior tenant of the subject property" and the court's basis for vacating final judgment. At the August 14, 2009 oral argument, WRP contested the amount of the "reasonable expenses" owed to ATFH. While discussing the amount of reasonable expenses, ATFH's counsel discussed the redemption

[T]he tax collector calculates that, the redemption. We called the tax collector, get us the redemption, we'll make it easy, so we can submit it to them instead of them going to tax collector and getting it. They provided it. Problem is this tax collector projects it out to the next town council meeting date, that's how they do it, because then there is going to be a redemption issue. . . . So we got the figures from them, and then I notified [WRP's attorney], that if you're going to obviously have to redeem within five days, not on August 18th, we provided a per diem, back out the days from the 18th at a per diem rate of 45.50, and that's going to be your redemption.

In ATFH's counsel's subsequent deposition, she stated that she discussed the inclusion of the premium with the tax collector prior to the submission of the July 15, 2009 breakdown: "I spoke to [the tax collector] when the court order came out and we talked about calculating the amount for the redemption of the tax sale certificate, and we discussed the fact that the order was the premium was to be included." ATFH's counsel later recognized that it is normally impermissible to collect a premium as part of a "standard redemption."4

Finally, we turn to defendants' appeal from the denial of their motion for sanctions. Such "determinations on the availability and amount of fees and costs for frivolous litigation are reviewable for 'abuse of discretion.'" Ferolito v. Park Hill Ass'n, 408 N.J. Super. 401, 407 (App. Div.), certif. denied, 200 N.J. 502 (2009). "Reversal is warranted when '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 in judgment.'" Ibid.

Defendants assert that WRP s complaint was frivolous and its attorneys should therefore be sanctioned. WRP counters that defendants have neither established that the trial court abused its discretion in denying sanctions nor demonstrated the frivolousness of WRP s suit.

In denying the motion for sanctions, the trial court found [n]o evidence has been presented that this litigation was commenced or continued in bad faith. Thus, the award of fees is unwarranted. As noted, we review the trial court s denial of sanctions under an abuse of discretion standard, and we find no abuse here.

Affirmed.

1 The individual plaintiffs are siblings and members of WRP, a New Jersey general partnership.

2 The statute provides that when the interest rate bid on a tax sale falls below 1%, a purchaser may offer to pay to the municipality, "a premium over and above the amount of taxes, assessments or other charges." N.J.S.A. 54:5-32. The property is then sold to the purchaser "who offers to pay . . . the highest amount of premium." Ibid. Pursuant to N.J.S.A. 54:5-33, the premium may be refunded to the purchaser if the tax sale property is redeemed or foreclosed upon within five years of the tax sale; otherwise the premium is forfeited to the municipality. ATF, as we have noted, bid a $7600 premium to win the auction and paid this sum, along with the property taxes and assessments owed to the Borough.

3 ATF subsequently assigned the certificate to ATFH Real Property, LLC (ATFH).

4 WRP relies on the Supreme Court's decision in Varsolona v. Breen Capital Servs. Corp., 180 N.J. 605 (2004) for the proposition that "the statute was enacted . . . to make 'certain that delinquent taxpayers shall not, on redemption, be required to pay more than the statute requires.'" Id. at 622. WRP argues that it was redeeming its tax sale certificate pursuant to the statute and therefore could not be required to reimburse the premium.

However, the Chancery Division vacated the foreclosure judgment under such terms as were just. See R. 4:50-1. We heretofore found the challenged terms of the order to be just. See ATFH Real Prop., supra, 417 N.J. Super. at 528. While Varsolona prohibits charging property owners more than the statute requires, this prohibition applies in the context of a statutory redemption. Judge Koblitz's equitable remedy was crafted pursuant to Rule 4:50-1, not the statute, making that statute inapplicable. Therefore, even if the statute prohibits a certificate holder from obtaining reimbursement of its premium from the property owner upon redemption, this rule is inapplicable here.