Otchy v. City of Elizabeth Bd. of Educ.

• Decision Date: 15 October 1999
• Court: New Jersey Superior Court
• Parties: Ann Elizabeth OTCHY and Michael Otchy, her husband, Plaintiffs-Appellants, v. CITY OF ELIZABETH BOARD OF EDUCATION, Defendant-Respondent.

737 A.2d 1151

325 N.J. Super. 98

Ann Elizabeth OTCHY and Michael Otchy, her husband, Plaintiffs-Appellants, v. CITY OF ELIZABETH BOARD OF EDUCATION, Defendant-Respondent.

Superior Court of New Jersey, Appellate Division.

Argued September 15, 1999.

Decided October 15, 1999.

Amirali Y. Haidri, Union, for plaintiffs-appellants (Mr. Haidri, attorney; Michael Agnello, on the brief).

Paul J. Soderman, West Orange, for defendant-respondent (Zucker, Facher & Zucker, attorneys; Mr. Soderman, on the brief).

Before Judges BAIME, BROCHIN and EICHEN.

The opinion of the court was delivered by EICHEN, J.A.D.

Plaintiffs Ann Elizabeth Otchy and Michael Otchy, her husband,¹ appeal from an order dismissing their complaint against defendant Elizabeth Board of Education (the Board) brought under the New Jersey Tort Claims Act, N.J.S.A. 59:1-1 to -12-3 (the Act) on the ground that the statute of limitations² barred the action. The court determined that the relation-back rule, R. 4:9-3, could not save the action, and that plaintiffs' bankruptcy did not extend the statute or suspend its running. We affirm.

The facts surrounding this appeal are uncomplicated. On September 22, 1995, plaintiff allegedly fell on a sidewalk abutting the Elizabeth High School. On November 20, 1995, Otchy served a notice of claim on the Clerk of the Board pursuant to N.J.S.A. 59:8-3 and -4. Following its investigation, by letter dated September 3, 1996, the Board's insurance company advised plaintiffs' counsel it was rejecting the claim. A few months later, on November 6, 1996, plaintiffs filed a bankruptcy petition under Chapter 7 of the Bankruptcy Code.

On December 16, 1996, plaintiffs' counsel received a letter from the trustee in bankruptcy pointing out that plaintiff's personal injury claim was an asset of the estate, and requested information concerning the claim. In the letter, the trustee cautioned, among other things, that counsel could not represent plaintiff in any action brought to recover personal injury damages, or settle the claim without his consent, but that if the trustee determined the claim had no value to the estate, he would advise counsel of his intention to abandon the estate's interest in it.³

On February 18, 1997, plaintiffs received a discharge of their liabilities from the bankruptcy court. Seven months later, on September 17, 1997, three days before the limitations period was to expire, plaintiffs' counsel contacted the trustee in bankruptcy concerning the status of the claim, and was allegedly advised that the bankruptcy case was "virtually closed" and that "[counsel] could proceed."

On September 19, 1997, plaintiffs' counsel filed a complaint against the City of Elizabeth (the City) and various "John Does" alleging that plaintiff fell on a sidewalk abutting the Elizabeth High School. The complaint also alleged that the property was owned, maintained, and controlled by the City, and that the City's negligence caused plaintiff to sustain serious injuries. The record reflects that the property is not owned by the City, but by the Board. Certifications filed by plaintiff and her counsel indicate that they did not specifically name the Board as a defendant in the complaint because they believed the Board was not a separate legal entity, but was part of the City, and, therefore, naming the Board was unnecessary.

By order entered on January 23, 1998, the Law Division granted the City's motion to dismiss the complaint on the ground that Otchy had failed to serve a notice of claim on the City as required by N.J.S.A. 59:8-3 and 4, but granted plaintiffs' cross-motion for leave to file an amended complaint adding the Board as a party defendant.

On April 3, 1998, the Board moved successfully to dismiss plaintiffs' complaint on the ground that the statute of limitations had run. In granting the motion, the court determined that the mistaken belief of plaintiff or plaintiff's counsel that the City was the proper legal entity to sue did not justify application of the relation-back doctrine under R. 4:9-3 to defeat the limitations bar. The court also concluded that the Bankruptcy Code, 11 U.S.C. § 108(a), did not extend the running of the statute of limitations beyond the two years provided in N.J.S.A. 2A:14-2.

Plaintiffs appeal, making numerous arguments, some of which were not presented to the Law Division judge. We elect to address a few of the more salient ones. Plaintiffs argue that because R. 4:9-3 reflects a liberal amendment policy, and because their naming of the City as a defendant in the original complaint instead of the Board was a simple mistake, the court should have allowed the amended complaint to relate back to the original filing of the complaint. They also argue, for the first time in their reply brief, that the relation-back rule applies because, at the very least, the Board had constructive notice of the institution of their action against the City by reason of the "interdependence" of the two entities. Further, they contend that their prompt filing of the amended complaint against the Board constituted "substantial compliance" with the requirements of the Act; and that, in light of the absence of any demonstrated prejudice to the Board, equitable principles dictate that the amendment relate back to the original filing of the complaint.

Plaintiffs also assert that the Bankruptcy Code tolled the running of the statute of limitations; that they were "prohibited" from filing suit within the statute by the bankruptcy trustee; and that 11 U.S.C. § 108(a) extended the statute for two years from the filing of their Chapter 7 petition on November 6, 1996. We reject all of plaintiffs' contentions.

I.

We turn first to plaintiff's argument that the relation-back rule, R. 4:9-3, suspended the running of the statute of limitations in this case. Rule 4:9-3 provides as follows:

Whenever the claim or defense asserted in the amended pleading arose out of the conduct, transaction or occurrence set forth or attempted to be set forth in the original pleading, the amendment relates back to the date of the original pleading; but the court, in addition to its power to allow amendments may, upon terms, permit the statement of a new or different claim or defense in the pleading. An amendment changing the party against whom a claim is asserted relates back if the foregoing provision is satisfied and, within the period provided by law for commencing the action against the party to be brought in by amendment, the party (1) has received such notice of the institution of the action that the party will not be prejudiced in maintaining a defense on the merits, and (2) knew or should have known that, but for a mistake concerning the identity of the proper party, the action would have been brought against the party to be brought in by amendment.

In Kernan v. One Washington Park, 154 N.J. 437, 458, 713 A.2d 411 (1998), the Court recently had occasion to review the competing interests at stake in considering whether to allow a claim against a party newly added to a personal injury action after the statute of limitations had expired:

[I]n the context of amended pleadings, an accommodation has traditionally been made between the defendant's right to rely on the repose afforded by the statute of limitations and the right of the plaintiff to correct pleading errors or to respond affirmatively to his acquisition of new information respecting his claim. This accommodation is based on the perception that a person who has timely notice of the pendency of an action ... cannot reasonably object to the late assertion against him ... provided he is reasonably chargeable with the knowledge that those other claims would have been timely asserted against him but for plaintiff's error or lack of information and provided further that the late assertion does not prejudice him in maintaining his defense. [Wimmer [v. Coombs ], 198 N.J.Super. [184,] 188-89, 486 A.2d 916 [ (App.Div.1985) ].]

Whether an amendment adding a new party to an action should relate back to the filing of the original complaint basically involves a two-part inquiry.⁴ First, the court is required to decide whether the amendment did, in fact, add a new defendant, or merely correct the name of the defendant in the original complaint. If it is determined the added defendant is a new party, and not just a correction of a misnomer, in order for the amendment to relate back, the plaintiff must show that the new defendant had "such notice (albeit informal) of the action prior to the running of the statute of limitations that he would not be prejudiced in maintaining his defense on the merits and knew or should have known that but for an error of identification, the action would have been brought against him." Pressler, Current N.J. Court Rules, comment 2 on R. 4:9-3 (2000).

A misnomer occurs where the correct party is already before the court, but the name in the complaint is deficient in some respect. See Stevens-Davis Co. v. Peerless Service Laundry, 112 N.J.L. 304, 306, 170 A. 619 (Sup.Ct.1936) (allowing correct corporate title to be substituted for erroneously stated one). Because the mere correction of the name of a party is more "formal" than "substantial," it does not affect the rights of the added party, and the amendment may fairly relate back to the original filing despite the running of the statute of limitations. See Coventry v. Barrington, 117 N.J.L. 217, 219, 187 A. 348 (E. & A.1936); see also Mears v. Economy Brake Service, Inc., 78 N.J.Super. 218, 227, 188 A.2d 207 (App.Div.),

certif. denied,

40 N.J. 216, 191 A.2d 59 (1963).

In this case, plaintiff and her counsel's mistaken belief that the City, and not the Board, was the real party in interest is not the type of mistake the relation-back rule was intended to correct because correcting the mistake involves more than just curing a nominal defect; rather, it allows a new claim to be asserted against an entirely new par...