GREGORY LIPPINCOTT, et al. v. ESTATE OF ROBERT L. COLES, ESQUIRE

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3468-03T53468-03T5

GREGORY LIPPINCOTT, JANET

LIPPINCOTT and JOANNA PATTERSON,

Executors on Behalf of The

ESTATE OF JOSEPH T. LIPPINCOTT

and THE ESTATE OF ELEANOR W.

LIPPINCOTT,

Plaintiffs-Appellants,

v.

ESTATE OF ROBERT L. COLES,

ESQUIRE,

Defendant,

and

POND & SPITZ BUILDING

DIVISION, INC.; BRUCE MARTIN;

GLEN HENKEL, ESQUIRE; ARTHUR

A. DiPADOVA, ESQUIRE; KULZER &

DiPADOVA, P.A.; and HEATHER

GLEN ASSOCIATES,

Defendants-Respondents.

 

Argued: October 26, 2005 - Decided:

Before Judges Fall, Parker and Sapp-Peterson.

On appeal from the Superior Court of New Jersey, Law Division, Burlington County, Docket Number BUR-L-1164-00.

Mark J. Molz argued the cause for appellants (Mr. Molz, attorney; Stephen Cristal, on the brief).

Robert J. Machi argued the cause for respondents Glen Henkel, Esquire, Arthur A. DiPadova, Esquire, and Kulzer & DiPadova, P.A. (Morgan, Melhuish, Monaghan, Arvidson, Abrutyn & Lisowski, attorneys; Mr. Machi, on the brief).

Gregory R. McCloskey argued the cause for respondents Pond & Spitz Building Division, Inc., Bruce Martin, and Heather Glen Associates.

PER CURIAM

Plaintiffs Gregory Lippincott, Janet Lippincott and Joanna, executors of the Estates of their parents Joseph and Eleanor Lippincott, appeal from orders issued on October 20, 2003, dismissing their claims against all defendants except the Estate of Robert L. Coles, Esq. The dispute between plaintiffs and defendants arose from a contractual relationship created by agreements between decedents and developers.

On December 28, 1988, decedents entered into an agreement with Fred Pond, Stephen Spitz and Bruce Martin under which Pond, Spitz and Martin were permitted to subdivide decedent's property, consisting of a farm in Mount Laurel, into residential building lots, and in turn sell those lots to third parties. The agreement included a formula for division of the proceeds after each lot sale, which formula was amended twice.

Bruce Martin, a real estate developer, drafted the agreement and subsequent amendments thereto. Thereafter, Pond, Spitz and Martin formed a partnership defendant Heather Glen Associates which applied for subdivision approval. On June 15, 1989, the "Heather Glen" subdivision received preliminary approval from the Mount Laurel Township Planning Board for division of the property into twenty-one residential building lots.

On September 17, 1992, decedents entered into an agreement, again drafted by Martin, to sell the property to defendant Pond & Spitz Building Division, Inc. Robert Coles, Esq. reviewed the contract on behalf of decedents, and represented decedents during the contract, subdivision and sales stages, including the period of review and approval for the December 28, 1988 agreement and its two amendments.

Defendant Glen Henkel, a tax and real estate attorney and member of the defendant law firm, Kulzer & DiPadova, representing Heather Glenn Associates, prepared an escrow agreement dated November 9, 1992, designed to defer tax liability incurred by Heather Glenn until the sale of the individual lots to third parties. Henkel and Coles were named in that agreement as escrow agents to receive and disburse payments to their respective clients pursuant to the terms of the September 17, 1992 agreement, and its amendments.

Additionally, on November 9, 1992, a mortgage was entered, under which Pond & Spitz Building Division, Inc. was designated borrower, and attorneys Coles and Henkel, as escrow agents under the November 9, 1992 escrow agreement, as lenders. Pond and Spitz also signed a personal guaranty. The mortgage served "as security for an obligation of Pond & Spitz Building Division, Inc. to Joseph D. Lippincott and Eleanor W. Lippincott, Fred Pond, Stephen Spitz and Bruce Martin, beneficiaries of the Escrow Agreement[.]"

The consideration for the transfer of title to their property to Pond & Spitz Building Division, Inc. was $150,000, all of which decedents had received as down payment monies prior to closing. Decedents were also to receive the balance of monies due under the agreement upon the subdivision of the land, construction of the homes and individual sale of each home to a third party, pursuant to the terms of the November 9, 1992 escrow agreement.

Heather Glen completed the subdivision of the property, marketed and sold of the individual lots. At first, payments to decedents for the closings on individual lots were made pursuant to the escrow agreement. Escrow agent Henkel sent escrow agent Coles a letter with a check enclosed in the amount of $5,000 after each closing. For example, by letter dated February 15, 1994, Henkel's secretary wrote to Coles, stating:

In accordance with our telephone conversation today, enclosed is a check in the amount of $5,000. Mr. Henkel has endorsed it in blank. This check represents the proceeds from Lot 10, Block 601.08 and it is to be delivered to the Lippincotts.

We have been advised to forward these funds to you pursuant to agreement.

Henkel testified at depositions that shortly into the closing process a determination was made that it was impractical to continue disbursing monies from the title company's trust account to the escrow agent's trust account before finally making payment to the parties. According to Henkel, he, Pond & Spitz, Martin, and Coles, on behalf of decedents, determined that the monies would be disbursed directly through the title office for the remaining closings. However, the approval of escrow agents Coles and Henkel was still required prior to the disbursement of any money.

On appeal, plaintiffs contend that this decision eliminating the function of the escrow agent's trust account constituted a violation of the escrow agreement.

On October 15, 1996, at the completion of fourteen of twenty closings, Martin prepared and forwarded to all parties an accounting of all monies disbursed to date with respect to the Property. Martin's accounting stated that decedents were entitled to receive $223,255.00, a total that the plaintiffs stipulated was in fact paid to decedents. Martin and Henkel stated during depositions that neither decedents nor Coles ever objected to Martin's accounting, or asserted that the amount of monies paid to decedents was inadequate.

Joseph Lippincott died in 1997. Eleanor W. Lippincott died in 1998.

On April 28, 2000, plaintiffs filed a complaint against defendants contending that they negligently or intentionally failed to secure and make the required payments to decedents as the subdivided lots were sold. Plaintiffs asserted that defendants knew or should have known that Coles was defrauding and stealing from the decedents, asserting various legal theories to support that contention. An amended complaint was filed on December 5, 2000.

On August 15, 2003, after completion of discovery, Henkel and DiPadova filed a motion for summary judgment, seeking dismissal of the amended complaint against them. On October 7, 2003, Pond & Spitz Building Division, Inc., Martin, and Heather Glen Associates also filed a motion seeking entry of summary judgment in their favor. Plaintiffs opposed the motions, and filed a cross-motion seeking summary judgment against all defendants.

The motions were argued in the Law Division before Judge John A. Sweeney on October 20, 2003. Although the judge delivered his decision on that date, a malfunction of the sound recording equipment caused the proceedings not to be recorded. However, on October 21, 2003, the judge placed his findings and conclusions on the record. The motion judge concluded that Henkel could not have been a fiduciary for the decedents, since he was retained and paid by defendants, and his duties were clearly set forth in the fiduciary agreement. He noted that there was no lawyer-client relationship between decedents and Henkel.

The judge dismissed the claims against all defendants, other than the Estate of Robert L. Coles, on the grounds of laches, estoppel and waiver, and because the allegations of fraud and misrepresentation in the complaint lacked specificity. The judge stated, in pertinent part:

In this matter, there was an agreement entered into between the Lippincotts and three individuals who later formed Heather Glenn Associates. That agreement is dated December 29, 1988. The purpose of the agreement was to permit the individuals and later Heather Glenn to sub-divide property owned by the Lippincotts and then offer it for sale, dividing the proceeds in accordance with a rather complex formula set forth in the agreement.

The agreement was later amended on April 27th, 1989 and subsequently on July 28th, 1989 a second amendment to the agreement was executed. On September 17, 1992, there was an agreement of sale from Lippincotts to Pond and Spitz Building Division, which later resulted in the preparation of an escrow agreement dated November 5, 1992, which was prepared by Mr. Henkel at the request of Pond and Spitz Building Division.

Mr. Henkel is an attorney, and was sought out for his tax advice and to prepare and represent those defendants in connection with his effort to defer tax liability, which resulted in the preparation of the escrow agreement naming both Mr. Henkel and Mr. Coles, the attorney for the Lippincotts, as co-escrow agents.

The complaint filed by [plaintiffs] initially named all of those defendants and a subsequent amendment to the complaint further charged Mr. Henkel, in addition to legal malpractice, with a breach of a fiduciary obligation. The complaint also alleges breach of contract and various other causes of action against the various defendants.

The allegations against Henkel and Arthur DiPadova are set forth in count two of both the complaint and amended complaint wherein the plaintiff contends that they negligently and/or intentionally failed to secure and then make monetary payments due to Lippincott from the sale of the sub-divided lots, and that they knew or should have known that the defendant, Cole's counsel for the Lippincotts, was defrauding and stealing from the Lippincotts.

Plaintiffs also allege that Henkel and DiPadova are liable for breach of contract, unjust enrichment, quantum meruit, actual fraud, negligent and/or intentional misrepresentation, professional negligence, gross negligence, and/or conversion, and the plaintiff seeks both compensatory and punitive damages.

After hearing arguments, I decided after defining "fiduciary," which comes from the Latin term "fiduciaries" as of or relating to or involving a confidence or trust that Mr. Henkel could not have, under the circumstances presented in this case, been a fiduciary for the Lippincotts. He was retained by the defendants and paid by them, and the escrow agreement clearly set forth his obligations to them. . . . [M]r. Henkel under the circumstances set forth in this case, unlike other matters that I'll refer to shortly, could not have been a fiduciary to both his clients for whom he prepared the escrow agreement and to the Lippincotts because of the inherent conflict between potentially adversarial parties.

Being a fiduciary is antithetical to adversarial relationships or conflicting interests, which the parties obviously have the potential to have and may actually have had in this case.

The agreement itself provided that neither escrow agent should be precluded form representing their respective clients, and the parties acknowledged that the escrow agents were indeed attorneys for the respective parties and not representing the interests of adversaries.

The agreement also provided that the Lippincotts would pay Coles' fees for services rendered as an escrow agent and that Pond and Spitz and Martin would pay Henkel's fees for services rendered as an escrow agent. Either escrow agent retained the right to prevent distribution of the funds in question. Neither exercised any of that authority.

There is absolutely no evidence in any part of the record, which indicates that the Lippincotts ever had any contact or ever met Mr. Henkel. Therefore, the requisite elements of legal malpractice are absent. They are the existence of an attorney/client relationship creating a duty of care upon the attorney, the breach of such a duty, proximate causation of damages sustained and actual damages. [Conklin v. Hannoch Weisman, 145 N.J. 395 (1996)].

There having been no attorney/client relationship, there could have been no reliance by the Lippincotts on anything that Mr. Henkel did either as an attorney or as an escrow agent, and I base that decision on the lack of an attorney/client relationship and the very specific terms of the escrow agreement. I also dismiss all claims against Mr. Henkel in his alleged fiduciary relationship to the Lippincotts based upon the rules of professional conduct, in addition to the language of the escrow agreement. I also rely upon the case entitled [Matter of Hollendonner, 102 N.J. 21 (1985)], which one attorney acting as an escrow agent could be said to be acting on behalf of both parties where it is disclosed that he is acting on behalf of both parties where it is disclosed that he is acting on their behalf. Here, in this case, there was never any indication by Mr. Henkel that he would preserve or, protect the rights or do any calculations, or make any objections to disbursements on behalf of the Lippincotts. Rather, he would do so only on behalf of his clients.

[Plaintiffs' counsel's] argument that there was a breach of the escrow agreement by both Coles and Henkel lacks merit because their decision to have funds paid directly by a title company after several closings had already taken place, and money had gone through the escrow account, and to have the title company pay from its own escrow account was no breach of duty and no damages flowed form that decision as both retained the right to object to any disbursements made at the request of Mr. Martin to the title company when he wrote letters to the title company authorizing disbursements and telling the title company to which party disbursements and should be made. Neither Mr. Coles nor Mr. Henkel ever objected.

Furthermore, there was an accounting that was done by Mr. Martin after either the 14th or 15th closing, which showed that the Lippincotts had received all the money to which they were entitled. They did not object to that accounting, neither did they have an objection from their lawyer, Mr. Coles.

Furthermore, there is no proof that any damages flowed from any of the alleged wrongdoing by the defendants who move in this case for summary judgment. There were accountants who were retained initially by [plaintiffs' counsel's] office; none wrote reports, none ever opined that there was anything wrong with the distribution of any of the funds, or that the Lippincotts failed to receive all that was due to them. And, so there is no specification of damages. The only expert's report is Mr. Dugan, to whom I owe no deference on legal matters, but I have considered his report, and his report is absent any method of calculation of damages. The only thing he said was that a good portion of the Lippincott's damages flowed from the failure to act or the fraud on the part of Mr. Coles. He did not even opine as to what, if any, damages, flowed from any alleged wrongdoing by Mr. Henkel or his firm of his partner.

Furthermore, all of the claims should be dismissed because of laches, estoppel, and waiver, for the reasons set forth by defense counsel on page 13 of the brief filed in this matter. Finally, all claims have to be dismissed because of -- which are based upon the allegations of fraud and misrepresentation because the complaint lacks the specificity of factual allegations required in fraud and misrepresentation matters. It was acknowledged on the record yesterday that the compliant does lack the specificity that the rule requires.

As to the issue of damages; that is, punitive damages, there is absolutely no evidence in the record before me of any intentional wrong or evil-mindedness on the part of any defendant. Insofar as Martin, Mr. Henkel and Heather Glen Associates is concerned, there is absolutely no evidence of any breach of contract or that Mr. Martin, represented by Mr. McCloskey, engaged in any wrongdoing whatsoever. In fact, he is the individual who prepared the very accounting that was sent to and, presumably, received by Mr. Coles, as well as his clients, to which no objection was ever made, and that accounting set forth in some detail all disbursements made to that date, as well as a conclusion that that is all the Lippincotts were entitled to receive.

I am entirely satisfied that the complaint insofar as all of those defendants are concerned lacks merit and that there are no material facts in dispute under the standard set forth in Brill from which a jury or other fact finder could conclude that Henkel, Kessler, and DiPadova, DiPadova, Martin, Pond and Spitz or Heather Glen engaged in any fraudulent activity, made any misrepresentations, breached any contract, or diverted any funds that would have been due and owing to the Lippincotts.

For all of those reasons, the complaint against those defendants is dismissed with prejudice. I will now retire to chambers and prepare a letter to all counsel indicating the deficiency in the record yesterday, and informing them of what I had done here this morning by way of placing the matter upon the record again.

Orders granting summary judgment in favor of all defendants, save Coles' Estate, were entered on October 20, 2003. The court entered a default entered against Coles' Estate, later resulting in a judgment against Coles' Estate in the amount of $767,319.03 on January 29, 2004.

On appeal, plaintiffs present the following arguments for our consideration:

POINT I

HENKEL, AS TRUSTEE OF ESCROW, OWED DUTY TO LIPPINCOTTS.

POINT II

THERE ARE PROVABLE DAMAGES.

POINT III

FRAUD, MISREPRESENTATION THROUGH MATERIAL OMISSION.

POINT IV

LACHES, WAIVER & ESTOPPEL DO NOT APPLY.

POINT V

NO STATUTE OF LIMITATIONS DEFENSE.

POINT VI

OBJECTION TO NEW EXHIBITS IN HENKEL'S REPLY BRIEF.

After analyzing the record in the light of the written and oral arguments advanced by the parties, we conclude that the issues presented by plaintiffs are without sufficient merit to warrant extensive discussion in a written opinion, R. 2:11-3(e)(1)(E), and we affirm substantially for the reasons articulated by Judge Sweeney in his oral opinion delivered on October 21, 2003. We add the following.

Plaintiffs failed to establish a prima facie case of legal malpractice against Henkel. See Garcia v. Kozlov, Seaton, Ramanini & Brooks, P.C., 179 N.J. 343, 357 (2004) (noting that the elements of a cause of action for legal malpractice are, (1) the existence of an attorney-client relationship creating a duty of care, (2) the breach of that duty, and (3) proximate causation of the damages claimed by the plaintiff). Here, there was no attorney-client relationship between decedents and Henkel; indeed, there is no evidence in the record that decedents ever met Henkel. Moreover, the duties and responsibilities of Henkel and Coles as escrow agents were to their respective clients. Unlike, the circumstances in Hollendonner, supra, 102 N.J. at 26-27, Henkel did not serve as the escrow agent for both parties.

Plaintiffs have also failed to show a prima facie case of fraud or misrepresentation against Henkel because Henkel owed no fiduciary duty to decedents, and they have failed to provide evidence suggesting that Henkel withheld information, or that any of his actions resulted in actual damages to them. See Gennari v. Weichert Co. Realtors, 148 N.J. 582, 610 (1997) (delineating the elements necessary to establish a cause of action for common law fraud).

Judge Sweeney also properly applied the doctrines of laches, estoppel and waiver in dismissing plaintiffs' claims against defendants. The complaint was filed on April 28, 2000, based on financial transactions that occurred between 1988 and 1996, approximately two years after both Mr. and Mrs. Lippincott had died, and without any evidence to demonstrate that decedents ever objected to the manner of disbursement of the funds under the agreement. Moreover, as noted by Judge Sweeney, plaintiffs' allegations against defendants lacked specificity.

Plaintiffs' contention that Henkel improperly included new evidence in his reply brief to the trial court is equally without merit. The record discloses that with the exception of Machi's certification, all documents objected to had been produced during discovery and were known to the parties. Additionally, the opposition brief submitted by plaintiffs to the trial court also served as plaintiffs' brief in support of their cross-motion; therefore, a reply was appropriate. See R. 4:46-1. Machi's certification merely referenced and attached the closing statements and checks issued to the parties under the agreement, and nothing has been submitted demonstrating that those documents were erroneous or that any prejudice was visited upon plaintiffs by their inclusion.

 
Affirmed.

Although the property was subdivided into twenty-one lots, the September 17, 1992 agreement provided that decedents would retain the lot containing their house.

(continued)

(continued)

16

A-3468-03T5

December 19, 2005