Baxt v. Liloia

• Decision Date: 13 March 1995
• Citation: 656 A.2d 835,281 N.J.Super. 50
• Parties: Sherwood BAXT and Saida Baxt, Plaintiffs-Appellants, v. Gerald A. LILOIA and Anthony J. Sylvester, Defendants-Respondents.
• Court: New Jersey Superior Court — Appellate Division

Page 50

281 N.J.Super. 50

656 A.2d 835

Sherwood BAXT and Saida Baxt, Plaintiffs-Appellants, v. Gerald A. LILOIA and Anthony J. Sylvester, Defendants-Respondents.

Superior Court of New Jersey,

Appellate Division.

Argued Jan. 23, 1995.

Decided March 13, 1995.

Helen Davis Chaitman, Somerset, for appellants (Ross & Hardies, attorneys; Ms. Chaitman, Sean M. Sullivan and Kelly J. Bugle, on the brief).

Michael R. Cole, Morristown, for respondents (Riker, Danzig, Scherer, Hyland & Perretti, attorneys; Jeffrey J. Miller and Harold L. Kofman, on the brief).

Before Judges DREIER, WEFING and BRAITHWAITE.

The opinion of the court was delivered by

WEFING, J.A.D.

This case is a companion matter to another decided today, The Summit Trust Company v. The Grove Mercantile Center, et al. Understanding the issues presented by this appeal requires reference to the record of that matter, a foreclosure action premised upon a default on a certain construction loan from The Summit Trust Company (Summit) to The Grove Mercantile Center (Grove).

Plaintiff Sherwood Baxt was a general partner in Grove; he and Saida Baxt were defendants in the foreclosure action. Other Grove partners and foreclosure defendants were Paul Hartman and Paul Baxt. Among the issues presented in the foreclosure action was a counterclaim asserted by defendants against Summit on a theory of lender liability.

The foreclosure complaint was filed in March 1991. After a period of discovery, the attorneys for Summit filed a motion for summary judgment. Within the motion, Summit contended it and Grove had negotiated a modification agreement which extended the original loan for one year and that in conjunction with the modification agreement, Grove had executed a release of all claims against Summit. Such a release, if given, removed any basis for Grove's counterclaim on a lender liability theory. Summit's attorneys, in preparing the motion for summary judgment, included, within the moving papers, a copy of the release executed by Grove general partner, Paul Hartman. Mr. Hartman's signature was neither witnessed nor notarized and the document could not be recorded. N.J.S.A. 46:16-2.

The attorneys for Grove in the foreclosure action were perplexed when they received this motion. During discovery prior to Summit's motion being filed, Grove's attorneys inspected the bank's documents and noted that, while Summit's files contained a copy of the modification agreement executed on behalf of the bank, the files did not contain a copy of the modification agreement executed by Grove. Mr. Hartman informed Grove's attorneys that, although the signature on the document in the moving papers looked like his, he had no recollection of either signing the document or giving it to the bank. In addition, Grove's attorneys noted that Summit's answer to Grove's counterclaim made no mention of a release.

Upon receipt of the motion, Grove's attorneys commenced discovery on the limited issue of how the executed copy of the modification agreement got into the bank's file. They conducted depositions of two bank representatives; the depositions of each individual took two days to conclude. We note merely that the depositions did not proceed entirely smoothly; we do not find it necessary to set forth the extensive colloquy between counsel.

At least one deposed witness recalled receiving a faxed copy of the modification agreement signed by Mr. Hartman. The document annexed to the summary judgment, however, bore no indication of having been faxed. Furthermore, Mr. Hartman's telephone bills contained no record of such a fax.

Before resumption of the final day of deposition on this issue, Grove's attorney reviewed Grove's entire file which it had earlier produced to the bank in discovery. During the review, she discovered a misfiled folder which contained the original modification agreement and three copies, all executed by Mr. Hartman.

During that final day of depositions, Summit's attorneys admitted they obtained the executed copy of the modification agreement attached to Summit's motion for summary judgment from the Grove files during document inspection and directed bank personnel to place it within the bank's files.

Thereafter, plaintiffs filed this two-count complaint; defendants are the attorneys who represented Summit in the foreclosure action. The first count sought damages for tortious concealment of evidence and the second was premised on an alleged breach of the Rules of Professional Conduct. The complaint was consolidated with the pending foreclosure action in Hudson County.

In December 1992, defendants moved to dismiss the complaint. The application was denied as to the first count and granted as to the second. The Chancery judge who heard defendants' motion concluded that the question whether defendants' conduct constituted an ethics violation was a collateral issue over which the court did not have "primary jurisdiction;" he thus dismissed the second count.

Thereafter, the foreclosure action was settled and the matter, on which the first count remained outstanding, was transferred to the Law Division in Bergen County where it had been originally filed. The foreclosure action's settlement terms have not been made known to us.

The parties later filed cross-motions for summary judgment on the remaining count. After oral argument, the trial judge granted defendants' motion for summary judgment and denied plaintiffs'. He set forth his reasons in a comprehensive ten-page letter opinion which concluded that plaintiffs failed to show they justifiably relied, to their detriment, upon the signed copy of the modification agreement attached to Summit's summary judgment motion. Viviano v. CBS, Inc., 251 N.J.Super. 113, 597 A.2d 543 (App.Div.1991), certif. denied 127 N.J. 565, 606 A.2d 375 (1992); DSK Enterprises, Inc. v. United Jersey Bank, 189 N.J.Super. 242, 459 A.2d 1201 (App.Div.) certif. denied 94 N.J. 598, 468 A.2d 232 (1983). From those two determinations in defendants' favor, plaintiffs appeal to this court. We affirm.

We turn first to whether the second count in plaintiffs' complaint stated a cause of action. Both lower courts which considered this matter were obviously troubled by defendants attaching, to the bank's summary judgment motion, the executed copy of the modification agreement obtained through normal discovery without noting the source of the document. This is not the appropriate forum to determine the propriety of those actions and we express no opinion on them.

Plaintiffs rely upon three reported New Jersey opinions for their proposition that a breach of the Rules of Professional Conduct by one attorney during the course of litigation may give rise to a cause of action for damages for the attorney's adversary. ¹ Plaintiffs refer to Malewich v. Zacharias, 196 N.J.Super. 372, 482 A.2d 951 (App.Div.1984), Albright v. Byrnes, 206 N.J.Super. 625, 503 A.2d 386 (App.Div.1986) and Tedards v. Auty, 232 N.J.Super. 541, 557 A.2d 1030 (App.Div.1989). All of these cases, in our view, are substantively distinguishable.

Malewich v. Zacharias, supra, presented a claim by one attorney against his adversary in a divorce suit. The defendant Zacharias represented Malewich as a plaintiff in a matrimonial action. She sued him for legal malpractice when he did not appear on the trial date. Her then-husband and his attorney, Auty, did appear. The trial court heard testimony, signed an order which dissolved the marriage, provided for equitable distribution and imposed damages against the plaintiff. Zacharias joined the attorney who represented the husband in the divorce proceeding as a third-party defendant in the legal malpractice action. Zacharias asserted that he did not appear on the trial date because Auty told Zacharias he would call Zacharias if the case were proceeding to trial that day. Auty did not call him so he remained in his office. The transcript of the divorce matter showed that Auty represented to the matrimonial judge that Zacharias would not appear to contest any of the issues. In reversing the trial court's dismissal of Zacharias's third-party complaint against Auty, and remanding the matter to the Law Division for trial, this court stated:

A member of the Bar should well understand that an adversary might reasonably rely upon representations made to him, and thus a duty to the adversary can rise. A breach of that duty can render the attorney liable to such an adversary for all or part of a claim advanced by the adversary's client in a malpractice action.

[Malewich v. Zacharias, 196 N.J.Super. at 377, 482 A.2d 951].

Here, however, plaintiffs have not asserted any negligence on the part of their attorneys in handling the foreclosure litigation and their attorneys have not been exposed to a claim for damages. Plaintiffs' counsel are not seeking to be made whole in the event liability were imposed upon them; plaintiffs, rather, seek to assert a direct claim against the attorneys who represented their adversary in prior litigation.

Similarly, Albright v. Byrnes, supra, was a claim of negligence against an attorney for his handling of a loan from a decedent to his nephew who held a power of attorney. Within the course of our opinion, this court noted that ethical standards "set the minimum level of competency which must be displayed by all attorneys." Albright v. Byrnes, 206 N.J.Super. at 634, 503 A.2d 386.

Finally Tedards v. Auty, supra, was a suit for damages by a former husband against the attorney who represented his ex-wife in post-judgment matrimonial litigation. He asserted the attorney should be held liable for his damages for abuse of process in obtaining and seeking to enforce a writ of ne exeat.

Most recently, in Petrillo v. Bachenberg, 263 N.J.Super. 472, 623 A.2d 272 (App.Div.), certif. granted, 134 N.J. 566, 636 A.2d 523 (1993), this court concluded that a buyer of real estate may have a cause of action against the attorney for the seller...