Decided. As Corrected March 17 1994.: December 23, 1993.
On appeal from the Superior Court of New Jersey, Law Division, Essex County.
Michels, Skillman and Kestin. The opinion of the court was delivered by Michels, P.J.A.D.
Plaintiff Michael Falzarano, individually and as the general partner in Journey's End, appeals from an order of the Law Division awarding defendant Theodore W. Daunno counsel fees of $5,000 pursuant to N.J.S.A. 2A:15-59.1, the so-called "frivolous litigation statute."
Plaintiff instituted this action to recover damages sustained as a result of the alleged legal malpractice of defendants in connection with the sale of his restaurant, particularly their failure to timely
record the collateral security documents issued in connection therewith. Plaintiff charged defendant Theodore J. Leo, Esq. and his law firm, defendant Leo, Johnson & Pasqueletto, who represented him in the sale, with legal malpractice by failing to obtain and timely record collateral security documents, consisting of mortgages and Uniform Commercial Code security agreements and financing statements. Plaintiff also charged Leo with malpractice for entrusting the recording of the security documents to defendant Suzanne B. Sherman, Esq., an associate in and an employee of defendant Citrino, Balsam, DiBiasi & Daunno (The Citrino firm), who represented the buyer of the restaurant. Plaintiff joined as defendants the individual partners, including Mr. Daunno, and the estate of a deceased partner of the Citrino law firm, contending that they were liable under a theory of vicarious liability for Ms. Sherman's alleged failure to timely record plaintiff's security documents after agreeing to do so.
After issue was joined, Mr. Daunno moved for summary judgment on the ground that he was not a partner in the Citrino law firm and that since he was only a co-employee of Ms. Sherman, he was not vicariously liable for her alleged malpractice. The Citrino law firm opposed the motion, arguing that Mr. Daunno was in fact a partner in the firm and could be held vicariously liable for Ms. Sherman's conduct. The trial court reserved decision on the motion and proceeded with the trial. On the second day of trial, the claim was settled. According to plaintiff, the terms and conditions of the settlement were set forth in a release that included a confidentiality clause, precluding disclosure of its terms and conditions. However, it appears that no payment was made by or on behalf of Mr. Daunno individually even though his law firm, through its professional liability carrier, contributed to the settlement.
Following settlement, Mr. Daunno applied for counsel fees against plaintiff pursuant to N.J.S.A. 2A:15-59.1. Mr. Daunno claimed that the action against him was frivolous and sought to recover $5,000, which was the amount of a deductible that he was required to pay his professional liability carrier for the counsel
fees it incurred in representing him in this matter. During argument on the motion, the trial court informed the parties that it had initially declined to rule on Mr. Daunno's summary judgment motion, but later it denied the motion. The trial court also informed the parties that it could not find a copy of the order and that it was not even certain whether the order had been sent to counsel. Notwithstanding the trial court's denial of the summary judgment, and without making a specific finding that plaintiff's action against Mr. Daunno was frivolous, the trial court awarded Mr. Daunno counsel fees of $5,000 pursuant to N.J.S.A. 2A:15-59.1. This appeal followed.
Plaintiff seeks a reversal of the order, contending generally that the trial court erred in awarding any counsel fees because Mr. Daunno, as a named partner in the Citrino law firm, was vicariously liable for the alleged legal malpractice of Ms. Sherman. He argues, therefore, that the action against Mr. Daunno was not frivolous within the meaning and intendment of the statute. We agree and reverse.
N.J.S.A. 2A:15-59.1, which was enacted in 1988 by L. 1988, c. 46, § 1, provides:
a. A party who prevails in a civil action, either as plaintiff or defendant, against any other party may be awarded all reasonable litigation costs and reasonable attorney fees, if the Judge finds at any time during the proceedings or upon judgment that a complaint, ...