Opinion
DOCKET NO. A-2019-14T1
04-13-2016
THE HAMPTON CLUB CONDOMINIUM ASSOCIATION, INC., Plaintiff-Appellant, v. FIRST BAPTIST DEVELOPMENT and URBAN RENEWAL CORPORATION, Defendant, and CITY OF NEW BRUNSWICK, Defendant-Respondent.
Samuel Inglese argued the cause for appellant (Mezzacca & Kwasnik, attorneys; John F. Kwasnik, of counsel; Mario A. Ferraro, on the brief). Charly Gayden argued the cause for respondent.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Messano and Carroll. On appeal from the Superior Court of New Jersey, Chancery Division, Middlesex County, Docket No. C-109-13. Samuel Inglese argued the cause for appellant (Mezzacca & Kwasnik, attorneys; John F. Kwasnik, of counsel; Mario A. Ferraro, on the brief). Charly Gayden argued the cause for respondent. PER CURIAM
Plaintiff Hampton Club Condominium Association appeals from companion orders of the Chancery Division dismissing its claims against defendant City of New Brunswick (the City) and denying it leave to file an amended complaint. For the reasons discussed below, we affirm in part and reverse and remand in part.
I.
We begin by reviewing the history of the development of the condominium property to lend context to the present dispute. On June 12, 1985, Edpas New Brunswick Limited Partnership (Edpas) acquired 16.59 acres in New Brunswick, including Block 506.03, for development of a luxury condominium complex known as the Hampton Club. Block 506.03 contained seven lots, including lot 1.05. In 1985, Edpas conveyed some of its property to ECP Partners I.L.P (ECP), but the deed specifically excluded lot 1.05 from the conveyance.
On May 14, 1988, ECP deeded to defendant First Baptist Development and Urban Renewal Corp. (First Baptist), a developer, some of the undeveloped parcels that had been designated for plaintiff. This deed also specifically excepted lot 1.05 from the conveyance.
On July 6, 1995, Edpas conveyed additional land to ECP, but again, lot 1.05 was specifically excluded. Thus, despite numerous conveyances over the years, Edpas retained legal title to lot 1.05. Even though plaintiff never acquired clear title to lot 1.05, it used that parcel for recreation and parking. More recently, the property was redesigned to also accommodate a new gate house and entryway into the condominium complex.
On September 12, 2006, East Coast Title Agency (East Coast) informed plaintiff's attorney, John Kwasnik, Esq., that Edpas had retained title to lot 1.05. As of 2007, First Baptist relinquished all control of the development to plaintiff.
On November 12, 2008, notwithstanding that East Coast had informed Kwasnik that Edpas had title to lot 1.05, Kwasnik prepared a deed that purported to convey lot 1.05 from First Baptist to plaintiff. The deed was recorded in the Middlesex County Clerk's Office (clerk's office) on December 17, 2008. On the same date, a new deed that contained a corrected legal description of the property was re-recorded. On November 3, 2009, Kwasnik prepared a deed that purported to consolidate lots 1.05 and 1.06, and the "consolidation deed" was recorded in the clerk's office.
In March 2010, the City determined to take by eminent domain part of plaintiff's property to build a high school. On June 22, 2010, plaintiff, represented by Kwasnik, and New Brunswick Development Corporation (DEVCO) signed an agreement memorializing the terms of the eminent domain. The agreement provided, among other things, that DEVCO would fund up to $10,000 of the cost for plaintiff to bring an action to quiet title to lot 1.05. Plaintiff was also to receive a newly-constructed security guardhouse and other major capital improvements. It is undisputed that plaintiff never commenced the quiet title action.
In August 2012, a fire destroyed some individual Hampton Club units. The premises were insured by QBE Insurance Corp. The value of plaintiff's insurance claim was $1.24 million with supplemental coverage of $179,505.
A city ordinance, Section 3.20.010, provided that fire insurance proceeds could not be paid to an owner of real property if that property had outstanding municipal liens. On August 21, 2012, QBE asked the city tax assessor whether there were liens on plaintiff's property. On August 23, the tax assessor informed QBE that there were six outstanding municipal liens on lots 1.05 and 1.06, and the total amount due exceeded $88,000. On August 27, plaintiff informed the City that it had never received notice of these liens.
Despite the liens, on September 14, 2012, QBE paid plaintiff $1,244 million, the full amount of the claim. On May 24, 2013, QBE paid plaintiff the supplemental amount of $213,868. The check for the supplemental proceeds was made out jointly to plaintiff and the City, but plaintiff deposited the full amount. On the supplemental check, QBE included the notation "lien not satisfied."
In fact, the supplemental maximum was $179,000, but the record does not disclose why QBE paid $213,868. --------
Despite receiving the fire insurance proceeds in full, plaintiff filed a complaint in the Chancery Division on June 28, 2013. Plaintiff sought to compel: the City to execute documents permitting QBE to release plaintiff's fire insurance proceeds; First Baptist to pay past due expenses on the property; and the City to waive interest and penalties associated with the municipal liens.
A title search on August 30, 2013, confirmed that plaintiff still had not acquired clear title to lot 1.05. On September 5, Philip Duchesneau, the city tax assessor, certified that the deeds that Kwasnik had recorded in the clerk's office reflected that plaintiff was the owner of lot 1.05. Between 2003 and 2012, the City had sold six tax sale certificates totaling $88,402 against lots 1.05 and 1.06 for unpaid taxes, water and sewer charges.
At a September 17, 2013 hearing, Kwasnik represented that, during the course of the negotiations with DEVCO, plaintiff was never informed there were outstanding taxes due on the property, and that plaintiff only became aware of the liens after the fire. Also, Kwasnik inexplicably argued that the insurance proceeds had been withheld, even though by that time they had been paid in full, including the supplemental proceeds. The court ordered the City to provide a full accounting of the liens, which the City produced on September 30, 2013.
Plaintiff moved to amend its complaint on July 28, 2014, alleging the existence of additional tax liens. The city tax collector, Marilyn Chetrancolo, was deposed on July 31, 2014. She stated that in August 2012, there had been six outstanding liens on lots 1.05 and 1.06. In a certification dated September 11, 2014, Chetrancolo detailed ten "tax sale certificates which [p]laintiff asserts are now at issue" in its proposed amended complaint. Eight of those liens had been canceled or redeemed. The two open certificates, 09-619 and 09-689, were for unpaid water and sewer charges on lots 1.05 and 1.06. Part of lot 1.05 was recreational and utilized sprinkler services during warmer weather.
In August and September 2014, the City and First Baptist filed motions for summary judgment. The court heard argument on plaintiff's motion to amend and defendants' summary judgment motions on November 21, 2014. The court found that First Baptist had no liability. Plaintiff agreed, and withdrew its complaint against First Baptist.
The court granted summary judgment to the City with respect to plaintiff's claims regarding the release of the insurance proceeds. The court determined that this issue was moot because the insurance proceeds had already been released and the City had provided an accounting of the municipal liens. The court also granted the City summary judgment on plaintiff's remaining claim that the City should waive fees and penalties for tax, water and sewer charges. The court ruled that "such claims are not cognizable in the [Chancery Division]," but instead should have been brought either in Tax Court or in the Law Division as an action in lieu of prerogative writs.
Plaintiff requested that the court transfer the matter to the Law Division, but the court refused. The court also declined to make a determination as to whether the statute of limitations precluded plaintiff's ability to file a new action in the Law Division. Finally, the court denied plaintiff's motion to amend its complaint. This appeal followed.
II.
Plaintiff does not challenge the court's grant of summary judgment on its request that the City provide documentation to permit release of the insurance proceeds ("the document claim") and an accounting of the tax liens. Rather, plaintiff's appeal of the summary judgment order is limited to its claim that the City should waive fees and penalties associated with the municipal liens ("the penalties claim"). Plaintiff argues that the Chancery Division had ancillary jurisdiction over that claim. Plaintiff further contends that if the court declined to exercise ancillary jurisdiction, it should have transferred the penalties claim to the Law Division instead of dismissing it.
"An appellate court reviews an order granting summary judgment in accordance with the same standard as the motion judge." Bhagat v. Bhagat, 217 N.J. 22, 38 (2014) (citing W.J.A. v. D.A., 210 N.J. 229, 237-38 (2012); Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010)). We "identify whether there are genuine issues of material fact and, if not, whether the moving party is entitled to summary judgment as a matter of law." Ibid. (citing Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995); R. 4:46-2(c)).
[A] determination whether there exists a "genuine issue" of material fact that precludes summary judgment requires the motion judge to consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party.
[Brill, supra, 142 N.J. at 540.]
We then decide "whether the motion judge's application of the law was correct." Atl. Mut. Ins. Co. v. Hillside Bottling Co., 387 N.J. Super. 224, 231 (App. Div.), certif. denied, 189 N.J. 104 (2006). In this regard, "the legal conclusions undergirding the summary judgment motion itself" are reviewed "on a plenary de novo basis." Estate of Hanges v. Metro. Prop. & Cas. Ins. Co., 202 N.J. 369, 385 (2010).
It is the "settled rule that where equity has rightfully assumed jurisdiction over a cause for any purpose, it may ordinarily retain the cause for all purposes, and proceed to a final determination of the entire controversy, and establish purely legal rights and grant legal remedies." Mantell v. Int'l Plastic Harmonica Corp., 141 N.J. Eq. 379, 393 (E. & A. 1947). Stated somewhat differently, the doctrine of ancillary jurisdiction provides that,
where an action is brought which in the first instance is cognizable in the Chancery Division, it should be retained in that division irrespective of the fact that before or during the trial the equitable phases of the cause have been fully disposed of, leaving only purely legal issues remaining for determination.
[Steiner v. Stein, 2 N.J. 367, 378 (1949).]
The policy behind the doctrine is to avoid multiplicity of suits, and that "jurisdiction of the whole controversy may be assumed for the doing of complete justice in the one suit." Fleischer v. James Drug Stores, Inc., 1 N.J. 138, 150 ( 1948); see also Mantell, supra, 141 N.J. Eq. at 393. The goal is to avoid the unnecessary fragmentation of litigation. Lyn-Anna Props., Ltd. v. Harborview Dev. Corp., 145 N.J. 313, 329 (1996).
Nonetheless, it is clearly the prerogative of a chancery judge to transfer matters to the Law Division when legal claims remain, "once there has been a final resolution of the equitable claims." Marioni v. 94 Broadway, Inc., 374 N.J. Super. 588, 617 (App. Div.) (footnote omitted), certif. denied, 183 N.J. 591 (2005). However, such a transfer is neither necessary nor required if "the Chancery judge has invested a substantial amount of time in a case." Ibid. (footnote omitted).
A legal claim or issue is ancillary to companion equitable claims and issues if it is "germane to or grow[s] out of the subject matter of the equitable jurisdiction." Fleischer, supra, 1 N.J. at 150. That is, a legal claim or issue is ancillary if it is "incidental" or "essential" to the underlying equitable claims or issues. Lyn-Anna Props., supra, 145 N.J. at 330; Ward v. Merrimack Mut. Fire Ins. Co., 312 N.J. Super. 162, 166 (App. Div. 1998).
In the present case, plaintiff alleged that it never received notice of the municipal liens and was unaware of them prior to the fire loss. It therefore filed suit in the Chancery Division seeking to compel the City to execute documents permitting QBE to release the fire insurance proceeds, and to compel First Baptist to pay past due expenses on the property that it was responsible for. Plaintiff also sought to compel the City to provide an accounting for any municipal liens on the property. All of these claims sought equitable relief and were properly cognizable in the Chancery Division.
Because plaintiff asserted that the City had failed to properly notify it of the charges, plaintiff also sought to abrogate the fees and penalties associated with the municipal liens. Since the penalties claim grew out of, and was incidental to, plaintiff's equitable claims, we conclude that the penalties claim was initially properly brought in the Chancery Division along with its equitable claims.
The motion judge dismissed plaintiff's penalties claim solely on the grounds that it was not cognizable in the Chancery Division, without addressing the merits of the claim. The court erred in doing so. Rather, upon dismissing the claims for equitable relief, the court should have then exercised ancillary jurisdiction to resolve the penalties claim or, alternatively, transferred it to the Law Division. See R. 4:3-1(b) (authorizing the filing of a motion to transfer an action from one division of Superior Court to another, within certain time constraints, or thereafter on the court's own motion).
The City contends that summary judgment was properly entered because plaintiff did not have legal title to lot 1.05 and therefore lacked standing to assert its claims. In rejecting this argument, we observe that our courts have historically employed a liberal rule of standing. Crescent Park Tenants Ass'n v. Realty Equities Corp. of N.Y., 58 N.J. 98, 101 (1971); see also Jen Elec., Inc. v. Cnty. of Essex, 197 N.J. 627, 645 (2009); N.J. Builders Ass'n v. Bernards Twp., 219 N.J. Super. 539, 539 (App. Div.), certif. granted, 104 N.J. 421 (1986), aff'd, 108 N.J. 223 (1987). Although our courts will not "function in the abstract" or entertain proceedings commenced "by plaintiffs who are 'mere intermeddlers,' . . . interlopers or strangers to the dispute," we will entertain and adjudicate suits, claims and appeals when "the litigant's concern with the subject matter evidence[s] a sufficient stake and real adverseness." Crescent Park, supra, 58 N.J. at 107 (quoting Baxter v. Baxter, 43 N.J. Eq. 82, 86 (Ch. 1887), aff'd, 44 N.J. Eq. 298 (E. & A. 1888)).
Here, the City has acknowledged that lot 1.05 was at all times used as an integral part of the Hampton Club and that part of it was used by plaintiff as a recreation lot and a visitor's parking lot. Also, as the City is aware, the property was recently redesigned to include a new gate house and entrance into the condominium complex. Simply put, the City does not dispute that, regardless of the quality of title, plaintiff has at all times since the liens attached been in possession of the property and believed it was the owner. We deem the confluence of these facts sufficient to confer standing on plaintiff to pursue its claims.
We therefore reverse the dismissal of the penalties claim and remand that claim to the Chancery Division which, in the exercise of its reasoned discretion, may either assert ancillary jurisdiction over it or transfer it to the Law Division. In doing so, we express no opinion as to the merits or timeliness of the claim.
III.
We next address plaintiff's argument that the court erred in denying its proposed amendment to the complaint. The court refused to permit the amendment because it contained claims regarding "new" liens, but all of those liens had already been canceled or redeemed.
"The granting of a motion to file an amended complaint always rests in the court's sound discretion." Kernan v. One Wash. Park Urban Renewal Assocs., 154 N.J. 437, 457 (1998); Fisher v. Yates, 270 N.J. Super. 458, 467 (App. Div. 1994). We ordinarily will not disturb a trial judge's determination on a motion to amend a pleading, unless it constitutes a "clear abuse of discretion." Franklin Med. Assocs. v. Newark Pub. Sch., 362 N.J. Super. 494, 506 (App. Div. 2003) (quoting Salitan v. Magnus, 28 N.J. 20, 26 (1958)).
The "Court has construed Rule 4:9-1 to 'require[ ] that motions for leave to amend be granted liberally,' even if the ultimate merits of the amendment are uncertain." Prime Accounting Dept. v. Twp. of Carney's Point, 212 N.J. 493, 511 (2013) (alteration in original) (quoting Kernan, supra, 154 N.J. at 456). "One exception to that rule arises when the amendment would be 'futile,' because 'the amended claim will nonetheless fail and, hence, allowing the amendment would be a useless endeavor.'" Ibid. (quoting Notte v. Merchants Mut. Ins. Co., 185 N.J. 490, 501 (2006)). "[C]ourts are free to refuse leave to amend when the newly asserted claim is not sustainable as a matter of law . . . . [T]here is no point to permitting the filing of an amended pleading when a subsequent motion to dismiss must be granted." Ibid. (alterations in original) (quoting Notte, supra, 185 N.J. at 501).
Plaintiff's proposed amended complaint contained some of the same claims as the original complaint, including: that the City execute documents to release fire insurance proceeds to plaintiff; that the City waive interest and penalties on the open tax sale certificates; and that First Baptist pay all costs associated with property that had been under its control. The amended complaint also requested: that the City provide a breakdown of the amounts owed on additional open tax sale certificates; that the City determine who was responsible for unpaid taxes on individual condominium units; and that the court award plaintiff attorney fees and costs.
Plaintiff's documents claim was properly dismissed as moot since plaintiff had already received the insurance proceeds. Also, plaintiff conceded that First Baptist was not responsible for costs associated with the property and agreed to dismiss that claim. The "new" claims involved tax liens that had all been cancelled or redeemed, and were primarily against individual condominium units for which plaintiff was not responsible. Also, plaintiff failed to establish any basis for a counsel fee award. Hence, all the "new claims" lack merit, and the only open liens that remain at issue are part of the original complaint. Therefore, because the proposed amendment lacks merit, we affirm the denial of plaintiff's motion to amend.
Affirmed in part and reversed and remanded in part. Jurisdiction is not retained.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION