400 N.J.Super. 398 (App. Div 2010)
JOSEPH BURKE and TIMOTHY BURKE,
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Plaintiffs-Appellants,
and
NANCY BURKE,
Plaintiff,
v.
SEA POINT REALTORS, THOMAS MEYER,
PATRICIA MEYER and DZINTARS
ABELITE (both individually and in
his capacity as Guardian of Alfreds
Nikmanis, an incapacitated person),
Defendants-Respondents.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
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Submitted March 31, 2008 - Decided
Before Judges Collester, C.S. Fisher
and C.L. Miniman.
On appeal from the Superior Court of
New Jersey, Law Division, Ocean County, Docket No. L-928-06.
Joseph Burke and Timothy Burke,
appellants pro se.
Orlovsky, Grasso, Bolger, Mensching
& Daley, attorneys for respondents Sea Point Realtors, Thomas Meyer and
Patricia Meyer (John J. Mensching, on the brief).
Mulvaney, Coronato & Brady,
attorneys for respondent Dzintars Abelite (both individ-ually and in his
capacity as Guardian of Alfred Nikmanis, an incapacitated person) (Terry F.
Brady, on the brief).
The opinion
of the court was delivered by
FISHER, J.A.D.
This
case was triggered by a guardian's decision to retain defendant Sea Point
Realty to market real property owned by the guardian's ward. Without notice to plaintiffs or other disappointed
offerors, the guardian obtained the Probate judge's approval of a conveyance to
defendants Thomas and Patricia Meyer without clearly revealing that the Meyers
were the principals of Sea Point. Based
on this and defendants' alleged attempts to discourage buyers during the
marketing process, plaintiffs filed this action for damages. We conclude that plaintiffs' claims were not
precluded by the proceedings in the guardianship action and, with one
exception, reverse the summary judgment entered in defendants' favor.
I
A. The Proceedings in
The Probate Part
Alfreds Nikmanis was the owner of real
property in Brick Township. In light of his
deteriorating physical and mental condition, his friend of many years,
defendant Dzintars Abelite commenced an action, pursuant to N.J.S.A.
3B:13-1 to -31 and R. 4:86-1 to -6, for a declaration that Nikmanis was
incapacitated and unable to manage his affairs.
On May 19, 2005, a judgment was entered that appointed Abelite as the
guardian of Nikmanis's person and property.
Abelite
(the guardian) thereafter concluded that it was in Nikmanis's best interests to
sell the Brick Township property and engaged Sea Point as his listing
agent. Sea Point received a number of
offers, and the guardian thereafter filed an action in the Probate Part,
pursuant to R. 4:94-1 to -7, seeking approval to sell the property to
the Meyers.
In
his verified complaint, the guardian alleged that the property was purchased by
Nikmanis in 1999 for $113,000 and was unencumbered. He asserted that the Meyers' offer was the
highest and urged its approval. As more
fully explored later, the guardian's papers did not make clear the existence of
a relationship between the Meyers and Sea Point. And, because of the limited class of persons
given notice of the application, the application went unopposed and was apparently
not further scrutinized by the Probate judge, who granted the guardian's
application without explanation.[1]
B. The Proceedings in
the
Law Division
Upon
learning of the Probate judge's determination, plaintiffs commenced this Law
Division action -- against the guardian, the Meyers and Sea Point -- seeking
damages based upon what they claim, among other things, was a fraudulent scheme
to discourage buyers and to make the property available to the Meyers at the
lowest possible price. Plaintiffs asserted:
that the guardian's submission to the Probate judge was inadequate and failed
to disclose the Meyers-Sea Point relationship; that the guardian's failure to give notice to them
and the other disappointed offerors of the probate proceedings precluded deeper
scrutiny of the guardian's submission; and that the Meyers, in their role as
listing agent, discouraged potential purchasers by indicating that the property
had many problems as a way of keeping down the amount of any bids received.
By
way of separate motions, all defendants obtained summary judgment. The Law Division judge essentially based his
rulings on the fact that plaintiffs never entered into an enforceable contract with
the guardian, and that plaintiffs had no standing to be heard in the Probate
Part, or, stated another way, that the Probate judge's approval of the sale of
the property to the Meyers was conclusive.
II
There
is no dispute that the Meyers were then and are now the principals of Sea
Point. There is also no dispute that Sea
Point was retained by the guardian to be the listing agent on this property. In examining these facts in the light
required by the Brill[2]
standard, we are satisfied that it would have been of great interest to the
Probate judge at the time she considered the guardian's sale of the property to
the Meyers to know that the Meyers were the principals of Sea Point. By entering into a listing agreement with the
guardian, Sea Point and its representatives entered into a fiduciary relationship
that required the "exercise [of] fidelity, good faith and primary devotion
to the interests of [their] principal."
Exit A Plus Realty v. Zuniga, 395 N.J. Super. 655, 664
(App. Div. 2007) (quoting Ellsworth Dobbs, Inc. v. Johnson, 50 N.J.
528, 553 (1967)).
Rule
4:94-3 authorizes a Probate judge to permit a sale of an incapacitated person's
property if "the court is satisfied that the best interests of the ward
would thereby be substantially promoted."
In her role of protector of the interests of the incapacitated person in
this instance, it no doubt would have been important to the Probate judge to
know that the principals of the listing agent were the proposed purchasers. Although we may assume that relationship alone
might not have been cause to completely disqualify the Meyers as purchasers --
an issue we need not decide -- the situation certainly warranted further
scrutiny. A fair reading of the record
before the Probate judge indicates that the guardian failed to adequately disclose
this information to the Probate judge and strongly suggests that the Probate
judge ruled on the application without knowledge of the Meyers-Sea Point
relationship.
In
applying to the Probate judge for approval of the sale, the guardian claimed
that he spoke with "several realtors" and then "listed the
property for sale." His complaint
did not mention that Sea Point was the listing agent or that the Meyers were the
principals of Sea Point. The guardian's
moving certification similarly failed to adequately reveal the relationship
between the Meyers and Sea Point.
Following his description of the parties, the property, and his reasons
for selling, the guardian only set forth the following in his certification
regarding the offers received and the reason why he believed it advantageous to
sell to the Meyers:
After
speaking with several realtors, and with Alfreds himself, I listed the property
for sale, and I received several offers.
The proposed contracts are attached as Exhibit B. They show offers of $236,000, $235,500,
$210,000, $241,900 (subject to a $218,000 mortgage contingency), &
$200,000. Based upon all of the offers,
I believe that the offer of $236,000 from Thomas & Patricia Meyer was the
most advantageous, and I ask the Court to approve this contract. I note that Patricia Meyer is a realtor,
and she is the proposed buyer as well.
Her proposed contract is 100% as-is, and I will not need to make any
repairs of any kind. Given the fact that
the house has been vacant for some time, the house would otherwise be in need
of substantial repairs, as can be seen from the terms of some of the other
offers.
.
. . .
I
ask the Court to approve the Meyer contract for sale as-is at $236,000.
[Emphasis added.]
As can be seen, the guardian indicated
only that Patricia Meyer was "a" realtor; he did not state that she
was "the" realtor involved in marketing this property.
To
inhibit further inquiry, the guardian did not give notice of the application to
any of the individuals who had an interest in contesting whether the guardian's
decision to sell to the Meyers was appropriate.
The order to show cause entered by the Probate judge at the outset required
that the guardian give notice to "any interested party." The guardian apparently interpreted this to
mean that notice should be given only to the Meyers, the ward, and the attorney
appointed to represent the ward in the proceedings that led to the guardian's
appointment. The disappointed offerors
on the property were not notified -- not surprisingly, no opposition was filed.
Without
objection from these other interested persons, it appears that the guardian's
superficial certification went unexamined in the Probate Part. It has been argued that the proposed contract
attached to the certification resolves all doubts on the point and reveals the
connection between the Meyers and Sea Point.
Although there is a provision in the contract that reveals this
connection, we are not satisfied that this sufficiently informed the Probate
judge of a circumstance that was highly significant to her determination of
whether this transaction was in the incapacitated person's best interests.
The
contract identifies the purchasers of the property as "Thomas Meyer and
Patricia Meyer," and gives what we assume was the address of their
residence. Later in the contract, Sea
Point's address is identified as 1773 Route 88, Brick, an address different
from the address given in the contract for the Meyers. Thus, a cursory examination of the contract, limited
to the identity of the purchasers and the identity of the listing agent, would
fail to suggest a relationship between the Meyers and Sea Point. Instead, the only indication of their relationship
appears on the sixth page of the single-spaced contract, where it is stated in paragraph
29: "Sea Point Realty . . . and
Patricia Meyer . . . as its authorized representative(s), are working on this
transaction as . . . seller's agents."
Sea Point and the Meyers are correct that their relationship is thus revealed
by this attachment to the guardian's certification. But, considering the lack of opposition to
the application, it seems to us unlikely that the Probate judge was aware of
this brief passage in the contract. It
certainly was not highlighted for the judge in the papers submitted by the
guardian. And the Probate judge's
treatment of the application without a hearing or further inquiry suggests that
the judge was understandably unaware of the Sea Point-Meyers' relationship.
In
addition, because of the failure to highlight the Meyers' relationship to Sea
Point, the Probate judge may have labored under a misunderstanding about the
amount of their offer. The guardian's
certification asserts that other than plaintiffs' $241,900 offer, which was
viewed as less desirable because of a mortgage contingency, the Meyers'
all-cash offer of $236,000 was the highest and best. The Meyers' contract, which is attached to
the guardian's certification, in fact indicates $236,000 as the purchase price,
but it also reveals that Sea Point was entitled to be paid -- by the seller --
a 5% commission. According to a HUD
statement prepared for that subsequent transaction, Sea Point actually received
that 5% commission -- $11,800 -- from the seller's funds at closing. As a result, the property did not cost the
Meyers $236,000, as suggested to the Probate judge. Instead, the Meyers paid $236,000 and their
real estate agency received back $11,800; in essence, defendants expended only
$224,200 to obtain this property. This
would have been an important fact for the guardian to disclose in his
certification. Had the Probate judge been
aware of this, she may have viewed the Meyers' offer differently and may have
concluded that the marketing process was unfairly skewed to serve the Meyers'
interests in the property.[3] That is, in light of the benefit the Meyers
received from their entitlement to a commission, they essentially had an
approximate $11,800 "leg up" on their competition.
In
short, it cannot be disputed that it was important for the Probate judge to
know of Sea Point's alleged self-dealing in this matter. See Exit A Plus Realty, supra,
395 N.J. Super. at 664; R. 4:94-3. The certification submitted by the guardian in
seeking approval for the sale to the Meyers is somewhat disingenuous, leaving
it to only the most careful reading of the attached contracts to learn of the
relationship between the Meyers and Sea Point -- a fact that would have been
highlighted in a candid certification.
In
light of these circumstances, the Law Division judge -- in considering the
motions for summary judgment filed by these defendants -- was obligated by the Brill
standard to assume that defendants had failed to adequately reveal relevant and
material information in order to gain approval for a transaction that may have
otherwise not passed muster with the Probate judge.
III
Notwithstanding
this analysis of the record in the probate proceedings, it has been argued to
us that what occurred in the Probate Part is of no moment because plaintiffs
had no standing to be heard there. For
present purposes we may assume the truth of the argument that in a situation
like this, a guardian is not obligated by statute or rule to give notice to
unsuccessful offerors, such as plaintiffs.
That does not, however, give license to conceal or to fail to thoroughly
and candidly advise the court of relevant information.
Although
the court rules may not be entirely clear about who is entitled to notice when
there is competition for property that a guardian proposes to sell,[4]
experience suggests that the better practice has been to give notice of applications
for the approval of transfers to all potentially interested persons, including
unsuccessful offerors.[5] In considering the motions for summary judgment
in this case, the Law Division judge should have viewed the lack of notice to
plaintiffs and other offerors of the probate proceedings as supporting an
adverse inference about the bona fides of the guardian's request for approval
of the sale.[6]
For
these reasons, we find no substance in the argument that plaintiffs' alleged
lack of standing in the Probate Part somehow insulates the Probate judge's
approval of the sale to the Meyers from further scrutiny by way of plaintiffs'
action for damages against both the Meyers, Sea Point and the guardian.
IV
As
we have observed, the Law Division judge's decision to grant summary judgment
in favor of defendants was based only on his conclusion that plaintiffs never
entered into a contract with the guardian for the purchase of this
property. That factual conclusion is
unimpeachable and certainly warrants dismissal of plaintiffs' breach of
contract claim, but it does not conclude the matter. The essential thrust of plaintiffs' complaint
is their claim of fraud and tortious interference with a prospective economic
advantage, which bespeak the absence of an enforceable contract. That is, those claims do not require proof of
a contract, but instead are based on the allegation that plaintiffs were precluded
from entering into a contract by the wrongful actions of defendants.[7] The written decision rendered by the Law
Division judge on September 25, 2006 certainly contains adequate support for
the dismissal of plaintiffs' breach of contract claim, but it has no ostensible
bearing on the remainder of the complaint.
We
also discern from the oral argument on these motions that the Law Division judge
may have believed the Probate judge's ruling was unimpeachable and that he was
required to defer and assume that the Meyers were the legitimate purchasers of
this property. Any such conclusion is,
at best, arguable and certainly not so clear as to permit the entry of summary
judgment. Indeed, in considering the
remaining counts of the complaint following our remand, the trial judge should
not assume that plaintiffs are precluded by the probate proceedings if for no
other reason than plaintiffs were not parties to the probate proceeding and,
thus, "did not have a 'full and fair opportunity' to litigate the issue in
the earlier case." Allen v.
McCurry, 449 U.S. 90, 95, 101 S. Ct. 411, 415, 66 L. Ed.
2d 308, 313 (1980) (citation omitted); see also Biddle v. Biddle,
166 N.J. Super. 1, 5 (App. Div. 1979).
Moreover, as we have indicated, the Probate judge's decision may have
rested on misinformation -- yet another reason to deny it the preclusive effect
normally associated with final judgments.
See Restatement (Second) of Judgments §§ 28, 29 (1982).
During
the colloquy between the Law Division judge and counsel it also appears that
the judge was critical of plaintiffs' failure to come forward with greater proof
of the fraud or conspiracy they were asserting.
On remand, the judge must remain mindful that an alleged victim of fraud
rarely has access to that type of information. See, e.g., Ocean Cape Hotel Corp. v.
Masefield Corp., 63 N.J. Super. 369, 383 (App. Div. 1960). It was enough, at the summary judgment stage,
that plaintiffs were able to demonstrate that the relationship between the
Meyers and Sea Point was inadequately disclosed to the Probate judge. Plaintiffs could not have been expected at
that stage -- at least when it appears that discovery had not been completed --
to provide certifications about the actual terms of the alleged conspirators'
agreement. Victims of fraud rarely have
access to the inner-workings of their adversaries' minds. See Wilson v. Amerada Hess Corp.,
168 N.J. 236, 253-54 (2001).
And,
lastly, Sea Point and Meyers have argued on appeal that their motion for
summary judgment went unopposed. It is
true that this was the status of the motion when it first was heard by the
trial judge. Counsel for plaintiffs at
that time argued that his earlier papers -- we assume he was referring to
plaintiff's opposition to the guardian's motion for summary judgment -- sufficed
to defeat the other defendants' motion for summary judgment. But the trial judge correctly disagreed and appropriately
adjourned the motion in order to permit the filing of proper opposing
papers. Plaintiffs took advantage of
this opportunity and filed a certification in which the questions surrounding
the probate proceeds were summarized; the certification further asserted that
Sea Point had acted unethically and that pretrial discovery had not been
concluded, thus challenging the propriety of summary judgment. In short, we find no substance to the
argument that the motion of Sea Point and Meyers was unopposed because the
record on appeal contains an opposing certification and the Law Division judge
did refer to and consider it in ruling on the motion.[8]
V
For
these reasons, we affirm only those parts of the orders under review that
dismissed, by way of summary judgment, plaintiffs' breach of a contract claim. We reverse in all other respects and remand
for further proceedings in conformity with this opinion.
We
do not retain jurisdiction.
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[1]The
record on appeal does not contain a transcript of any proceedings the Probate
judge may have conducted in ultimately determining to approve the sale, and the
order entered at the time does not indicate the existence of either an oral or
written decision.
[2]Brill
v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).
[3]We
recognize in this regard that any other purchaser would have likely been
obligated to pay this commission to Sea Point as well, thus netting to the
ward's estate the same amount. But the
fact remains that Sea Point was entitled to a 5% commission, and, as a result,
the Meyers gained a distinct advantage over their competition for this
property.
[4]Rule
4:94-2, which indicates the circumstances that would permit a guardian to sell
a ward's property, does not define the class of persons entitled to notice
except to indicate that the ward need not be given notice unless the court
otherwise orders.
[5]Practitioners
often give notice to disappointed offerors for no other reason than to insulate
the transaction from future claims by those parties.
[6]We
would respectfully suggest that the Civil Practice Committee consider examining
the feasibility of a rule change to avoid potential circumstances such as that
which may have occurred here.
[7]For
example, the claim that Sea Point and the Meyers tortiously interfered with
plaintiffs' prospective economic advantage, in these circumstances, is
dependent upon proof that plaintiffs did not enter into a contract with the
guardian. Plaintiffs did not need to
prove an enforceable contract on this claim but instead needed only to show
that they were in pursuit of an economic advantage, which was intentionally and
with malice interfered with by the defendant, that the interference caused the
loss of the prospective gain, and that they were damaged. Printing Mart-Morristown v. Sharp
Electronics Corp., 116 N.J. 739, 751-52 (1989). In addition, we discern from plaintiffs'
complaint and their submissions in the Law Division and in this court, that
they are arguing, somewhat inartfully, that a bidding process was generated
with regard to this property. A party
that loses such a contest is not foreclosed from arguing the process was
infected with fraudulent conduct and such a claim may be actionable pursuant to
the Consumer Fraud Act. See Jackson
v. Manasquan Savings Bank, 271 N.J. Super. 136 (Law Div. 1993).
[8]In
finding no merit in plaintiffs' arguments, the Law Division judge in a very
brief oral decision rejected plaintiffs' contention that Sea Point was
plaintiffs' agent. That conclusion was
certainly supported by the record but it was not conclusive on the other
arguments raised by plaintiffs.
