DONALD ERICKSON, et al. v. JEFFREY S. LEONARD, ESQ., et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3410-04T13410-04T1

DONALD ERICKSON, Individually

and LYNN DEVELOPMENT CORPORATION,

A Corporation of the State of

New Jersey,

Plaintiffs-Defendants,

v.

JEFFREY S. LEONARD, ESQ.,

and HERSH, RAMSEY & BERMAN, P.C.,

Defendants-Respondents.

___________________________________

 

Argued December 6, 2005 - Decided

Before Judges Coburn, Lisa and S.L. Reisner.

On appeal from the Superior Court of New Jersey, Law Division, Morris County,

L-47-02.

Jeffrey D. Ullman argued the cause for appellant (Ullman, Furhman & Platt, attorneys; Mr. Ullman, on the brief).

Christopher J. Carey argued the cause for respondents (Graham, Curtin & Sheridan, attorneys; Mr. Carey, of counsel; Patrick B. Minter and Loren L. Speziale, on the brief).

PER CURIAM

This is a legal malpractice case filed by plaintiff Donald Erickson against his former attorneys, defendants Jeffrey Leonard and Hersh, Ramsey & Berman, P.C. The trial court granted defendants' motion for summary judgment and dismissed the malpractice complaint. We reverse and remand the case for trial.

I

These are the most pertinent facts. Erickson, a builder, was the sole shareholder in a construction company called Lynn Development Corporation (LDC). LDC contracted with William and Aida Visakay to build them a house. During the contract negotiations, the Visakays' attorney insisted that Erickson personally guarantee the return of his clients' deposit if the house was not built, a term to which Erickson agreed. The attorney also asked that Erickson be personally liable for completion of any punch list items remaining after the Visakays paid the purchase price. Erickson refused to agree to this term, and, hence, he only signed the contract in his personal capacity as to the term concerning return of the deposit. He signed on behalf of LDC as to all terms of the contract.

Five years after the construction was finished, the Visakays sued Erickson, claiming that the house had a major structural defect. Their complaint, later supported by an expert report, contended that the house was built in part on loose, compressible soil which in turn caused the foundation to settle and crack. Although LDC had registered the house with the Homeowner's Warranty Insurance Corporation (HOW), as required under N.J.S.A. 46:3B-1, et seq., by the time the Visakays made their claim HOW was in financial difficulties. Hence, they filed a lawsuit instead of pursuing the administrative process offered under the HOW program. See N.J.S.A. 46:3B-7 and -9. The Visakays' complaint named Erickson personally and "d/b/a Lynn Development Corporation" but did not name the corporation itself as a defendant.

Hersh, Ramsey represented Erickson in the Visakay lawsuit. There is no dispute on this record that Erickson told Hersh, Ramsey that he did not want to spend the money to hire a construction expert. He also admitted, at his deposition in the Visakay lawsuit, that the house had a major structural defect. And he conceded that no soil borings were done prior to construction to determine the suitability of the soil on which the house was to be built. Hence, his attorneys recommended that he settle the case. However, the firm never filed a motion seeking to have Erickson dismissed from the lawsuit on the grounds that he was not personally liable for the acts of LDC.

According to Erickson, based on his attorneys' advice that he had no defense to the Visakays' complaint, he settled that case. He then attempted to repudiate the settlement. Following a testimonial hearing, Judge Langlois concluded that he had voluntarily authorized his attorneys to settle, and we affirmed that determination. Visakay v. Erickson, Docket No. A-6279-00T2 (App. Div. 2003). Erickson then filed this lawsuit against the Hersh, Ramsey firm for malpractice. They counterclaimed for their fee. A different Law Division judge granted summary judgment dismissing plaintiff's complaint, finding that he was estopped by the decision in the Visakay case and that he had not proven malpractice in any event. Plaintiff settled the fee claim and filed this appeal.

II

On this appeal, plaintiff raises a series of arguments only one of which merits discussion in a written opinion, R. 2:11-3(e)(1)(E), beyond the following comments. We find no merit in plaintiff's claim that the Visakays did not have a major structural defect in their house and that his attorneys should have attempted to qualify him as his own defense expert. Erickson admitted in his deposition that the house had a major structural defect, and in light of that admission no reasonable jury could accept his current contention that he could have served effectively as his own defense expert. He was unwilling to spend the money to hire an expert, and without an expert he could not defend himself on the merits of the Visakays' complaint. He also did not submit a construction expert report in the malpractice suit in support of his contention that the house did not have a major defect; hence there is no basis to conclude that he could have won the Visakay case on the merits. This aspect of the malpractice claim was properly dismissed.

The trial court erred, however, in dismissing Erickson's claim that the Hersh, Ramsey firm failed to pursue the issue of his personal liability for the defects in the house. It is axiomatic that on a motion for summary judgment, the nonmoving party is entitled to the benefit of all favorable inferences to be drawn from the evidence. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995); Ziegelheim v. Apollo, 128 N.J. 250, 261-62 (1992). In reviewing the trial court's determination, our review is de novo, using the same standard. Antheunisse v. Tiffany & Co., Inc., 229 N.J. Super. 399, 402 (App. Div. 1988), certif. denied, 115 N.J. 59 (1989). Like the trial court, our charge is not to decide whether Erickson will win his case at trial, but to decide whether, weighing the evidence against the Brill standard, it is reasonably possible that he might prevail. In reversing, we find no more than that the motion record satisfies that lenient standard.

The undisputed evidence on the motion record supports a reasonable inference that the Visakays were well aware that they were dealing with a corporate entity and that Erickson was not agreeing to personal liability, except to a very limited extent. See New Mea Constr. Corp. v. Harper, 203 N.J. Super. 486, 497 (App. Div. 1985). There is no evidence that Erickson used the corporation to perpetuate a fraud or that the corporation was undercapitalized for the purpose for which it was created, i.e, to construct houses. See Lyon v. Barrett, 89 N.J. 294, 300 (1982); U.S. v. Pisani, 646 F.2d 83, 87-89 (3d Cir. 1988). The house was completed, and the Visakays did not complain about the structural defect until five years later. Erickson protected the Visakays, as the law required, by registering the house with HOW. Further, Erickson provided an expert report detailing the alleged malpractice by the Hersh, Ramsey firm in failing to file a motion to dismiss the complaint against him in his personal capacity. The defendant law firm did not file a contesting expert report on the malpractice issue.

Ordinarily, the sole shareholder of a corporation is not personally liable for the debts of the corporation. Saltiel v. G.S.I. Consultants, Inc., 170 N.J. 297, 316 (2003); see Lyon v. Barrett, supra, 89 N.J. at 300. And, generally, a breach of contract action against a corporation, premised on faulty construction of a house, cannot be parlayed into a tort claim against its sole shareholder. Saltiel, supra, 170 N.J. at 316; New Mea Constr. Corp., supra, 203 N.J. Super. at 496-97. On this record, reasonable jurors could conclude that Erickson had a viable defense to personal liability and that the Hersh, Ramsey firm should have asserted that defense on his behalf, rather than advising him to settle the Visakay case. Of course, at trial, additional facts may be adduced on behalf of the defense that might sway the jury to reach a different conclusion. We decide only that Erickson is entitled to his day in court on this issue.

 
Reversed and remanded.

We find no merit in defendants' contention that Erickson is estopped from pursuing this aspect of his malpractice claim because he agreed to settle the Visakay case. See Ziegelheim v. Apollo, supra, 128 N.J. at 263; Sommers v. McKinney, 287 N.J. Super. 1, 11 (App. Div. 1996).

(continued)

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A-3410-04T1

 

January 6, 2006