Schettino v. Roizman Development

• Decision Date: 21 June 1999
• Citation: 158 N.J. 476,730 A.2d 797
• Parties: John SCHETTINO, Plaintiff-Respondent, v. ROIZMAN DEVELOPMENT, INC., Israel Roizman, Individually, Fairview Associates 94 L.P., Defendants-Appellants, and Biltmore Properties, Ltd., Inc., Belgiovine Enterprises, Belgiovine Enterprises, Inc., Belgiovine Development, and Crystal Lake, Inc., Defendants.
• Court: New Jersey Supreme Court

730 A.2d 797

158 N.J. 476

John SCHETTINO, Plaintiff-Respondent, v. ROIZMAN DEVELOPMENT, INC., Israel Roizman, Individually, Fairview Associates 94 L.P., Defendants-Appellants, and Biltmore Properties, Ltd., Inc., Belgiovine Enterprises, Belgiovine Enterprises, Inc., Belgiovine Development, and Crystal Lake, Inc., Defendants.

Supreme Court of New Jersey.

Argued March 1, 1999.

Decided June 21, 1999.

Joseph B. Fiorenzo, Hackensack, for defendants-appellants (Sokol, Behot & Fiorenzo, attorneys; Mr. Fiorenzo and Susan I. Wegner, on the brief).

John J. D'Anton, Ridgefield, for plaintiff-respondent.

The opinion of the Court was delivered by POLLOCK, J.

The issue is whether, in an action asserting joint and several liability of multiple defendants, a single defendant, following rejection of its offer to settle the claim against it, may be awarded attorney's fees pursuant to the offer-of-judgment rule, Rule 4:58-1, -2 and -3.

Plaintiff, John Schettino, alleged that four defendants were jointly and severally liable to him for a real estate broker's commission of $390,000. One set of defendants, Israel Roizman, Roizman Development, Inc., and Fairview Associates 94 L.P. (collectively, "Roizman") offered to settle its share of liability for $1000. Schettino rejected the offer. The Law Division thereafter granted Roizman's motion for summary judgment and dismissed plaintiff's complaint. The court then awarded Roizman attorney's fees incurred after Schettino had rejected its offer.

The Appellate Division affirmed the dismissal, but vacated the award of attorney's fees. 310 N.J.Super. 159, 167-68, 708 A.2d 446 (App.Div.1998). It held that the offer-of-judgment rule does not apply when a single defendant in a multi-defendant action makes an offer of settlement representing only its pro rata share of liability.

We granted Roizman's petition for certification to review the denial of attorney's fees, 156 N.J. 411, 719 A.2d 642 (1998), and now affirm. We hold that a plaintiff who has asserted that multiple defendants are jointly and severally liable is not subject to the financial consequences of Rule 4:58-3 for rejecting an offer by a single defendant to settle only the claim against it. We further hold that, because Schettino's action was for unliquidated damages and did not result in an award "in excess of $750," Roizman is not entitled to counsel fees under Rule 4:58-3. Lastly, in light of the concerns raised by this appeal, we refer the matter to the Civil Practice Committee for reconsideration of the offer-of-judgment rule.

I.

In 1985, Schettino, a licensed real estate broker, arranged for the sale of property at 371-377 Bergen Boulevard, Fairview, New Jersey ("the property") to Biltmore Properties, Ltd. ("Biltmore"). Three years later, Biltmore sold the property, subject to a purchase money mortgage, to Belgiovine Enterprises, Belgiovine Enterprises, Inc., and Belgiovine Development (collectively, "Belgiovine"). Schettino was not involved in that sale.

Belgiovine began development of the property, but encountered financial difficulties and could not meet its monthly mortgage payments. In 1990, Belgiovine filed a Chapter 11 bankruptcy action in the Bankruptcy Court. Biltmore moved to foreclose, and in May 1993, the Bankruptcy Court entered a judgment directing the sale of the property.

Six months later, before the foreclosure sale, Roizman became interested in purchasing the property from Belgiovine. Roizman's attorney asked Schettino to arrange a meeting between Roizman, which apparently did not know that Biltmore had foreclosed on the property, and Belgiovine. According to Schettino, Roizman and Belgiovine discussed both a purchase price of $12 million and the pending foreclosure action. In contrast, Roizman asserts that Schettino falsely represented himself as Belgiovine's broker. Roizman also states that Schettino did not disclose the impending foreclosure sale. At some point, the negotiations ceased when Roizman discovered that Belgiovine could not sell the property.

According to Roizman, from that point forward Schettino no longer was involved in the sale. Schettino, however, claims that he remained involved and that Belgiovine introduced Roizman to Crystal Lake, Inc. ("Crystal Lake"), Biltmore's successor-in-interest, which had purchased the property at the foreclosure sale in January 1994. Schettino concedes that no defendant entered into a written listing agreement with him.

One week after Crystal Lake purchased the property, Schettino sent a letter to Roizman seeking protection of his commission if Roizman purchased the property from Crystal Lake. In July 1994, Crystal Lake sold the property to Roizman for $7.8 million. Neither party paid a commission to Schettino.

On July 15, 1996, Schettino filed a complaint in the Law Division asserting joint and several liability against Roizman, Biltmore, Crystal Lake, and Belgiovine. Schettino claimed a real estate commission of $390,000 as the "efficient procuring cause of the sale" to Roizman. The complaint also asserted that defendants tortiously interfered with his right to a commission.

On three separate occasions, Roizman's attorney demanded that Schettino withdraw the complaint. First, on September 17, 1996, the attorney sent Schettino's attorney a notice, pursuant to Rule 1:4-8(b)(1), explaining why Schettino's action was frivolous as a matter both of fact and of law. The letter recited that Biltmore had foreclosed Belgiovine's interest in the property, and that because of the foreclosure Belgiovine had not sold the property to Roizman. Instead, Roizman had acquired the property in an unrelated purchase from Crystal Lake. Significantly, the letter expressly advised that Schettino's claim for a commission was barred by the Statute of Frauds, N.J.S.A. 25:1-16(b), which provides in relevant part that a broker is entitled to a commission "only if before or after the transfer the authority of the broker is given or recognized in a writing signed by the principal or the principal's authorized agent, and the writing states either the amount or the rate of commission."

Second, before filing an answer, Roizman served Schettino with an offer of judgment for $1000. Schettino rejected the offer.

Finally, on October 7, 1996, Roizman's counsel sent a letter to Schettino's counsel warning that Roizman would apply for counsel fees. The letter stated in part:

[I]t will be necessary for us to perform additional legal services on behalf of our client.... Your client's rejection of our Offer of Settlement will ultimately mean that he will be responsible for counsel fees incurred in obtaining a dismissal of the action.

It is unfortunate that Mr. Schettino will require our client to go through the time and expense of obtaining a dismissal when there exists no factual or legal basis for the claim. Fortunately the Court Rules now permit us to be made whole by being reimbursed for those fees unnecessarily incurred.

On January 24, 1997, Roizman moved for summary judgment. The Law Division granted the motion both because of Schettino's failure to comply with the Statute of Frauds and because of the lack of any agreement by Roizman or Crystal Lake to pay Schettino a commission. The Appellate Division denied Schettino's motion for leave to appeal.

Pursuant to Rule 4:58-3, the Law Division granted Roizman's motion for counsel fees of $17,746.44. The court stayed execution of the award, indicating that it would reconsider the award on completion of plaintiff's appeal.

Thereafter, the Law Division entered a consent order for final judgment dismissing with prejudice Schettino's claim against Biltmore and Crystal Lake. Schettino has not pursued his claim against Belgiovine, although the record does not reflect that the claim was ever dismissed.

On Schettino's appeal, the Appellate Division affirmed the grant of summary judgment for Roizman and the dismissal of the complaint against Biltmore and Crystal Lake. 310 N.J.Super., supra, at 167-68, 708 A.2d 446. The court held that Schettino was not entitled to a commission because he had not been the "efficient procuring cause of the sale" and he had not complied with N.J.S.A. 25:1-16(b). 310 N.J.Super., supra, at 166-67, 708 A.2d 446. As the Appellate Division explained, Schettino failed to satisfy the statute because he had neither obtained the requisite writing nor complied with N.J.S.A. 25:1-16(d), which allows the commission if "within five days after making an oral agreement and before the transfer or sale, the broker serves the principal with a written notice, which states that its terms are those of the prior oral agreement including the rate or amount of commission to be paid." 310 N.J.Super., supra, at 165-66, 708 A.2d 446. The only writing Schettino provided to Roizman was sent after the five-day time limit, did not refer to any prior oral agreement, and did not state the rate or amount of commission.

Relying on the unofficial comment to Rule 4:58 (the "Comment"), the Appellate Division reversed the award of counsel fees. As the Comment states, "an offer made by a single defendant to the claimant to pay a specific amount as his pro rata share should not be considered as an offer within the intendment of this rule such as will result in binding the claimant to the consequences stated in R. 4:58-3." Pressler, Current N.J. Court Rules, comment on R. 4:58 (1999). Roizman's offer, according to the Appellate Division, constituted an offer by a single defendant to pay its pro rata share of liability, and thus should not be considered an offer under Rule 4:58-3. 310 N.J.Super., supra, at 167, 708 A.2d 446. The court rejected Roizman's contention that its offer was made on behalf of all defendants. Ibid. It acknowledged that "the language of R. 4:58-1, -2, and—3 may leave room for future clarification and improvement." Id. at 168, 708 A.2d 446. Nevertheless, the court concluded that "it [is] sufficiently clear that the...