(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 November 10, 1998 -- Decided January 25, 1999
PER CURIAM
This appeal concerns an application of the entire controversy doctrine. A subsidiary question
concerns when a cause of action for negligent appraisal of real property accrues.
Vision Mortgage Company (Vision) retained the defendants (Chiapperini) to perform appraisals in
connection with residential mortgage loans. In 1988, Vision loaned Edwin Nazario $182,000 on the basis of
Chiapperini's $280,000 appraisal of property in Jersey City. In 1989, Vision loaned Trevor Willis $367,000
on the basis of Chiapperini's $511,000 appraisal of property in Montclair.
Nazario defaulted in 1989, and Willis defaulted in 1991. Both mortgages were foreclosed and
resulted in deficiencies, in that the proceeds of the foreclosure sales did not equal the loan amounts.
Vision sued Chiapperini in 1992 alleging negligence in the appraisal of the property securing the
Willis loan. On June 13, 1995, Vision and Chiapperini settled that suit. Three months later, on August 22,
1995, Vision filed this action against Chiapperini for negligent appraisal of the Nazario property.
Chiapperini sought summary judgment, arguing that Vision's claims were barred by the entire
controversy doctrine and the six-year statute of limitations. The trial court granted the motion on both
grounds. In respect of the statute-of-limitations bar, the trial court held that Vision's cause of action accrued
on the date of Nazario's default on the mortgage in April 1989.
On appeal, the Appellate Division reversed the summary judgment in favor of defendant. Vision
Mortgage v. Chiapperini, Inc.,
307 N.J. Super. 48 (App. Div. 1998). A majority held that because the
Nazario and Willis actions did not arise from related transactions, the entire controversy doctrine did not
apply. It also held that Vision's cause of action did not accrue until it acquired the property following a
foreclosure sale, and the six-year statute of limitations therefore did not bar the action.
One judge dissented, reasoning that the entire controversy doctrine required Vision to include the
Nazario claim in the Willis action. He therefore found it unnecessary to address the statute-of-limitations
defense.
Chiapperini appealed as of right with respect to the issue of the entire controversy doctrine and
sought certification of the statute-of-limitations issue. The Supreme Court granted the petition.
HELD: Vision's action is not barred either by the entire controversy doctrine or the statute of limitations.
1. The ruling on the entire controversy issue is affirmed primarily for the reasons stated by the Appellate
Division in its reported opinion. The transactional facts are sufficiently different to avoid invoking the
doctrine. In terms of fairness, Chiapperini could have wrapped up all its affairs by seeking a general release
when it settled the first action. (pp. 4-5)
2. The Court adopted revisions to the rules governing the entire controversy doctrine last year. One of
those revisions is embodied in R. 4:5-1(b)(2) and requires that counsel in an action inform the court of non-parties who should be joined. The facts of this case suggest that counsel should also inform the court of
other potential claims that it may have against the same party. The Civil Practice Committee is requested to
consider that issue in the next rule cycle. (p. 5)
3. On the statute-of-limitations issue, the Appellate Division concluded that the claim accrues only after the
property has been sold in foreclosure and a deficiency fully established. Because the mortgagee exercises
control over the sale, this would essentially allow it to determine when the claim accrues. The Court also
takes issue with the trial court's finding that the claim accrued on the date of default. A default does not
necessarily establish injury to the mortgagee. (pp. 6-7)
4. The better analysis leads to the conclusion that the cause of action should accrue when the mortgagee
knows or has reason to know that its collateral has been impaired or endangered by the negligent appraisal.
At that point, the mortgagee knows it has suffered legal injury, even if damages may be uncertain. (p. 7)
5. The record establishes that Vision's cause of action concerning the Nazario appraisal accrued in
December 1991, when it received an appraisal valuing the property at $209,000, an amount $70,000 less than
the loan value. Because Vision commenced this action on June 13, 1995, less than four years after it became
aware of the 1991 appraisal, it was brought within the applicable six-year statute-of-limitations period. (pp.
7-8)
The judgment of the Appellate Division is AFFIRMED.
CHIEF JUSTICE PORITZ and JUSTICES HANDLER, POLLOCK, O'HERN, GARIBALDI, STEIN
and COLEMAN join in this opinion.
SUPREME COURT OF NEW JERSEY
A-
178 September Term 1997
VISION MORTGAGE CORPORATION,
INC.,
Plaintiff-Respondent,
v.
PATRICIA J. CHIAPPERINI, INC.,
and PATRICIA J. CHIAPPERINI,
Defendants-Appellants.
Argued November 10, 1998 -- Decided January 25, 1999
On appeal from and certification to the
Superior Court, Appellate Division, whose
opinion is reported at
307 N.J. Super. 48
(1998).
Jeffrey S. Intravatola argued the cause for
appellants (Hoagland, Longo, Moran, Dunst &
Doukas, attorneys; Mr. Intravatola, Michael
J. Caccavelli and Christopher M. Longo, on
the briefs).
Christine D. Petruzzell argued the cause for
respondent (Wilentz, Goldman & Spitzer,
attorneys; James E. Tonrey, Jr., on the
briefs).
PER CURIAM
This appeal primarily concerns an application of the entire
controversy doctrine. A subsidiary question concerns when a
cause of action for a negligent appraisal of real property
accrues. The issues arise in the context of an action by a
mortgage company against an appraiser for professional
malpractice in failing accurately to estimate the value of real
property that would secure mortgage debt.
The facts of the case are more fully set forth in the
opinion of the Appellate Division at
307 N.J. Super. 48 (App.
Div. 1998). In brief, plaintiff Vision Mortgage Company (Vision)
had retained the defendants (whom we shall refer to as
Chiapperini) to perform real estate appraisals in connection with
residential mortgage loans. In 1988, Vision loaned Edwin Nazario
$182,000 on the basis of a $280,000 appraisal of property in
Jersey City. In 1989, Vision loaned Trevor Willis $367,700 on
the basis of a $511,000 appraisal of property in Montclair.
For convenience we omit reference to the role of assignees
of the mortgages because the mortgages were assigned "with
recourse," meaning that Vision retained the risk of any default
on the loans.
Both mortgagors defaulted, Nazario in 1989 and Willis in
1991. Both mortgages were foreclosed. Both foreclosures
resulted in deficiencies, in that the proceeds of the foreclosure
sales or the value of the security recovered did not equal the
loan amounts.
Vision first sued Chiapperini in 1992 alleging that it had
negligently failed to value accurately the real property that
secured the $367,700 loan to Willis. On June 13, 1995, Vision
and Chiapperini settled that suit. Three months later, on August
22, 1995, Vision sued Chiapperini for negligent appraisal of the
Nazario property.
Chiapperini sought summary judgment, arguing that Vision's
claims were barred by the entire controversy doctrine and the
six-year statute of limitations. The trial court ruled that
Vision's claims were barred by the entire controversy doctrine.
Even if the doctrine did not apply, the trial court found that
the claims were barred because the cause of action for
malpractice accrued on the date of Nazario's default in April
1989, more than six years before the August 1995 suit.
On appeal, the Appellate Division reversed the summary
judgment in favor of defendant.
307 N.J. Super. 48. A majority
held that because the Nazario and Willis actions did not arise
from related transactions, the entire controversy doctrine did
not apply. Id. at 54. The panel held that plaintiff's cause of
action did not accrue until Vision acquired the property
following a foreclosure sale. Id. at 55. The Appellate Division
majority thus concluded that the six-year statute of limitations
did not bar this action. Id. at 57.
One judge dissented, reasoning that, "under the entire
controversy doctrine plaintiff should have combined the claim
based on the Nazario appraisal in its action on the Willis
appraisal." Id. at 57 (D'Annunzio, J., dissenting). In light of
that conclusion, Judge D'Annunzio found it unnecessary to address
defendant's statute-of-limitations defense. Id. at 60
(D'Annunzio, J., dissenting).
Chiapperini appealed as of right with respect to the issue
of the entire controversy doctrine and sought certification of
the statute-of-limitations issue. We granted the petition.
153 N.J. 216 (1998).
I.
We affirm the disposition of the entire controversy issue
primarily for the reasons stated by the Appellate Division in its
reported opinion. We are satisfied that there is a sufficient
difference in the transactional facts not to warrant invocation
of the entire controversy doctrine. A court would not have to
retry the same issues; the testimony in each of the trials would
undoubtedly differ. Had there been a master contract governing
appraisal services to be performed by defendant, the argument for
application of the entire controversy doctrine would have been
stronger. In terms of fairness, Chiapperini knew that it had
performed multiple appraisals for Vision. Had it wanted to wrap
up all of its affairs in a single package, Chiapperini could have
sought a general release when it settled the first case brought
by Vision. Thus, concerns of fairness weigh against an
application of the entire controversy doctrine. As this Court
recently stated: "We have always emphasized that preclusion is a
remedy of last resort. . . . 'Courts must carefully analyze' both
fairness to the parties and fairness to the system of judicial
administration 'before dismissing claims or parties to a suit.'"
Olds v. Donnelly,
150 N.J. 424, 446-47 (1997) (quoting Gelber v.
Zito Partnerships,
147 N.J. 561, 565 (1997)) (emphasis added).
We add only this observation. Following our decision in
Olds, the Civil Practice Committee recommended and we adopted
revisions in our rules governing the entire controversy doctrine.
One of the Committee's recommendations, embodied in Rule 4:5-1(b)(2), was that counsel in an action inform the court of non-parties who should be joined in the action or are subject to
joinder. It strikes us that counsel should also inform the court
of other potential claims that it may have against the same
party. One of the goals of the entire controversy doctrine is
the efficient judicial administration of multiple claims. That
is better accomplished when courts possess the facts upon which
to base case-management decisions. We request that the Civil
Practice Committee consider that issue in the next rule cycle.
II.
Somewhat more difficult is the second question in the case.
Adopting a California rule, the Appellate Division held, "an
action by a mortgagee against its appraiser for professional
malpractice does not accrue until the loss, if any, of the
mortgagee is established by resort to the security through
foreclosure or otherwise." 307 N.J. Super. at 55 (citing Slavin
v. Trout,
18 Cal. App. 4th 1536,
23 Cal. Rptr.2d 219 (Cal. Ct.
App. 1993)). Presumably, that means the claim accrues after the
property has been sold at foreclosure and a deficiency fully
established. In some cases, it may be years before a mortgage
company is able to complete a foreclosure sale. A rule providing
that an action by a mortgagee against an appraiser does not
accrue until the mortgagee acquires the property through
foreclosure would afford mortgagees an indefinite amount of time
within which to bring suit. In essence, the rule would allow the
mortgagee to determine when the claim accrues. A mortgagee might
even forego a useless foreclosure sale, thus preventing a cause
of action from accruing.
On the other hand, we disagree with the trial court's
finding that the claim accrued on the date of default. A default
does not necessarily establish injury to the mortgagee. A
mortgage debtor may default for any number of reasons, such as
death, divorce, or a change in job status. Those reasons will
have nothing to do with the possibility of injury from negligent
appraisal. In short, a default gives a lender no reason to
believe that the lender's collateral is undervalued.
The better analysis leads us to conclude that the accrual of
a cause of action should not await the sale of the mortgaged
properties, but rather that the cause of action should accrue
when the mortgagee knows or has reason to know that its
collateral has been impaired or endangered by the negligent
appraisal. At that time, the mortgagee knows that it has
suffered legal injury. "[P]ursuant to the discovery rule, a
professional malpractice claim accrues when: (1) the claimant
suffers an injury or damages; and (2) the claimant knows or
should know that its injury is attributable to the professional
negligent advice." Circle Chevrolet Co. v. Giordano, Halleran &
Ciesla,
142 N.J. 280, 296 (1995) (citing Grunwald v. Bronkesh,
131 N.J. 483, 494 (1993)).
That the damages may be uncertain does not delay accrual.
"It is not necessary that all or even the greater part of the
damages have to occur before the cause of action arises."
Grunwald, supra, 131 N.J. at 495 (quoting United States v.
Butterman,
701 F.2d 104, 106 (9th Cir. 1983) (applying California
law) (internal citations omitted)).
Under the Circle/Grunwald analysis, we must examine the
record to determine when Vision knew or had reason to know that
the collateral was impaired. The record establishes that
Vision's cause of action concerning the Nazario appraisal accrued
on or about December 10, 1991, when it received an appraisal
valuing the property at $209,000, an amount $70,000 less than its
loan value. At that point, Vision surely became aware that
Nazario's mortgage loan was undersecured due to defendant's
negligent appraisal, and that Vision had been damaged by
defendant's mistake. Nothing else in the record indicates that
Vision knew or should have known that the collateral was impaired
prior to the December 1991 appraisal. Because Vision commenced
this action on June 13, 1995, less than four years after it
became aware of the 1991 appraisal, plaintiff brought the action
well within the six-year statute of limitations for professional
malpractice.
For the reasons stated, the judgment of the Appellate
Division is affirmed.
CHIEF JUSTICE PORITZ and JUSTICES HANDLER, POLLOCK, O'HERN,
GARIBALDI, STEIN, and COLEMAN join in this opinion.
NO. A-178 SEPTEMBER TERM 1997
ON APPEAL FROM Appellate Division, Superior Court
and
ON CERTIFICATION TO Appellate Division, Superior Court
VISION MORTGAGE CORPORATION, INC.,
Plaintiff-Respondent,
v.
PATRICIA J. CHIAPPERINI, INC.,
and PATRICIA J. CHIAPPERINI,
Defendants-Appellants.
DECIDED January 25, 1999
Chief Justice Poritz PRESIDING
OPINION BY PER CURIAM
CONCURRING OPINION BY
CONCURRING/DISSENTING OPINION BY