WILLIAM TORRE v. HILL WALLACK, LLP

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

WILLIAM TORRE,

Plaintiff-Appellant,

v.

HILL WALLACK, LLP; ERIC ABRAHAM,

ESQUIRE; TODD GREENE, ESQUIRE,

Defendants-Respondents.

___________________________________

January 8, 2015

Argued December 10, 2014 Decided

Before Judges Alvarez and Waugh.

On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-1685-13.

Robert R. Atkins, Jr., argued the cause for appellant (Walter T. Wolf, LLC, attorneys; Walter T. Wolf, Brian P. Stouffer, and Michael J. DeRita, on the briefs).

James G. O'Donohue argued the cause for respondents (Hill Wallack, LLP, attorneys; Mr. O'Donohue, of counsel and on the brief; Lisa Chapland, on the brief).

PER CURIAM

Plaintiff William Torre appeals the Law Division's November 8, 2013 order granting summary judgment with respect to his malpractice claim against defendants Hill Wallack, LLP, Eric Abraham, and Todd Greene. We affirm.

I.

We discern the following facts and procedural history from the record on appeal.

Hill Wallack represented Torre in connection with litigation against his former business partner Douglas Huhn. He and Huhn had co-founded Total Furniture Logistics (TFL) in the early 2000s, with each holding a one-half interest in the company. In February 2007, according to Torre, he discovered that Huhn was misappropriating funds from TFL.

In March 2007, Torre retained Hill Wallack to represent TFL in an action against Huhn, his wife, and an entity owned by Huhn. Abraham and Greene were attorneys at Hill Wallack who worked on the Huhn litigation.

After mediation resolved many of the issues involved in the Huhn action, the remaining issues were to be submitted to binding arbitration. However, prior to the arbitration hearing, the parties came to an agreement on the remaining issues during a final mediation session.

The August 2007 settlement agreement provided for Huhn to pay a total of $200,000 to Torre over time. As security, Huhn was required to give Torre a mortgage on his personal residence, stock in a new corporation established by Huhn, and liens on four vehicles owned by the new corporation. On the day following the settlement, however, Huhn executed a mortgage on his personal residence to secure a loan in excess of $550,000. That mortgage was recorded prior to Torre's mortgage, and was consequently superior to it.

In June 2008, Huhn defaulted on his obligation to make periodic payments to Torre. In an email to Huhn's attorney, which was copied to Abraham, Torre requested the attorney to forward the stock in Huhn's new company, adding that "[t]he Huhn[s] are in default and have vacated their residence and have made the security of the second mortgage worthless by signing a new mortgage the day after our settlement agreement was signed and before our mortgage was recorded."

Defendants represented Torre in discussions with Huhn's attorney concerning the default. On October 27, 2008, however, Torre sent defendants an email stating that "there is no need for Hill Wallack to have any further dealings in this matter." He requested them to refer any attorney representing Huhn directly to him, adding that he would decide at that time whether he needed renewed representation by the firm. On November 10, following the filing of a substitution of attorney so Torre could appear pro se, Torre obtained a consent judgment against Huhn in the amount of $87,000, plus interest. Torre alleges that defendants failed to advise him of his legal rights with respect to the default, specifically that Torre should have filed a motion to vacate the order dismissing the Huhn action due to fraud, or filed suit against Huhn for fraud, breach of the settlement agreement, or both.

In July 2009, Hill Wallack filed a complaint against Torre, seeking to recover approximately $63,000 in outstanding legal fees arising from its representation of Torre in the Huhn action. The parties entered into a settlement on October 8, which required Torre to pay defendants $42,000 over a three-year period.1 The implementing consent order, in its first paragraph, contained the following language: "[a]ll claims by and between Hill Wallack and Torre which were asserted or could have been asserted in this action are hereby settled upon the terms set forth in this Consent Order."

In June 2011, Torre, who was then represented by new counsel, filed a complaint against Huhn, seeking relief from their 2007 settlement agreement. In January 2012, the Law Division dismissed Torre's complaint for failure to have filed a timely motion under Rule 4:50-2 for relief from the settlement order.

Huhn filed for bankruptcy in June 2010, but the petition was dismissed in April 2011. He refiled in June 2012. Torre made a claim against Huhn in the bankruptcy action, seeking to have the outstanding debt declared non-dischargeable due to Huhn's fraud. In January 2013, the bankruptcy trustee reported that there was no property available for distribution to any creditors. As a result, Torre had no other avenues to collect on his judgment against Huhn.

In August 2013, Torre filed the present action alleging malpractice by Hill Wallack and its two attorneys. Defendants filed a motion for summary judgment in October, arguing that the malpractice claim was precluded by the 2009 release, as well as the entire controversy doctrine. Following argument on November 8, the motion judge delivered an oral decision explaining his reasons for granting defendants' motion. He found that Torre had sufficient knowledge of defendants' alleged malpractice at the time he signed the release to warrant dismissal of the claim with prejudice. The implementing order was signed the same day. This appeal followed.

II.

On appeal, Torre argues that the motion judge erred in granting summary judgment because his malpractice claim against defendants had not yet accrued at the time the 2009 release was executed. He also argues that it is not barred by the entire controversy doctrine for the same reason.

Rule 4:46-2(c) directs that summary judgment 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." The motion judge must determine "'whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'" Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007) (quoting Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 536 (1995)).

We review a grant of summary judgment under the same standard as the motion judge. Rowe v. Mazel Thirty, LLC, 209 N.J. 35, 41 (2012). "[T]he legal conclusions undergirding the summary judgment motion itself" are reviewed "on a plenary de novo basis." Estate of Hanges v. Metro. Prop. & Cas. Ins. Co., 202 N.J. 369, 385 (2010).

Professional malpractice arises from the theory of negligence. Grunwald v. Bronkesh, 131 N.J. 483, 492 (1993). Mere knowledge of negligence, however, does not cause a professional malpractice claim to accrue. Olds v. Donnelly, 150 N.J. 424, 437 (1997). Such a claim accrues only "'when: (1) the claimant suffers an injury or damages; and (2) the claimant knows or should know that its injury is attributable to the professional negligent advice.'" Vision Mortg. Corp. v. Patricia J. Chiapperini, Inc., 307 N.J. Super. 48, 55 (App. Div. 1998) (quoting Circle Chevrolet Co. v. Giordano, Halleran & Ciesla, 142 N.J. 280, 296 (1995)), aff'd, 156 N.J. 580 (1999).

With respect to damage or injury,2 the Court specified that a party must suffer "actual damages" for there to be an accrual. Grunwald, supra, 131 N.J. at 494. With respect to knowledge that the injury is attributable to the defendant, the critical inquiry is "whether the facts presented would alert a reasonable person, exercising ordinary diligence, that he or she was injured due to the fault of another." Caravaggio v. D'Agostini, 166 N.J. 237, 246 (2001). Contrary to Torre's argument, awareness of the "legal effect of those facts" is not a requirement for accrual of the cause of action. Grunwald, supra, 131 N.J. at 493 (citing Burd v. N.J. Tel. Co., 76 N.J. 284, 291-92 (1978)).

At the time Torre settled the fee action brought by Hill Wallack and agreed to the release, he was at least aware (1) that he no longer had the security of the mortgage on Huhn's residence because an intervening mortgage had been recorded first and (2) that he was having considerable difficulty collecting on his consent judgment against Huhn because it was unsecured. Because it is axiomatic that an unsecured debt is riskier than a secured debt, the fact that Torre's mortgage was junior to the bank's mortgage was actual, rather than speculative, injury.

We reject Torre's argument that the injury prong of the accrual test required complete exhaustion of his efforts to collect from Huhn prior to accrual. As the Court noted in Grunwald, "'[i]t is not necessary that all or even the greater part of the damages have to occur before the cause of action arises.'" Grunwald, supra, 131 N.J. at 495 (quoting United States v. Gutterman, 701 F.2d 104, 106 (9th Cir. 1983)). In fact, the expenditure of attorneys' fees in the effort to collect is appropriately considered damages. Ibid.

We also conclude that Torre knew, or should have known, that the injury was attributable to defendants' professional negligence.3 As noted, Torre knew that the recording of the mortgage Huhn signed the day after his settlement with Torre vitiated the value of the mortgage Torre had received from Huhn, which was not filed until over a month later. Those facts would most certainly "alert a reasonable person, exercising ordinary diligence," Caravaggio, supra, 166 N.J. at 246, to the distinct possibility that the attorneys who represented him during the Huhn litigation and settlement should have taken steps to preclude the recordation of an intervening mortgage and, once it was discovered, should have recommended prompt remedial action, such as a motion to set aside the settlement or whatever additional action Torre now contends defendants should have advised him to take before he terminated their attorney-client relationship. Indeed, in his response to Paragraphs 27 and 28 of Hill Wallack's statement of material facts for the summary judgment motion, Torre admitted that he had told Hill Wallack attorneys that they "had not properly represented him" in connection with the Huhn settlement, specifically referring to the validity of the mortgage, among other issues. In his partial denial of Paragraph 28, Torre admitted that he knew of defendants' failure to obtain the mortgage and that he voiced "dissatisfaction" with defendants "for their failure to do so." He denied only that he threatened a malpractice suit at that time.

Because we have found that Torre's cause of action against defendants for legal malpractice had accrued by the time he signed the Hill Wallack settlement order, including the release, we conclude that the motion judge did not err in holding that the present action is precluded by that release.4 It is well established that "[a] general release, not restricted by its terms to particular claims or demands, ordinarily covers all claims and demands." Bilotti v. Accurate Forming Corp., 39 N.J. 184, 204 (1963).

Even if the malpractice claim had not been released in the 2009 settlement order, it would be barred by the entire controversy doctrine. The doctrine is implemented by Rule 4:30A, which provides

Non-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, except as otherwise provided by R. 4:64-5 (foreclosure actions) and R. 4:67-4(a) (leave required for counterclaims or cross-claims in summary actions).

In Alpha Beauty Distribs., Inc. v. Winn-Dixie Stores, Inc., 425 N.J. Super. 94, 104 (App. Div. 2012), we explained the application of the doctrine as follows

The entire controversy doctrine compels at times, and encourages at others, the joinder of related claims so as "to eliminate delay, prevent harassment of a party and unnecessary clogging of the judicial system, avoid wasting the time and effort of the parties, and promote fundamental fairness." Cogdell v. Hospital Center at Orange, 116 N.J. 7, 15 (1989) (quoting Barres v. Holt, Rinehart and Winston, Inc., 74 N.J. 461, 465 (1977) (Schreiber, J., dissenting)). In light of these considerations, the doctrine imposes on a litigant the duty to present "all aspects of a controversy in one legal proceeding." The Malaker Corp. Stockholders Protective Comm. [v.] First Jersey Nat'l Bank, 163 N.J. Super. 463, 496 (App. Div. 1978), certif. denied, 79 N.J. 488 (1979). In determining what constitutes a single controversy, courts "look at the core set of facts that provides the link between distinct claims against the same or different parties." Hobart Bros. Co. v. Nat'l Union Fire Ins. Co., 354 N.J. Super. 229, 244 (App. Div. 2002).

The doctrine applies to "'matters actually litigated'" as well as matters "'that might have been thus litigated and determined.'" Vision Mortg. Corp., supra, 307 N.J. Super. at 52 (quoting Mori v. Hartz Mountain Dev. Corp., 193 N.J. Super. 47, 56 (App. Div. 1983)). As an equitable doctrine, the entire controversy doctrine will not act as a bar when, considering the totality of the circumstances, its application would undermine "'its objectives, namely, the promotion of conclusive determinations, party fairness, and judicial economy and efficiency.'" K-Land Corp. No. 28 v. Landis Sewerage Auth., 173 N.J. 59, 70 (2002) (emphasis omitted) (quoting Pressler, Current N.J. Court Rules, comments 1 & 2 on R. 4:30A (2002)).

The entire controversy doctrine is applied where "a sufficient commonality of facts undergirds each set of claims to constitute essentially a single controversy that should be the subject of only one litigation." DiTrolio v. Antiles, 142 N.J. 253, 258 (1995). "In determining whether successive claims constitute one controversy for purposes of the doctrine, the central consideration is whether the claims against the different parties arise from related facts or the same transaction or series of transactions." Id. at 267. The entire controversy doctrine has been held to encompass "virtually all causes, claims, and defenses relating to a controversy between the parties engaged in litigation." Cogdell, supra, 116 N.J. at 16. It may apply to bar a claim "where the 'plaintiff had sufficient information to have included these defendants in the earlier lawsuit.'" DiTrolio, supra, 142 N.J. at 274 (quoting Cogdell, supra, 116 N.J. at 25).

As we have already held, Torre's claim against defendants had accrued at the time of the 2009 fee action. Consequently, it was subject to mandatory joinder at that time. Both the claim for fees and the claim for malpractice arose out of Torre's action against Huhn in 2007, and a finding of malpractice would have wiped out Hill Wallack's claim for fees. We see no unfairness in application of the doctrine to Torre under the circumstances of this case.

Affirmed.

1 After Torre defaulted on his payments, Hill Wallack obtained a judgment against Torre in the amount of $41,200. The judgment was recorded as a lien against his real property.

2 The terms are essentially "interchangeable." Grunwald, supra, 131 N.J. at 495.

3 We make no finding that defendants were, in fact, negligent. We assume negligence solely for the purpose of our analysis in this opinion.

4 Because we have found that Torre's malpractice cause of action had accrued at the time the release was signed, we need not address the issue of whether it would have covered unaccrued claims.