PADULA BUILDERS, INC. v. LOUISA J. KOSTIHA

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3025-05T53025-05T5

PADULA BUILDERS, INC.,

Plaintiff-Respondent/

Cross-Appellant,

v.

LOUISA J. KOSTIHA,

Defendant-Appellant/

Cross-Respondent.

________________________________________________________________

 

Argued May 8, 2007 - Decided July 3, 2007

Before Judges Skillman, Lisa and Holston, Jr.

On appeal from Superior Court of New Jersey, Chancery Division, Ocean County, Docket No. C-210-03.

Joseph Di Rienzo argued the cause for appellant/cross-respondent (Di Rienzo & Di Rienzo, attorneys; Mr. Di Rienzo, on the brief).

Thomas E. Monahan argued the cause for respondent/cross-appellant (Gilmore & Monahan, attorneys; Michael J. Gilmore, on the brief).

PER CURIAM

Defendant, Louisa J. Kostiha, appeals from four orders entered by the Chancery Division. The orders arise from the trial of plaintiff Padula Builders' complaint for specific performance of an option agreement for the conveyance of two lots contained in a five lot subdivision. The orders also arise from the trial of defendant's counterclaim for damages for breach of an alleged contract for the construction of a house for defendant by plaintiff on one of the lots in the subdivision. Three of the orders appealed from were entered after a trial or evidentiary hearing. The other order denied defendant's motion for reconsideration.

The dispute concerns an option agreement between the parties dated June 25, 2001. The agreement granted plaintiff the option to purchase four of the five lots owned by defendant in Dover Township, on which she had obtained a five lot residential subdivision. The subdivision as appears on Dover Township's Tax Map is described as Block 392.04, Lots 29.01, 29.02, 29.03, 29.04, and 29.05.

The term of the option was for two years commencing July 1, 2001 and continuing until June 30, 2003. Plaintiff was given the option to purchase four of the five lots, two for $175,000 and two for $200,000. All payments due under the option were required to be made within the two-year time frame. Defendant would retain the remaining lot and plaintiff would construct a house for defendant on that lot.

The option was to be exercised on a lot-by-lot basis, and the agreement contemplated that plaintiff would find a buyer, design a custom home of at least 3,500 square feet, and enter into a contract with that buyer for the construction of a house on the lot. Plaintiff would then give written notification to defendant of its exercise of the option on that lot.

Other than the first lot, for which the entire purchase price was required to be paid on notification by plaintiff of its exercise of the option, only a $10,000 deposit would be paid up front on the remaining three lots with the balance to be paid upon closing of title with the third-party buyer.

The first lot, Lot 29.04, was sold by defendant to Dr. and Mrs. Kumar under a contract for sale dated August 2002. The direct sale of the lot to the Kumars by defendant for $100,000 was by mutual agreement of the parties, and constituted a modification of the terms of the option agreement. Defendant, thereafter, found buyers for two of the three remaining lots. By letters dated March 24, 2003 and April 23, 2003, plaintiff gave defendant written notice of its exercise of the option on two of the remaining lots, Lots 29.03 and 29.05, and tendered the required $10,000 option payment for Lot 29.03.

Plaintiff had entered into separate contracts for the purchase of each of the lots, with houses to be constructed thereon, with third-party purchasers. Construction of the houses on those lots was not to be completed by June 30, 2003, the option end date. However, plaintiff was prepared to tender payment of the balance due for each of the lots at a closing to be held prior to June 30, 2003.

Defendant contended that Section 4 of the option agreement required completion of construction on or before June 30, 2003, and that as a result of the failure of plaintiff to complete construction, plaintiff was in default of the agreement. Defendant, therefore, refused to convey title to the lots. Defendant further claimed that completion of her house on the retained lot before June 30, 2003 was a condition of the option agreement, the failure of which placed plaintiff in default.

Judge Clyne bifurcated the issues and tried plaintiff's claim for specific performance first. After conducting a bench trial, Judge Clyne in an oral and written opinion of September 17, 2004 granted plaintiff specific performance of the option to purchase the two lots. By order dated October 18, 2004, defendant was required to convey to plaintiff Lots 29.03 and 29.05. The judge further ordered plaintiff to pay the purchase price for each lot of $175,000 and $200,000 respectively, as set forth in the option agreement, with closing to take place at the office of plaintiff's counsel on October 18, 2004.

Defendant, thereafter, changed counsel. Substituted counsel filed a motion for reconsideration of the court's September 17, 2004 order based on defendant's claim that the entire trial was tainted because of the impermissible dual representation by defendant's trial counsel in the sale of the lot to the Kumars. The contract for the sale of this lot had a separate construction contract between plaintiff and the Kumars attached. Defendant alleged her trial counsel represented both plaintiff and her in the Kumar transaction, and thus, was in conflict of interest because of divided loyalty when representing her in the trial of plaintiff's specific performance claim.

Defendant further sought reconsideration of the court's October 18, 2004 order for specific performance on the basis that she was precluded at the trial from presenting the defense of unclean hands, which was the third separate defense asserted in her answer to plaintiff's complaint. Plaintiff sought to have the court set aside its order for specific performance on the basis that defendant and plaintiff participated in an unlawful scheme to defraud the government of income taxes by side agreements. Defendant asserted that plaintiff agreed to pay her an additional $50,000 in cash and give her a $50,000 credit against the construction of her residence in connection with the Kumar conveyance.

The court rejected defendant's arguments and determined that all legal arguments and all separate defenses associated with the right of specific performance had been available for defendant to raise at the trial of the claim for specific performance. The court stated that plaintiff's belated assertion of the parties' tax avoidance scheme was one in which defendant was raising the issue with unclean hands. The judge thus denied reconsideration on that basis.

The judge found, after a plenary hearing on December 20, 2005, that defendant failed to establish the existence of dual representation on the part of her former trial attorney or his law firm. The ruling was memorialized in the court's January 9, 2006 order.

Thereafter, Judge Clyne tried the damages claims. The judge made detailed findings in an oral decision of the amounts due for the value of work performed by plaintiff on defendant's house, offset by amounts plaintiff owed defendant, including amounts due for reimbursement for real estate taxes on the lots conveyed as required by the option agreement. On January 31, 2006, after determining defendant owed plaintiff a total of $50,053.95 and plaintiff owed defendant a total of $50,500 and after setting off one sum against the other, the court awarded defendant damages in the amount of $446.05 plus $7,896.05 as reimbursement for taxes paid on Lots 29.02, 29.03, and 29.05 plus pre-judgment interest in accordance with the Rules of Court. The court entered an order of judgment in defendant's favor in the amount of $8,342.10. Defendant appeals all four orders. We affirm.

Defendant presents the following arguments for our consideration:

POINT I

THE TRIAL COURT ERRED IN ENTERING A JUDGMENT COMPELLING DEFENDANT TO SELL LOTS 29. 03 AND 29.05 TO PLAINTIFF, AS THE PLAIN LANGUAGE OF THE OPTION CONTRACT DEMONSTRATES THAT THE PARTIES INTENDED PLAINTIFF'S CONSTRUCTION OF A HOME AND SALE OF THAT HOME TO A BONA FIDE THIRD PARTY PURCHASER DURING THE OPTION PERIOD TO BE A CONDITION OF PLAINTIFF'S OPTION.

POINT II

THE TRIAL COURT EITHER DENIED DEFENDANT HER RIGHT TO PROCEDURAL DUE PROCESS UNDER BOTH THE UNITED STATES CONSTITUTION AND THE NEW JERSEY CONSTITUTION OR VIOLATED NEW JERSEY LAW BY ENTERING A JUDGMENT FOR SPECIFIC PERFORMANCE WITHOUT TRYING OR OTHERWISE CONSIDERING DEFENDANT'S AFFIRMATIVE DEFENSES.

POINT III

THE TRIAL COURT ERRED IN FINDING THAT MR. YORK DID NOT REPRESENT PLAINTIFF IN THE OPTION NEGOTIATION AND THE VIJAYAKUMAR TRANSACTION, THEREBY REFUSING TO VACATE THE ORDER GRANTING SPECIFIC LEGAL SERVICES ON PLAINTIFF'S BEHALF, UNDER THE STANDARD IMPOSED BY NEW JERSEY LAW, AND THE EXISTENCE OF THAT RELATIONSHIP CREATED A CONFLICT OF INTEREST THAT UNFAIRLY TAINTED THE FIRST PORTION OF THE BIFURCATED TRIAL.

POINT IV

THE TRIAL COURT ERRED IN ITS ASSESSMENT OF DAMAGES ASSOCIATED WITH THE PARTIES' DEALINGS BY REFUSING TO PERMIT DEFENDANT TO UPDATE THE TOTAL COSTS ASSOCIATED WITH THE DELAY IN CONSTRUCTION AND SALE OF THE LOTS IN LIGHT OF PLAINTIFF'S MISREPRESENTATIONS, BY ERRONEOUSLY FINDING THAT THERE WERE NO ORAL AGREEMENTS ON VARIOUS ISSUES AND BY ERRONEOUSLY ASSIGNING DAMAGES ON VARIOUS ISSUES.

We reject these arguments and affirm.

I.

Plaintiff contends that defendant's appeal of the October 18, 2004 order for specific performance is untimely as it was not filed within 45 days of entry of final judgment.

Pursuant to Rule 2:4-1(a), "[a]ppeals from final judgments or orders of courts. . . shall be taken within 45 days of their entry." "It is also well settled that a judgment, in order to be eligible for appeal as a final judgment, must be final as to all parties and all issues." Pressler, Current N.J. Court Rules, comment 2.2.2 on R. 2:2-3 (2007).

Rule 2:2-3(a)(3) states that "[f]inal judgments of a court, for appeal purposes, shall also include those referred to by . . . R. 4:42-2 (certification of interlocutory order)[.]" Rule 4:42-2 "permits the certification of an interlocutory judgment as final even if that adjudication does not fully dispose of a separable claim." Pressler, Current N.J. Court Rules, comment 1 on R. 4:42-2 (2007). Rule 4:42-2 applies:

[I]f the trial court certifies that there is no just reason for delay of such enforcement, the trial court may direct the entry of final judgment upon fewer than all the claims as to all parties, but only in the following circumstances: (1) upon a complete adjudication of a separate claim; or (2) upon complete adjudication of all the rights and liabilities asserted in the litigation as to any party.

[R. 4:42-2.]

After the court's written decision of September 17, 2004, but prior to the filing of its October 18, 2004 order memorializing that decision, the court, by order dated October 15, 2004, granted defendant's application for stay of the sale of the lots, and ordered that the "[p]arties shall appear for trial on November 15th, 2004 to complete damages portion of trial." The October 18, 2004 order, which granted specific performance, stated that "closing on the subject properties . . . shall take place on October 18, 2004 at 10 a.m."

On June 23, 2005, defendant filed a motion for reconsideration of the court's October 18, 2004 order, alleging a conflict of interest and dual representation on the part of defendant's prior counsel, and for a new trial, based on its affirmative defense of unclean hands. The October 18, 2004 order only addressed the issue of specific performance and did not reach the issues of damages, nor did it address the affirmative defense and conflict of interest issues raised on the motion for reconsideration. Further, in the court's December 20, 2005 written opinion on the issue of damages, the court stated that it incorporated the findings of fact and conclusions of law rendered in its previous opinions.

Rule 4:42-2, which authorizes the certification as final of an interlocutory order subject to enforcement under Rule 4:59, applies only to orders for the payment of money, because those are the only types of orders subject to enforcement by execution under Rule 4:59. An injunctive order, including an order for specific performance, is immediately enforceable without such a certification. However, its enforceability does not make such an order appealable as of right. Moreover, even if Rule 4:42-2 permitted an injunctive order to be certified as final, the October 18, 2004, order was not so certified.

The October 18, 2004 order was not final and dispositive of all the issues between the parties. See R. 2:2-3(a). It was only after the January 31, 2006 order for damages was filed that the case was ripe for appeal. Defendant's Notice of Appeal was filed on February 17, 2006, well within the forty-five days requirement of Rule 2:4-1. As a result, plaintiff's contention that the notice of appeal was untimely is without merit.

II.

Defendant claims that the trial court erred in entering a judgment for specific performance because plaintiff did not exercise its option in accordance with the contract's plain language. Defendant argues that the court should have reviewed the language in the contract for the plain meaning of the objective intent of the parties as manifested in the contract language, rather than by finding the intent of the parties at the time they entered into the agreement by testimony offered at trial.

Section 4 of the option agreement states:

[Defendant] and [plaintiff] agree that the [plaintiff] may exercise this Option by giving [defendant] written notice that [plaintiff] intends to construct a home on any of the aforementioned lots. [Defendant] agrees that upon receipt of such notice and upon completion of the construction of said house by the issuance of a temporary or permanent certificate of occupancy, [defendant] shall deliver to [plaintiff] a bargain and sale deed to the property. Simultaneously thereto, [plaintiff] shall pay to [defendant] the total amount of the debt agreed upon herein for the lot in question upon closing of title with a bona fide third-party purchaser. In no event shall the period for payment of monies due extend beyond the Option period.

The court found that:

[T]he intent of the parties in entering into the option contract was to provide the buyer with the opportunity to delay paying for the lots in question until he built homes on the lots in question so long as he did not delay paying for the lots beyond June 30, 2003 . . . . Defendant . . . asserts that in addition to creating the right in favor of the plaintiff to pay for lots out of the proceeds of the sale of the improved lots, there was also the obligation to complete the construction of the homes on the lots which are the subject of plaintiff's exercise of the option to purchase.

The obligation asserted by the defendant is not clear from the wording of the option contract. The reference to the construction of homes is not to be found in the option contract in the context of an expressed obligation or as a condition precedent to the exercise of the option

. . . .

The court based its conclusion on the following factors: 1) defendant acknowledged that throughout the transaction she never communicated her intent that plaintiff must construct the homes before the end of the option date; 2) when defendant provided a list of conditions on April 21, 2003, which she wanted to be met prior to closing, it did not include a requirement that the homes be completed; 3) as of April 21, 2003, when defendant went to the building department and knew plaintiff had not obtained a building permit, it was unreasonable for her to expect plaintiff to construct two homes in two months and nine days as no reasonable person could expect such; 4) defendant never communicated that such impossibility to construct the homes in the two months and nine days would preclude plaintiff from exercising the option; 5) in the subsequent sale of the lot to another buyer, defendant did not place a time limit on the construction of the home; and 6) defendant's home is still not built.

Defendant argues that the terms are unambiguous and viewing the option agreement as a whole, plaintiff was required to construct a home on the lot before plaintiff could exercise its option. Defendant relies upon Brunswick Hills Racquet Club, Inc. v. Rt. 18 Shopping Center Associates, 182 N.J. 210, 223 (2005), where the Supreme Court stated that "an option contract is a unilateral agreement requiring a party to convey property at a specified price, provided the option holder exercises the option in strict accordance with the terms and time requirements of the contract." (Internal quotations omitted).

Judge Clyne found that "the obligation asserted by the defendant [in Section 4] is not clear from the wording of the option contract." Therefore, the court determined the intent of the parties when they entered into the agreement from the testimony at trial. The court concluded, based on the testimony of the parties, "that there was no meeting of the minds with regard to the alleged obligation to complete the homes . . . as a condition precedent to exercising the option." Rather, the court concluded "that the only meeting of the minds was in the nature of a financing arrangement as the clause was requested by [plaintiff] for [plaintiff's] benefit." The court concluded that plaintiff had the right to waive the financing arrangement and exercise the option by paying for the lots in question, without reference to completion of homes on the lots, so long as plaintiff exercised the option before June 30, 2003.

In Friedman v. Chopra, 220 N.J. Super. 546, 549 (1987), certif. denied, 110 N.J. 164 (1988), this court stated, "[w]here sellers agree that purchasers may close with no mortgage, they cannot complain if the purchasers choose to close with a mortgage in an amount less than the amount stated in the mortgage contingency clause." We added that a contingency clause in a mortgage agreement is "primarily for the purchasers' benefit, their right to waive is implied and purchasers are therefore free to close with a smaller mortgage or no mortgage at all." Id. at 549-50.

While Section 4 of the option agreement did not contain a mortgage contingency clause, the court, based on this section, likened the construction clause to a mortgage contingency clause as to its purpose and benefit and concluded that plaintiff had the right to waive the clause so long as it exercised the option before June 30, 2003. Because plaintiff exercised its option by written notice to defendant, supplied defendant with the agreed $10,000 deposit at least as to Lot 29.03, and was ready and able to pay the agreed upon purchase price at a closing on or before June 30, 2003, the court found that plaintiff had exercised its option for both lots in accordance with the option terms and was entitled to an order for specific performance.

We concur with Judge Clyne's finding that Section 4, as written, is ambiguous as to whether the parties intended a requirement that construction be completed within the two year option period as a condition of effective exercise of an option. We are, therefore, satisfied that the ambiguity presented permitted introduction of extrinsic evidence regarding the parties' intent. See Meserve v. Traverso, 119 N.J.L. 566, 569 (E. & A. 1938). The court made factual findings supportive of plaintiff's interpretation of the agreement, to which we are required to defer. Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 483-84 (1974).

On March 24, 2003, plaintiff provided defendant with adequate written notice of its intent to exercise the option to Lot 29.03 and tendered the $10,000 down payment required by Section 3 of the option agreement. As of April 23, 2003, plaintiff likewise provided defendant with adequate written notice of its intent to exercise the option with respect to Lot 29.05. It was ready, willing and able to settle on both lots prior to the June 30, 2003 end date as it had in place a commercial line of credit in the amount of $500,000 with Commerce Bank/Shore NA as of June 30, 2003. Therefore, plaintiff provided defendant with adequate written notice and had enough money to close on the properties.

Defendant contends that the reason that she wanted construction complete on the houses, prior to the option being exercised, was that she posted over $30,000 in utility and municipal bonds with Dover Township that would not be released until three houses were built. Further, she was concerned about the appearance of the development since she intended to live there. She testified that she did not want to live on a construction site, and she knew that finishing construction would affect her property value.

Despite these contentions, Judge Clyne found that these were not reasonable objectives. The court based this conclusion on the fact that plaintiff's house has not been completed at the time of the September 17, 2004 trial and that in the sale of the remaining lot to another builder she did not include a time limit provision for building houses on that lot. We note that defendant acknowledged that the construction provision was plaintiff's idea, thereby supporting the court's finding that the construction clause was primarily to benefit plaintiff, was similar to a mortgage contingency clause, and was waivable by plaintiff.

III.

Defendant contends that the trial court's order granting specific performance should be reversed because she was not given procedural due process. She alleges that the court failed to hear her affirmative defense of unclean hands at the trial on plaintiff's claim for specific performance. Defendant argues that because of the unclean hands of plaintiff, the court should have not enforced the agreement.

Our review of the record satisfies us that the court did not preclude defendant from presenting evidence in support of her affirmative defense in the trial for the application of specific performance. Defendant preserved her affirmative defenses in her answer, however, she chose not to raise them during the trial of the specific performance claim. At the beginning of trial, the court stated:

Very specifically, the issue to be tried in this trial is whether or not the plaintiff had exercised the option. . . .

. . . .

A very narrow issue. The intent of the parties is the issue and the Court's prepared to proceed.

The trial court then asked both counsel if they wanted to make an opening statement. Nowhere in the transcript of the specific performance trial is there any indication that defendant sought to raise the defense of the parties' unclean hands. However, defendant clearly was not precluded from raising this affirmative defense.

The first time defendant raised the affirmative defense, after asserting it in her answer, was in her reconsideration motion. Defendant alleged unclean hands on the part of plaintiff because plaintiff paid defendant $50,000 in cash and gave defendant a $50,000 credit toward the construction price of her home at the time of the Kumar closing. The payment and credit were not reflected in the sale price of the lot to the Kumars and reduced the realty transfer fee and capital gains income tax defendant was required to pay if the additional $100,000 was not reported by her. Further, the payment and credit reduced the amount of commission plaintiff was required to pay the real estate broker by $1,000. Under the option agreement, the sale price should have been $200,000, but with the $50,000 cash payment and $50,000 credit that would go unclaimed and unreported, the sale price would only be $100,000. Therefore, defendant would only pay taxes on $100,000 and plaintiff would only pay a sales commission on $100,000.

In his October 17, 2005 letter opinion, Judge Clyne stated that had the court been provided with these assertions during the trial, the court "may have barred both parties from pursuing any rights under the contract." The court noted, however, that defendant "suggests she should be rewarded by having this Court set aside its decision and dismiss the Plaintiff's and Defendant's causes of action." The court concluded that one who brings an equitable defense must have clean hands to assert it. The trial court stated that "[d]efendant does not come to the Court with clean hands in this respect and the Court declines to overturn its decision based on these facts." See Merchants Indem. Corp. v. Eggleston, 37 N.J. 114, 132 (1962) (stating that the unclean hands doctrine is applied against a person bringing an equity claim).

In Cummings v. Bahr, 295 N.J. Super. 374, 384 (App. Div. 1996), we stated:

Reconsideration should be utilized only for those cases which fall into that narrow corridor in which either 1) the Court has expressed its decision based upon a palpably incorrect or irrational basis, or 2) it is obvious that the Court either did not consider, or failed to appreciate the significance of probative, competent evidence. . . .

 
Alternatively, if a litigant wishes to bring new or additional information to the Court's attention which it could not have provided on the first application, the Court should, in the interest of justice (and in the exercise of sound discretion), consider the evidence.

[Ibid. (quoting D'Atria v. D'Atria, 242 N.J. Super. 392, 401-02 (Ch. Div. 1990).]

In this case, defendant brought new information to the trial court's attention in the motion for reconsideration. However, defendant knew of this information and had ample opportunity to raise the affirmative defense at the first trial, thus waiving her assertion of the defense. We find no abuse of the court's discretion in its denial of the motion for reconsideration based on the belated assertion of the unclean hands defense. Cummings, supra, 295 N.J. Super. at 384.

The trial court's order also denied reconsideration based on defendant's contention that her trial counsel failed to adequately represent her in the first trial by failing to assert the unclean hands defense. The court correctly noted that in civil cases the remedy for a party who contends inadequate representation is not a new trial, but rather a claim against the attorney for malpractice. See Olds v. Donnelly 150 N.J. 424, 437-38 (1997) (stating that a legal malpractice claim accrues after an adverse judgment is entered in the trial court); see also Watson v. Moss, 619 F.2d 775, 776 (8th Cir. 1980) (stating "[a] party with privately retained counsel does not have any right to a new trial in a civil suit because of inadequate counsel, but has as its remedy a suit against the attorney for malpractice.").

IV.

Defendant contends that the trial court erred in holding there was no conflict of interest tainting the first trial. A plenary hearing on that issue was conducted November 14-16, 2005. Four witnesses were presented: plaintiff, Louis Padula, Harvey York, Esq., one of defendant's prior attorneys, and Thomas Tweer (defendant's boyfriend). On December 20, 2005, the court issued a written opinion finding that defendant's counsel had not previously represented plaintiff in the sale of the lot to the Kumars and thus no conflict of interest on counsel's part tainted the first trial.

Padula testified that he was not represented by York but defendant testified that plaintiff was represented by York in the Kumar transaction. York testified that any of the service he provided plaintiff in attaching its construction contract with the Kumars to the land sale contract between defendant and the Kumars was not in representation of plaintiff, but in furtherance of a closing for the benefit of defendant. York stated that the land sale contract to the Kumars was tied to the construction contract between the Kumars and plaintiff.

Defendant argues the following facts in support of her contention of dual representation: the option contract was prepared by York and signed by plaintiff and defendant; the parties agreed that each closing would be done by York; York opened his file on April 12, 2002 in his office and titled the matter "Padula Builder to Vijayakumar"; the file label contained plaintiff's name, business address, and telephone number, and no reference to defendant; and York and plaintiff exchanged correspondence without copying defendant on subjects related to the Kumar closing.

There was also evidence demonstrating that York did not represent plaintiff: York never prepared a construction contract for plaintiff; plaintiff never met with York at any place or time to review the construction or land sale contract; York represented only the defendant at the land sale closing; York informed the Kumars' attorney that he should deal directly with plaintiff with respect to the construction contract; and York never billed or received any payment from plaintiff.

The court in its decision stated:

The court finds as a fact that the services performed by Mr. York with regard to the Kumar transaction were in furtherance of the interest of his client, [defendant.] She wanted to close title, receive monies from the buyer, cash monies from Mr. Padula, and a credit toward construction costs from Mr. Padula with regard to the construction of her home. The Kumar transaction contemplated a sale of land and a construction contract. The two were inextricably tied. Without the construction contract, there would be no land sale contract. Without the land sale contract, there would be no construction contract. In order for [defendant] to get the benefit of the sales contract it was absolutely necessary that the parties bring closure with regard to the construction agreement. To the extent that Mr. York facilitated the construction agreement by forwarding contracts and communications, he did so in order for the sales closing to occur for the benefit of his client, [defendant.] The fact that these services were of incidental benefit to Mr. Padula does not make Mr. Padula his client.

The Defendant makes reference to letters and faxes authored by Mr. York which referred to Mr. Padula as his client. This reference was made in the context of transferring documents or information in furtherance of having a closing take place. Notwithstanding the reference to Mr. Padula as a client in various cover letters and faxes, the Court finds that there was not an attorney-client relationship. Mr. Padula and Mr. York both testified that no advice was sought by Mr. Padula from Mr. York or given by Mr. York to Mr. Padula. Mr. York reviewed no documents at the direction of or on behalf of Mr. Padula. Indeed, Mr. York did not even read the Kumar/Padula construction contract. Both Mr. York and Mr. Padula testified that Mr. Padula gave no money, goods, or services to Mr. York. Everyone, including [defendant], agrees that Mr. York did not even meet Mr. Padula until the day of the Kumar closing, at which time introductions were made by [defendant].

An attorney client relationship "begins with the reliance by a non-lawyer on the professional skills of a lawyer who is conscious of that reliance and, in some fashion, manifests an acceptance of responsibility for it." Michels, New Jersey Attorney Ethics, 13:1 at 241 (2007). No bill, payment or express contract between the attorney and client is required. Ibid; see also, In re Palmieri, 76 N.J. 51, 58, 60 (1978). The "relationship may be inferred from the conduct of the parties, the surrounding circumstances, statements made by the lawyer, or some combination of all three." Michels, supra, 13:4-1 at 245. It must be "an aware, consensual relationship." Palmieri, supra, 76 N.J. at 58. There must be evidence showing that the attorney affirmatively accepts "professional responsibility." Id. at 58, 60. "[T]he common thread in cases in which a lawyer-client relationship is said to have arisen by implication is reliance by the 'client' on the professional skills of the attorney coupled with the attorney's awareness of that reliance and tacit acceptance of it." Michels, supra, 13:4-1 at 246.

Our review of the record convinces us that there was sufficient credible evidence to support the judge's determination that York did not represent plaintiff. In the Kumar transaction, plaintiff's and defendant's interests were linked together. Defendant and plaintiff both wanted to close on the sale of the land. Therefore, the construction contract was made part of the sale of the land. York did not advise on or change the construction contract prepared by plaintiff or in any way enter into a relationship in which he would be required to give divided loyalty. York never met Padula until the land sale closing. Although Padula received a benefit from York's representation of defendant, the benefit was only incidental to York's representation of defendant. Additionally, we see no evidence that York obtained confidential information from defendant that enabled plaintiff to obtain any improper advantage at the specific performance or damages trials. There is sufficient evidence in the record to support Judge Clyne's decision.

V.

Defendant contends that the court erred in limiting the scope of damages at the damages trial and in arriving at its decision as to the amount of damages defendant sustained. She argues that the judge should have let her bring her current damages up to the date of the January 2006 trial. Further, defendant contends that the court failed to consider her assertions that plaintiff damaged her by failing to perform its work on the construction of her house in a timely fashion. Defendant claims that plaintiff breached the covenant of good faith and fair dealing which caused defendant greater costs. During the damages trial, conducted on January 9-11, 2006, the court heard testimony from Padula and defendant. As to the damages associated with completing the house, the court determined that plaintiff had no duty to finish building defendant's home. The court, referring to its prior finding, stated: "[t]here was no meeting of the minds as it related to an obligation to construct homes within two years as promised. The court added: "Inasmuch as the Court has . . . sustained the objection as it relates to the obligation to construct homes within two years, the same two year time limit with regard to the construction of the defendant's home would apply."

Plaintiff contended that the cost of the work performed on defendant's home was in the amount of $52,000. Defendant contends that the judge erred at its starting point, by failing to reduce the $52,000 in construction costs claimed by plaintiff by $14,000 because of masonry work not performed. This contention is without merit. The record reflects that although the judge started at $52,000, the judge deducted $14,875 for masonry work expenses not performed before determining construction costs due plaintiff. Therefore, the court began its damages analysis as to plaintiff at $37,125.

Plaintiff contended it was entitled to overhead and profit on the work it did complete on defendant's home. The court rejected plaintiff's contention and awarded no damages to plaintiff for overhead or profit.

The parties agreed that defendant received a steel door frame in the amount of $86.95. The parties also agreed that Padula arranged the sewer installation and that he incurred that expense which was $1,000. The parties agreed that the Affordable Housing Fee owed Dover Township was $747.50 and the permit fees of $3,127 were paid by plaintiff and were damages incurred by it.

After looking at three invoices regarding plaintiff's claim for clearing of the lots, topsoil, layout of the house, crawlspace dig, dig of the basement and for loads of fill, the court ordered $5,997.50 to be paid by defendant. As for engineering work associated with the design of the retaining wall, the court ordered $650 to be paid. Further, there was an oil tank found in between defendant's lot and the Kumars. The court determined that plaintiff's removal of this oil tank at a cost of $750 provided a benefit to defendant and that defendant should pay for the removal. The court also awarded plaintiff damages for the trees it placed on defendant's property. Defendant received three trees at $190 per tree for a total of $570. The court, therefore, arrived at a total damages award due plaintiff in the amount of $50,053.95.

Both parties agreed that there was a $50,000 construction credit due to defendant from the Kumar lot sale. Along with the $50,000 credit defendant was owed, the court awarded defendant reimbursement for attorney's fees in the amount of $500 on the basis that plaintiff benefited to that extent in York's representation of defendant in its Kumar transaction. Further, pursuant to the option agreement, defendant was owed money for taxes paid on the property through 2003. As a result defendant was to receive $50,500 plus taxes.

Defendant asserts that the judge erred in limiting her damages as to unpaid taxes. However, the judge noted that the language in the option agreement had a time of the essence clause, which meant that plaintiff's obligation for taxes ran until the property closed. The judge awarded taxes from the beginning of the option agreement up until 2003, the end date of the option agreement. Therefore, the judge ordered $1,859.88 for taxes on lot 29.04 for 2001 and 2002, $2,930.32 for taxes on lot 29.03 for 2001, 2002, and 2003, and $3,118.85 for taxes on lot 29.05 for 2001, 2002, and 2003. After setting off the $50,053.95 damages award due plaintiff from the $50,500 in damages due defendant, the court determined $446.05 plus prejudgment interest as the damages due defendant before adding in a credit for taxes due defendant from plaintiff pursuant to the option agreement. The unpaid taxes, combined with the $446.05, entitled defendant to a total damages judgment of $8,342.10.

After a thorough review of the record of the damages trial, we are convinced that there is substantial credible evidence to

support the judge's damages award. Leimgruber v. Claridge

Assocs, Ltd., 73 N.J. 450, 455-56 (1976).

Affirmed.

 

Kumar is the shortened name used in the transcripts for Dr. Cellappar and Auganthi Vijayakumar.

Louis J. Padula in his trial testimony stated that he did not tender $10,000 with his written notice as to Lot 29.05 because, on advise of his counsel, it was unnecessary since defendant had not responded to his previous correspondence demanding a date for settlement on Lot 29.03.

The court's written decision granting specific performance is dated September 17, 2004. The decision was memorialized in an order granting specific performance entered October 18, 2004.

Plaintiff in its notice of cross-appeal disputes the court's computation of real estate taxes to be paid pursuant to the option agreement and the assessment of damages. Plaintiff in its brief has abandoned that contention by asserting the trial court's determinations with regard to damages issues were not in error and should be affirmed.

(continued)

(continued)

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A-3025-05T5

July 3, 2007