MARIE ROGAN VS. CHRISTOPHER LEIBLE(L-5045-12, ESSEX COUNTY AND STATEWIDE)Â (CONSOLIDATED) ( 2017 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court."
Although it is posted on the internet, this opinion is binding only on the
parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3757-14T2
A-3758-14T21
MARIE ROGAN,
Plaintiff-Respondent,
v.
CHRISTOPHER LEIBLE and
PATRICIA ZENGEL,
Defendants-Appellants,
and
ROBERT L. GARIBALDI, JR.,
ESQ., as escrow agent only,
Defendant.
_________________________________
Argued October 12, 2017 – Decided November 22, 2017
Before Judges Nugent, Currier, and Geiger.
On appeal from Superior Court of New Jersey,
Law Division, Essex County, Docket No. L-5045-
12.
Eric S. Solotoff argued the cause for
appellant Christopher Leible (Fox Rothschild,
LLP, attorneys; Mr. Solotoff, of counsel and
on the briefs; Lauren Vodopia, on the briefs).
1
We have consolidated these back-to-back appeals for disposition
in this opinion.
Barry S. Goodman argued the cause for
appellant Patricia Zengel (Greenbaum, Rowe,
Smith & Davis, LLP, attorneys; Mr. Goodman,
of counsel and on the briefs; Steven B.
Gladis, on the briefs).
David M. Paris argued the cause for respondent
(Piro Zinna Cifelli Paris & Genitempo, LLC,
attorneys; Mr. Paris and Margarita Romanova,
on the briefs).
PER CURIAM
Defendants Christopher Leible and Patricia Zengel separately
appeal from a judgment the trial court entered against them after
suppressing their answers with prejudice for failure to make
discovery.2 The trial court suppressed defendants' answers under
the authority of Rule 4:23-5, even though the rule's procedural
safeguards had not been followed. The ensuing proof hearing
culminated in the entry of a substantial judgment that in part had
no basis in fact or in law. For these reasons, we vacate the
suppression orders and judgment, reinstate defendants' answers and
affirmative defenses, and remand for further proceedings.
Underlying the procedural issues on this appeal is an
unconsummated contract for the sale of a residential condominium
unit. Plaintiff Marie Rogan contracted to buy the unit from its
2
Because the judgment was not entered against Garibaldi, and
because he has not filed an appeal, we do not include him when we
refer to "defendants" throughout this opinion.
2 A-3757-14T2
owner, defendant Leible. Leible's real estate agent was defendant
Zengel. Robert Garibaldi, an attorney, acted as the escrow agent
for plaintiff's $40,000 deposit. Things went awry when plaintiff
was unable to obtain a mortgage.
The parties disputed the reason plaintiff could not get a
mortgage. Plaintiff claimed the reason was the condominium
association's involvement in litigation, a fact Garibaldi and
defendants did not disclose to plaintiff when she signed the
contract. Garibaldi and defendants, or at least defendant Leible,
claimed plaintiff was not creditworthy.
In any event, when plaintiff was unable to get a mortgage,
she invoked the contract's mortgage contingency clause and
demanded return of her deposit. When Garibaldi refused to return
the deposit — because his "client [was] not willing to release the
deposit at [that] time" — plaintiff commenced this action by filing
a complaint against him and defendants.
The complaint's four counts included causes of action for
fraudulent misrepresentation, consumer fraud, breach of contract,
and conversion. The breach of contract count alleged that
Garibaldi and defendant Leible, not defendant Zengel, breached by
refusing to return the deposit. Defendant Zengel was not a party
3 A-3757-14T2
to the contract. Similarly, the complaint's conversion count was
based on defendant Leible's refusal to return the deposit.
Garibaldi was a party as well as a potential witness, having
informed plaintiff her deposit would not be returned.
Notwithstanding these roles and the potential conflicts between
defendants based on the complaint's allegations, Garibaldi
undertook his own and defendants' representation. He filed an
answer on behalf of himself and the others, and he filed a
counterclaim on behalf of Leible. In response, plaintiff's
attorney sent Garibaldi a letter demanding defendants withdraw
their frivolous counterclaim pursuant to Rule 1:4-8 and N.J.S.A.
2A:15-59.1. They declined to do so. Plaintiff filed an answer
to the counterclaim, asserting, among other things, defendants
filed the counterclaim in bad faith, thus violating the Frivolous
Action Statute, N.J.S.A. 2A:15-59.1.
Plaintiff served defendants with discovery requests. When
they did not timely respond, she filed a motion to compel
discovery, as authorized by Rule 4:23-5(c). Defendants did not
oppose the motion and the trial court granted it, ordering
defendants to serve discovery responses within ten days or risk
having their answer "stricken by the [c]ourt upon an ex parte
application to this [c]ourt." Nonetheless, plaintiff filed a
4 A-3757-14T2
motion to suppress defendants' answer without prejudice, as
authorized by Rule 4:23-5(a)(1). The court granted the motion.
Plaintiff served Garibaldi with the suppression order.
Garibaldi neither sent the order to his clients, defendants, nor
notified them "in the form prescribed by Appendix II-A of these
rules, specifically explaining the consequences of failure to
comply with the discovery obligation and to file and serve a timely
motion to restore." R. 4:23-5(a)(1).
A week after the court granted plaintiff's suppression
motion, Garibaldi moved to deposit plaintiff's $40,000 into court
and to be dismissed from the case as he was no longer acting as
an escrow agent. R. 4:57-1. Plaintiff opposed Garibaldi's motion
to be dismissed from the suit and cross-moved to disqualify
Garibaldi from representing defendants based on his status as a
witness. The court granted Garibaldi's motion to deposit the
escrowed funds, denied without prejudice his motion to be dismissed
from the suit, and granted plaintiff's motion to disqualify
Garibaldi from representing defendants.
The same day, defendant Zengel responded to plaintiff's
request for production of documents. The response included general
objections, assertions of "to be provided," and claims certain
requests were not applicable to the case. In addition, defendant
5 A-3757-14T2
Zengel completed her interrogatory answers, but they were not
given to plaintiff.
When defendants did not timely file a motion to reinstate
their answer, plaintiff filed a motion to suppress their answer
with prejudice as authorized by Rule 4:23-5(a)(2). Because
defendants were now unrepresented, plaintiff's counsel sent them
copies of the motion and a letter, as required by the rule, "in
the form prescribed by Appendix II-B, of the pendency of the motion
to . . . suppress with prejudice." Ibid. Defendants did not
oppose the motion and did not appear in court on its return date.
The court granted the motion "FOR REASONS SET FORTH BY MOVANT."
Shortly after the court suppressed defendants' answer with
prejudice, defendants retained new counsel. Defendants
subsequently served the delinquent discovery and filed a motion
to reinstate their answer. The parties disputed the adequacy of
defendants' discovery responses. The court denied the motion and
scheduled a proof hearing. After further motion practice, the
court ordered the deposited funds returned to plaintiff.
Following the proof hearing, at which plaintiff and her
accountant testified, the court entered judgment against
defendants for $140,105: $38,172 for compensatory damages, trebled
to $114,516 pursuant to the Consumer Fraud Act (CFA), N.J.S.A.
6 A-3757-14T2
56:8-1 to -204; and $25,589 for counsel fees and costs. The trial
court determined that defendant Leible had wrongfully exercised
control over the deposit when he refused to refund it, and his
conduct constituted an act of conversion. The court further found
defendants had committed consumer fraud by failing to disclose the
condominium association was in litigation. In doing so, the court
made findings of fact as to defendant Leible's knowledge of the
condominium association litigation, but none as to defendant
Zengel's knowledge of the litigation. Lastly, the trial court
awarded attorney's fees to plaintiff, finding plaintiff was
entitled to fees under the CFA. The court noted Rule 1:4-8 also
supported the award of fees.
The court entered an order of judgment. Defendants appealed.
On appeal, defendants contend the trial court abused its
discretion by suppressing their answer with prejudice without
adhering to the requirements of Rule 4:23-5, and by denying their
motion to reinstate the answer after they served discovery
responses. They also contend the trial court committed numerous
errors in entering judgment, particularly under the CFA.
Plaintiff disputes the trial court erred in any way. She
insists defendants utterly disregarded their discovery
obligations, thus warranting the suppression of their answer with
7 A-3757-14T2
prejudice. She further insists she produced ample evidence at the
proof hearing to support the court's consumer fraud award as well
as its award of fees and costs.
We begin with defendants' challenges to the trial court's
suppression of their answer with prejudice. We review the trial
court's ruling under an abuse of discretion standard. A & M Farm
& Garden Ctr. v. Am. Sprinkler Mech., LLC, 423 N.J. Super. 528,
534 (App. Div. 2012); Cooper v. Consol. Rail Corp., 391 N.J. Super.
17, 22-23 (App. Div. 2007).
Rule 4:23-5 establishes a two-step process that a party must
follow to obtain an order dismissing or suppressing with prejudice
the pleading of an adversary who has failed to make discovery.
The moving party must first "move, on notice, for an order
dismissing or suppressing the pleading of the delinquent party"
without prejudice. R. 4:23-5(a)(1).3 If the court has not vacated
an order of dismissal or suppression without prejudice, "the party
entitled to the discovery may, after the expiration of [sixty]
days from the date of the order, move on notice for an order of
dismissal or suppression with prejudice." R. 4:23-5(a)(2).
3
"Prior to moving to dismiss pursuant to subparagraph (a)(1) of
this rule, a party may move for an order compelling discovery
demanded pursuant to R. 4:14 [depositions], R. 4:18 [discovery and
inspection of documents] and R. 4:19 [physical and mental
examinations]." R. 4:23-5(c).
8 A-3757-14T2
Rule 4:23-5 contains procedural safeguards to bolster its
main objective, which "is to compel discovery responses rather
than to dismiss the case." A & M Farm, supra, 423 N.J. Super. at
534. Rule 4:23-5(a)(1) provides:
Upon being served with the order of dismissal
or suppression without prejudice, counsel for
the delinquent party shall forthwith serve a
copy of the order on the client by regular and
certified mail, return receipt requested,
accompanied by a notice in the form prescribed
by Appendix II-A of these rules, specifically
explaining the consequences of failure to
comply with the discovery obligation and to
file and serve a timely motion to restore.
The filing and service of the subsequent motion to dismiss
or suppress with prejudice triggers additional safeguards. Rule
4:23-5(a)(2) provides:
The attorney for the delinquent party shall,
not later than 7 days prior to the return date
of the motion, file and serve an affidavit
reciting that the client was previously served
as required by subparagraph (a)(1) and has
been served with an additional notification,
in the form prescribed by Appendix II-B, of
the pendency of the motion to dismiss or
suppress with prejudice. In lieu thereof, the
attorney for the delinquent party may certify
that despite diligent inquiry, which shall be
detailed in the affidavit, the client's
whereabouts have not been able to be
determined and such service on the client was
therefore not made. If the delinquent party
is appearing pro se, the moving party shall
attach to the motion a similar affidavit of
service of the order and notices or, in lieu
thereof, a certification as to why service was
9 A-3757-14T2
not made. Appearance on the return date of
the motion shall be mandatory for the attorney
for the delinquent party or the delinquent pro
se party.
In addition to the attorneys' obligations, Rule 4:23-5(a)(3)
imposes obligations on the court:
If the attorney for the delinquent party fails
to timely serve the client with the original
order of dismissal or suppression without
prejudice, fails to file and serve the
affidavit and the notifications required by
this rule, or fails to appear on the return
date of the motion to dismiss or suppress with
prejudice, the court shall, unless exceptional
circumstances are demonstrated, proceed by
order to show cause or take such other
appropriate action as may be necessary to
obtain compliance with the requirements of
this rule.
This judicial obligation "was designed as a fail-safe measure
to ensure that the ultimate sanction is not needlessly imposed."
A & M Farm, supra, 423 N.J. Super. at 537. "The requirement that
the court take 'appropriate action as may be necessary to obtain
compliance' calls upon the court to exercise its inherent authority
to make certain its decision to terminate the litigation is an
informed one." Id. at 537-38 (quoting R. 4:23-5(b)(3)). Thus,
in cases where "there is nothing before the court showing that a
litigant has received notice of its exposure to the ultimate
sanction, the court must take some action to obtain compliance
with the requirements of the rule before entering an order of
10 A-3757-14T2
dismissal or suppression with prejudice." Id. at 539. In
addition, "the court must set forth what effort was made to secure
compliance on the record or on the order." Ibid.Here, Garibaldi did not send defendants the required notice
after their answer was suppressed without prejudice. He did not
even send them a copy of the order. Although plaintiff's attorney
sent defendants copies of the motion to dismiss with prejudice,
their attorney had been disqualified from representing them and
they apparently did not appear on the return date of the motion.
Rule 4:23-5(a)(3) requires that a court take action if the
attorney for the delinquent party has not served that party with
the order of dismissal or suppression without prejudice, fails to
file and serve the affidavit and notifications required by the
rule, or fails to appear on the return date of the motion. Here,
it is undisputed Garibaldi did not comply with the requirements
of Rule 4:23-5(a)(1). Neither an attorney nor defendants appeared
on the return date of the motion to dismiss with prejudice. Rule
4:23-5(a)(3) required the court to take some action to obtain
compliance with the requirements of the rule before entering the
order of suppression. The court was also required to set forth
on the record or on the suppression order what effort was made to
secure compliance. The court did neither. The oversight is
11 A-3757-14T2
particularly troublesome in view of the court's disqualification
of defendants' counsel a month before plaintiff filed the motion
to suppress with prejudice.
The court could have had its clerk contact Garibaldi or
compelled Garibaldi's appearance to determine if he had complied
with Rule 4:23-5 while representing defendants. Either action
would have disclosed several pertinent facts: Garibaldi's non-
compliance with Rule 4:23-5(a)(1); when, or if, Garibaldi had
informed defendants of his disqualification; and perhaps why
defendants had yet to retain new counsel or take any action to
avoid the suppression of their answer with prejudice. We conclude
the court misapplied its discretion by imposing the ultimate
sanction without attempting to determine compliance with Rule
4:23-5 under these circumstances.
Plaintiff insists the trial court did not abuse its discretion
in view of defendants' prolonged non-compliance with their
discovery obligations and plaintiff's notification to defendants
as required by Rule 4:23-5(a)(2). Although not entirely without
merit, these arguments overlook the injustice that appears to have
occurred, warranting reversal. See Abtrax Pharm., Inc. v. Elkins-
Sinn, Inc., 139 N.J. 499, 517 (1995) (noting appellate courts
12 A-3757-14T2
should not interfere with a trial court's sanction for discovery
misconduct "unless an injustice appears to have been done").
First, defendants were prejudiced by their attorney's
undertaking their representation when he should have known he
would be a witness, by his disqualification at a critical time
during plaintiff's motion practice, and by his non-compliance with
Rule 4:23-5. These circumstances contributed to the suppression
of defendants' answer and ultimately to the judgment entered
against them; a substantial judgment that in large part was
unsupported by facts and contrary to law.
The judgment entered against defendant Leible included treble
damages and attorney's fees under the CFA, despite well-settled
law that the CFA does not apply to a homeowner, such as defendant
Leible in these circumstances. See, e.g., Zaman v. Felton, 219
N.J. 199, 223 (2014) (noting "our courts have declined to impose
the CFA remedies upon the non-professional, casual seller of real
estate"); Byrne v. Weichert Realtors, 290 N.J. Super. 126, 134
(App. Div.) (explaining that the provisions of the CFA "do[] not
apply . . . to non-professional sellers of real estate, i.e. to
the homeowner who sells a house in the normal course of events"),
certif. denied, 147 N.J. 259 (1996).
13 A-3757-14T2
The CFA judgment against defendant Zengel is also
questionable. Plaintiff alleged a combination of defendants' non-
disclosure of the condominium association's litigation and the
non-return of the deposit constituted consumer fraud and caused
her damages. The trial court cited no evidence to support its
conclusion that defendant Zengel was aware of the condominium
association's litigation when plaintiff contracted to purchase the
condominium unit. Moreover, defendant Zengel was not a party to
the contract of sale and plaintiff produced no evidence at the
proof hearing that Zengel participated in or influenced defendant
Leible's decision not to return the security deposit.
When a trial court requires a plaintiff to provide proof of
liability as to a defaulting defendant, the plaintiff need only
establish a prima facie case. Kolczycki v. City of E. Orange, 317
N.J. Super. 505, 514 (App. Div. 1999); Heimbach v. Mueller, 229
N.J. Super. 17, 20 (App. Div. 1988); see also Pressler & Verniero,
Current N.J. Court Rules, comment 2.2.2 on R. 4:43-2 (2018)
(stating that "unless there is intervening consideration of public
policy or other requirement of fundamental justice, the judge
should ordinarily apply to plaintiff's proofs the prima facie case
standard of R. 4:37-2(b) and R. 4:40-1, thus not weighing evidence
or finding facts but only determining bare sufficiency"). Judgment
14 A-3757-14T2
should be denied if "some necessary element of plaintiff's prima
facie case [is] missing or because plaintiff's claim [is] barred
by some rule of law whose applicability [is] evident either from
the pleadings or from the proofs presented." Heimbach, supra, 229
N.J. Super. at 23-24.
Here, established precedent barred plaintiff's CFA claim
against Leible, and plaintiff's claim against Zengel was missing
elements of a prima facie case. Yet, the court entered a judgment
that included treble damages and attorney's fees against
defendants.4
We vacate the suppression orders and the judgment and remand
for further proceedings. We do so because trial counsel did not
comply with the requirements of Rule 4:23-5, the trial court made
no attempt to comply with its obligation under the rule, defendants
were left unrepresented by an attorney when the motion to suppress
with prejudice was filed, and the consequence was the entry of a
judgment in large part unsupported by facts or law.
On remand, the trial court should conduct a management
conference, within thirty days if practical, and enter a discovery
order specifying the remaining discovery needed and the deadlines
4
Although the trial court stated plaintiff was entitled to
attorney's fees under Rule 1:4-8, the court provided no analysis
or explanation for this determination.
15 A-3757-14T2
for completion. Defendants will thus have explicit notice of
their discovery obligations and the consequences of failing to
timely discharge them. The merits of the causes of action pleaded
in the complaint shall be decided following completion of
discovery, by motion or at a trial, but not on the basis of the
previous proof hearing or this opinion.
Our opinion should not be read as precluding plaintiff from
seeking fees or appropriate sanctions as a result of motion
practice necessitated by defendants' failure to timely make
discovery and Garibaldi's non-compliance with Rule 4:23-5. See
R. 4:23-5(a)(3). Nor should our opinion be construed as suggesting
that Leible's withholding of the deposit and his defenses to
plaintiff's suit for its return either do or do not have merit.
The suppression orders and judgment are vacated. Defendants'
answer is reinstated. This matter is remanded to the trial court
for further proceedings consistent with this opinion. We do not
retain jurisdiction.
16 A-3757-14T2