On appeal from the Superior Court of New Jersey, Law Division, Essex County.
Approved for Publication March 7, 1996.
Before Judges Pressler, Keefe and Wefing. The opinion of the court was delivered by Pressler, P.j.a.d.
The opinion of the court was delivered by: Pressler
The opinion of the court was delivered by
Plaintiff Mary Perry, the alternate executrix of the estate of Madelyn R. Angus, appeals from an order of the Law Division dismissing, on entire controversy grounds, her professional negligence action against defendant La Vecchia and Zarro, the accountant partnership that had employed defendant Vincent P. Tuzzio, plaintiff's predecessor executor, and defendant Enzo La Vecchia, one of the partners. We are persuaded that the entire controversy doctrine, whose application here rested upon an earlier probate action, cannot reasonably be invoked under the circumstances of this case to bar the Law Division action. Accordingly, we reverse and remand.
This litigation is attended by an anomalous and tortuous procedural background. Defendant Tuzzio, an accountant employed by defendant La Vecchia and Zarro, was decedent's business advisor in whom she evidently placed considerable confidence. She had, in fact, given him a limited power of attorney during her lifetime, authorizing him to withdraw funds from her bank accounts. Decedent also named him as executor of her will, left him a bequest of $40,000, and devised the residuary estate in equal shares to a charity and to plaintiff, whom she named as alternate executor. Decedent, then elderly, died in 1988, about a year after she executed her will. Tuzzio qualified as executor, and letters testamentary were issued to him.
During the course of the administration of the estate, plaintiff learned that Tuzzio had used decedent's funds during her lifetime to make for her an imprudent unsecured loan of $80,000 to clients of his firm to enable them to purchase a home. He also negotiated a consideration for himself to be paid by the borrowers for his having obtained the loan for them. Accordingly, in July 1990, plaintiff, by complaint and order to show cause filed in the probate action, sought Tuzzio's removal as executor because, among other reasons, the estate apparently had a claim against him arising out of that transaction. Tuzzio filed an answer denying wrongdoing. Eventually, however, he agreed to endorse a consent order substituting plaintiff as executrix, requiring him to turn over the estate's assets to her, and requiring him to settle his account.
In September 1991, Tuzzio filed his complaint to settle his account pursuant to R. 4:87. The loan was listed as an asset of the estate at its face value, although by that time the borrowers had long since defaulted, the purchase money mortgage on the house had been foreclosed, and the borrowers had applied for bankruptcy protection. Plaintiff filed exceptions to the account seeking to surcharge Tuzzio for the loss of the principal of the loan, to deny him executor commissions for the period of his service, to recoup, by way of surcharge, the accounting fees previously paid to him and his firm and to require him to repay to the estate the amount of his bequest.
An evidential hearing ensued. All the issues raised by the exceptions were there addressed, even though Tuzzio's conduct as executor was intertwined with his actions as decedent's financial advisor during her lifetime. The court rejected Tuzzio's contention that the claims based on his pre-executorship conduct should not be tried as part of the exception proceeding as a matter of procedural due process, the proper allocation of judicial business, and the orderly trial of causes of action. Following the evidential hearing, the court entered an order surcharging Tuzzio for the loss sustained by the estate as a result of the loan and disallowing executor and accountant fees. He was not required to disgorge his bequest.
Tuzzio appealed, and by our opinion under docket number A-1671-92T1, we affirmed. We were satisfied that the evidence supported the trial Judge's findings and Conclusions. With respect to Tuzzio's procedural challenges, we recognized the procedural anomaly in trying Tuzzio's pre-executorship conduct as part of the exception proceeding. We concluded, however, that there was no resultant inJustice to him because of his full and fair opportunity to litigate the issue and because of the nexus between that conduct and his conduct as executor. That is to say, the exception essentially challenged the inclusion of the face amount of the loan as an asset of the estate. We agreed with the trial Judge that litigation of that challenge fairly required consideration of all the facts respecting Tuzzio's involvement with that listed asset.
While Tuzzio's appeal was pending, plaintiff brought this professional negligence action against the defendant partnership that had employed Tuzzio during the time of these events. Basically, she sought recovery against them on respondeat superior and negligent supervision theories, Tuzzio having apparently himself become judgment proof. Defendant moved for summary judgment dismissing the complaint on the ground of the entire controversy doctrine, and plaintiff cross moved for summary judgment of liability based on the doctrine of collateral estoppel. The court granted defendant's motion and denied plaintiff's. Plaintiff appeals.
We have no doubt that the court was correct in rejecting plaintiff's collateral estoppel claim. We are also satisfied, however, that it erred in dismissing her action on entire controversy grounds. In sum, we conclude that plaintiff has the right to litigate her claims against defendants, and that defendants have the right to defend against them unburdened by any fact or issue preclusion.
We appreciate the far reach accorded the entire controversy doctrine by Cogdell v. Hospital Center at Orange, 116 N.J. 7, 560 A.2d 1169 (1989), and its more recent progeny, namely, Mortgagelinq Corp. v. Commonwealth Land Title, 142 N.J. 336, 662 A.2d 536 (1995); Mystic Isle Development Corp. v. Perskie & Nehmad, 142 N.J. 310, 662 A.2d 523 (1995); Circle Chevrolet v. Giordano, Halleran & Ciesla, 142 N.J. 280, 662 A.2d 509 (1995); and DiTrolio v. Antiles, 142 N.J. 253, 662 A.2d 494 (1995). We recognize that the doctrine places upon parties the obligation to join in a single litigation not only all of the separate components of their controversy but also all other parties against whom claims germane to that controversy might be brought. We also recognize that the penalty for failure to so join either issues or parties is the preclusion of subsequent litigation against those parties and the raising of those claims. We therefore have no doubt that if ...