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Karpovich v. Barbarula

July 16, 1997


On certification to the Superior Court, Appellate Division.

The opinion of the Court was delivered by Pollock, J. Chief Justice. Poritz and Justices Handler, O'hern, Garibaldi, and Coleman join in Justice POLLOCK's opinion. Justice Stein has filed a separate opinion, Concurring in part and Dissenting in part.

The opinion of the court was delivered by: Pollock

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

Karpovich v. Barbarula, 150 N.J. 473, 696 A.2d 659 (A-110)

(NOTE: This is a companion case to Olds v. Donnelly and Donohue v. Kuhn, also decided today.)

Pollock, J., writing for a majority of the Court.

The basic issue in this case is whether the application of the entire controversy doctrine precludes plaintiff, Mary E. Karpovich from pursuing this attorney-malpractice action.

On July 1992, Karpovich delivered $397,0000 to an investment counselor, James Burgio, to invest on her behalf. Burgio loaned part of the money to Our Gang, Inc., and converted the rest for his personal use. Karpovich alleges that John M. Barbarula and Joseph Affinito performed legal work for her in connection with the Our Gang loan.

Our Gang subsequently defaulted on the loan. Karpovich and Burgio signed a settlement agreement in which Burgio agreed to repay Karpovich. Burgio later defaulted on the agreement, and Karpovich sued him. Seven days later, the Law Division entered a consent judgment against Burgio. Karpovich could not collect on the judgment, as Burgio became insolvent.

Karpovich instituted the present malpractice suit in August 1994. She alleges that defendants undertook to represent her in the loan to Our Gang at the request of Burgio and they negligently failed to prepare a security agreement or to timely file financing statements.

Defendants moved for summary judgment on entire controversy grounds. The trial court granted the motion and dismissed the claims with prejudice. It noted that Karpovich knew of the existence of a claim against defendants at the time she sued Burgio, but determined to split the actions. The Appellate Division affirmed. It concluded that Karpovich's intent to split the litigation was obvious. It further held that Karpovich prejudiced defendants by depriving them of discovery and of the ability to assert a cross-claim for contribution against Burgio, who later became insolvent.

HELD: The entire controversy doctrine does not compel either notice to the trial court of the possible legal-malpractice claim or the joinder of the attorney in the underlying action that gives rise to that claim.

1. The purposes of the entire controversy doctrine are to promote a complete determination of a matter, to avoid prejudice to absent parties, and to promote judicial economy. The goals remain fairness to the parties and fairness to the system of judicial administration. When considering fairness to the party against whom the entire controversy doctrine is invoked, one question is whether or not the party had a fair and reasonable opportunity to have fully litigated that claim in the original action. The settlement of Karpovich's claim with Burgio and the subsequent consent judgment did not afford Karpovich an adequate opportunity to litigate her malpractice claims against Barbarula and Affinito. Only seven days transpired between the filing of the Burgio action and the entry of a consent judgment. The consent judgment involved virtually no judicial resources. Judicial involvement was so minimal as not to warrant the invocation of the entire controversy doctrine. Further, the Court declines to rule that a violation of Rule 4:5-1(b)(2) necessarily mandates dismissal. A court must exercise its discretion and consider the purposes of the entire controversy doctrine before barring a subsequent action. (pp. 7-11)

The judgment of the Appellate Division is REVERSED.

JUSTICE STEIN, Concurring in part and Dissenting in part, is of the view that the entire controversy doctrine should no longer bar suits against parties omitted from prior litigation.


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