On appeal from Superior Court of New Jersey, Law Division, Morris County.
Approved for Publication May 23, 1995.
Before Judges Brody, A.m. Stein and P.g. Levy. The opinion of the court was delivered by Brody, P.j.a.d.
The opinion of the court was delivered by: Brody
This is an action for legal malpractice. We granted defendants' motion for leave to appeal from an order for a partial new trial. After an eleven-week trial, the jury found by its answers to special interrogatories that there was malpractice, but that the malpractice did not proximately cause plaintiffs' losses. The trial Judge concluded that the issue of proximate cause must be retried because his instructions may have misled the jury. We now affirm with some modification and a sharpening of the analysis.
Defendant Carleton Kemph, Esq. (hereinafter defendant), on behalf of his law firm, defendant Hannoch Weisman, P.C., *fn1 represented a partnership (hereinafter plaintiffs), trading as Conklin Farms, in the sale of 117 acres of undeveloped land in Montville Township. One of the partners, Frank Conklin, has since died. His estate is represented in this action by its executrix. Plaintiffs were using the property profitably for mining sand and gravel when the Township indicated a willingness to rezone it to satisfy its legal obligation to provide space for low and middle income housing. The rezoning presented an opportunity to sell the property at a premium price.
Under the contract of sale, Longview Estates, the buyer, agreed to pay $12,000,000 for the property, $3,000,000 to be paid in cash at or before closing. The balance was to be secured by a purchase-money mortgage to plaintiffs. Plaintiffs agreed to subordinate their mortgage to one or more institutional construction-money mortgages and, by amendment to the contract, to a mortgage that secured a loan the buyer obtained to raise the cash due at closing. Plaintiffs were also secured by personal guarantees of the buyer's principals.
The sale closed without incident. The development, however, failed. The property was foreclosed by mortgage lenders who benefited from plaintiffs' subordination agreement. The foreclosure sale left no equity for plaintiffs. Meanwhile, plaintiffs' buyer and the guarantors all filed for bankruptcy protection. As a result, plaintiffs sustained a substantial loss.
The major claim in this action is that defendant's explanations to plaintiffs of the meaning and risks of the subordination agreement were inadequate and inaccurate. Plaintiffs also blamed defendant for failing to assure them more protection in the subordination agreement. They claim that defendant should have insisted during negotiations that there be a cap in the amount of the construction loans and that the property subject to the construction mortgages be limited to that portion of the property under immediate construction.
The jury absolved defendant and his firm of malpractice respecting the level of protection afforded plaintiffs in the subordination agreement. As to the claim of inadequate explanations, the jury answered "yes" to the following special interrogatory:
Were Carleton R. Kemph and Hannoch Weisman negligent in representing the Conklin Farm partnership in connection with explaining subordination and the risks associated with subordination?
However, the jury answered "no" to the next interrogatory:
Was the negligence of Carleton R. Kemph and Hannoch Weisman a proximate cause of damage suffered by the Conklin Farm partnership?
Most of the Judge's charge on the issue of proximate causation, which included an explanation of "intervening cause," was abstract "boiler plate." Although technically correct, that portion of the charge had limited value to the jury because it did not apply difficult abstract concepts to the facts of the case. The trial Judge concluded that he may have misled the jury in the brief portion of ...