JOBAR REALTY, CO., INC v. STEVEN R. TOMBALAKIAN

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3660-10T1

JOBAR REALTY, CO., INC.

and JOSEPH PONZIO, JR.,

Plaintiffs-Appellants,

v.

STEVEN R. TOMBALAKIAN,

ESQ. and PODVEY, MEANOR,

CATENACCI, HILDNER,

COCOZIELLO & CHATTMAN,

P.C.,

Defendants-Respondents.

____________________________________________________

March 26, 2012

Argued December 13, 2011 - Decided

Before Judges Messano, Espinosa and Kennedy.

On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-0588-09.

William H. Michelson argued the cause for appellants (Law Offices of William H. Michelson, attorneys; Mr. Michelson, on the brief).

Marshall D. Bilder argued the cause for respondents (Sterns & Weinroth, attorneys; Mr. Bilder, of counsel and on the brief).

PER CURIAM

This is a legal malpractice action brought by Joseph Ponzio, Jr. (plaintiff) and his company, Jobar Realty Co., Inc.,1 against Steven R. Tombalakian (Tombalakian) and his law firm, Podvey, Meanor, Catenacci, Hildner, Cocoziello & Chattman, P.C. (Podvey, and collectively, defendants). Ponzio appeals from the grant of summary judgment to defendants dismissing his complaint. We have considered the arguments raised in light of the record and applicable legal standards. We affirm.

I.

The following facts are gleaned from the motion record and our prior opinion, which preceded defendants' motion for summary judgment. Jobar Realty, Inc. v. Ryan, No. A-3451-06 (App. Div. Dec. 21, 2007), certif. denied, 195 N.J. 420 (2008).

Plaintiff owned a small strip mall in Fanwood. In 2002, he entered into a contract to sell the property. Pursuant to the contract's terms, plaintiff placed $10,000 in escrow and was required to provide the buyer with "all environmental clearance documents[,]" including a no further action letter (NFA) from the New Jersey Department of Environmental Protection (DEP) "within six months after closing."

Plaintiff retained Thomas G. Aljian, an attorney employed by Podvey, to represent him "with regard to . . . environmental and related matters concerning" the property. Aljian filed a proposed Memorandum of Agreement with the DEP, which is not contained in the record. Aljian also suggested that plaintiff "go[] after" one of his former tenants, a dry-cleaning business, Robert's Cleaners, owned by Eleanor Ryan (Ryan), whose husband had recently died. Knowing Ryan was ill and believing she did not have insurance,2 plaintiff told Aljian that he would be satisfied if he could obtain $15,000 to $25,000 from Ryan to contribute to environmental remediation expenses, which had already cost $31,000.

In February 2003, Aljian wrote Ryan and advised of plaintiff's desire "to recover the costs of the environmental cleanup." He requested that Ryan contact her insurance company and place it on notice of plaintiff's claim. Aljian thereafter communicated with Ryan's attorney, Carol A. Gross, who advised that she was unsure about any available coverage. On March 21, 2003, however, Ryan's insurance company, The Hartford (Hartford), informed Aljian that it had "written some general liability policies for Robert's Cleaners and [was] presently investigating [the] matter under a reservation of rights." Thereafter, Hartford did not communicate with Podvey regarding the claim. Plaintiff certified that Aljian informed him that Ryan had no insurance and never discussed the March 21 letter.

Aljian entered into settlement negotiations with Gross. In October 2003, Aljian enlisted Tombalakian to continue these discussions, and plaintiff was copied on correspondence from Tombalakian to Gross regarding same. On February 23, 2004, Gross forwarded a $14,510 settlement proposal and noted that her "final offer assumes . . . we can reach a prompt resolution on the wording of settlement documents, which must include no admission of liability by our client and a full release and indemnification from your client."

In an extensive email to plaintiff that enclosed Gross's letter, Tombalakian explained that while Ryan "ha[d] more than doubled her offer to $14,510, this [was] still below our 'final' demand of $21,000." He further advised plaintiff to "[t]ake a few moments and review the attached letter from Gross, where she disputes some of our costs." Tombalakian also wrote, "Since I know you are sick and tired of this effort leading nowhere, we can either keep at this, or pull the trigger and initiate a law suit against Eleanor Ryan." Tombalakian cautioned, however, that a lawsuit would prove costly.

In his reply to the email, plaintiff reiterated that he would be "very happy to settle at $21,000, get [his] approval from [the DEP], and move on." Ultimately, Tombalakian negotiated and conveyed to plaintiff a $21,000 settlement offer from Ryan. Plaintiff responded in an email, calling the settlement "[g]reat news!" Tombalakian forwarded plaintiff a draft of the settlement, including releases and indemnifications.3

In an email sent May 28, plaintiff asked Tombalakian to acquire the settlement money as soon as possible so he could pay off his "interest accruing debt." That same day, Tombalakian told plaintiff that Gross had informed him that "Ryan's insurance company will be paying the $21,000 settlement," and that Hartford's attorneys needed to review the settlement documents.4 Plaintiff responded that he was "never told insurance was paying for [the settlement]," the insurance issue was "suppose[d] to be looked into long long long long [sic] ago," and he had "approached this differently thinking [Ryan] was on the hook for all of the money."

On June 21, Aljian responded to an earlier letter in which plaintiff expressed concern with Tombalakian's handling of his case and that he had not received the NFA from the DEP. On August 31, Gross sent a final draft of the settlement documents to Tombalakian, who forwarded them to plaintiff.

On September 30, plaintiff contacted Tombalakian, stating that he had reviewed the settlement agreement, which he found "unacceptable at the very least." Plaintiff specifically stated that he would not "release Ryan or the insurance company from their responsibility to comply with further requirements to clean THEIR mess[.]" Noting that he had not received the NFA, plaintiff indicated that he would not sign the settlement agreement. Plaintiff instructed Tombalakian to "do all he [could] to make [Gross] agreeable . . . [and] to find out . . . what steps [plaintiff] would have to take to protect [his] interests and recover [his] losses."

In his October 1 reply, Tombalakian acknowledged plaintiff's apparent desire to "renege" on the settlement, but advised that plaintiff was bound to honor the agreement. Tombalakian told plaintiff, "The fact that you now want to get more money out of Ryan is not a proper basis to nullify your prior agreement." Tombalakian also noted that, while he had sent plaintiff final drafts of the agreement in early August, plaintiff was only now objecting to the settlement's terms. Tombalakian told plaintiff that he had accomplished what plaintiff had asked, i.e., a $21,000 settlement, plaintiff was free to hire new counsel if he desired, and Tombalakian was "done."

In reply, plaintiff sent a final email, dated October 4, in which he informed Tombalakian that he did not immediately object to the settlement drafts because he was on vacation and otherwise waiting for the DEP to update him about the NFA. Plaintiff stated that he was not concerned with acquiring more money from Ryan, but rather with the settlement agreement's language releasing Ryan from future liability. Tombalakian did not reply.

On October 21, the DEP denied plaintiff's request for an NFA letter. Plaintiff retained new counsel, Keith A. McKenna, Esq., and spent more than $6,300 for a new engineer regarding remediation of the site. Plaintiff also certified that, "because the buyer's lender would not wait any further[,]" he lost the $10,000 escrow.

On May 5, 2005, now represented by McKenna, plaintiff filed suit against Ryan, alleging negligence, breach of contract, and strict liability under the New Jersey Spill Compensation and Control Act due to an alleged "discharge of hazardous substances and other contaminants into" plaintiff's property. In response, Ryan moved to enforce the parties' settlement agreement.

After conducting a plenary hearing, the trial court found the settlement agreement enforceable, and we affirmed. Jobar Realty, Inc., supra, slip op. at 5, 12. In particular, we noted that plaintiff's attorneys had authority to "settle the matter for $21,000, together with the exchange of releases and indemnifications which would cover any and all, past and future, claims between the parties." Id. slip op. at 8. We further noted that we were "unaware of any legal or ethical obligation . . . which would require adversary counsel to inform her counterpart that there was insurance coverage." Id. slip op. at 10-11. We added that plaintiff's counsel, "prior to the agreement to settle, did not seek a confirmation of the absence of coverage, nor did they insist on a warranty or representation that such coverage did not exist," and, therefore, there was no unilateral mistake "which compromised plaintiffs' ability to negotiate with defendants." Ibid.

In July 2008, plaintiff received settlement checks from Ryan and Hartford. On January 21, 2009, plaintiff filed this suit.

In his complaint, plaintiff alleged that Tombalakian and Podvey committed legal malpractice by wrongfully advising that Ryan had no insurance. That negligence: (1) prevented plaintiff from receiving the NFA; (2) resulted in a monetarily deficient settlement agreement; (3) forced plaintiff to incur additional remediation expenses; (4) caused plaintiff to retain legal counsel to file suit against Ryan; and (5) negatively affected the rental and sale value of plaintiff's property.

Following discovery, defendants moved for summary judgment. After oral argument, the judge granted the motion and explained his reasons in an oral opinion delivered from the bench.

The judge concluded that plaintiff failed to establish a genuine issue of material fact regarding the proximate causation element of the malpractice claim. The "fatal flaw" in plaintiff's case was the absence of "proof, lay or expert, showing that [plaintiff] would have been better off had the underlying case not settled." The judge noted that plaintiff produced no evidence detailing what Ryan would have settled for or what plaintiff would have received if the matter had proceeded to trial. The judge concluded that plaintiff's damages were "self-proclaimed and self-inflicted[,]" as plaintiff chose "to throw good money under the bed and now . . . seeks to recoup that money from the same person [Tombalakian] who advised him not to spend that money in the first place."

The judge entered the order under review and this appeal ensued.

II.

In reviewing a grant of summary judgment, we apply the same standard as the motion judge. EMC Mortgage Corp. v. Chaudhri, 400 N.J. Super. 126, 136 (App. Div. 2008) (citing Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007)). We first determine whether the moving party has demonstrated there were no genuine disputes as to material facts. Atl. Mut. Ins. Co. v. Hillside Bottling Co., 387 N.J. Super. 224, 230 (App. Div.), certif. denied, 189 N.J. 104 (2006).

[A] determination whether there exists a "genuine issue" of material fact that precludes summary judgment requires the motion judge to consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party.

[Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).]

We then decide "whether the motion judge's application of the law was correct." Atl. Mut. Ins. Co., supra, 387 N.J. Super. at 231. In doing so, we owe no deference to the motion judge's conclusions on issues of law, and review those de novo. Ibid. (citing Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).

To establish a claim for legal malpractice, the plaintiff must show "'(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. Estate of Lovett, 250 N.J. Super. 79, 87 (Ch. Div. 1991)). "Ordinarily, expert testimony is required in a legal malpractice case. But when the attorney's 'duty is so basic that it may be determined by the court as a matter of law,' expert evidence is not required to establish the attorney's duty of care." Kranz v. Tiger, 390 N.J. Super. 135, 147 (App. Div.) (quoting Brizak v. Needle, 239 N.J. Super. 415, 429 (App. Div.), certif. denied, 122 N.J. 164 (1990)), certif. denied, 192 N.J. 294 (2007).

Plaintiff's expert, Sheryl Mintz Goski, Esq., opined that defendants breached their duty of care "by not advising [plaintiff] that there was an insurance company for [Ryan] that had responded to the[] demand letter and was investigating the . . . claim." This breach was accentuated because "the settlement was limited to the past actual costs that were expended" to remediate the site. Further, when plaintiff rejected the indemnification language Gross insisted upon, Goski opined that defendants should have "asked that the settlement language be negotiated and revised," rather than "abandon[ing] the client[]."

In support of their motion for summary judgment, defendants did not supply an opposing expert report. While they contended there was no abandonment of plaintiff because they "advised . . . that a final agreement had already been reached" with Ryan, the focus of defendants' argument was the lack of proximately caused damages from any alleged breach. They noted, for example, that Goski failed: to identify "any damages attributable to defendants' alleged failure to advise . . . that there was an insurance company" investigating the claim; to "contend that any insurance carrier would have provided coverages under the circumstances"; to opine as to the legal costs involved in such a declaratory judgment coverage action; to opine whether Ryan "would have agreed to a different or better settlement than the one defendants secured," or the costs "such efforts would have entailed."

The motion judge focused solely upon the third element of the legal malpractice claim, i.e., damages proximately caused by the alleged breach. We agree that the critical issue in this case is whether there was sufficient proof of proximately-caused damages so as to withstand defendants' summary judgment motion.

Proximate causation requires the plaintiff to demonstrate that a "defendant's breach was a proximate cause of plaintiff's injury." Froom v. Perel, 377 N.J. Super. 298, 313 (App. Div.) (citing Conklin, supra, 145 N.J. at 416-20), certif. denied, 185 N.J. 267 (2005). To do so, a plaintiff must present "competent, credible evidence[,] . . . [not] mere 'conjecture, surmise or suspicion.'" Ibid. (quoting 2175 Lemoine Ave. v. Finco, Inc., 272 N.J. Super. 478, 487-88 (App. Div.), certif. denied, 137 N.J. 311 (1994)). A plaintiff must demonstrate that the "defendant's negligent conduct was a 'substantial factor' in bringing about plaintiff's injury, even though there may be other concurrent causes of harm." Ibid. (quoting Conklin, supra, 145 N.J. at 419).

A plaintiff's damages are generally measured by the amount that he "would have received but for the attorney's negligence." Ibid. (emphasis added in original) (quoting 2175 Lemoine Ave., supra, 272 N.J. Super. at 487-88). Such damages are typically proven through the "suit within a suit" method, i.e., presenting evidence that would have been submitted at the underlying trial. Garcia, supra, 179 N.J. at 358. The plaintiff has the burden of showing that "(1) he would have recovered a judgment in the action against the main defendant, (2) the amount of that judgment, and (3) the degree of collectibility of such judgment." Ibid. (quoting Hoppe v. Ranzini, 158 N.J. Super. 158, 165 (App. Div. 1978)).

Although the suit within a suit approach is commonly employed, the Supreme Court has noted its shortcomings, specifically the fact that it "wholly ignores the possibility of a settlement." Ibid. (quoting Gautam v. DeLuca, 215 N.J. Super. 388, 398 (App. Div.), certif. denied, 109 N.J. 39 (1987)). The Court has, therefore, afforded trial courts flexibility to determine the manner in which a plaintiff may prove damages. Id. at 359-61.

In a claim for transactional legal malpractice, where the suit within a suit method is untenable, "there must be evidence to establish that the negligence was a substantial factor in bringing about the loss of a gain or benefit from the transaction." Froom, supra, 377 N.J. Super. at 315.

Where . . . a plaintiff alleges that he suffered a loss in a particular transaction because an attorney failed to take steps to protect his interest, the plaintiff must present evidence that, even in the absence of negligence by the attorney, the other parties to the transaction would have recognized plaintiff's interest and plaintiff would have derived a benefit from it.

[Ibid.]

Regarding the damages attributable to defendants' negligence, Goski opined:

Plaintiffs are entitled to all reimbursement of legal costs subsequent to the withdrawal and abandonment by [Podvey] of the Plaintiffs in or about October 2004. These would include the costs of Mr. [Keith A.] McKenna who handled the litigation with the tenant; that of Mr. [Michael B.] Blacker who handled the appeal of the trial court decision; Plaintiffs' counsel in this litigation; as well as the undersigned. Had Plaintiffs been properly represented by [Podvey], either [Podvey] would have secured a settlement with language that would have been acceptable to Plaintiffs, or else Plaintiffs would have litigated with [Ryan] without the burden of disproving their acquiescence to the settlement enforced by the [c]ourt in subsequent litigation.

Moreover, Plaintiffs are entitled to be reimbursed an interest factor on the monies held in escrow since it was represented to them by [Podvey] that the NFA [letter] would certainly have been retained during the almost two year time frame when [Podvey] did represent the Plaintiffs. It appears that the $10,000 escrow that apparently had been held by the attorney for the buyer of the Property ha[d] been, by this time, released to the buyer.

If there are additional environmental expenses necessitated by the passage of time from the date that the NFA should have been received if properly prosecuted by [Podvey] and today, based upon [Podvey's] projections to the client at the beginning of the engagement that might be recoverable by the Plaintiffs. I do understand that any further environmental investigation might have been stalled due to the cessation of [Podvey's] representation and the attendant and subsequent costs incurred by the Plaintiffs.

Plaintiff argues that, but for defendants' negligence, he would have recovered damages from Hartford, which never disclaimed coverage, or another insurance company that insured Ryan before Hartford; he would not have needed to file suit against Ryan and incur the legal fees spent in bringing that suit and the appeal thereafter, or, alternatively, he would have garnered a more favorable settlement with Ryan; and he would have avoided "further cost occasioned by the DEP rejection of [plaintiff's] remediation effort."

We reject these claims because, even considering Goski's report, they are not supported by "competent, credible evidence," but rather by "mere conjecture, surmise or suspicion." Froom, supra, 377 N.J. Super. at 313 (citation and internal quotation marks omitted).

For example, there was no credible proof that Hartford or any other insurance company that insured Ryan would have agreed to pay more to settle plaintiff's claim, or that a declaratory judgment action would have likely succeeded and coverage provided. Goski apparently never examined the policy or policies at issue and never opined about the likely success of such litigation. Plaintiff argued before us that it was unfair to place such a burden upon him in order to defeat summary judgment, but we disagree. Opinions regarding available coverages, or the likely success of a declaratory judgment action, would certainly be within the realm of a competent expert.

Plaintiff's claim that he was damaged by having to bring suit against Ryan, incurring legal fees in the process, is equally unavailing. The record discloses that Tombalakian specifically advised plaintiff before the settlement was reached, that the only other recourse was to file suit against Ryan, the cost of which might be prohibitive. Moreover, we previously found that an enforceable settlement was reached between plaintiff and Ryan, and Tombalakian disclosed its relevant terms regarding the indemnification provisions.

Therefore, plaintiff's claim devolves solely to the argument that he would not have agreed to the settlement had Tombalakian disclosed the fact that Ryan's insurer, Hartford, was contributing to the settlement. As we said in Froom, supra, 377 N.J. Super. at 315, "the plaintiff must present evidence that, even in the absence of negligence by the attorney, the other parties to the transaction would have recognized plaintiff's interest and plaintiff would have derived a benefit from it." Plaintiff failed to produce any evidence that a suit against Ryan, in Goski's words, "litigated . . . without the burden of disproving . . . acquiescence to the settlement," would have been successful and probably have recovered more than the settlement he obtained.

Lastly, the record is devoid of any facts that support the argument that defendants' breach caused plaintiff to incur additional costs "occasioned by the DEP rejection of his remediation effort." Goski's opinion that "additional environmental expenses [were] necessitated by the passage of time" because defendants failed to "properly prosecute[]" the approvals is unsupported by the record. Aljian informed plaintiff in June 2004, "there is nothing you, I or any other person can do to get this matter moved to the front of the line."

Goski also concluded that there was "a failure of communications" between Aljian and Tombalakian regarding the approvals, but there is no credible evidence that links that alleged failure to plaintiff's increased remediation costs. In short, plaintiff provided no expert testimony that demonstrated he incurred increased environmental clean up costs because of defendants' alleged breach of their professional responsibilities.

A

1 Plaintiff was the owner and president of Jobar Realty Co., Inc. For simplicity, we refer throughout the opinion to "plaintiff," in the singular, and Ponzio in particular.

2 Although plaintiff claims that he did not know Ryan had insurance, the lease agreement required Ryan to obtain and provide proof of insurance to plaintiff. We assume plaintiff's claim is more accurately that he was unsure whether Ryan had insurance coverage for the costs of remediation, not whether she maintained an insurance policy.

3 Plaintiff asserted in a certification that he only approved the settlement "subject to seeing the necessary paperwork." However, not only did plaintiff fail to include this caveat in his email to Tombalakian, Tombalakian claimed during a subsequent hearing that he forwarded the documents to plaintiff and never received any objection. Jobar Realty, Inc., supra, slip op. at 4.

4 This information was apparently incorrect, because Ryan ultimately paid over $15,000 of the settlement agreement.