GREENBAUM, ROWE, SMITH, RAVIN, DAVIS & HIMMEL v. RICHARD P. TULLY AND JOSEPH WISTREICH

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4993-03T34993-03T3

GREENBAUM, ROWE, SMITH,

RAVIN, DAVIS & HIMMEL,

Plaintiff-Respondents,

v.

RICHARD P. TULLY AND

JOSEPH WISTREICH,

Defendants/Third-Party

Plaintiffs-Appellants,

2100 LINWOOD AVENUE OWNERS, INC., MILDRED COLLENDAR, ZITA FOSTER, SIDNEY DIAMOND, IRVING PLUTZER, RICHARD MAIDER, AND JOSEPH WISTREICH,

Third-Party Defendants

-Respondents.

__________________________________

 

Argued September 12, 2005 - Decided

Before Judges A. A. Rodr guez, Alley and

C. S. Fisher.

On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, L-0549-02.

Paul Leodori argued the cause for appellants Richard P. Tully and Joseph Wistreich (Reger, Rizzo, Kavulich & Darnall, attorneys; Mr. Leodori, on the brief).

Michael A. Klein argued the cause for respondent Greenbaum, Rowe, Smith, Ravin, Davis & Himmel (Greenbaum, Rowe, Smith, Ravin, Davis & Himmel, attorneys; Barry S. Goodman, of counsel and on the brief; Mr. Klein, on the brief).

Gregory E. Peterson argued the cause for respondents 2100 Linwood Avenue Owners, Inc., Mildred Collendar, Zita Foster, Sidney Diamond, Irving Plutzer, Richard Maider, and Joseph Wistreich (Connell Foley, attorneys; Karen Painter Randall, of counsel; Michael P. Davis and Mr. Peterson, on the brief).

PER CURIAM

This litigation began when the plaintiff, Greenbaum, Rowe, Smith, Ravin, Davis & Himmel (GRSRDH or plaintiff), filed a complaint against Richard P. Tully and Joseph Wistreich ("defendants") on January 9, 2002, seeking to recover from defendants legal fees in the amount of $58,649.36, which allegedly were incurred in connection with plaintiff's representation of defendants in Mediterranean Investments North & South, Co. v. 2100 Linwood Avenue Owners, Inc., Richard P. Tully and Joseph Wistreich, No. BER-L-1013 (Law. Div.) ("the Mediterranean action"). As we understand it, the Mediterranean action was decided by the Law Division in Bergen County in 1996.

A certification of Gina M. Pontoriero, a GRSRDH attorney, states that defendants retained her firm on January 26, 1996, to "perform legal services in connection with a disputed election, which took place on November 13, 1995[,] . . . to elect three members to the Board of Directors of the cooperative, 2100 Linwood Avenue Owners, Inc."

According to the first amended complaint in that case, the plaintiff, Mediterranean Investments North & South, Co., was "the sponsor/seller of cooperative apartments located in a building known as Mediterranean Tower North, which is located at 2100 Linwood Avenue, Fort Lee, New Jersey." The named defendants in the Mediterranean lawsuit were 2100 Linwood Avenue Owners, Inc., Joseph Wistreich, and Richard Tully. The complaint states, "2100 Linwood is the apartment corporation which operates, maintains, and supervises Mediterranean Tower North . . . [and its] principal place of business is . . . located at 2100 Linwood Avenue. . . ." Joseph Wistreich and Richard Tully, the defendants in the present action, allegedly resided at this address, were shareholders in 2100 Linwood, and were both losing candidates for the 2100 Linwood Board in the November 13, 1995 election.

Also according to the complaint, during the November 13, 1995 election, seven shareholders, including Tully and Wistreich, ran for three available Board positions. "Mediterranean Investments cast a total of 13,671 shares, of which 8574 shares are owned by Mediterranean Investments, and 5097 shares of which Mediterranean Investments voted on behalf of other, nonsponsor owners." Mediterranean Investments did not vote its shares for Tully or Wistreich. Instead, it voted its shares for the three winning candidates.

"Sometime after the election, [the complaint states], a 2100 Linwood shareholder protested the outcome of the vote on the grounds that Mediterranean Investments, as a sponsor, was not allowed to vote its shares in the Board at all, despite having voted its shares in such elections for over a decade." As a result of the conflict, the Board met on January 31, 1996, during which the majority of the board members present voted in favor of a resolution that would direct the company that counted the votes to recount them, ignoring the Mediterranean Investment votes and counting forty other votes that had been declared void by the company during the first count of votes.

As a result of the recount, two of the original winners were ousted and Tully and Wistreich were declared winners. It appears that the third winner from the initial vote retained his position as a result of the recount. After further litigation, defendants prevailed on September 3, 1996, when Judge Lawrence D. Smith issued an order in their favor.

In the present litigation, after GRSRDH as plaintiff filed its complaint against defendants on January 9, 2002, to recover attorney fees allegedly due for representation in the Mediterranean lawsuit; defendants filed their answer on April 25, 2002. Defendants moved to file an amended answer and counterclaim against plaintiff, and a third party complaint against 2100 Linwood Avenue Owners, Inc. ("third party defendants"). Although their motion to file a third party complaint was granted on February 7, 2003, defendants' motion for leave to file an amended answer and counterclaim were denied, and we denied their motion for leave to appeal on March 14, 2003.

On April 9, 2003, defendants filed a third party complaint against 2100 Linwood Avenue Owners, Inc., Mildred Collendar, Zita Foster, Sidney Diamond, Irving Plutzer, Richard Maider, and Joseph Wistreich ("third party defendants"). All of these parties were named in the Mediterranean lawsuit. The third party defendants filed an answer to the third party complaint on June 20, 2003.

On June 20, 2003, defendants filed a notice of motion for reconsideration of the February 7, 2003 order denying defendants' request to amend their complaint so as to file a counterclaim against plaintiff, or in the alternative, summary judgment warranting the dismissal of plaintiff's complaint. Third party defendants filed a motion for summary judgment on July 15, 2003.

On July 25, 2003, Judge Ciccone issued an order denying defendants' request for summary judgment as to plaintiff's claim and denied defendant's reconsideration motion. Judge Ciccone stated on the record that

Having heard all the testimony and having reviewed all the papers, the motion for reconsideration is, in fact, denied. Taking the standards in mind and having satisfied them by the moving parties, it's clear from the controlling decisions that the defendants' legal malpractice claim is time-barred. A pleading may state as a counterclaim any claim that the opposing party whether or not arising out of a transaction or occurrence is the subject of the opposing party's claim.

. . . It is well-settled law that the period begins to run when the claim accrues, which is governed by the discovery rule. A legal malpractice claim accrues when the client knows or should have known the facts underlying the elements of fault and injury. In B[u]rd vs. New Jersey Telephone[, 76 N.J. 284 (1978),] the New Jersey Supreme Court stated there's no suggestion in any of the leading cases that the accrual of the cause of action is postponed until the plaintiff learns or should have known of the law positing a right of recovery.

As to the elements of legal malpractice, the Dixon (phonetic) Court stated that a prospective plaintiff acquires knowledge of an attorney's fault where he or she realizes the lawyer has been negligent and when he or she knows what they should have any harm arising out of the given transaction is attributable to the plaintiff's negligence. Dixon stated that the ultimate case-specific question is when a plaintiff knows or should have known the damages attributable to the attorney's negligent advice.

After reviewing all the facts involved it's clear that the defendant[s] knew or should have known at the very latest on December 20th, 2002 that the damages were attributable to the plaintiff's alleged negligent advice. By that time the defendants should have known or discovered facts essential to the legal malpractice claim. Defendant, specifically Tully, had a personal knowledge of the facts in the underlying case. The defendants' argument that there's an equitable exception to the statute of limitations which would permit the filing of a counterclaim for legal malpractice such as the exception does not apply to this case. In a case relied upon by them, [Mancini v. Township of Teaneck, 349 N.J. Super. 527 (App. Div. 2002),] the Appellate Division held that there's an equitable exception to the statute of limitations in an anti-discrimination case involving continuing violations. Mancini is inapposite of the instant issues as this is a case involving discrimination and the defendants have failed and cannot assert any continuing violation. And therefore, the motion for reconsideration is denied.

On July 30, 2003, Judge Ciccone "ordered that [d]efendants' Motion for Reconsideration of the Court's prior Order denying Defendants' motion to amend their pleadings to assert against [p]laintiff is denied" and she further vacated the July 25, 2003 order. Defendants filed a motion for reconsideration of the July 30, 2003 order on August 6, 2003. This motion was denied with the exception of changing one clerical error by an August 14, 2003 order and an August 15, 2003 letter opinion. The correction that was made was to one aspect of the oral opinion, namely the portion which stated: "After reviewing all the facts involved it's clear that the defendant[s] knew or should have known at the very latest on December 20, 2002 . . . ." This date should have read "1996" instead. Judge Ciccone refused to reconsider the motion because of this clerical error. She also noted the following:

In addition, addressing defendants' argument that the "relation back" doctrine, as codified in Rule 4:9-3, preserves defendants' counterclaim for legal malpractice, this Court Rule is inapplicable. Accordingly, defendants' motion for reconsideration must be denied.

Rule 4:49-2 sets forth the time period within which a judgment may be altered. It states that, "a motion for rehearing or reconsideration seeking to alter or amend a judgment or order shall be served not later than 20 days after service of the judgment or order upon all parties by the party obtaining it. The motion shall state with specificity the basis on which it is made, including a statement of the matters or controlling decisions which counsel believes the court has overlooked or as to which it has erred." See R. 4:49-2.

The decision to hear a motion for reconsideration is solely within the discretion of the trial court judge. See Johnson v. Cyklop Strapping Corp., 220 N.J. Super. 250, 257 (App. Div. 1987). However, "a litigant should not seek reconsideration merely because of dissatisfaction with a decision of the court." See D'Atria v. D'Atria, 242 N.J. Super. 392, 401 (Law Div. 1990). In fact, the courts have found that reconsideration should only be heard when either, "(1) the court has expressed its decision based upon a palpably incorrect or irrational basis, or (2) it is obvious that the court either did not consider or failed to appreciate the significance of probative, competence evidence." Id. See also Cummings v. Bahr, 295 N.J. Super. 374, 384 (App. Div. 1996).

Taking this standard into consideration, this Court holds that defendants have failed to present this Court with new law or evidence, which the Court previously overlooked to warrant the granting of this motion. Moreover, what defendants rely on is inapplicable in this matter.

Rule 4:9-3 provides in pertinent part that "[w]henever the claim or defense asserted in the amended pleading arose out of the conduct, transaction or occurrence set forth or attempted to be set forth in the original pleading, the amendment relates back to the date of the original pleading; but the court, in addition to its power to allow amendments may, upon terms, permit the statement of a new or different claim or defense in the pleading."

However, the Appellate Division, in Giambuttista v. Bradlees Inc, 130 N.J. Super. 381, 384 (App. Div. 1974), held that "if a counterclaim is not asserted in the answer when filed but by way of supplemental pleading, and the statute of limitations has run at the time of asserting the counterclaim, even though it had not run at the commencement of the action, then it is barred."

This was affirmed by the Supreme Court in Molnar v. Hedden, 138 N.J. 96 (1994). There the Supreme Court held that "[t]he relation-back Rule 'does not authorize amendment of the pleading to allege a new cause of action another party to the litigation [that] is barred by the running of the statute of limitations.'" Molnar, 138 N.J. at 104, citing Pressler, Current N.J. Court Rules, comment 1 on R. 4:9-3 (1994). "that is because ordinarily, after the statute of limitation has run, the opposing party 'acquire[s] a vested right to be forever free of [the relevant claim].'" Molner, 138 N.J. at 104, citing McGlone v. Corbi, 59 N.J. 86, 94 (1971). Based on the foregoing, it is the opinion of this Court that Rule 4:9-3 is inapplicable and thus, defendants' motion for reconsideration is denied.

At this point, the trial court had yet to determine whether summary judgment was appropriate in the third party lawsuit and in the suit filed by plaintiff against defendant, as had been raised in the certification filed by defendants' attorney on June 20, 2003. Thereafter, Judge Gelade granted summary judgment in favor of third party defendants because of defendants' "failure to comply with the Statute of Limitations and pursuant to the Entire Controversy and Collateral Estoppel doctrines." Further, Judge Gelade denied the motion for summary judgment filed by defendants against plaintiff. Judge Gelade stated:

And as I understand essentially what occurred in this case is there was a co-op, which was built by a sponsor, Mediterranean, some time in the . . . early to mid '90s and the defendants in this case, Tully and Wistreich, were owners of their . . . [co-op.] And as shareholders there was - there were actually a couple of actions, but Mediterranean . . . in an election to elect a board, Mediterranean is sponsor and seller of the initial co-op units, was allowed by the board, and that - that's the third party defendant, the 2100 Linwood Group that named individuals are members of the board go to - Mediterranean was - was allowed to vote its unsold shares in that election. Tully and Wistreich hired counsel, because Mediterranean got an early order to show cause and thereafter there was an order to show cause filed on behalf of Tully and Wistreich seeking to bar Mediterranean from voting its shares and they were represented by the Greenbaum firm in that motion, in the order to show cause and at the hearings and proceedings Judge Smith of the Superior Court in Morris County granted the relief to Tully and Wistreich against Mediterranean. Mediterranean was not allowed to vote its unsold shares and the - the third party defendants in this case were the parties who opposed Tully and Wistreich and they were directed by Judge Smith, by his order which became final September 3rd, 1996 not to permit those shares to be voted. So in that lawsuit, the 1996 lawsuit, Tully and Wistreich were adverse to the 2100 Linwood persons who are now the third party defendants here.

In October 1996, for whatever it's worth, there was a memo sent by Tully and Wistreich to the owners indicating that the suit had terminated - terminated favorably to them and that they had prevailed and the matter was successfully concluded, with other language supposedly complimenting the work done by the . . . Greenbaum firm. The Greenbaum firm submitted a final invoice . . . to Tully and Wistreich on December 20th, 1996 and on that invoice the last item of services billed was September 26th, 1996.

During the period between December 20th, '96 when the bill was submitted until January 9th, 2002 when the Greenbaum firm filed this action, there were attempts by Greenbaum to collect its fees. Letters were sent, notices under . . . the rules requiring that the client be given an opportunity to submit to fee arbitration were sent and eventually the fee wasn't collected and . . . on January 9th, 2002 this lawsuit was filed. The Greenbaum firm as the plaintiff and Tully and Wistreich as the defendants. An answer was filed on April 24th, 2002.

And then in January 2003 the defendants, Tully and Wistreich, moved to file a counterclaim alleging legal malpractice and that was denied by Judge Ciccone and the defendants, [Wistreich] and Tully['s] . . . [request to] amend the answer to allow a counterclaim for legal malpractice was denied. That in essence they have - the plaintiffs waited an inordinate amount of time to file their complaint prejudicing the rights of the defendants and prejudicing them in their attempt to defend against this suit. They claim that laches is designed to prevent a party such as the law firm from sitting back and waiting until the last minute to file a complaint for legal fees, that there's nothing that could have prevented them from filing it in the - in the interim, in the almost five and a half years since the matter was concluded and the Greenbaum firm contends that there - there is no issue [of] laches because, number one, there's no prejudice to the defendants, that they had adequate notice . . . and that also they cannot show that there was anything that Greenbaum did that showed under the laches statute that there was an inexcusable delay.

[Defendant's attorney] argues on behalf of the - of the defendants that DeStefano vs. Greenstone, 357 [N.J. Super. 352, 359 (App. Div. 2003),] stands for the proposition that an attorney may not collect fees for work negligently performed and that this is what's happening in this case, and also that under Mancini vs. Township of Teaneck[, 349 N.J. Super. 527 (App. Div. 2002),] that there's a continuing violation of equitable tolling . . . I believe that those really go to the motion for reconsideration that was before Judge Ciccone, but to the extent that they could . . . bear on laches I certainly would consider the argument in this case.

. . . .

[M]ost of what counsel has said quite frankly is a defense - well two things - is a defense to the - to the bona fides of this 50 some thousand dollars in legal fees, and second, a re-argument of the motion to - for leave to file the counterclaim which Judge Ciccone has ruled upon. [W]hether I would've done the same thing as Judge Ciccone is irrelevant because that's the law of the case and I'm . . . not in a position to comment on it.

However, the . . . remaining arguments really go to a fact sensitive analysis of what happened after . . . the September '96 matter was terminated. A bill was sent; there's been no dispute that the Greenbaum firm then became counsel to the co-op board and served as counsel to the co-op board. What motivated them to wait? They claim they were negotiating on the bills, they were giving time to their - their client to pay the bill and the client contends that he was not expecting that this bill would be collected. But those are fact issues that I believe have to be resolved at trial and the fact that there's no affirmative legal malpractice claim I don't believe would prevent the defendants from raising any relevant defense to the . . . action for counsel fees. Who's right or wrong is gonna have to be decided by an analysis of the facts by a jury.

But in order to prevail on a claim [of] laches, the Lavin v. Board of Education of the City of Hackensack, [ 90 N.J. 145, 151 (1982),] says and I quote, "Laches in a general sense [is the] neglect for an unreasonable and unexplained length of time under circumstances permitting diligence to do what in law should have been done. More specifically it is inexcusable delay in asserting a right." Under Brill the moving party in this case, defendants, have to come forward with some fact to show that the plaintiff did delay for an inexcusable amount of time. The plaintiff contends that it was giving its client an opportunity to - it was forbearing in order to give its client an opportunity to make payment arrangements. The - the defendants contend otherwise, but there - there doesn't seem to be any fact other than that - that a partner left the firm and that should give rise to some assert - some inference that that then gave the firm some leeway to now sue on this bill because it no longer had the client. Again, that - that may be a defense to the underlying action, but it certainly doesn't go to the issue of laches. A law firm - I have to give all reasonable inferences on a summary judgment motion to the non-moving party, in this case the Greenbaum firm, and they argue that there has to be some prejudice demonstrated to the - the - in this case the defendants and I don't think that there is any prejudice. They have the opportunity to defend the same as they would have had the complaint been brought two, three, four years ago. Merely because they waited until - actually it was almost a year before the statute ran, they waited some five years to file a complaint doesn't per se mean it's laches and that's essentially all that the - that the defendants have to -- to claim laches other than an inference which they'd like to be drawn and I think that while such an inference may be drawn, it has to be based on facts, presented to a jury and a jury's finding on those facts.

So I believe that there are issues of fact. The issues of fact are whether the . . . plaintiff had an ulterior motive in asserting its right to legal fees, whether it was entitled to legal fees in the first place, but they have to be determined at trial. I - I don't believe that . . . this case could be decided on a motion for summary judgment or that the . . . defendant/moving party has . . . produced facts which demonstrate that there is an inexcusable delay and neglect on the part of the plaintiff. So the motion for summary judgment by defendants is denied.

With respect to the case between defendant/third party plaintiff and third party defendants, Judge Gelade stated that

On the statute of limitation issue, Burd v. New Jersey Telephone Company, 76 [N.J. 284, 291,] . . . establishes that the statute begins to run when the plaintiff is aware of the fact that underlies the cause of action and in Beard v. American Medical Optics, 155 [N.J. 54, 72 (1998),] the court refined that by saying it was when plaintiff was either aware or should have been aware of the underlying cause of action and that this is an objective test that has to be provided by the facts of each particular case.

In this case, third party plaintiffs . . . contend that there really was no controversy between them and the third party defendants, the board members and the 2100 Linwood Corporation, that they . . . they had a controversy, it was resolved in September 1996 and that the issue of counsel fees didn't really arise until they were served with a summons and complaint by the attorney - by the law firm against Tully and Wistreich and at that point it ripened and that there was nothing for them to sue the board on prior to their being served with a summons and complaint.

The third party defendants contend that there was an underlying legal matter where Tully and Wistreich at least in part were adverse to the third party defendants and that as a result of that case an application could have been made either at the - when a judgment was entered or an order entered by Judge Smith, they could've applied for legal fees on whatever grounds you normally apply for legal fees on, or they could have within a certain number of days after the entry of the order come in an[d] applied for legal fees on the frivolous litigation grounds.

Because . . . [in] New Jersey . . . each party bears their own legal fees . . . then it's unlikely that in the usual case the adversary will have to pay the legal fees, but that could and should be decided in the underlying litigation. On the statute of limitations by itself I think there are enough issues of fact as to whether or not at least 2100 Linwood would've been required to indemnify the plaintiff - third party plaintiff, that the Court would both be inclined to grant summary judgment on that count. However on the entire controversy, both parties cite to . . . Cogdell vs. Hospital Center at Orange, 116 [N.J. 7 (1989),] and that made it clear that the entire controversy . . . relates to claims not parties. So if the parties who were present in the case in the 1995/96 litigation, all parties, third party plaintiffs and . . . third party defendants were all participants in that cause of action, if there was counsel fees, they - they - if counsel fees were appropriate in that case they should've been applied for. If the Court were to permit this suit to continue at this time where the counsel fees arise at a specific litigation, there's an allegation by the defendants who are the third party plaintiffs, that the Greenbaum firm erred in not seeking counsel fee against the third party defendants, if that be the case then clearly the time for resolving these issues is while the underlying clams were being litigated. What would happen in this case is that the Court would have to re-litigate all of the facts surrounding that underlying litigation of the board versus Tully and Wistreich and Tully and Wistreich versus the board, and that's what the entire controversy doctrine is designed to prohibit.

I've taken a look at this case because it is an equitable remedy and I've tried to apply it to the facts of this case and I just don't see any grounds in departing from - I think I'd be violating the entire controversy doctrine if I were to permit . . . this claim to go forward. The relief could've been had . . . by a declaratory judgment action, it couldn't been had anywhere along the line during the course of the original litigation. But to now have . . . a case tried, this third party case tried almost in its entirety by the trial court would violate the entire controversy doctrine. So . . . I know that there are equities involved, but the entire controversy doctrine is an equitable remedy only to the extent that it prevents unnecessary litigation. It's not - it can't be defeated purely because perhaps it would not permit a party to recover on a claim which i[t] might have recovered on had it made that claim during the underlying controversy and it's almost circumlocution to argue that, well, we had a lawsuit, we could've made a claim for legal fees, we didn't. Six or seven years later the legal fees issue becomes ripe, so now we want to litigate that issue that really could've been litigated in the previous case and wasn't and it would be unfair and inequitable not to let us do this because we have the ripe claim - a valid claim rather against the third party defendants who were the adversaries in that other case. If that were - if that argument - if I were to accept that argument unfortunately it would defeat the entire controversy doctrine each time it were raised and I find that the - under the entire controversy doctrine that the parties on one side, Wistreich and Tully, and then the other side, the 2100 Linwood and its board were involved in a previous litigation in 1995/96, that that litigation resulted in a decision by Judge Smith in September of 1996, that it involved all of the parties involved in this case and all of the claims involved in this case and that the issue of counsel fee[s] could have at least been raised and perhaps resolved in the underlying lawsuit in '96 and that to permit a re-litigation of those issues at this time is violative of the entire controversy doctrine. So on that ground and that ground alone I will grant the summary judgment to the third party defendants.

Defendants' motion for reconsideration was denied.

Significantly, Tully has certified, GRSRDH and defendants settled the fee matter for $21,000 in January 2004. On March 4, 2004, defendants filed a motion to enforce the settlement, and on March 22, 2004, plaintiff filed a cross-motion to enforce the terms of the parties settlement. After a hearing before Judge Gelade on April 2, 2004, both motions were denied and defendants were ordered to pay plaintiff the sum. Judge Gelade stated the following on the record:

The matter involves a settlement which both parties, plaintiff and defendant, agree took place that there was -- there had been payment by defendant of $21,000 to the plaintiff in exchange for a release. The defendant's attorney sent to the plaintiff a - final order by consent and a release and the plaintiff then sent to the defendant a settlement agreement and mutual release. And, the defense counsel is contending that the defense wishes to be permitted to file a complaint against other third-parties present - preserve their rights to file a complaint against other third-parties. The - the defendant contends that it should have a right to - to preserve its rights and the plaintiff is - is agreeing that there's a settlement, but it wants to provide that the plaintiff cannot sue a former employee of the plaintiff. Frankly, there's nothing in the record to indicate that the parties contemplate the - a suit against a third-party and if there were such a suit, of course, there are defense - defenses that could be raised against it. I don't believe that it is appropriate either way to sign a complaint as presented by the defendant preserving its rights. And the order sent to me by defendants does that, and the - the plaintiff's order I believe is more in keeping with a strict enforcement of the settlement that both parties have agreed to. That is, that the complaint will be dismissed with prejudice, that the payment of $21,000 should be made within 30 days and therefore, I'm going to sign the plaintiff's version because the defendant's version adds terms which are not appropriate for a settlement of this case . . . those terms refer to possibility of future cases which is not appropriate.

Defendant filed a motion for reconsideration on April 21, 2004, and plaintiff filed a cross motion for sanctions on May 5, 2004. After a hearing on these motions, Judge Gelade denied plaintiff's motion for sanctions. He issued another order instructing defendants to pay plaintiff $21,000 and also instructing plaintiff to release defendants and defendants to release plaintiff from all claims, "known and unknown, as of the date of" the order. Further, Judge Gelade thereafter stated on the record with respect to the settlement of the parties:

What's at issue in this case is that the defendant has . . . submitted to the plaintiff a Settlement Agreement which contained in the Settlement Agreement in Article 17 that nothing in this agreement shall be construed or interpreted to preclude defendants from asserting or continuing to serve claims against any person or entity other than Greenbaum, including but not limited to 2100 Linwood (phonetic) owners, and going onto Benjamin Lambert, Jr. and Harris Beech, (phonetic) LLP, the attorney who had been with Greenbaum and handled the matter and left and went with another law firm.

And, what, Mr. Leodori [(attorney for defendants)], you, you've been hearing this case many times. This is reconsideration. There's nothing in your papers that I didn't consider on April 2nd when I decided this case. What you're asking me to do is to impose on the Greenbaum firm a provision which they claim they never agreed to, was never discussed, and gives you the right to file a Complaint, not only file a Complaint, but for this Court to determine that those people, Lambert and Harris, are not covered by the settlement of this case.

Now, my Order doesn't preclude you from going after anybody, including 2100 Linwood and going after Lambert, or anyone else. My Order simply says that I'm not going to, you got pay him [sic] for $21,000, you settled it. Whether or not that binds that settlement, precludes you from proceeding against attorney Lambert or the other firm, is something that would have to be considered by whatever motion Judge is assigned to that case if you file that case.

I can't, I don't what, I can't be in a position to support either side. I'd have to have a trial on the merits with a jury in order to figure out what was meant, but I don't think, I don't think I'm able to do that. Particularly what you're saying is that you're excluding claims against people who which claims arose after the matters involved in this case, the Greenbaum firm. So it just, I don't, it's not appropriate for me to make that decision on the record I have.

. . . .

Well, look, there's a lot of issues that can be raised in that kind of a suit and I, you can, you, I'm not, I'm not barring you from bringing it, I'm not making any determination, but you have a right to raise anything you want against those parties and the defense to for Lambert or whoever you sue, Harris Beech, could raise the issues that Greenbaum raises and say the entire controversy or - satisfaction, or anything else they want, but . . . I'm not making a determination one way or the other. But there's nothing in the record that, that I haven't previously considered because this is a motion for reconsideration and that's the only standard I'm going on is this reconsideration standard.

. . . .

I'm convinced as I was last time that there was a settlement for $21,000, that there does not appear to be any participation in that settlement by Lambert or Harris Beech to, to exclude or include language which gives either party a right in defense or in, or a claim against Lambert or Harris Beech would be inappropriate and not supported by the facts and records. This case was settled for $21,000. My Order is very simple. The defense pays the plaintiff Greenbaum $21,000. The case is over. Do whatever, Mr. Leodori, whatever you want to do with your other claims you're free to do . . . That's my decision. The motion is denied.

Defendants filed a notice of appeal on May 17, 2004. Their brief asserts the following contentions:

DEFENDANTS' THIRD PARTY COMPLAINT AGAINST 2100 LINWOOD MUST BE REINSTATED.

a. On September 3, 1996, And To Date, Defendants Do Not Have A Ripe Equitable Indemnity Claim Against 2100 Linwood Which Renders The Entire Controversy Doctrine Inapplicable.

b. Defendants Third Party Claims Against 2100 Linwood Are Not Barred By The Entire Controversy Doctrine.

c. Defendants Never Sought Legal Fees Or Costs Against 2100 Linwood In The Mediterranean Litigation.

DEFENDANTS' MOTION TO FILE A COUNTERCLAIM AGAINST PLAINTIFF WAS IMPROPERLY DENIED.

a. Pursuant to N.J.S.A. 2a:14-1 Defendants' Counterclaim Against Plaintiff Should Be Authorized Since The Only Evidence Before The Trial Court Was Defendants Did Not Know Of Plaintiff's Malpractice Until After Consulting With Counsel In 2003.

b. The Trial Court Erred In Denying Defendants Leave To File A Counterclaim By Not Applying The "Discovery Rule."

c. The Trial Court Erred In Denying Defendants Leave to File A Counter Claim Since Plaintiff's Malpractice Did Not Cause Damages Until 2002 When They First Incurred Legal Fees And Costs.

d. The Relation Back Rule As Codified In R. 4:9-3 Preserved Defendants' Claims Against Plaintiff.

PLAINTIFF'S COMPLAINT IS BARRED BY THE DOCTRINE OF LACHES AND SHOULD BE DISMISSED AGAINST DEFENDANTS.

IN THE ALTERNATIVE, THE SETTLEMENT WITH PLAINTIFF WAS EXPRESSLY CONTINGENT UPON DEFENDANTS' RIGHTS AGAINST THIRD PARTIES BEING PRESERVED.

We preface our analysis of the contentions on appeal by noting that at oral argument the parties clarified a subject that had appeared to us, from our reading of the briefs, to be in dispute. The clarification, upon which, it was represented, we can rely, is that the settlement resolved the claim that the trial court allegedly erred in not permitting the counterclaim. We thus premise both our discussion of the issues and our disposition of the appeal on the understanding represented to us at oral argument that the counterclaim is now moot, and that the settlement was not intended to cover defendants' potential claims against Lambert after he left GRSRDH.

We first consider defendants' contention that the entire controversy doctrine is inapplicable in this case, and in the alternative, the entire controversy doctrine does not operate to bar the third party claims defendant wishes to pursue against third party defendants. We set forth the following summary by way of background.

The entire controversy doctrine is set forth in R. 4:30A, which states that "[n]on-joinder of claims required to be joined by the entire controversy doctrine shall result in the preclusion of the omitted claims to the extent required by the entire controversy doctrine. . . ." The doctrine is summarized in part in Pressler, Current N.J. Court Rules, comment 1 & 2 on R. 4:30A (2006):

The entire controversy doctrine, an equitable preclusionary doctrine whose purposes are to encourage comprehensive and conclusive litigation determinations, to avoid fragmentation of litigation, and to promote party fairness and judicial economy and efficiency, was originally conceived of as a claim-joinder mandate, requiring all parties in an action to raise in that action all transactionally related claims each had against any other whether assertable by complaint, counterclaim, or cross-claim. See generally, Falcone v. Middlesex County Med. Soc., 47 N.J. 92 (1966); Wm. Blanchard Co. v. Beach Concrete Co., Inc., 150 N.J. Super. 277 (App. Div.), certif. denied, 75 N.J. 528 (1977); Hobart Bros. v. Nat. Union Fire Ins., 354 N.J. Super. 229, 241 (App. Div.), certif. denied, 175 N.J. 170 (2002). See also K-Land v. Lansis Sewerage, 173 N.J. 59, 69-71 (2002) . . . . Although the court rules had not initially contained any provision expressly referring to the entire controversy doctrine, R. 4:27-1(b) was added to the rule governing joinder of claims effective September 1979 to provide for mandatory joinder of claims under the doctrine, which, however, was undefined, it having been then and remains still the Supreme Court's view that development of the substantive content of the doctrine is best left to case law.

Prior to the Supreme Court's decision in Cogdell v. Hospital Center at Orange, 116 N.J. 7 (1989), the courts remained committed to the concept that the entire controversy doctrine was limited to claim preclusion and did not preclude a successive action against a person who had not been joined in the first action even if that person was subject to joinder in the first action and the claim against that person in the successive action was transactionally related to the claim or claims raised in the first action. See, e.g., Aetna Ins. Co. v. Gilchrist Brothers, Inc., 85 N.J. 550 (1981); McFadden v. Turner, 159 N.J. Super. 360 (App. Div. 1978); Gareeb v. Weinstein, 161 N.J. Super. 1 (App. Div. 1978); Juliano v. Gaston, 187 N.J. Super. 491 (App. Div. 1982), certif. den. 93 N.J. 318 (1983); Goncalvez v. Patuto, 188 N.J. Super. 620 (App. Div. 1983); Bates Marketing Assocs. v. Lloyd's Electronics, 190 N.J. Super. 502 (App. Div. 1983), appeal dismissed 97 N.J. 703 (1984); Buoni v. Browning Ferres Industries, 219 N.J. Super. 96, 102 (Law Div. 1987); Sentry Ins. Co. v. Cropski, 218 N.J. Super. 196 (App. Div. 1987); Marion v. Borough of Manasquan, 231 N.J. Super. 320 (App. Div. 1989).

The abrogation of the claim-preclusion limitation of the entire controversy doctrine and its extension to non-parties accomplished by Cogdell v. Hospital Center at Orange, 116 N.J. 7 (1989) was foreshadowed by Crispin v. Volkswagenwerk, A.G., 96 N.J. 336 (1984), in which a party's apparently strategic intentional failure to join a transactionally related non-party and the bringing of a successive action against that non-party were deemed to be an egregious breach of fair dealing and an untenable imposition upon the administration of civil justice. The Court's initial response to Crispin was the addition of a provision to R. 4:5-1, effective 1984, which required the parties to include with their initial pleadings a certification both as to other pending related actions and as to other persons who should be joined in the action, and also imposed upon them the continuing obligation to make such disclosure during the pendency of that action. The court was also authorized to compel joinder of such persons upon its own or a party's motion. The evident purpose of that amendment was to avoid Crispin situations in the future. Effective 1991, that provision was redesignated as paragraph (b)(2) of R. 4:5-1. See further the Comment on that rule.

In Cogdell, the Supreme Court took the view that the party disclosures mandated by R. 4:5-1 and the court's joinder authorization thereby afforded were inadequate to protect both non-parties and the court system from the prejudice of fragmented litigation and therefore required all transactionally related non-parties to be joined in the action on pain of preclusion of a successive action against them asserting the claims that could have been asserted in the first action had they been joined. Accordingly, party joinder, as well as claim joinder, was mandated under the entire controversy doctrine, and in 1990, R. 4:30A was adopted so to require, R. 4:27-1(b) was deleted, and the resulting R. 4:27-1 and R. 4:29-1 were amended merely to cross-reference to the new rule.

. . . .

The rule as to claim joinder continues to require, as a general matter, that all aspects of the controversy between those who are parties to the litigation be included in a single action. See, e.g., Falcone v. Middlesex County Med. Soc., 47 N.J. 92 (1966); Wm. Blanchard Co. v. Beach Concrete Co., Inc., 150 N.J. Super. 277 (App. Div. 1977), certif. den. 75 N.J. 528 (1977); Thornton v. Potamkin Chevrolet, 94 N.J. 1 (1983); Mori v. Hartz Mountain Development Corp., 193 N.J. Super. 47 (App. Div. 1983); Jones v. Warren, 199 N.J. Super. 2 (App. Div. 1985); Foley Machinery Co. v. Amland Contractors, Inc., 209 N.J. Super. 70, 77 (App. Div. 1986); Tall Timbers Pr. Own. v. Tall Timbers, 217 N.J. Super. 119 (App. Div. 1987); Busch v. Biggs, 264 N.J. Super. 385 (App. Div. 1993); Boardwalk Regency v. Square, 288 N.J. Super. 494 (App. Div. 1996); Hynes v. Clarke, 297 N.J. Super. 44, 55-56 (App. Div. 1997); Buck v. MacDonald, 300 N.J. Super. 158 (App. Div. 1997); In re Estate of Gabrellian, 372 N.J. Super. 432, 444 (App. Div. 2004). And see Richardson v. Kulick, 213 N.J. Super. 250 (App. Div. 1986) (spouse's own personal injury claim must be joined with per quod claim); Green v. General Motors Corp., 310 N.J. Super. 507, 547 (App. Div.), certif. den. 156 N.J. 381 (1998) (doctrine barred the crossclaim for contribution there asserted by a non-settling party who failed to have settling defendant's percentage of fault assessed by jury); Luppino v. Mizrahi, 326 N.J. Super. 182, 186 (App. Div. 1999) (tenants claim for return of security deposit must be joined in landlord's claim for rent). Obviously, absent a factual nexus grounded in a core set of related factual circumstances, the doctrine does not apply. Garvey v. Township of Wall, 303 N.J. Super. 93, 100 (App. Div. 1997).

Since preclusion under the entire controversy doctrine is an affirmative defense like any other preclusionary doctrine, it is waived if not timely raised. Kopin v. Orange Products, Inc., 297 N.J. Super. 353, 375 (App. Div.), certif. den. 149 N.J. 409 (1997). See also Aikens v. Schmidt, 329 N.J. Super. 335 (App. Div. 2000) (defendant waived entire controversy doctrine by not raising it until plaintiff had rested).

It is also clear that the court has the right to direct reservation of a claim against an existing or unjoined party for later action, and the entire controversy doctrine does not apply when the court has done so or was likely to have done so. See DiIorio v. Structural Stone & Brick, 368 N.J. Super. 134, 139 (App. Div. 2004); Interchange State Bank v. Veglia, 286 N.J. Super 164 (App. Div. 1995), certif. den. 144 N.J. 377 (1996); Brown v. Brown, 208 N.J. Super. 372 (App. Div. 1986).

As to the equitable nature of the doctrine, barring its application where to do so would be unfair in the totality of the circumstances and would not promote any of its objectives, namely, the promotion of conclusive determinations, party fairness, and judicial economy and efficiency, see K-Land v. Landis Sewerage, 173 N.J. 59, 74-75 (2002); Oliver v. Ambrose, 152 N.J. 383, 395-396 (1998); Joel v. Morrocco, 147 N.J. 546 (1997); Smith v. Farber, 307 N.J. Super. 107, 133 (App. Div. 1997); Unkert v. General Motors Corp., 301 N.J. Super. 583, 595 (App. Div.), certif. den. 152 N.J. 10 (1997); Illiano v. Seaview Orthopedics, 299 N.J. Super. 99 (App. Div. 1997).

The doctrine does not apply to preclude a successive action if the first action did not result in any adjudication on the merits. See Arena v. Borough of Jamesburg, 309 N.J. Super. 106 (App. Div. 1998) (an action voluntarily dismissed by plaintiff prior to the filing of an answering pleading is not construable as having been dismissed on the merits and hence will not bar a successive action). See also Woodward-Clyde v. Chem. & P. Sciences, 105 N.J. 464, 473, 475 (1987) (institution of successive action not barred if counterclaim in first action alleging the same cause was dismissed for discovery failure).

Nor does the doctrine apply to bar component claims either unknown, unarisen or unaccrued at the time of the original action. K-Land v. Landis Sewerage, 173 N.J. 59, 70 (2002).

Defendants first argue that the entire controversy doctrine is inapplicable to their claim against the third party defendants since the claim will not ripen until a judgment is rendered against plaintiffs in the present action. Essentially, defendants argue that until it is determined what amount they owe plaintiff for services rendered, the claim against third party defendants for indemnity of the legal fees is not ripe; thus, it was improperly dismissed by way of summary judgment since the entire controversy doctrine could not apply to a claim not yet ripe.

As we understand defendants' position, it is that plaintiff did not file a claim against defendant until 2002, therefore there was no way that the fees defendants owed plaintiff could have been litigated in the Mediterranean lawsuit. As a result, the amount defendant sought to be reimbursed by third party defendants could not be determined. The point remains, however, that defendants were aware that they were going to incur attorney fees during the Mediterranean lawsuit. Though the amount of these fees may have been unascertainable at the time of the Mediterranean suit,

the mere fact that damages might be uncertain does not delay the accrual of a cause of action for purposes of the entire controversy doctrine. Hobart Bros. Co. v. Nat'l Union Fire Ins. Co., 354 N.J. Super. 229, 245 (App. Div. 2002). The doctrine does not require that all or even the greater part of the damages be fixed and ascertainable before the cause of action accrues. Ibid.

[Thomas v. Hargest, 363 N.J. Super. 589, 597-98 (App. Div. 2003).]

Defendants knew or should have known that they would have incurred attorney fees as a result of plaintiff representing them in the Mediterranean lawsuit. In a memo dated October 10, 1996, Mr. Tully acknowledges that they retained plaintiff to defend him and Mr. Wistreich in the Mediterranean lawsuit and acknowledged that the Mediterranean litigation had concluded. Defendants could have raised the cause of action against third party defendants to recover attorney fees during the Mediterranean lawsuit, and left the question of the exact amount of attorney fees for a later point in time. Thus, judgment in favor of third party defendants was appropriate. Even assuming that defendants did not know the amount of the attorney fees incurred during the course of the Mediterranean lawsuit, that does not relieve them of their failure to assert the claim during the suit; and even if it did, defendants do not point us to any basis for calculating that fee shifting was warranted in this case.

Defendants attempt to frame their seeking of reimbursement of attorney fees as a traditional "indemnification" claim under which the cause of action accrues only once liability between parties has been fixed. None of the cases they have relied on, however, have to do with the attorney-client relationship and the reimbursement of attorney fees, and they are not persuasive as to that point.

Moreover, while defendants argue that plaintiff should have sought the fees from 2100 Linwood since they were the ones at fault in the underlying Mediterranean litigation, in New Jersey each of the parties is responsible for the payment of their respective attorney fees and "fee-shifting" is allowed only in limited instances. See generally Grubbs v. Knoll, 372 N.J. Super. 420, 447-51 (App. Div. 2005). As a result, plaintiff had no authority to seek payment from anyone other than defendants as a matter of law.

Although defendants assert that they were unable to pursue fees from third party defendants because plaintiff simultaneously represented 2100 Linwood and defendants during the Mediterranean litigation, they fail to show any basis for us to conclude that plaintiff represented both defendants and third party defendants during the course of the Mediterranean lawsuit that would have prevented them from raising a claim against third party defendants for attorney fees. Since there existed no issue as to whether plaintiff's "malpractice" precluded defendants from seeking attorney fees from third party defendants during the Mediterranean lawsuit, judgment in favor of third party defendants was appropriate.

We also reject as meritless defendants' contentions that the entire controversy doctrine cannot bar their third party claims against third party defendant because the order "specifically acknowledged, anticipated and allowed the filing of future claims between [d]efendants and [third party defendants]." Defendants point to the following provisions of the order:

7. The undersigned shall entertain any applications as may be necessary relating to the upcoming election per paragraph 5. (Any other application including applications to determine whether other claims should be raised in the context of this litigation in light of the provisions of R. 4:30A, would not necessarily be assigned to the undersigned.

. . . .

9. Any other issues heretofore raised by any of the parties, but not decided by the Court, are hereby deemed abandoned, with the exception of the crossclaim of 2100 Linwood against Richard Tully, which shall continue in the Law Division.

Neither of these provisions, however, stands for the proposition that defendants allege. And while defendants also state in their brief that they never sought legal fees or costs against third party defendants during the Mediterranean litigation, and thus, their claim against third party defendants is preserved, this concession goes to the heart of the entire controversy doctrine. The claim should have been raised during the underlying litigation rather than five to six years afterwards, especially since all of the third party defendants named here were named in the underlying lawsuit as well.

Because of the clarification at oral argument referred to above, it is unnecessary for us to discuss contentions regarding the counterclaim, such as for example, the assertion that the holding that defendants "'knew or should have known' that Plaintiff committed legal malpractice as of December 20, 1996 is contrary to the undisputed evidence[,]" and that as a result, under N.J.S.A. 2a:14-1, the counterclaim against plaintiff should be allowed.

As to defendants' laches claims, for the reasons set forth on the record by Judge Gelade on September 18, 2003, and pursuant to R. 2:11-3(e)(1)(A), we conclude that this claim is without merit. The legitimate inferences drawn from the evidence readily could sustain a judgment in favor of plaintiffs. Defendants failed to satisfy every element of the laches defense, including a showing that defendants were prejudiced by plaintiff's delay and a showing why the equitable defense of laches should be applied to this legal claim. As a result, the denial of summary judgment in favor of defendants on this basis was not error.

Finally, we reject defendants' contention that their settlement agreement with plaintiff was expressly contingent upon their rights against third parties being preserved, and thus that the trial court erred in giving effect to the agreement absent this element being present. By the terms of the agreement, defendants may pursue claims against whomever they wish. This leaves to future analysis whether defendants' suit against a nonparty is barred for any reason that may preclude defendants from seeking relief from others in connection with the fees incurred as a result of the Mediterranean lawsuit.

 
Affirmed.

As is also shown below, Judge Ciccone corrected the year so that it read 1996 instead of 2002.

(continued)

(continued)

35

A-4993-03T3

September 29, 2005