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Perazzelli v. Perazzelli

Decided: December 22, 1976.


Lowengrub, J.s.c.


The issue presented in the pretrial motion before this court is novel and a case of first impression in New Jersey. The facts are as follows: Immediately prior to the taking of testimony on the day fixed for trial plaintiff's attorney orally applied to have defendant's attorney disqualified as trial counsel for defendant because plaintiff's counsel planned to call him as a witness to testify to a material fact in dispute. It is alleged by plaintiff that her husband and his counsel are business partners or at least that defendant has a proprietary interest in a business owned and operated by his attorney.

Plaintiff's attorney filed an affidavit wherein he stated he received information that defendant and his attorney were partners in National Abstract Company (National). After he received that information he, among other things, asked defendant's attorney to supply him with information concerning the ownership of the title company. He alleges that defendant's attorney said he was the sole stockholder of the company which had been in existence about six years. Further, that defendant was helping him with the company and that if it "continues to grow * * * at some point in the future * * * he would give Bruce Perazzelli a piece of it." The remaining allegations of the affidavit were to the effect that defendant's attorney would in the future give defendant a stock ownership interest in the title company if the effect of defendant's present efforts on behalf of that company were such that the company became a profitable business venture instead of the unprofitable one it now was, its sole benefit being a tax write-off for defendant's counsel.

In response to the affidavit of plaintiff's counsel, defendant's attorney submitted his affidavit wherein he alleged that defendant is not an employee of his title company and that he "has not earned any income whatever from his association with National." Further, that the complaint was filed prior to February 21, 1975 and that on October 1, 1975, he "entered into a verbal agreement with Mr. Perazzelli to the effect that if he could turn National around

for me, I would consider giving him a percentage of the stock ownership of National Abstract Company." The affidavit also stated that his losses in National have not been recovered and that defendant "is not entitled to stock ownership in National Abstract Company." The affidavit concludes with the following statement:

In an effort to permit Mr. Perazzelli to assist me in the operation of National Abstract Company and to permit him to solicit business, I have recently made him a Vice President and have permitted him to sign checks for National Abstract Company.

The 1975 U.S. Small Business Corporation Income Tax Return for National for the fiscal year ending September 30, 1976, and an accountant's report for the same fiscal period, were attached to the affidavit of defendant's attorney. The "stockholder's equity" section of the balance sheet indicated that the capital stock of the corporation consisted of 2500 authorized shares of common no par stock, of which 100 shares were issued and outstanding. The corporation tax return, Schedule K, indicated that the only stockholder named is defendant's counsel and that he holds 100 shares.

Plaintiff's counsel argued that because he was recently retained to represent plaintiff and because he had just learned of the alleged relationship between defendant and his counsel, he ought to be permitted to take further discovery on the issue raised; namely, the interest of defendant in the title company vis-a-vis its inclusion for purposes of equitable distribution.

At the outset it must be made clear that it is not the function of this court to determine, at this time, the truth or falsity of the allegation of a business relationship between defendant and his counsel. That is an issue of a material fact disputed between the parties and the determination of that fact must abide the conclusion of a plenary hearing.

The issues to be determined at this time may be stated thus:

1. May an attorney continue to represent a client, as trial counsel, where it is learned on the day fixed for trial that the attorney will be called to testify by the ...

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