CHARLES WIDOM et al. v. MELINDA WIDOM

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1191-05T51191-05T5

CHARLES WIDOM and

MELINDA WIDOM,

Plaintiffs-Appellants,

v.

HOWARD L. EGENBERG,

Defendant-Respondent,

and

NICHOLAS V. DEPALMA,

Defendant.

________________________________________________

 

Argued September 19, 2006 - Decided November 29, 2006

Before Judges Axelrad and Gilroy.

On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-3489-05.

David B. Rubin argued the cause for appellant.

Christopher J. Carey argued the cause for respondent (Graham, Curtin & Sheridan, attorneys; Mr. Carey, of counsel and on the brief; Mary-Ann E. Gill on the brief).

PER CURIAM

This legal malpractice action arises out of an underlying dispute involving ownership interests in a single-family residence in East Brunswick. Plaintiffs, Charles Widom and Melinda Widom, his wife, appeal from the order of the Law Division entered on October 25, 2005, dismissing their complaint against Howard L. Egenberg, Esq., on the grounds that the complaint was time barred by the six-year statute of limitations, N.J.S.A. 2A:14-1. We reverse and remand to the trial court.

On May 10, 2005, plaintiffs filed a complaint alleging defendant negligently represented them in connection with a real estate closing that occurred on June 20, 1997, when plaintiffs transferred ownership of their home to their daughter and son-in-law, Staci and Joseph Portee. Because the complaint was not filed for almost eight years post-closing of title, defendant, in lieu of an answer, filed a motion for summary judgment seeking to dismiss the complaint for failure to comply with the six-year statute of limitations, N.J.S.A. 2A:14-1. After plaintiffs opposed the motion, arguing that the limitations period had been tolled by the discovery rule, a Lopez hearing was conducted to determine when plaintiffs knew, or reasonably should have known, they had a potential legal malpractice claim against defendant. Testifying at the hearing were plaintiffs, defendant, and Nicholas DePalma.

The facts deduced from the motion record, as supplemented by the testimony at the evidentiary hearing, are as follows. Plaintiffs were the owners of premises at 10 Tutor Place, East Brunswick. Residing in the home with plaintiffs were Staci and Joseph. Because of financial difficulties, plaintiffs defaulted on their mortgage payments. In May 1997, plaintiffs received notice that final judgment in foreclosure was eminent unless their mortgage arrearages were satisfied. To save their home from foreclosure, plaintiffs entered into an oral agreement to convey their home to the Portees, with the Portees satisfying the original mortgage debt. The agreement provided that after the transfer of title, plaintiffs would continue to reside in the home, with plaintiffs paying all utilities. According to plaintiffs, the parties also agreed that "when [plaintiffs] got back on their feet financially, the home would be sold. The Portees would be repaid $30,000 that they told the Widoms they were applying toward the purchase, and would also be reimbursed for any capital improvements. The balance of the equity would be paid to the Widoms." (the side agreement). Because plaintiffs were dealing with their daughter, and at the time were comfortable acting on a level of trust, the side agreement was never reduced to writing.

Staci contacted defendant, who had previously represented Joseph in other real property matters, but who had no prior contact with plaintiffs. After an initial meeting with plaintiffs and the Portees, defendant prepared a contract for the purchase and sale of the property whereby the Portees would purchase the property for $190,000 and obtain a new mortgage in the amount of $150,000 to pay off the mortgage in foreclosure. The contract further reflected that $40,000 was to be paid by a "gift of equity" from plaintiffs to the Portees. Defendant informed Staci early on in the transaction that he could not represent both her and her husband, and plaintiffs in the real estate transaction, and that plaintiffs would have to obtain independent counsel. Staci informed defendant that her parents could not afford separate counsel and that she and Joseph would pay for the cost of another attorney. Staci believed that defendant would arrange for another attorney to represent her parents. However, contrary to his own advice, defendant undertook to represent plaintiffs and the Portees in the transaction.

A closing was scheduled for June 20, 1997. Leading up to the closing, virtually of defendant's communications were with Staci, and all pre-closing paperwork, including the sales contract, was mailed by defendant's office to the parties' home. Plaintiffs relied on Staci as the "point person for the transaction."

Unfortunately, throughout the transaction, neither plaintiffs nor the Portees advised defendant of the side agreement. Like most transactions of this nature, things proceeded smoothly between plaintiffs and the Portees for six years until 2003 when the Portees denied the existence of the side agreement. Plaintiffs instituted suit in the Chancery Division to enforce the side agreement. The suit was settled by the Portees paying plaintiffs the sum of $75,000, subject to preservation of their malpractice claims against Egenberg and DePalma. The $75,000 settlement sum represented the equity in the home as of the June 20, 1997 closing date. Plaintiffs contend in their malpractice action that defendant "committed legal malpractice by undertaking joint representation of both them and the Portees, and failing to properly advise them concerning their legal rights before the closing." Plaintiffs assert that "a competent attorney would have consulted with them prior to the closing, would have ascertained the existence of the oral agreement with the Portees, and would have informed them of the Statute of Frauds [N.J.S.A. 25:1-5-1 to 16] implications of not reducing it to writing." The thrust of their claim is "if the Portees were unwilling to acknowledge such an agreement in a written contract at that point, the [plaintiffs] would have had the opportunity to explore other options before conveying the property to the Portees, and avoided the predicament in which they eventually found themselves."

Summary judgment must be granted "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 528-29 (1995). In determining whether there is a genuine issue of material fact for summary judgment purposes, the trial court must ascertain "what reasonable conclusions a rational jury can draw from the evidence . . . ." Id. at 535. To make the determination, the judge must accept as true all evidence that supports the position of the party defending against the motion and accord him or her the benefit of all legitimate inferences which can be deduced therefrom. Ibid. "'[I]f reasonable minds could differ, the motion must be denied.'" Ibid. (quoting Lanzet v. Greenberg, 126 N.J. 168, 174 (1991)).

A legal malpractice action is based on negligence. Grunwald v. Bronkesh, 131 N.J. 483, 492 (1993). To prove a cause of action for legal malpractice, a plaintiff must establish three elements: "'(1) the existence of an attorney-client relationship creating a duty of care upon the attorney; (2) the breach of that duty; and (3) proximate causation.'" Conklin v. Hannoch Weisman, 145 N.J. 395, 416 (1996) (quoting Lovett v. Est. of Lovett, 250 N.J. Super. 79, 87 (Ch. Div. 1991)). The timeliness of a complaint for legal malpractice is governed by N.J.S.A. 2A:14-1. McGrogan v. Till, 167 N.J. 414, 417 (2001). That statute requires a plaintiff to file his or her complaint "within six years from the accrual of the cause of action." Vastano v. Algeier, 178 N.J. 230, 236 (2003). "Ordinarily a cause of action 'acrues when an attorney's breach of professional duty proximately causes a plaintiff's damages.'" Ibid. (quoting Grunwald, supra, 131 N.J. at 492). However, "in some circumstances a client may not be able to detect the essential facts of a malpractice claim with ease or speed because of the complexity of the issues or proceedings, or because of the special nature of the attorney-client relationship." Ibid. To ameliorate the harsh impact of limitations provisions, the Court has adopted equitable doctrines that may extend the time for filing of a claim beyond what would be allowed under a bright-line application of the statute of limitations. See LaFage v. Jani, 166 N.J. 412, 420-31 (2001) (equitable tolling); and Negron v. Llarena, 156 N.J. 296, 304-05 (1998) (substantial compliance). Another doctrine is the discovery rule. Lopez, supra, 62 N.J. at 273-76. This rule provides that a cause of action does not accrue until the plaintiff "'suffers actual damage and discovers, or through the use of reasonable diligence should discover, the facts essential to the malpractice claim.'" Vastano, supra, 178 N.J. at 236 (quoting Grunwald, supra, 131 N.J. at 494).

In determining that plaintiffs' claim was time barred, the motion judge found plaintiffs should have realized they had a potential malpractice claim at the time of the closing because they were educated people, fully capable of reading and understanding the documents they signed, and were aware that the side agreement with the Portees was not contained in any of the closing papers.

I find both of them educated people to the extent that they can read and write; that they can understand English; that they both hold responsible positions in the form of one being a teacher's aid[e], the other one being a sales assistant wherein it is required that complicated electronic pamphlets, brochures, et cetera require[s] reading in order for him that is, Mr. Widom, to do his job.

. . . .

The question then again remains when did the Widom[]s have or when should they have known that they had a claim against Mr. Egenberg for legal malpractice. This [c]ourt finds that in light of the fact that they were the only ones who knew about this oral agreement; that they never mentioned it to Mr. Egenberg at all; that without mentioning it to Mr. Egenberg, he could not have advised them in any way as to what their rights were with regard to whether or not that oral agreement was binding in it[s] original form that being oral or whether or not it needed to be placed in writing.

Again, both testified that they never told anyone that this oral agreement encompassing this additional $30,000 and the fact that they at some point in time when they were in a better financial position were go[i]ng to take this house back and this agreement was something that was understanding of that the people involved in this transaction; that is the Portee[]s and the Widom[]s.

And again, if you do not tell a person that you have a problem, there is no way for them to know that you allegedly have a problem. At the closing, they knew that there was no mention of this oral agreement either by the Portee[]s, either by themselves, either by Mr. Egenberg and when they knew that, they walked away from the closing knowing that this alleged oral agreement had not been addressed in any way, shape[,] or form at the closing. It [is] this [c]ourt's opinion that it was at that point in time that they knew or should have known that they had a claim, especially in light of the fact that they indicated during their testimony that they felt they should have had a representative; a lawyer explaining to them what their rights were; what rights they had; what rights they did not have; and at the time of the closing, there was no one there to represent them.

On appeal, plaintiffs argue that the motion judge erred in determining that the period of limitations commenced on the date of closing of title, June 20, 1997. Plaintiffs contend that under the discovery rule, the limitation period was tolled until late 2003, when they first had reason to know of any breach of duty by defendant, and for the first time suffered harm from defendant's negligence. Plaintiffs assert that nothing occurred at the closing that would have alerted them that their side agreement with the Portees concerning future events should have been reduced to writing to avoid a Statute of Frauds problem if the Portees chose to disavow it post-closing. Defendant counters that "[e]mploying an objective standard and judging the facts of this case by what a reasonable person should have known through the exercise of reasonable diligence and intelligence, the plaintiffs' claims accrued on June 20, 1997, over eight (8) years ago."

Reviewing courts "'do not disturb the factual findings and legal conclusions of the [motion] judge unless we are convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice . . . .'" Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974) (quoting Fagliarone v. Twp. of No. Bergen, 78 N.J. Super. 154, 155 (App. Div. 1963)). However, "[a] [motion judge's] interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Manalapan Realty v. Manalapan Tp. Comm., 140 N.J. 366, 378 (1995).

We are satisfied that the motion judge mistakenly granted summary judgment. We conclude that the judge's determination that defendant "could not have advised [plaintiffs] in any way as to what their rights were with regard to whether or not that oral agreement was binding in it[s] original form," because neither plaintiffs nor the Portees had informed defendant of the existence of such agreement, is relevant to the ultimate issue of whether defendant deviated from the required standard of care, not on the question of when plaintiffs knew or should have known of a potential cause of action.

Giving plaintiffs all favorable inferences on the motion, we discern that the record is devoid of any evidence that they knew, or should reasonably have known, that their side agreement with the Portees ought to have been in writing to avoid a potential Statute of Frauds problem, or that they should have been represented by independent counsel, and not by defendant who also represented the Portees. Plaintiffs relied upon the trust of their daughter and son-in-law to conform to the side agreement without having to reduce the agreement to writing. There is no evidence that prior to plaintiffs consulting with present counsel in 2003, they were aware of the problems that could arise from enforcing the side agreement under the Statute of Frauds unless the agreement was reduced to writing. Nor do we find that a layperson would be aware of such matters. Because plaintiffs were unaware that the side agreement should have been reduced to writing, there was no reason to question defendant at closing concerning the absence of the side agreement in the closing documents. Accordingly, we reverse and remand to the trial court for further proceedings.

Reverse and remanded to the trial court.

 

The order also dismissed plaintiffs' claims for legal malpractice against Nicholas V. DePalma, Esq., an attorney who shared office space with defendant Egenberg; however, that dismissal is not challenged on appeal. Accordingly, all references in this opinion to defendant refer only to defendant Egenberg.

Lopez v. Swyer, 62 N.J. 267 (1973).

Although not relevant to the statute of limitations issue, defendant prepared the HUD-1 Uniform Settlement Statement, stating that defendant DePalma was to receive $500 for preparing the closing documents on behalf of plaintiffs. This was false. Defendant prepared the documents, and did not pay $500 to DePalma. However, DePalma, at the request of defendant, witnessed and acknowledged the deed and affidavit of title in blank, which were later signed by plaintiffs.

Because of the questions raised concerning possible violations of Rules of Professional Conduct as noted in fn. 3, supra, we have directed the Clerk of this court to forward a copy of this opinion to the Office of Attorney Ethics for its review and consideration.

(continued)

(continued)

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A-1191-05T5

November 29, 2006