New Jersey Attorney Law Review Blog

I couldn't find a better example to illustrate the problem with our judicial system.  In a recently unpublished decision of the New Jersey Appellate Division,  Hernandez v. North Jersey Neurosurgical Associates, Superior Court of New Jersey, Docket No. A-0890-12T2, the appeals court reversed a Hudson County trial judge's decision to enter default against a medical doctor whose attorney was unavailable to appear for the trial call because he was scheduled to be on trial in another case in Monmouth County, NJ.

Demonstrating a rigid approach to justice, the trial court refused to postpone a trial date in this medical malpractice case due to the unavailability of one of the defendant doctor's attorneys, preferring instead to punish the doctor by entering default against him and essentially leaving the doctor in no-man's land. In this case, the attorney had designated himself as the doctor's trial attorney in accordance with NJ Court Rule 4:25-4, meaning that if he were unavailable to try the case then the court is required to adjourn the trial.   According to several NJ Supreme Court directives, the trial court is given discretion to waive R. 4:25-4 if the case is more than 3 years old and  delayed by the unavailability of designated trial counsel.   Such were the facts in this particular case.

Without belaboring the point, there were multiple adjournments of the trial date for a variety of different reasons, which caused the case to become more than 3 years old on the court's calendar.  The appellate decision reflects that counsel were all cooperating with one another regarding the various adjournment requests, including the last adjournment request that the trial court rejected. In other words, all parties and their counsel were in agreement to adjourn the trial because of the doctor's attorney's unavailability yet the presiding  judge refused to grant any further adjournments.

At the trial call another attorney from the law firm appeared and informed the trial judge that she was a family law practitioner, did not have the expertise to handle a medical malpractice defense, and was not authorized to try the case or pick a jury; she requested the case be marked "ready hold" until her boss - the designated trial counsel -  completed his other trial.   In the meantime,  a judge in Monmouth County - apparently trying to help the cause for the doctor in Hudson County - entered an order refusing to release the designated trial attorney to appear in the Hudson County case.

At the trial call, quite fortuitously, the plaintiff's counsel implored the trial judge to grant the adjournment request, "stating that he and his clients would much prefer a short adjournment of the trial rather than a long and costly appellate process on the issue of whether an adjournment could be denied under these circumstances."   As their luck would have it, that's exactly what they got - a long and costly appellate process.  The trial judge declined the "ready hold" request and entered default against the doctor.  The doctor then appealed.

Fortunately, the Appellate Division reversed the trial court's nonsensical decision declaring it to be an abuse of discretion. The parties no doubt wasted significant legal fees - likely in excess of $10,000 - arguing about whether the trial court should have adjourned the case.   Even with all counsel consenting to the adjournment the trial judge stubbornly refused. The appeals court went to great lengths to spare criticism of the trial court for having "tunnel vision."    

To me, this case represents form over substance.  The trial court did not have to act in this manner.  Had the trial judge truly listened to the plea by plaintiff's counsel to avoid "a long and costly appellate process" arguing about a simple trial adjournment, the parties and our judicial system would have been better served.   An abuse of discretion indeed!

It is not too difficult to Imagine the following scenario.  There is bitter litigation between 2 or more parties that has dragged on for several years.  Each side is represented by legal counsel, and each has spent thousands of dollars in legal fees trying to posture the case in their favor.  A trial is approaching shortly.   The parties are each growing weary of the case; it has become too time consuming and expensive, and the law of diminishing returns has set in for all involved. This is why the overwhelming majority of civil disputes ultimately settle before trial.  Lawyers know it, and so to the clients and judges.   

In fact, our court system is designed to encourage and foster settlements.   In the Superior Court of New Jersey, Law Division,, all contract and business law disputes are generally subject to mandatory mediation with a court-appointed mediator who agrees to volunteer up to 2 hours of his/her time trying to foster settlement of the cases they are assigned to.   The mediation is usually scheduled at the initial stages of the case, and the litigants' attendance is required.  While the mediator has no power to force the parties to settle, an early intervention with all parties present face-to-face can sometimes lead to a settlement before the parties engage in substantial pretrial discovery proceedings.  

In Chancery Court matters, the judge will usually schedule a status conference at the early stage of the case at which time the judge may ask the lawyers to explore various settlement options.  

At some point during the case, assume the various parties reach a settlement while appearing either at a court hearing, mediation hearing or status conference.  The lawyers take a few moments to jot down the key or principal terms of the settlement, and ask to see the judge so that they can place the settlement terms on the record in open court thus creating a binding contract or agreement to settle the case.  Each litigant assures their lawyer that they are on board with the settlement terms, but because a few of them have other commitments they tell their lawyer to proceed without them and to fill them in on the details afterwards.   The judge then comes out, the lawyers enter their respective appearances for their clients, and usually one of the lawyers lay out the specific terms of the settlement in the presence of a court reporter or while the proceeding is being taped in the courtroom.   The judge asks each lawyer to confirm his or her understanding of the settlement, to confirm that each client is on board, etc.  The judge then thanks everyone for working together to reach a consensual resolution, tells the lawyers that they can memorialize the settlement terms in a stipulation to be filed later on, and leaves the bench.   

In the next week or two a draft of a stipulation of settlement is prepared and circulated to everyone by email.   Suddenly, one of the litigant's objects to the settlement claiming he/she never agreed to that term and refuses to allow his/her lawyer to sign the stipulation.   Unfortunately, this happens quite frequently in litigation with one of the parties either suffering from buyer's remorse, realizing they made a mistake, or simply misunderstanding a key component of the settlement.  

It is fundamental principle that the settlement of litigation ranks high in the public policy of New Jersey.  Ziegelheim v. Apollo, 128 N.J. 250, 263 (1992); Nolan v. Lee Ho, 120 N.J. 465, 472 (1990); Judson v. Peoples Bank & Trust Co., 25 N.J. 17, 35 (1957).  As such, settlements should be encouraged.  Ziegelheim v. Apollo, 128 N.J. at 263. 

The relationship between an attorney and client is that of principal and agent.   An agency relationship is created “when one person (a principal) manifests assent to another person (an agent) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act.”   Lawyers' Fund for Client Prot. v. Stewart Title Guar. Co., 203 N.J. 208, 220 (2010).  

Generally, an agent may only bind his principal for such acts that “are within his actual or apparent authority.”  Carlson v. Hannah, 6 N.J. 202, 212 (1951).   Actual authority is the authority that a principal expressly or implicitly gives an agent.  United States v. Martinez, 613 F.2d 473, 481 (3d Cir. 1980);  Reynolds Offset Co. v. Summer, 58 N.J. Super. 542 (App. Div. 1959).  Actual authority may be either express or implied.  Id. at 557.

The focus on an analysis of whether the attorney had actual authority is on the client’s manifestations to the attorney regarding settlement and the attorney’s reasonable interpretation of those manifestations.  Newark Branch, N.A.A.C.P. v. Township of West Orange, 786 F.Supp. 408, 424 (D.N.J. 1992)(New Jersey law).   The general rule is that unless an attorney is specifically authorized by the client to settle a case, the consent of the client is necessary.  City of Jersey City v. Roosevelt Stadium Marina, Inc., 210 N.J. Super. 315, 327 (App. Div. 1986).  “Negotiations of an attorney are not binding on the client unless the client has expressly authorized the settlement or the client's voluntary act has placed the attorney in a situation wherein a person of ordinary prudence would be justified in presuming that the attorney had authority to enter into a settlement, not just negotiations, on behalf of the client.”  Amatuzzo v. Kozmiuk, 305 N.J. Super. 469, 475 (App Div. 1997)(citing United States Plywood Corp. v. Neidlinger,41 N.J. 66, 74  (1963)(emphasis added)(other internal citation omitted).  “Thus, in private litigation, where the client by words or conduct communicated to the adverse attorney, engenders a reasonable belief that the attorney possesses authority to conclude a settlement, the settlement may be enforced.

However, the attorney's words or acts alone are insufficient to cloak the attorney with apparent authority.”  Amatuzzo v. Kozmiuk, 305 N.J. Super. at 475-476. "It is well settled that 'stipulations . . . made by attorneys when acting within the scope of their authority are enforceable against their clients.'"  Jennings v. Reed, 381 N.J. Super. 217, 230 (App. Div. 2005)(quoting Carlsen v. Carlsen, 49 N.J. 130, 137, (App. Div. 1958).  "Consequently, an attorney is presumed to possess authority to act on behalf of the client, and the party asserting the lack of authority must sustain 'a heavy burden to establish that [her] attorney acted without any kind of authority in agreeing to the entry of judgment in the trial court.'"  Jennings v. Reed, 381 N.J. Super. at 231.

In the particular scenario that I've outlined here, the objecting party who allowed his/her attorney to confirm/accept the settlement terms as recounted in the presence of the Court and all other attorneys bears a 'heavy burden' to persuade the judge that his/her attorney was not cloaked with actual authority to settle the case on those terms, or that there was not a meeting of the minds as to the principal terms.

    In an unpublished decision issued on January 11, 2013, a NJ appeals court upheld the firing of a first-grade teacher in the Paterson school district who called her students "future criminals" in a Facebook post.   In the Matter of the Tenure Hearing of Jennifer O'Brien, Superior Court of New Jersey, Appellate Division, Docket No. A-2452-11T4.  This case represents another example of the consequences of misusing popular social media sites.     

In this case a two-judge appeals panel ruled that the teacher's derogatory Facebook posting was not protected speech under the First Amendment of the U.S. Constitution, and that her "right to express those comments was outweighed by the district's interest in the efficient operation of its schools." 

The teacher, Jennifer O'Brien, employed as a Paterson teacher since 1998, was assigned to teach a first grade class of 23 students.  Almost all of her first graders were 6 years old , and either were Latinos or African-Americans.  

On March 28, 2011, O'Brien  posted the following two comments on her Facebook page.

"I'm not a teacher - I'm a warden for future criminals!"

"They had a scared straight program in school - why couldn't [I] bring [first ] graders?"

Paterson school officials discovered these Facebook postings the following day, and news quickly spread throughout the school district and drew national media attention.  Parents expressed outrage over the postings at a school council meeting, and one parent threatened to remove her child from the school.  The school district suspended O'Brien without pay pending a further investigation. 

Thereafter, the deputy superintendent of schools filed an administrative complaint against O'Brien charging her with conduct unbecoming of a teacher. The district superintendent determined that probable cause existed to support the charges, and if established were sufficient to warrant O'Brien's dismissal.  Thus, the district continued O'Brien's suspension without pay. Thereafter, formal charges were filed with the Commissioner of Education, and the matter was referred to the Office of Administrative Law for a hearing before an administrative law judge.

During her administrative law hearing O'Brien testified that she had about 300 friends linked to her Facebook account, including several friends from her school and the school district.  O'Brien claimed that she posted the statement that her students were "future criminals" because of their behavior, not because of their race or ethnicity.  She stated that 6 or 7 of her students had behavioral, which had negatively affected the classroom environment. 

At the administrative law hearing O'Brien also testified that one of her students had struck her just a week before she made the Facebook postings, that other students had stolen items from her, and that some students had hit each other.   She stated she referred the disciplinary matters to school officials but thought they hadn't adequately addressed the problems.  

O'Brien explained that the school started a "Scared Straight" program on the same day she posted the comments on Facebook, that she was just speaking out of frustration for her student's behavior that day, and that she didn't think all her students were "future criminals."  Instead, she maintained that she merely intended to point out that children who misbehaved in her classes should face the consequences.

In her defense, O'Brien argued that her Facebook comments constituted protected free speech under the First Amendment of the U.S. Constitution, and that her otherwise unblemished record did not support her dismissal because of a momentary lapse of judgment.  The administrative law judge disagreed with both contentions, and concluded that O'Brien's relationship with with the Paterson school district was irreparably damaged and that her testimony was lacking in remorse.  

On appeal, the New Jersey Appellate Division explained the law governing a public employee's claim of free speech.

To determine whether a public employee's statements are protected by the First Amendment, we balance the employee's interest as a citizen, in commenting upon matters of public concern and the interests of the State, as an employer, in " 'promoting the efficiency of the public services it performs for its employees.' "  Karins v. City of Atlantic City, 152 N.J. 532, 549 (1998)(quoting Pickering v. Bd. of Ed., 391 U.S. 563, 568, 88 S.Ct. 1731, 1734-1735, 20 L.Ed.2d 811, 817 (1968).

At the administrative hearings, O'Brien claimed her Facebook postings addressed a matter of public concern, specifically student behavior in the classroom.  The administrative law judge disagreed, concluding that O'Brien's statements were personal and reflected her dissatisfaction with her job and conduct of several of her students.   The administrative law judge also concluded that even if O'Brien's Facebook postings were considered to address a matter of public concern, her right to make those statements was outweighed by the school district's interest in the efficient operation of its schools. 

The appeals court affirmed in all respects, concluding that the seriousness of O'Brien's conduct justified her dismissal from her tenured teacher's position.

When a construction supplier sells materials on credit to a contractor with multiple open accounts, receives only partial payments without instructions from the contractor as to whose jobs/accounts the payments should be applied to, and later seeks to enforce a construction lien claim against a single property owner for the unpaid balance, the supplier must make inquiry as to the source of the funds obtained by the contractor to pay the supplier.   The suppliers duty in this regard extends to circumstances where a reasonable supplier should suspect the contractor has not used an owner's funds to pay for materials supplied for that owner.  The purpose in requiring a supplier to ascertain the source of its customer's funds is to ensure that the supplier has properly allocated its customer's payments to the correct jobs/accounts.   A supplier that fails to fulfill this duty sacrifices its rights under the Construction Lien Law, a NJ appeals court concluded in L&W Supply Corporation v. DeSilva Contractors, et al., Docket No. A-2960-12-10T2 (December 19, 2012).  

In issuing this ruling, the appeals court relied on precedent established by the New Jersey Supreme Court in Craft v. Stevenson Lumber Yard, Inc., 179 N.J. 56, 63 (2004).  In Craft, the Court held that a materials supplier that seeks to file a construction lien has a duty to apply payments correctly against several open accounts of a materials purchaser, such as a subcontractor, if the supplier has reason to know that the payment funds came from a particular building project.  We now consider the obligation of the materials supplier "to ascertain the source of . . . payments and to apply them accordingly."  Id. at 76.  

Like many other states, New Jersey offers protection to subcontractors, laborers and materials suppliers who do not receive payment for work or materials provided for the benefit of a property owner or general contractor by providing the right to record and enforce a construction lien against the property. The Construction Lien Law found at N.J.S.A. 2A:44A-1 to N.J.S.A. 2A:44A-38, allows a contractor or supplier who is owed payment for its work or materials to file a lien against the real property on which the improvements are constructed.  N.J.S.A. 2A:44A-3a.  The primary purpose of the Construction Lien Law to secure payment of monies due to contractors and suppliers of a construction project.   Thomas Grp., Inc. v. Wharton Senior Citizen Hous., Inc., 163 N.J.507, 517 (2000). 

    

A secondary purpose of the Construction Lie Law is to "protect owners" against paying more than once for the same work or materials.  Labov Mech., Inc. v. E. Coast Power, L.L.C., 377 N.J. Super. 240, 245 (App. Div. 2005).  To effect the second purpose, the statute limits the lien to the amount available in the "lien fund," which "shall not exceed the unpaid portion of the contract price of the claimant's contract for the work, services, material or equipment provided."  N.J.S.A. 2A:44A-9a. 

  There are significant legal distinctions between owning property as tenants by the entirety versus owning property as tenants in common.  Understanding these legal distinctions is important when it comes to purchasing  residential real estate with friends, business partners, or relatives.

A joint tenancy is a form of property ownership where the co-owners own the property equally.  If one joint tenant dies, the surviving joint tenant automatically inherits the entire property.   By contrast, a tenancy in common is a form of co-ownership of property that does not include a right of survivorship.   In a tenancy in common, each co-owner's portion can be passed to beneficiaries named in a will, which may or may not be someone who the surviving co-tenant ever envisioned owning the property with or living with.  In New Jersey, two people, other than married couples, are presumed to own property as tenants in common unless they've otherwise specified in the deed.   

In a recent decision that merits the attention of borrowers and lenders in commercial real estate foreclosures, the New Jersey Appellate Division held that a lender's acceptance of numerous late payments did not constitute a modification to the mortgage or result in curing the borrower's mortgage default.  Bank of America v. Princeton Park Associates, L.L.C., Docket No. A-0927-11T3 (App Div., November 8, 2012).  Consequently, the Appellate Division affirmed the trial court's granting of summary judgment in favor of the lender.

The facts of the case are rather straightforward.  Princeton Park Associates involved a commercial real estate loan transaction. The lender’s loan documents contained the standard default and acceleration provisions. Also, the promissory note included the following provisions: (i) no failure by the lender to accelerate the debt pursuant to the default provisions would constitute a waiver of the lender’s rights to insist on strict compliance with the terms of the note or any of the other loan documents; and (ii) the loan documents could be modified only by written agreement. The mortgage that secured the note contained a similar provision requiring modifications to be in writing. 

The borrower, Princeton Park Associates, defaulted on the loan on September 10, 2007 by beginning to make payments 60 days past the due date. The reason for the default is immaterial for purposes of this discussion. In any event, the borrower’s practice of tendering late payments and the bank’s acceptance continued for almost a year. 

From September 2007 through March 31, 2008, Bank of America issued a series of default letters to the borrower declaring the loan in default, demanding payment of the entire balance owed, plus interest and late fees, and that it was not waiving any of its rights under the loan documents to foreclose on the loan. The parties continued discussing possible loan modification solutions, exchanged proposed agreements, and even met face-to-face, but no modification agreement was ever reached.  

After August 6, 2008 the borrower ceased making payments on the loan.  Regardless, the borrower and the lender’s servicing agent continued having discussions into 2009. After additional efforts to reach a settlement proved unsuccessful, Bank of America filed a foreclosure complaint on October 16, 2009 based upon the borrower’s default.  The borrower filed a contesting answer denying it was in default  because of the bank's acceptance of the late payments.   Bank of America moved for summary judgment contending the borrower defaulted on the loan. In response, Princeton Park Associates argued that the terms of the loan had been modified because the bank accepted its late payments, and thus no default occurred. 

The trial judge rejected the borrower’s defense, relying on the express terms of the loan documents requiring modifications to be in the form of a written agreement.  The trial judge remarked about the borrower’s failure to present any evidence that such a written modification had ever occurred. The trial judge concluded that the bank’s acceptance of the late payments did not serve to modify the loan because the bank was entitled to these payments and reiterated in the default notices that accepting late payments did not constitute a waiver of any of its rights.

Following the trial court’s ruling, the lender obtained a final judgment by default. The appeal then ensued, with the borrower arguing that the trial judge erred in granting summary judgment because it was not in default on the loan because of the bank’s acceptance of the late payments. The borrower also presented an argument that the bank lacked standing, but that portion of the appeal is not discussed here.  

The Appellate Division affirmed the trial court’s ruling in all respects, though interestingly did not recite any case law to support its conclusion that the bank’s acceptance of late payments did not rise to the level of a loan modification agreement. Instead, the Appellate Division relied on the express terms of the loan documents, to wit:

Courts do not rewrite unambiguous contracts to provide a party with a better or different agreement than that bargained for.   See, e.g., Washington Constr. Co., Inc. v. Spinella, 8 N.J. 212, 217 (1951); Bar on the Pier, Inc. v. Bassinder, 358 N.J. Super. 473, 480 (App. Div. 2003), certif. denied, 177 N.J. 222 (2003). While the Appellate Division in the Princeton Park Associates case does not cite this principal of law, it seems clear to me that the concept of enforcing an unambiguous commercial loan agreement as it is written stands behind the Court's decision.

Succinctly summarizing from the trial brief, in New Jersey duly executed, notarized and recorded mortgage instruments  are presumptively valid and enforceable, and are presumed to have been made for good and valuable consideration.. In re Shaw, 51 F.Supp. 566, 568 (D.N.J. 1943), and N.J.S.A. 12A:3-308.  Under New Jersey law, a mortgage instrument must be duly acknowledged, proved and certified at the time the loan transaction is consummated.   N.1.S.A. 46:14-2.1 provides that in order for a deed or other instrument to be acknowledged, the maker of the instrument shall appear before an officer authorized to take acknowledgments or proofs and acknowledge that it was executed as the maker's own act. "If a deed or other instrument cannot be acknowledged or proved for any reason, the instrument may be proved in Superior Court by proof of handwriting or otherwise to the satisfaction of the court."  N.J.S.A. 46:14-4.1. 

Under N.J.S.A. 46:14-4.2, " ... a signature includes any mark made on a document by a person who thereby intends to give legal effect to the document. A signature also includes any mark made on a document on behalf of a person, with that person's authority and to effectuate that person's intent." Id.  N.J.S.A. 46: 14-6.1 enumerates a list of "officers" in New Jersey who are authorized to acknowledge signatures on documents, and includes a notary public.  N.J.S.A. 146:14-6.1(2).  A defendant's notarized signature is prima facie evidence that he/she signed the document without the need for the notary's testimony.  N.J. Evid. R. 902(h); N.J.S.A. 2A:82-17.  Moschillo v. Jovanov, 2010 N.J. Super. Unpub. LEXIS 3130 (App. Div. 2010).

A certificate of acknowledgement as to the execution of a mortgage is open to attack only in the case of fraud, and that in the absence of fraud the execution is conclusive even as to bona fide purchasers. See Mitschele-Baer, Inc. v. Livingston Sand & Gravel Sales Co., 108 N.J. Eq. 286 (N.J. Ch. 1931). "It should be the aim of the courts, when the mortgage is bona fide, to preserve and not to destroy." McDonald vs. H.B. McDonald Const. Co., 117 N.J. Eq. 181 (1934), citing Howell v. Stone & Downey, 75 N.J. Eq. 289 (E. & A. 1909). O ur courts have long recognized that when the bona fides surrounding the giving of a mortgage are not questioned, "[T]he statute should not be used as an instrument of inequity any more than of fraud."  McDonald, 117 N.J. Eq. at 183, citing Patrisco v. Nolan's Point Amusement Co., 10 N.J. Misc.
397 (Ch. 1932).

A party challenging his/her signature on a mortgage bears the burden of proof by clear and convincing evidence.  See Fazzio v. Equity One, Inc., 2006 N.J. Super. Unpub. LEXIS 2249 (App. Div. 2006(Appeals court refused to disturb trial judge's conclusion that the forgery of the borrower's signature on a mortgage subordination agreement had been proven by clear and convincing evidence).  Clear and convincing evidence "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 Purrazzella, 134 N.J. 228, 240 (1993) (quoting Aiello v. Knoll Golf Club, 64 N.J. Super. 156, 162 (App. Div. 1960)).   It must be "so clear, direct, and weighty and convincing as to enable [either a judge or jury] to come to a clear conviction, without hesitancy, of the truth of the precise facts in issue."   In re Seaman, 133 N.J. 67, 74 (1993).

Typically, a handwriting expert should be retained to support a forged signature claim.