Opinion
DOCKET NO. A-1773-13T1 DOCKET NO. A-1774-13T1
01-21-2015
IGOR TROGAN, M.D., Plaintiff-Respondent, and KERRY GALLAGHER, D,M.D., DAVID MORAN, M.D., MICHAEL DIMINO, M.D., DOUGLAS A. BLOCK, D.D.S., STEVEN ZUNGER, D.M.D., STEVEN BRAZEL, D.D.S. and JULIAN WILNER individually and derivatively on behalf of BRIDGE PLAZA CONDOMINIUM ASSOCIATION, INC., Plaintiffs, v. MICHAEL VOLOVNIK, BOARD OF DIRECTORS OF THE BRIDGE PLAZA CONDOMINIUM ASSOCIATION, INC., Defendants-Appellants. ERNEST G. LEVA, M.D., Plaintiff-Respondent, v. MICHAEL VOLOVNIK, Defendant-Appellant, and ALVIN CHESLOW, CORINNE RODGERS, MICHAEL TARANTUL and DAVID ROSEN, Defendants.
Stuart J. Lieberman argued the cause for appellant in A-1773-13 and A-1774-13 (Lieberman & Blecher, P.C., attorneys; Mr. Lieberman, on the brief). Mark W. Wiechnik argued the cause for respondents Igor Trogan, M.D. in A-1773-13 and Ernest Leva, M.D. in A-1774-13 (Herrick Feinstein, L.L.P., attorneys; Mr. Wiechnik and Breanne M. DeRaps, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Messano, Ostrer and Hayden. On appeal from the Superior Court of New Jersey, Chancery Division, Monmouth County, Docket Nos. C-0108-12, C-0140-13. Stuart J. Lieberman argued the cause for appellant in A-1773-13 and A-1774-13 (Lieberman & Blecher, P.C., attorneys; Mr. Lieberman, on the brief). Mark W. Wiechnik argued the cause for respondents Igor Trogan, M.D. in A-1773-13 and Ernest Leva, M.D. in A-1774-13 (Herrick Feinstein, L.L.P., attorneys; Mr. Wiechnik and Breanne M. DeRaps, on the brief). PER CURIAM
We consolidated these appeals that arise out of a dispute between certain unit owners in a commercial condominium and the sponsor of the development, defendant Michael Volovnik. We briefly set forth the procedural history.
In June 2012, plaintiffs, Igor Trogan, M.D., Kerry Gallagher, D.M.D., David Moran, D.M.D., Michael Dimino, M.D., Douglas A. Block, D.D.S., Steven Zunger, D.M.D., Steven Brazel, D.D.S. and Julian Wilner, individually as unit owners and on behalf of the Bridge Plaza Condominium Association, Inc. (the Association), filed a verified complaint against Volovnik and the Association's Board of Directors (the Board), on which Volovnik served as president (the Trogan litigation). Plaintiffs alleged that Volovnik, and "other unknown, unconfirmed, [and] unelected Board Members," had violated the condominium's Master Deed, the Association's by-laws and the New Jersey Condominium Act, N.J.S.A. 46:8B-1 to -38 (the Act).
One allegation was that defendants had refused to hold elections, thereby failing to turn over control of the Board to the unit owners as required by the governing documents and the Act. Another specific charge was that defendants had passed a resolution limiting the number of parking spaces per unit, which plaintiffs alleged was contrary to the governing documents and the Act, and thereafter imposed fines on unit owners for violations.
Volovnik and the Board answered and discovery ensued. Apparently sometime in May 2013, the parties reached a settlement that was reduced to writing and circulated for signatures. In addition to the individual plaintiffs, Volovnik, the Association's secretary, and the three then-current members of the Board executed the settlement agreement (the settlement). On July 2, the General Equity judge entered a consent order that dismissed the complaint pursuant to the settlement.
In pertinent part, the settlement provided that the Board would hold elections within sixty days, at which the non-sponsor unit owners would elect four directors, with Volovnik retaining control of one board seat as sponsor. The settlement also provided that the Board would "forgiv[e] and/or cancel[] all fines issued to [p]laintiffs for violation of the Association's rules." The parties also agreed, "as a material term of th[e] Settlement Agreement[,] that they [would] comply with all existing parking rules and regulations," they would be limited to four parking spaces per 1000 square feet of space owned or occupied, and they would utilize only spaces in front of, or on the side of, the building in which their unit was located. In this regard, the settlement specifically fixed the penalties the Association would impose if "any party . . . violate[d] the parking rules and regulations."
However, on July 1, one day before the consent order was entered, defendants filed a motion to enforce the terms of the settlement. It was their contention that despite having settled the suit, plaintiffs Trogan and Moran continued to violate the Association's parking rules and regulations. The motion was ultimately scheduled to be heard in September.
In the interim and despite the pendency of the motion, in accordance with the terms of the settlement, on August 6, the Board passed a resolution forgiving all previously-assessed fines. The Board also scheduled an election for August 19. On that evening, however, Volovnik and the other Board members voted to postpone the election until after the motion to enforce was heard. The unit members in attendance nonetheless proceeded to conduct the election. Plaintiff Ernest G. Leva, M.D., and three other members of the Association including plaintiff Moran gathered sufficient votes to win seats on the Board.
On August 20, Volovnik sent a letter to the Board secretary, counsel for plaintiffs in the Trogan litigation, Leva and the other winning candidates. Volovnik asserted that, since the Board had postponed the election, the results were null and void and would not be certified by the Board.
On August 23, 2013, Leva filed a verified complaint and order to show cause against Volovnik, the Association's secretary and Board members individually. He sought an order confirming the results of the August 19 election (the Leva litigation). Plaintiffs in the Trogan litigation filed a cross-motion seeking the same relief.
At some undisclosed point, the two actions were consolidated.
Defendants' motion to enforce the settlement was withdrawn before it was heard by the judge, only to be replaced by a motion to vacate the settlement. In support, Volovnik filed a certification in which he alleged that plaintiffs violated the parking regulations on a nearly-continuous basis during the months of June, July, August and into September 2013. He attached dozens of photographs of vehicles in the condominium's parking lots that supposedly proved the allegation.
Volovnik also asserted that plaintiffs' use of the parking lot in front of his building inhibited efforts to sell or rent the unit because "prospective buyers . . . question the availability of parking when they observe vehicles parked in front of a vacant building." Volovnik claimed that plaintiffs "fraudulently misrepresented their intention to comply with the Association's parking regulations," and that he "relied to [his] detriment on the[ir] representations."
In opposition, plaintiffs filed certifications that disputed Volovnik's conclusions about the vehicles shown in the photographs. As Trogan stated in his certification: "[T]he vehicles allegedly parked in violation of the Settlement Agreement could belong to anyone, including the employees and/or patients of other unit owners."
On October 25, 2013, the parties appeared for argument before the judge on defendants' motion to vacate the settlement in the Trogan litigation, and on the order to show cause pending in the Leva litigation. Defendants argued that discovery should be conducted and a hearing scheduled on their allegations of fraud. Plaintiffs argued that the photographs did not prove violations of the settlement's parking provisions and the motion should be denied.
Leva specifically argued that issues regarding the settlement had nothing to do with the election, and, therefore, the results should be certified. Defendants countered by arguing the election itself was contingent upon the validity of the settlement.
Several days later, the judge placed her oral decision on the record. Finding defendants' proofs, premised upon the photographs of vehicles in the parking lots, "unpersuasive," she concluded that they had failed to present sufficient grounds for vacating the settlement, noting "[t]here are just bare allegations that [it] was entered into through fraud." The judge determined "there is no evidence . . . that anyone's in violation of . . . the settlement." Turning to Leva's order to show cause, the judge concluded that "the Association's governing documents were followed with regard to all aspects of the election," and, since she refused to vacate the settlement, defendants' sole defense to the requested relief, Leva was entitled to judgment.
She entered two orders that day. One denied defendants' motion to vacate the settlement, and the second confirmed the election of Leva and the other new Board members. Volovnik appeals from both orders.
Volovnik argues that there was sufficient evidence to support his motion to vacate the settlement, and the judge's failure to do so resulted in an "injustice," because plaintiffs received all the benefits of the settlement and he received none. He notes that as a result of the settlement, plaintiffs have control of the Board, but the essential purpose of the agreement, i.e., resolution of the parking problems, remains unfulfilled. He also argues that the order confirming the election of Leva and others should be reversed, because as he argued before the General Equity judge, the election was solely occasioned by the settlement. We have considered these arguments in light of the record and applicable legal standards. We affirm.
We begin by reviewing some basic principles. "'Generally, a settlement agreement is governed by principles of contract law.'" Brundage v. Estate of Carambio, 195 N.J. 575, 600-01 (2008) (quoting Thompson v. City of Atlantic City, 190 N.J. 359, 379 (2007)). Since "[t]he settlement of litigation ranks high in our public policy," Jannarone v. W.T. Co., 65 N.J.Super. 472, 476 (App. Div.), certif. denied, 35 N.J. 61 (1961), "settlement agreements will be honored 'absent a demonstration of fraud or other compelling circumstances.'" Nolan v. Lee Ho, 120 N.J. 465, 472 (1990) (quoting Pascarella v. Bruck, 190 N.J. Super. 118, 125 (App. Div.), certif. denied, 94 N.J. 600 (1983)).
"Like other contracts, when a settlement is obtained by fraud, the injured party may seek rescission." Ibid. However, "[b]efore vacating a settlement agreement, our courts require 'clear and convincing proof' that the agreement should be vacated." Ibid. (citing DeCaro v. DeCaro, 13 N.J. 36 (1953)). "Evidence that is clear and convincing 'should produce in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established.'" In re Perskie, 207 N.J. 275, 290 (2011) (quoting In re Purrazzella, 134 N.J. 228, 240 (1993)). "To meet that burden, the evidence must be 'so clear, direct and weighty and convincing as to enable [the factfinder] to come to a clear conviction, without hesitancy, of the precise facts in issue.'" Ibid. (quoting In re Seaman, 133 N.J. 67, 74 (1993)).
When the moving party is not seeking monetary damages, as was the case here, he must provide clear and convincing proof of "equitable fraud," as opposed to legal fraud. Nolan, supra, 120 N.J. at 472. "In order to prove equitable fraud, [the moving party] must demonstrate a material misrepresentation made with intent that it be relied on, coupled with actual detrimental reliance." Ibid. (citing Jewish Ctr. of Sussex Cnty. v. Whale, 86 N.J. 619, 625 (1981)). Fraud may be grounded on a false representation of an intention to comply with a contract, in other words, a false state of mind. See, e.g., Ocean Cape Hotel Corp. v. Masefield Corp., 63 N.J. Super. 369, 379-80 (App. Div. 1960). But proof of mere failure to comply with the contract is not sufficient. Much more persuasive circumstantial evidence is required. See id. at 381 ("Misrepresentation of a present state of mind, with respect to a future matter, may be concluded from the utter recklessness and implausibility of the statement in light of subsequent acts and events; from a showing that . . . the promiser's intention to perform was dependent upon contingencies known to the promisor and unknown to the promisee; or from circumstances indicating that the promisor must have known at the time of his promise that he could not or would not fulfill it." (citations omitted)).
Here, Volovnik's proofs were deficient. His bare allegations of fraud rested upon photographs of cars in the condominium's parking lots, and the deduction, unsupported by any evidence, that those cars belonged to people that were visiting or working for the individual plaintiff unit owners.
Volovnik contends that the judge should have ordered discovery in contemplation of a plenary hearing because there were factual disputes between his interpretation of the photographs and plaintiffs' contrary assertions contained in their certifications. However, the General Equity judge properly concluded that Volovnik had failed to raise, even as a threshold issue, that plaintiffs had engaged in fraudulent conduct.
We contrast the allegations and proofs in this case, with those in Nolan, supra, 120 N.J. at 473-74, where the Court, concluded that, on the record before it, the defendant-moving party failed to prove equitable fraud and remanded the matter for a hearing. In that case, the defendant supplied written proof that the plaintiff's doctor advised her of the high risk nature of her pregnancy, that the doctor supplied that information to the plaintiff's attorney in writing, and that the attorney failed to supply the information and omitted the doctor's name from an interrogatory answer. Id. at 469-70. Although the trial judge found this proof clear and convincing and vacated the settlement, and the Appellate Division affirmed, the Court concluded a plenary hearing was required. Id. at 473-74.
Here, there was no proof, much less clear and convincing proof, that plaintiffs made a material misrepresentation regarding their intended use of the parking spaces when they entered into the settlement because there was, in the first instance, no proof that they had violated the settlement. We affirm the order denying defendants motion to vacate the settlement.
In light of our conclusion, Volovnik's arguments in support of reversing the order confirming the August 2013 election of Board members lack sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Volovniks's Case Information Statement lists as a potential question to be resolved whether Leva's election violated the Act. However, his brief does not address the issue. Volovnik's reply brief asserts, in a single sentence, that plaintiffs violated N.J.S.A. 46:8B-12.1(c) by inhibiting sales of unsold units he held as sponsor, and he suffered damages as a result. We do not address the contention because "[r]aising an issue for the first time in a reply brief is improper." Borough of Berlin v. Remington & Vernick Eng'rs, 337 N.J. Super. 590, 596 (App. Div.), certif. denied 168 N.J. 294 (2001); see also Musto v. Vidas, 333 N.J. Super. 52, 69 (App. Div.) (declining to address issue first raised in a reply brief when issue was not deemed matter of public importance), certif. denied, 165 N.J. 607 (2000). Additionally, since the issue is not adequately briefed, it is waived. See Finderne Heights Condo. Ass'n v. Rabinowitz, 390 N.J. Super. 154, 166 (App. Div. 2007).
--------
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION