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Kanengiser v. Kanengiser

Decided: March 14, 1991.


Transferred from Union County Docket No. UNN-L-8127-90.

Villanueva, J.s.c.


Plaintiff's complaint contains four causes of action, the principal one alleging that an attorney's letter seeking repayment of legal fees is "libelous and actionable per se." This letter sought the return of the excess over what the attorney alleged to have been the reasonable legal fee and questioned the propriety of a brokerage commission and stated defendants' intention to seek arbitration of the reasonableness of the legal fee before the appropriate forum and demanded the return of the "brokerage commission."

Defendants, Sidney Kanengiser, Alan Jacobson, Sills, Cummis and Gerald Span, by their two separate attorneys, have moved for summary judgment to dismiss three counts of the complaint which are based upon this letter on the grounds of absolute privilege.

The court holds that this letter clearly indicating an intention to arbitrate the reasonableness of legal fees pursuant to R. 1:20A-1 et seq. was "preliminary to a proposed judicial proceeding" and, therefore, is absolutely privileged and also cannot give rise to non-libel causes of action.

The secondary issue is whether limited distribution of the letter to trustees and beneficiaries of a trust from which the payments were made and to the financial adviser to one trustee,

who also was the husband of a class beneficiary, was "unreasonable publication" that defeated the absolute privilege. The court holds that such distribution did not defeat the absolute privilege because all recipients of the letter had a significant interest in the matter or connection to it.


Preliminary Statement.

This action revolves around correspondence dated October 4, 1990, from attorney Gerald Span to attorney Gerold Kanengiser. (Appendix A). This letter was not the first occasion when the two attorneys communicated. One year earlier Span, a partner in the Sills, Cummis, Zuckerman, Radin, Tischman, Epstein & Gross ("Sills") law firm, had been asked to represent Sidney Kanengiser ("Sidney") in an accounting action brought against him as the last surviving trustee of his father's trust by the children of his late brother Marvin. Span, in undertaking that representation, had repeated contacts with Gerold Kanengiser because the firm of Gordon & Kanengiser ("G & K"): (a) had represented the Kanengiser Trust until after Marvin's death in 1988; (b) had represented the Kanengiser Trust and the individual investors from the Kanengiser family in selling four roller rink properties in 1987; and (c) was still representing Marvin's estate and its executrix Beverlee Kanengiser, Marvin's second wife (but not the mother of his children), who were suing Sidney.

Span's representation of Sidney caused him not only to investigate whether monies flowing from the Kanengiser Trust to Marvin or Beverlee went beyond permitted "income" and reached into proscribed distribution of corpus (which was to be left entirely for the grandchildren), but also to determine whether Sidney had unwittingly engaged in any transaction involving the Kanengiser Trust for which he might be surcharged as the last fiduciary of the trust. As a result thereof, Sidney turned over to his attorneys, documents relating to the

sale by the family entities of four roller rink properties in 1987 out of which attorney Gerold Kanengiser claimed entitlement not only to $100,000 in legal fees, but also a separate brokerage commission amounting to approximately 3% of the $6,400,000 selling price (actually $200,000).

Installment payments from that 1987 sale were still being received for distribution to the former owners (including the Kanengiser Trust) by Sidney as one of the two persons acting for the now dissolved entities. Therefore, Sidney believed that his conduct in continuing to pay (and failing to demand return of payments from) G & K could be questioned by the beneficiaries because the Kanengiser Trust, from which Marvin's children demanded an accounting, had owned a substantial interest in the roller rinks which had been sold.

After obtaining the concurrence of the Jacobson family, who also had an interest in the roller rink proceeds, Sidney authorized Span to send a demand letter to G & K requesting justification of what appeared to be excessive legal fees and of the claim for a real estate commission which is violative of the well-settled public policy limiting the receipt of commissions to those specially licensed as brokers.

By September 1990, Sills had already commenced a separate legal action on Sidney's behalf against Beverlee and the estate of Marvin to recover the allegedly improper prior distributions of corpus to Marvin and Beverlee, which were made without the acquiescence or consent of Marvin's children. Having been unable for more than a year to resolve this matter privately with G & K (who represented Marvin's estate and his widow), Sidney's attorneys had no choice but to commence formal litigation against the clients of G & K. Hence, by the time of the Span letter of October 4, 1990, two civil actions had already been commenced regarding the conduct of members of the Kanengiser family who were at one time represented by G & K.

The letter of October 4, 1990, read in the overall context of communications with G & K, could be described as "the opening

salvo" of what would have been, absent plaintiff's preemptive filing of this complaint,*fn1 the third and fourth legal proceedings regarding the affairs of the Kanengiser family entities.

In these motions for summary judgment defendants contend that the statements contained in the Span letter, made while there were two pending judicial proceedings and as a preliminary to the commencement of two others (for return of legal fees in fee arbitration and an action to declare the "commission" agreement void as against public policy), are clothed with an absolute privilege.


Statement of Facts.

Plaintiff's allegations against the Sills defendants arise out of the statements in the Span letter concerning the operation of a family trust as well as family business investments over three decades and the litigation that payments from these investments to family members has spawned. Knowledge of these prior affairs is vital to place the statements in the Span letter in their proper context.

A. The Kanengiser Trust.

Morris Kanengiser, who died in 1952, created the "Kanengiser

Trust" in his will.*fn2 He named his three sons (Irving, Marvin and Sidney) as co-trustees of this trust and also named his three sons and one daughter (Esther Weiner) as income beneficiaries of the trust, all to receive equal one-fourth shares of the income produced by the trust. Morris further provided that the Kanengiser Trust would terminate upon the death of his last child, at which time the entire corpus of the trust would be distributed per stirpes among the children of Irving, Marvin, Sidney and Esther Weiner. Irving, Marvin and Esther Weiner are deceased; Sidney (now the client of the Sills law firm) is the sole surviving child and sole remaining trustee of the Kanengiser Trust. Until February 1989, plaintiff and his law firm, G & K, provided legal services to the Kanengiser Trust and to a variety of family-dominated entities.

Plaintiff is the nephew of Morris and a first cousin of Irving, Marvin, Sidney and Esther Weiner. He is not a beneficiary of Morris' will.

B. The Assets of the Kanengiser Trust.

After the death of Morris, the Kanengiser Trust, along with individual members of the Kanengiser and Jacobson families, purchased interests in various entities that operated roller skating rinks and owned the land upon which they were located. Through the years, G & K provided legal services to these corporations in connection with their ownership and operation of the rinks. Eventually the entities, still represented by G & K, began to divest themselves of their ownership interests in the roller skating rinks.

C. The Four Rinks Transaction.

By late 1987, Kanengiser family members, the Kanengiser Trust, and the Jacobson family shared interests in four corporations, each of which owned one roller skating rink. In the four rinks transaction they sold these four corporations to one buyer

for $6,400,000, most of which was received in the form of purchase-money mortgages taken back by the sellers. The four corporations were represented in this transaction by G & K, who charged a $100,000 legal fee. Defendants contend that plaintiff purported to act as the real estate broker for this sale, for which he claims entitlement to a commission of approximately 3% of the total sales price. Plaintiff denies that he either acted as a broker or was paid as a broker. A letter dated December 17, 1987, drafted by G & K contemporaneous with the sale which was signed by the selling entities, purported to acknowledge the brokerage services provided by plaintiff:

The undersigned do hereby acknowledge that by reason of your services in procuring a purchaser for the real property owned by the undersigned, for $6,400,000.00, you are to receive the sum of $200,000.00 payable on cash received in connection with the said sale in the amount of 3% of said cash until the aforementioned sum of $200,000.00 is fully paid. [Emphasis supplied]

Plaintiff has admitted that $200,000 of the monies he claims from the four rinks transaction arises from his "commission" arrangement. In a letter sent to Sidney, dated May 17, 1990, he acknowledged receipt of certain payments from Sidney and informed Sidney that he was applying the payments to brokerage commissions due from the four rinks transaction:

[The funds have] been applied on the account of commission as per the December 17, 1987 agreement. [Emphasis supplied]

The letter also acknowledged receipt of other monies and informed Sidney:

[The funds were] applied against the 3% commission due on the down payment in the original sale. [Emphasis supplied]

After the four rinks transaction was completed, the four corporations were dissolved. The payments due on the purchase-money mortgages realized from the transaction, however, were to continue for many years. The America On Wheels Real Estate Trust ("AOW") was established by a document drafted by G & K to receive and administer these funds. The shareholders of the dissolved corporations became the beneficiaries of AOW.

D. The Marvin Children Litigation.

In March 1988, Marvin, brother of Sidney and son of Morris (the creator of the Kanengiser Trust), died. His estate, with his second wife Beverlee as executrix, selected G & K as its attorneys. Marvin's children (born of his first wife) retained Samuel Saiber to represent their interests. Saiber attempted, without success, to obtain information from G & K (as prior attorneys for the trust and as attorneys for the estate) concerning payments from the Kanengiser Trust to Marvin and Beverlee beyond those permitted by the documents.

In June 1989, Marvin's children instituted two actions in the Probate Part of Superior Court, Law Division, Essex County: In re Estate of Morris Kanengiser and In re Estate of Fannie Kanengiser (collectively, the "Marvin children litigation"). These actions were brought against Sidney in his capacity as sole surviving trustee of the Kanengiser Trust. Sills has represented Sidney in these proceedings, which seek an accounting of the trust assets and the removal of Sidney as trustee. Marvin's children have alleged that the corpus of the trust was improperly distributed to Morris' children, who were entitled only to the income from the trust.

Central to the allegations of Marvin's children is the claim that their late father and his second wife, Beverlee, have improperly received trust corpus. These allegations, therefore, affect the interests of Marvin's estate and Beverlee. Because both the estate and Beverlee were represented by G & K, Span repeatedly contacted plaintiff to inquire about both plaintiff's and Marvin's actions regarding the trusts and the family's affairs. He explained that Marvin's children believed that Marvin's estate and Beverlee had received improper payments of trust corpus, and were demanding return thereof. Span attempted unsuccessfully to resolve the dispute.

E. The Sidney Litigation.

Because the Marvin children litigation could not be amicably resolved with G & K representing Marvin's Estate, Sidney

instituted an action against Marvin's estate and Beverlee (the "Sidney litigation") in August 1990. In this action, commenced by Sills and still pending in the Superior Court, Sidney is seeking to recover corpus of the Kanengiser Trust improperly received by Marvin and Beverlee. Morton Bunis, of the Sills firm, has been advised that plaintiff's firm (G & K) will be representing Beverlee and Marvin's estate in that action.

F. The Span Letter.

The entirety of plaintiff's claims in this libel action arise from the statements contained in the Span letter. Defendants contend that Span wrote this letter on October 4, 1990 in the course of Sills' representation of Sidney in the Marvin children litigation, the Sidney litigation, and two imminent proceedings arising out of plaintiff's involvement in the four rinks transaction.

By September 1990, Sidney and Alan Jacobson, acting on behalf of a majority of the interests in AOW (the trust created to distribute the proceeds from the four rinks transaction), informed Span of the details concerning plaintiff's involvement in the four rinks transaction. Sidney informed Span that plaintiff rendered legal services to the corporations which sold the four rinks and also claimed to have acted as broker in the transaction. For his brokerage services alone, plaintiff claimed a commission of approximately 3% of the total consideration, amounting to $200,000.

Sidney and Jacobson informed Span that plaintiff had charged a fee of $100,000 for legal services for the four rinks transaction. Thus, plaintiff was seeking $300,000 in total compensation from the four rinks transaction ($200,000 in commissions and $100,000 in legal fees). Sidney and Jacobson also told Span that plaintiff was seeking an additional $65,500 for other legal work previously performed for AOW. They sought Span's advice concerning plaintiff's claims.

Span advised Sidney and Jacobson that it had been settled law in New Jersey since at least 1981 that a lawyer cannot charge or collect a brokerage commission if he is not separately licensed as a real estate broker.*fn3 In addition, he informed Sidney and Jacobson that it is unethical for a lawyer to wear the hats of both attorney and broker in the same transaction, even if he were licensed as a real estate broker.*fn4 He further advised them that the legal fees claimed by plaintiff seemed excessive, and that fee arbitration under the auspices of the New Jersey State Bar Association (actually, the State Supreme Court which appoints fee arbitration committees) -- a quasi -judicial proceeding -- was available. In response, both Sidney and Jacobson authorized Span to make a formal demand upon plaintiff to return the brokerage fees he had already received, and to pursue all avenues of legal redress available.

Accordingly, Span made a written demand upon plaintiff to return whatever brokerage commissions that he had collected to which he allegedly was not entitled. Span further informed plaintiff that Sidney and Jacobson intended to pursue a fee arbitration proceeding to establish that the legal fees plaintiff was claiming were excessive.

Upon receipt of the Span letter, plaintiff invited Span to "call . . . for an appointment" at which they could "discuss the contents" of the letter. Span attempted to contact plaintiff, but his calls were ignored. Rather than "discuss the [matter]," plaintiff instituted the instant libel action and claim for legal fees.

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