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Ziegelheim v. Stephen Apollo

Decided: June 23, 1992.

MIRIAM ZIEGELHEIM, PLAINTIFF-RESPONDENT AND CROSS-APPELLANT,
v.
STEPHEN APOLLO, INDIVIDUALLY AND STEPHEN APOLLO, A PROFESSIONAL CORPORATION, DEFENDANTS-APPELLANTS AND CROSS-RESPONDENTS.



On certification to the Superior Court, Appellate Division.

Handler, Wilentz, Pollock, O'Hern, Stein, Clifford, Garibaldi

Handler

The opinion of the court was delivered by

HANDLER, J.

In this case we must decide what duties an attorney owes a client when negotiating a settlement and whether a client's agreement to a negotiated settlement bars her from recovering from her attorney for the negligent handling of her case.

I

Miriam Ziegelheim, plaintiff, and Irvin Ziegelheim were married on September 11, 1955, and were divorced by a final decree dated August 5, 1983. During the early years of their marriage, Mrs. Ziegelheim was gainfully employed, assisting her husband in his business ventures and working for other employers as well. After the Ziegelheims adopted two infant sons she became a full-time homemaker. The couple separated in August 1979.

In September 1979, Mrs. Ziegelheim retained defendant, attorney Stephen Apollo, to represent her in her anticipated divorce action. Because this appeal relates to the trial court's granting of summary judgment against plaintiff, we assume for the purposes of our decision that all of the facts she alleges relating to Apollo's handling of her divorce are true. According to Mrs. Ziegelheim, she and Apollo met on several occasions to plan various aspects of her case. She told him about all of the marital and separate assets of which she was aware, and they discussed her suspicion the Mr. Ziegelheim was either concealing or dissipating certain other assets as well. In particular, Mrs. Ziegelheim told Apollo that she thought her husband had $500,000 hidden in the form of cash savings and bonds. Accordingly, she asked Apollo to make a thorough inquiry into her husband's assets, including cash, bonds, patents, stocks, pensions, life insurance, profit-sharing plans, and real estate.

When Mrs. Ziegelheim contacted Apollo, she also was aware of a tax deficiency that had been assessed by the Internal Revenue Service against the Ziegelheims on their joint returns. She specifically advised Apollo of her desire that any property settlement agreement absolve her of responsibility for the deficiency. She also insisted that the divorce end with her retention of the marital home, free and clear, with Mr. Ziegelheim assuming the mortgage; that she be awarded $45,630 per year in alimony (with adjustments for inflation); and that Mr. Ziegelheim obtain a life insurance policy in the amount of $500,000 to secure payment of alimony.

In September 1990, Irvin Ziegelheim filed for divorce in the Superior Court, Chancery Division. Through Apollo, Mrs. Ziegelheim filed her answer and a counterclaim. Because both Mr. and Mrs. Ziegelheim sought to terminate their marriage, the only issues to be resolved at the consolidated trial were the payment of alimony, the identification of the marital property, and the equitable distribution of that property.

According to Mrs. Ziegelheim, Apollo failed to discover important information about her husband's assets before entering into settlement negotiations with Mr. Ziegelheim's attorney, Sheldon Liebowitz. Apollo hired an accountant who valued the marital estate at approximately $2,413,000. Mrs. Ziegelheim claims that the accountant substantially underestimated the estate because of several oversights by Apollo, including his failure to locate a bank vault owned by Mr. Ziegelheim; to locate or determine the value of his tax-free municipal bonds; to verify the value of his profit-sharing plan at Pilot Woodworking, a company in which he was the primary shareholder; to search for an estimated $500,000 in savings; to contact the United States Patent Office to verify the existence of certain patents he held; to inquire into a $1,000,000 life insurance policy naming an associate of his as the beneficiary; to verify the value of certain lake-front property; and to verify the value of his stock holdings. She alleges that had Apollo made a proper inquiry, it would have been apparent that the marital estate was worth approximately $2,562,000, or about $149,000 more than the accountant found.

On November 4, 1982, Apollo, Mrs. Ziegelheim, and her accountant commenced settlement Discussions with Liebowitz, Mr. Ziegelheim, and Mr. Ziegelheim's accountant. Several proposals and counter-proposals were made over several days, and the Discussions culminated on November 8, 1982, when the parties entered into a property settlement agreement governing distribution of the marital estate as well as arrangements for payment of alimony. Later that day, the agreement was orally entered into the record before the Judge presiding over the divorce action. Liebowitz recited to the court what he understood to be the terms of the settlement, asking Apollo to interrupt if the recitation contained any errors. Apollo never interrupted to indicate that he thought Liebowitz's representations were inaccurate. Under the agreement, Mrs. Ziegelheim was granted alimony for fifteen years, totalling approximately $330,000 and averaging approximately $22,000 per year. Mrs. Ziegelheim received the marital home and Mr. Ziegelheim received the couple's lake house. (The parties subsequently disagreed over which of them was to assume the mortgage on the marital home; two transcripts of the hearing differed on the point. The conflict was resolved at a subsequent hearing, in which the court determined that audio recordings of Liebowitz's recitation revealed that Mrs. Ziegelheim was to assume the mortgage.) The Ziegelheim's other personal property also was allocated between them. Mrs. Ziegelheim received shares in Pilot Woodworking, which the company would redeem according to a set schedule, and Mr. Ziegelheim promised to contribute $400 per year toward the purchase of a life term insurance policy. Mr. Ziegelheim also agreed to indemnify Mrs. Ziegelheim for any tax liabilities incurred for the years 1979, 1980, and 1981 "except for liabilities created by Mrs. Ziegelheim." In sum, Mrs. Ziegelheim was to receive approximately $333,000 in alimony, $6,000 in contributions to insurance costs, and $324,000 in property, the last figure representing approximately fourteen percent of the value of the estate (as appraised by Apollo and the accountant). Mr. Ziegelheim was to receive approximately $2,088,000 in property; approximately eighty-six percent of the value of the estate.

When testifying before the court immediately after the settlement was read into the record, both Mrs. Ziegelheim and Mr. Ziegelheim stated that they understood the agreement, that they thought it was fair, and that they entered into it voluntarily. Mrs. Ziegelheim now asserts, however, that she accepted the agreement only after Apollo advised her that wives could expect to receive no more than ten to twenty percent of the marital estate if they went to trial. She claims that Apollo's estimate was unduly pessimistic and did not comport with the advice that a reasonably competent attorney would have given under the circumstances. Had she been advised competently, she says, she would not have accepted the settlement.

The settlement was not finalized until August 2, 1983. According to Mrs. Ziegelheim, the written agreement failed to conform with the oral agreement in that it did not indemnify her for tax deficiencies for which she claims her former husband was wholly responsible. She also claims that the nine-month delay in putting the agreement into final written form was unnecessary, and that it caused her to lose one year's interest on the first $75,000 owed to her pursuant to the stock-redemption clause.

In 1984, Mrs. Ziegelheim filed a malpractice action against Apollo and contemporaneously sought to reopen the divorce decree and set aside the property settlement. While the motion to set aside the settlement was pending, the malpractice action was called to trial. Because the malpractice action was premature in the absence of a ruling on the motion to reopen the divorce decree, she voluntarily dismissed the action against Apollo in April 1987 and subsequently filed a second malpractice claim against him. The family court denied her motion to set aside the settlement agreement, concluding that the record demonstrated that "both plaintiff and defendant unequivocally accepted the agreement and felt that it was fair." In July 1988, the Appellate Division affirmed, stating that the parties had "entered into settlement after extensive ...


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