The opinion of the court was delivered by: COOLAHAN
This case raises questions concerning a New York attorney's liability for negligence in transferring his clients' personal injury case to a criminally indicted New Jersey lawyer who subsequently embezzled the clients' funds. The questions arise on a motion for summary judgment by third-party defendant Edward Devlin, the New York lawyer, against defendants-third-party plaintiffs Fidelity Union Trust Company (Fidelity) and Keene National Bank (Keene).
Pertinent procedural history may be briefly summarized. Devlin's clients, plaintiffs Henry Wendel and Karen Wendel Tormo,
brought the main action against six defendants to recover $148,997, the face amount of an instrument issued to settle the personal injury suit and wrongfully converted by Milton Yormark, the New Jersey lawyer consulted by Devlin. Against Fidelity, the depository bank, and Keene, a collecting and presenting bank, plaintiffs alleged causes of action for conversion under section 3-419(1) of New Jersey's Uniform Commercial Code, N.J.S.A. 12A:1-101 et seq. In addition, they alleged against Fidelity alone a cause of action for negligence based on its failure to take reasonable measures to discover whether Karen's endorsement on the draft was genuine. The banks in turn filed a third-party complaint for either contribution or indemnity against Devlin based on negligence toward his clients in selecting and failing properly to supervise Yormark.
Procedural facts unrelated to the present motion are set forth in the margin.
Facts pertinent to Devlin's role in this case are confused and conflicting. A chronological history must begin on July 5, 1968. On that date Karen Tormo, then an unmarried infant and a citizen of New York, was involved in a boating accident in Dover Township, New Jersey. Shortly afterward, Karen's father, Henry Wendel, consulted Devlin concerning the matter. Devlin, whom Wendel had often consulted concerning his business affairs, visited the Wendel home on July 20 to discuss the incident. Although no retainer agreement was executed, and Devlin's fee was not discussed,
Devlin agreed "to see what could be done with regard to settlement" of Karen's claim. Devlin Deposition at 10; see Wendel Deposition at 8-9.
Devlin initially learned of Yormark several days later through Yormark's telephone call to his office. Representing that he was "familiar with the accident," Yormark requested a personal meeting. Devlin Deposition at 18. Devlin agreed. Yormark, accompanied by an associate, met Devlin at the Kings County Courthouse in Brooklyn on July 23, 1968. He informed Devlin that "he and/or his representatives had discussed [the accident] with the Wendels and they had secured [Devlin's] name." Id. at 18. Explaining that he was a "negligence specialist," id. at 25, Yormark indicated that he was interested in handling the case. Id. at 20. Devlin declined this "offer," but promised to "consult him later if something developed." Id.
Devlin's testimony indicates that he informed Wendel of the incident several weeks later. Wendel, however, apparently could not recall having met Yormark. His response, according to Devlin, was "I had a lot of people in the home" after the accident. Id. at 21. Wendel's testimony indicates that he had never conferred with Yormark and that Devlin never informed him of the meeting. Wendel Deposition at 10-11.
By June 1970, Devlin had not settled Tormo's accident claim, and she had married, changed her residence to Spain, and obtained Spanish citizenship. Since New York was no longer a proper venue for the action, see 28 U.S.C. § 1391(a), and since Devlin was not licensed to practice outside New York, he contacted Yormark, requesting that he bring suit in New Jersey. Whether either Wendel or Tormo actually participated in Devlin's decision is disputed. Devlin testified that he advised Wendel of his action "when the matter was referred to Yormark." Devlin Deposition at 23. Wendel's testimony flatly contradicts Devlin. He stated that Devlin failed to advise him of his decision until January 1971. At that time, moreover, Devlin allegedly stated that Yormark was a "good well-qualified lawyer." Wendel Deposition at 55-56.
Yormark, meanwhile, had been indicted in 1969 in Essex County, New Jersey, for conspiring fraudulently to obtain money from an insurance company.
He was subsequently convicted in January 1971, sentenced the following month to two consecutive 18-month prison terms,
and disbarred in February 1972.
The facts concerning Yormark's criminal misadventure received coverage in the New Jersey press,
but Devlin never discovered them until after Yormark had fully executed his scheme. Devlin Deposition at 26. Prior to consulting him, Devlin's only independent inquiry into Yormark's reputation consisted of ascertaining that he was listed as a licensed New Jersey attorney in a lawyers' directory. Id. at 25.
Devlin's testimony indicates that he believed his responsibilities terminated as a result of the transfer. He notified Wendel that "Mr. Yormark was going to handle the case," id. at 39, but never expressly advised him that he considered his own role to have ended. Id. Wendel's testimony indicates that he never understood that to be true. After the transfer, he testified, he contacted Devlin at least twice monthly concerning the case, Wendel Deposition at 19, and Devlin repeatedly assured him that it was progressing well. Id. at 48. Devlin admitted these conversations, but stated that never was any reference made as to his responsibilities in the matter. Devlin Deposition at 39.
Devlin, at any rate, never consulted Yormark concerning resolution of the case after the transfer.
Yormark communicated nearly exclusively with Tormo in Spain. Tormo, in turn, communicated with Wendel, and Wendel with Devlin. In early 1971 Yormark communicated a $150,000 offer of settlement to Tormo. She mailed him a letter indicating her willingness to accept that figure in February 1971. In March, misrepresenting to her that he needed further evidence of her intent, he induced her to sign a release. The release was delivered personally by one James Clare, an attorney for the insurance company whose services Yormark had solicited. Clare acted as a witness to the signing. Tormo neither read the document, see Tormo Deposition at 53-54, nor retained a copy for her records. Id. at 26.
Wendel's testimony indicates that he advised Devlin of her signing this document, which he described as "needed for Mr. Yormark to prove that he wasn't bluffing." Wendel Deposition at 43. Wendel could not recall if he described Clare's role in the incident, id. at 50, and there is no indication that Devlin was advised of Tormo's February letter to Yormark. But, Wendel stated, Devlin expressed concern about the nature of the document and indicated that he would investigate the matter. Id. at 50-51. Tormo, further, testified that Devlin telephoned her to obtain a copy of the instrument, but she never complied because she had no copy herself. Tormo Deposition at 25. Devlin's testimony indicates that the call to Tormo never occurred, see Devlin Deposition at 60-61, but that Wendel "may have" advised him that his daughter signed a letter evidencing her willingness to settle. Id. at 62.
Tormo contacted him five weeks later concerning settlement developments. He assured her that all was well. Tormo Deposition at 29. In July 1971, while visiting her family in New York, she and Wendel met personally with Yormark. Yormark explained that three insurance companies involved in the settlement were debating their respective liabilities. Summer vacations, he warned, would further delay payment. Id. at 32. Wendel's testimony indicates that he communicated the substance of this meeting to Devlin. Wendel Deposition at 70. He purportedly complained of the delay involved, but he conveyed to Devlin no suspicion concerning Yormark. Id. Devlin's testimony indicates that this conversation never occurred. Devlin Deposition at 64-65.
After Tormo returned to Spain, she contacted Yormark nearly monthly. He put her off with similar excuses. In March 1972 she was unable to reach him at his office. Devlin, upon being apprized of this by Wendel, contacted Yormark's office and discovered he had disappeared. His investigation then revealed Yormark's embezzlement scheme.
Devlin has predicated his motion for summary judgment against the banks on numerous grounds. His primary contention is that there is no factual issue concerning his own liability to the plaintiffs. Before addressing that contention, however, consideration must be given to Devlin's objection to use of Wendel's and Tormo's deposition testimony on the present motion. Devlin argues that it may not be considered against him because it was taken prior to the time he was brought into the case and therefore he was neither represented at, nor given reasonable notice of, its taking. See Fed.R.Civ.P. 32(a).
He rests his objection on Taylor v. Rederi A/S Volo, 249 F. Supp. 326 (E.D.Pa.1966). The issue in Taylor was whether a third-party defendant was entitled to summary judgment where the only evidence against him was contained in the deposition of plaintiff's decedent which had been taken prior to the time he was brought into the action. The court held that the third-party defendant's motion must be granted since (1) only admissible evidence may be considered on summary judgment, and (2) the decedent's deposition, being unable to meet the requirements of Rule 26(d) (now 32(a)), Fed.R.Civ.P., would not be admissible as evidence against him at the trial.
Rule 32(a), the successor provision to Rule 26(d), requires, inter alia, that in order that deposition testimony may be admissible against any party, that party must have been "present or represented at the taking of the deposition" or must have had "reasonable notice thereof." By its terms, the rule applies "at the trial or upon the hearing of a motion or an interlocutory proceeding . . . ." Despite this language, however, courts and commentators have rejected the notion that the rule governs the use of deposition testimony at a hearing or a proceeding at which evidence in affidavit form is admissible. See United States v. Fox, 211 F. Supp. 25 (E.D.La.1962), aff'd 334 F.2d 449 (5th Cir. 1964); Wright & Miller, Federal Practice & Procedure: Civil § 2142 (1970). The reasoning behind this rejection is that deposition testimony taken under oath, even if failing to satisfy Rule 32(a)'s requirements, is "at least as good as affidavits." United States v. Fox, supra, at 30.
This proposition is both supported by obvious good sense, and, according to this Court's reading, not contradicted by the Taylor opinion. Taylor cannot be read to hold that a deposition must satisfy Rule 32(a) in order to be considered on a motion for summary judgment, but rather that a deposition, like an affidavit, must satisfy Rule 56(e)'s requirement that it "set forth such facts as would be admissible in evidence . . . ." Fed.R.Civ.P. 56(e). The court held that it could not consider the decedent's deposition, not because Rule 32(a)'s predecessor barred its use on summary judgment, but because that provision would bar its use at trial. In the present case Rule 32(a) will not bar the admissibility of the facts set forth in the depositions of Wendel and Tormo because those facts will be offered, not in the form of prior deposition testimony, but in the form of testimony of presently available witnesses. So Devlin's reliance on Taylor is misplaced; the Court will consider the question of his liability to plaintiffs in light of all available deposition testimony.
That liability, as noted previously, rests upon an asserted breach of care either in selecting Yormark or in failing thereafter properly to supervise ...