(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
Argued September 25, 1996 -- Decided February 26, 1997
O'HERN, J., writing for a unanimous Court.
This appeal, like Gelber v. The Zito Partnership, also decided today, concerns an application of the
entire controversy doctrine. The specific issue is whether a party making a judicial challenge to zoning
approvals granted to a partnership must name in that land-use suit the individual partners as a precondition
to later enforcement of a monetary settlement against those partners.
The Keyport Planning Board granted permits to Watersedge, a partnership, to construct
condominium units on premises that adjoined property owned by Ethel Maloy (Maloy). Maloy sued to set
aside the approvals in October l987. In May l988, the Superior Court set aside the approvals. Watersedge
thereafter reapplied and the Planning Board approved a scaled down version of the project. After Maloy
again filed suit to void the action of the Planning Board, Watersedge offered to settle her claims for a sum of
money. When Maloy sought to be paid, the partnership denied that there had been a settlement. She,
therefore, moved to enforce the settlement.
The trial court entered an order requiring the partnership to execute the settlement agreement and
to make the payments called for in the agreement. When the partnership still refused to honor the
settlement, the court appointed an attorney-in-fact to execute the settlement documents in behalf of the
partnership. Thereafter, Maloy assigned her rights in the settlement to her attorney, Kenneth Joel (Joel).
When Joel deposed Vincent Morrocco, a Watersedge partner, he learned for the first time that Joseph
Parlavecchio also was a member of the partnership.
In December l992, Joel brought an action in the Law Division against the individual Watersedge
partners to require payment of the settlement. On the partners' motion, the trial court dismissed the
complaint, finding it barred under the entire controversy doctrine due to the failure to have joined the
individual partners of Watersedge in the initial (land use) action. On appeal, the Appellate Division
affirmed, holding that the entire controversy doctrine already required that a contract creditor sue both the
partnership and the partners in one action so that all issues could be decided expeditiously.
The Supreme Court granted Joel's petition for certification.
HELD: Joinder of the individual Watersedge partners was not necessary to the resolution of the zoning suit
and the individual partners may not invoke the entire controversy doctrine as a defense to their liability on
the monetary settlement made on behalf of the partnership.
1. The three objectives behind the entire controversy doctrine are to encourage the comprehensive and
conclusive determination of a legal controversy; to achieve party fairness; and to promote judicial economy
and efficiency by avoiding fragmented, multiple and duplicative litigation. (pp. 2-4)
2. Fairness in the context of party joinder focuses on basic fairness to all of the parties, but especially to
those named in the second suit who claim prejudice from not participating in the first suit. (pp. 4-5)
3. It is the factual circumstances giving rise to the controversy itself, rather than a commonality of claims,
issues or parties, that triggers the requirement of joinder to create a cohesive and complete litigation.
(pp. 5-6)
4. In each application of the entire controversy doctrine, a careful analysis of the relevant factors must be
made. In this case, because the first proceeding was not an action on a partnership debt, there was no
unfairness in the second proceeding to defendant partners. (pp. 12-13)
The judgment of the Appellate Division is REVERSED and the matter is REMANDED to the Law
Division for further proceedings on Joel's complaint.
CHIEF JUSTICE PORITZ and JUSTICES HANDLER, POLLOCK, GARIBALDI, STEIN and
COLEMAN join in JUSTICE O'HERN's opinion.
SUPREME COURT OF NEW JERSEY
A-
19 September Term 1996
KENNETH E. JOEL,
Plaintiff-Appellant,
v.
VINCENT MORROCCO AND JOSEPH
PARLAVECCHIO,
Defendants-Respondents,
and
JOSEPH SILVESTRI,
Defendant.
Argued September 25, 1996 -- Decided February 26, 1997
On certification to the Superior Court,
Appellate Division.
Kenneth E. Joel argued the cause pro se.
Edward C. Eastman argued the cause for
respondent Vincent Morrocco (Lomurro,
Davison, Eastman & Munoz, attorneys).
Robert J. Sussman submitted a letter in lieu
of brief on behalf of respondent Joseph
Parlavecchio and relied upon the arguments
presented on behalf of respondent Vincent
Morrocco (Sussman & Altwarg, attorneys).
The opinion of the Court was delivered by
O'HERN, J.
This appeal concerns an application of the entire
controversy doctrine. The essential question is whether a party
making a judicial challenge to zoning approvals granted to a
partnership must name in that land-use suit the individual
partners in the partnership as a precondition to later
enforcement of a money settlement against the partners. We find
that joinder of the partners was not necessary to the resolution
of the zoning suit and that the individual partners may not
invoke the entire controversy doctrine as a defense to their
liability on the monetary settlement made on behalf of the
partnership.
In a series of recent cases, we have reviewed the principles of the entire controversy doctrine. Prevratil v. Mohr, 145 N.J. 180 (1996); Circle Chevrolet Co. v. Giordano, Halleran & Ciesla, 142 N.J. 280 (1995); DiTrolio v. Antiles, 142 N.J. 253 (1995); Mystic Isle Dev. Corp. v. Perskie & Nehmad, 142 N.J. 310 (1995). There is no need to review those principles in detail. "The objectives behind the doctrine are threefold: (1) to encourage the comprehensive and conclusive determination of a legal controversy; (2) to achieve party fairness, including both parties before the court as well as prospective parties; and (3) to promote judicial economy and efficiency by avoiding fragmented, multiple and duplicative litigation." Mystic Isle, supra, 142 N.J. at 322. The entire controversy doctrine seeks to
further these objectives by requiring that, whenever possible,
"the adjudication of a legal controversy should occur in one
litigation in only one court." Cogdell v. Hospital Ctr.,
116 N.J. 7, 15 (1989). The doctrine requires parties to a
controversy before a court to assert all claims known to them
that stem from the same transactional facts, even those against
different parties. The doctrine fosters the "goals of efficient
judicial administration and fairness" to parties. Prevratil,
supra, 145 N.J. at 187.
The most clear-cut applications of the party-joinder rule
are in Crispin v. Volkswagenwerk A.G.,
96 N.J. 336 (1984);
Cogdell v. Hospital Ctr., supra,
116 N.J. 7; and DiTrolio v.
Antiles, supra,
142 N.J. 253. In Crispin, the claimant's
attorney quite deliberately withheld from resolution in a pending
automobile accident case a claim against the manufacturer of the
automobile for manufacture of a defective vehicle. A second suit
would have necessitated a rerun of the first case to determine
that part of the claimant's injuries attributable to the crash-worthiness of the car and the portion of the injuries that would
have occurred in any event. In Cogdell, injured claimants
alleging medical malpractice first sued the doctors alleged to
have negligently caused serious injuries to an infant during
delivery and then later sued the hospital and its staff for
causing the same injuries. The Court stated that the failure to
join the hospital and its staff in the first lawsuit was
"inconsistent with all of the policies that surround the entire
controversy doctrine." Cogdell, 116 N.J. at 26. The Court held
that "to the extent possible courts must determine an entire
controversy in a single judicial proceeding and that such a
determination necessarily embraces not only joinder of related
claims between the parties but also joinder of all persons who
have a material interest in the controversy." Ibid. In
DiTrolio, a physician first sued for restoration of privileges to
practice at a hospital and later attempted to sue many of the
same physicians who had participated in the evaluation of the
underlying licensing decision.
"The polestar of the application of the [entire controversy]
rule is judicial fairness." DiTrolio, supra, 142 N.J. at 272.
Fairness in the context of party joinder focuses on basic
fairness to all of the parties, but especially to those named in
the second suit who claim prejudice from not participating in the
first suit. It is a protective concept that focuses primarily on
whether defendants would be in a better position to defend
themselves if the claims against them had been raised and
asserted in the first litigation. Thus, for example, in
DiTrolio, supra, when the doctors named as defendants in the
second action were deposed as witnesses during the discovery
period in the earlier action, they would have approached the
depositions and the discovery process differently.
Fairness to the plaintiff must also be considered. We have
emphasized that the plaintiff must be actually aware of the
actionable conduct when the original suit is brought. Thus, to
bar a claim, a plaintiff "must have had a fair and reasonable
opportunity" to have made the claim in the first action and have
chosen not to do so. DiTrolio, supra, 142 N.J. at 273.
Efficiency in accomplishing the comprehensive and conclusive
determination of a legal controversy is the third aspect of
fairness. "At its most fundamental level inefficiency is a
duplication of lawsuits and multiple actions, each involving the
identical controversy and the same witnesses." DiTrolio, supra,
142 N.J. at 277. In essence, it is the factual circumstances
giving rise to the controversy itself, rather than a commonality
of claims, issues or parties, that triggers the requirement of
joinder to create a cohesive and complete litigation. Id. at
267-68.See footnote 1 In DiTrolio, the Court found that "substantially the
same evidence that would be adduced in the first action" would
have been adduced in the second action. 142 N.J. at 278. In
Mystic Isle, the Court found that "requiring Mystic to join the
attorney-defendants would have resulted in a more comprehensive
determination of the underlying legal controversy that sought to
determine who was responsible for [an] insufficient number of
sewer permits" needed for a development project. 142 N.J. at
327.
In this case, none of the facts giving rise to the first
action would be adduced in the second action. The first action
was a complaint in lieu of a prerogative writ challenging the
issuance of a zoning approval. The matter would have been tried
on the basis of the administrative record before the local
agency. The assertion of the personal claims against the
partners was not at all necessary to the "comprehensive and
conclusive" determination of the underlying legal controversy in
the land-use case. Defendants, however, assert that once Ms.
Maloy agreed to a money settlement and took steps to enforce the
settlement, she was bound to join the individual partners.
We appreciate that a good measure of confusion arose because the parties focused the court's attention on the fairness of the retroactive application of the Appellate Division decision in Seventy-Three Land, Inc. v. Maxlar Partners, 270 N.J. Super. 332 (App. Div. 1994). Seventy-Three Land held that in order to impose individual liability on partners in excess of partnership assets a creditor must have first joined the partners in the action on the debt against the partnership. This case began seven years before Seventy-Three Land, in 1987, when the Keyport Planning Board granted permits to Watersedge, a partnership of
the State of New Jersey (Watersedge), to construct nine condominium units on premises (the Keyport property) that adjoined property owned by Ethel Maloy (Maloy). Maloy first sued on October 1, 1987, to set aside the approvals. On May 17, 1988, the Superior Court set aside the approvals. Watersedge thereafter reapplied and the Planning Board approved a scaled down version of the project. The Keyport ordinance permitted multi-family uses under certain circumstances, but required that eighty percent of the units be one-bedroom or efficiency units, and that other lot size requirements be met. Maloy filed suit again in 1988 to void the action of the Planning Board. In April 1989, Watersedge offered to settle the claims of Maloy for a sum of money. The settlement contemplated a sliding scale of payments depending on the number of units constructed, with a minimum payment of $23,800 and the execution of a mortgage on the property to secure the settlement. When Maloy sought to be paid, the partnership denied that there had been a settlement. Plaintiff moved to enforce the settlement. On October 9, 1990, the trial court found that a settlement had been made and entered an order in favor of Maloy requiring the partnership to execute the settlement agreement, deliver the mortgage, and make payment of the monies called for in the agreement. When the partnership still refused to honor the settlement, Maloy made a motion in aid of litigant's rights. On June 28, 1991, the court appointed an attorney-in-fact to execute the settlement documents on behalf of the partnership. On January 16, 1992, Maloy assigned her rights
in the settlement to her attorney, Kenneth Joel (Joel). In
October 1992, Joel deposed Vincent Morrocco, a Watersedge
partner, and learned for the first time that Joseph Parlavecchio
was a member of the partnership. Until that time Joel had dealt
only with Morrocco and Joseph Silvestri, another Watersedge
partner.
In December 1992, Joel brought this action in the Law
Division of Monmouth County Superior Court, against the
individual Watersedge partners to require payment of the
settlement. On defendants' motion asserting that the claim was
barred by the entire controversy doctrine, the trial court
dismissed the complaint, finding Seventy-Three Land to be
dispositive. The court understood Seventy-Three Land to provide
that if a creditor of a partnership sues a partnership on a debt
and fails to join the individual partners in the action, a
creditor is barred under the entire controversy doctrine from
bringing the same claim against the individual partners in a
subsequent action. The court found that that principle bars Joel
from proceeding against the individual partners of Watersedge
after having failed to join the partners of Watersedge in the
initial suit. Joel argued that the land-use action had been
concluded in 1991 and that the 1994 decision in Seventy-Three
Land should not be applied retroactively. See Reno Auto Sales,
Inc. v. Prospect Park Sav. & Loan Ass'n,
243 N.J. Super. 624
(App. Div. 1990) (requiring new mandatory party-joinder rule be
applied only to first level litigation pending and not on
appeal). Defendants argued that Cogdell was decided on July 24,
1989, before the 1990 order of judgment.
Joel also relied on case law prior to Seventy-Three Land
that held that suits against individual partners for a
partnership contract debt under the Uniform Partnership Act were
prohibited until it was shown that the partnership assets were
exhausted. These cases had been noted but distinguished by the
Seventy-Three Land court. Head v. Henry Tyler Constr. Corp.,
539 So.2d 196 (Ala. 1988); Catalina Mortgage Co., Inc. v. Monier,
800 P.2d 574 (Ariz. 1990); McCune & McCune v. Mountain Bell Tel.,
758 P.2d 914 (Utah 1988). New Jersey case law had suggested that
although service upon a partnership could be accomplished by
serving a partner or managing agent, Rule 4:4-4(5), X-L Liquors,
Inc. v. Taylor,
17 N.J. 444 (1955), it was necessary to name the
partners individually to obtain a judgment against partners in
excess of partnership assets. Neustadter v. United Exposition
Serv. Co.,
14 N.J. Super. 484 (Ch. Div. 1951).
On appeal, in an unreported decision, the Appellate Division
affirmed. It held that "the entire controversy doctrine already
required that a contract creditor sue both the partnership and
the partners in one action so that all issues could be decided
expeditiously and the assets of each court be marshalled and
executed appropriately." We granted plaintiff's petition for
certification.
143 N.J. 517 (1996). Of course we agree, putting
aside for a moment the problem of fairness in retroactive
application of Seventy-Three Land, that a contract creditor
should sue both partnership and partners if the creditor seeks
recovery in excess of partnership assets. The problem is that
the first suit was not a suit by a contract creditor of the
partnership; it was a prerogative writ action brought by an
objector to land development approvals. No "commonality of facts
undergirds each set of claims." DiTrolio, supra, 142 N.J. at
258.
In each of our applications of the entire controversy doctrine we have emphasized the essential unfairness of forcing parties and courts to rerun a course previously run. In this case, there is no occasion, as in DiTrolio, Cogdell, and Crispin, to rerun the course. These were two separate actions, not two causes of action arising from the same transactional facts. The United States Supreme Court has held that a breach of an agreement that produced the dismissal of an earlier federal suit is an entirely distinct cause of action that must have an independent basis of federal jurisdiction. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 114 S. Ct. 1673, 128 L. Ed.2d 391 (1994).
The short of the matter is this: The [later] suit involves a claim for breach of a contract, part of the consideration for which was dismissal of an earlier federal suit. . . . The facts to be determined with regard to such alleged breaches of contract are quite separate from the facts to be determined in the principal suit, and automatic jurisdiction over such contracts is
in no way essential to the conduct of
federal-court business.
[Id. at ___, 114 S. Ct. at 1677,
128 L. Ed.
2d at 397-98.]
It is as though the partnership had given plaintiffs a promissory
note in novation of the original dispute. The partners could not
plead the entire controversy doctrine in defense of a suit on
such a note. At best, they could argue in the suit on the note
that it would be necessary to join the partnership and all of the
partners in order to impose personal liability beyond the assets
of the partnership.
The core values of the entire controversy doctrine require
disposition in one proceeding of all claims against all parties
that are necessary to the fair disposition of an underlying
controversy. As noted, the linchpin of defendants' argument is
that when Maloy agreed to accept the money settlement in October
1990, the Cogdell decision had already come down, thereby placing
Maloy on notice that she would be "at risk" if she did not join
the individual partners. It asks too much of the entire
controversy doctrine to require a lawyer in a prerogative writ
action to anticipate that a settling party may become insolvent
and thus must join all the partners in an underlying non-contractual action in order to settle that case. Rule 4:4-4(5)
made the original service on one of the partners effective to
bring the partnership before the court. There was no need to
replead in the land-use action.
The entire controversy doctrine is not intended to be a trap
for the unwary. As noted, the doctrine is easily recognized in
the context of the calculated fragmentation of litigation as in
Crispin and Cogdell, when parties for strategic reasons have
withheld claims concerning the underlying controversy and seek
two bites at the apple. In other contexts the commonality of
claims arising from the transactional circumstances may not be as
stark. In each application of the doctrine, a careful analysis
of the relevant factors must be made. In Prevratil, supra, we
held that the "twin pillars of the entire controversy doctrine,"
fairness to the parties and fairness to the system of judicial
administration, 145 N.J. at 197, required a remand to determine
whether the claimant had been fairly apprised of the previous
proceedings and had withheld the claim or would, because of the
circumstances of the claimant's case, be unfairly prejudiced by
application of the entire controversy doctrine. We said that
"equitable considerations can relax mandatory-joinder
requirements when joinder would be unfair." Id. at 190.
In this case, there is no unfairness in the second
proceeding to defendant partners. The first proceeding was not
an action on a partnership debt. It was the partnership that
converted the first proceeding into a new obligation. Kokkonen,
supra. In fact, we are informed that the first case had been
marked "settled" on the court's docket on April 22, 1991, before
the partnership reneged on its debt and the money judgment was
entered. At the time when the settlement was breached, there was
no pending case in which to join the individual partners. See
Molnar v. Hedden,
138 N.J. 96, 104 (1994) (holding that an
amended pleading could not relate back to an earlier filing once
a case had been settled: "nothing remained to which the
counterclaim could relate back.").
There is no unfairness to courts because the original
proceedings did not involve resolution of this later controversy.
The hearing before the first-level court concerned whether
conditions of the alleged settlement had been omitted, such as
consent of the construction mortgagee. The partners insist that
the court in this second-level action will have to relitigate the
terms of the settlement, that is, whether the settlement was
intended to bind only the partnership property and not the
partners, thus necessitating a second plenary hearing. We
disagree. The liability of the partners for partnership debt
will be resolved by the Uniform Partnership Law. N.J.S.A. 42:1-9
to -43. The debt of the partnership was created to end the first
litigation, not to be part of it. The unfairness would be to
plaintiff, who would be penalized for not having joined in a
land-use action individual partners not necessary to the
disposition of that matter at a time when the law was unsettled
as to whether individual partners could be joined in an action on
a debt before partnership assets were exhausted.
The judgment of the Appellate Division is reversed. The
matter is remanded to the Law Division for further proceedings on
plaintiff's complaint.
CHIEF JUSTICE PORITZ and JUSTICES HANDLER, POLLOCK,
GARIBALDI, STEIN and COLEMAN join in JUSTICE O'HERN's opinion.
NO. A-19 SEPTEMBER TERM 1996
ON APPEAL FROM
ON CERTIFICATION TO Appellate Division, Superior Court
KENNETH E. JOEL,
Plaintiff-Appellant,
v.
VINCENT MORROCCO AND JOSEPH PARLAVECCHIO,
Defendants-Respondents,
and
JOSEPH SILVESTRI,
Defendant.
DECIDED February 27, 1997
Chief Justice Poritz PRESIDING
OPINION BY Justice O'Hern
CONCURRING OPINION BY
DISSENTING OPINION BY
Footnote: 1In DiTrolio, we phrased the inquiry thus:
We must determine whether the entire controversy doctrine
is applicable to bar the current action because the facts
giving rise to the tort claims against the doctors and their
medical group also gave rise to the claims against the
hospital and its trustees in the earlier action. The issue is,
basically, whether a sufficient commonality of facts
undergirds each set of claims to constitute essentially a single
controversy that should be the subject of only one litigation.