August 24, 2007
PATRICIA KOONS, AS ADMINISTRATRIX AD PROSEQUENDUM OF THE ESTATE OF WILLIAM T. KOONS ON BEHALF OF WILLIAM J. KOONS, AND WILLIAM J. KOONS INDIVIDUALLY, PLAINTIFFS-APPELLANTS,
EDPATCO, INC.; EDWARD HAMROCK; PATRICIA KELLY; LICENSED BEVERAGE INSURANCE EXCHANGE; AND PRINCETON INSURANCE CO., DEFENDANTS-RESPONDENTS, AND ESTATE OF RICHARD L. KOONS, DEFENDANT.
On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, L-8011-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued May 2, 2007
Before Judges A. A. Rodríguez and Sabatino.
In the early hours of July 6, 1988, William T. Koons (decedent) and his brother, Richard L. Koons, died in a one-vehicle motorcycle accident after consuming alcoholic beverages at a bar known as "The Ground Floor," owned by defendant EDPATCO, Inc. (EDPATCO), a closely-held corporation with two shareholders, Edward Hamrock and Patricia Kelly. Decedent left a wife, Patricia Koons (widow) and a four-year old son, William J. Koons (son). Represented by A. Kenneth Weiner, Esq., the widow filed the first lawsuit against "The Ground Floor" only, however, EDPATCO and its shareholders were not named as defendants. This first suit resulted in a default judgment in the amount of $1,486,073.97, including prejudgment interest. However, the judgment was uncollectible. Shortly after this action was filed, EDPATCO filed for bankruptcy under Chapter Seven.
Represented by present counsel, the widow sued Weiner, his law firm and associates for legal malpractice, due to the inability to collect upon the default judgment. During the course of this legal malpractice suit, plaintiffs deposed Hamrock, who disclosed the whereabouts of Kelly. However, plaintiffs did not move to amend the default judgment nor to take Kelly's deposition. This suit concluded with a settlement of $270,000. The son was represented by a guardian ad litem, David B. Rubin, Esq. Rubin reviewed the settlement and wrote a letter to the court on behalf of William J. Koons indicating that the settlement was "fair and equitable."
This current action for wrongful death was filed by the widow and the son, who is now an adult (collectively "plaintiffs"), against: EDPATCO; Hamrock; Kelly; Licensed Beverage Insurance Exchange (LBIE), EDPATCO's insurer at the time of the accident; and LBIE's successor, Princeton Insurance Company (PIC) (collectively referred to in this opinion as "defendants").*fn1 Defendants answered and moved to dismiss the complaint with prejudice. Plaintiffs cross-moved for summary judgment, arguing that LaFage v. Jani, 166 N.J. 412 (2001), tolled the statute of limitations for wrongful death actions for minors. Judge Phillip Lewis Paley granted defendants' motion, dismissed the complaint with prejudice and denied plaintiffs' motion for summary judgment.
On appeal, plaintiffs contend that they have "a valid judgment and the court should allow collection against [PIC]." We disagree. The judgment is valid only against "The Ground Floor," which is a trade name. Collection of the judgment is not valid against PIC. First, there is no direct claim against PIC, which is incorrectly identified as a joint tortfeasor. Second, the PIC policy is a "claims made" policy and not an "occurrence" type policy. It is undisputed that no notice was given during the renewal period. See Resolution Trust Corp. v. Moskowitz, 868 F. Supp. 634 (D.N.J. 1994) (holding that the insured must suffer the loss and report the claim within the policy period in order to recover under a "claims made" policy). Moreover, we adopt PIC's argument that the proper procedure to enforce the judgment against PIC is to file a declaratory judgment action rather than to proceed summarily to enforce a judgment against its insured. Given the above conclusion, we need not address the lack of proper notice argument raised by PIC. That issue would be properly explored in a declaratory judgment action.
Plaintiffs also contend that "[t]he res judicata issue has two possibilities": (1) service was ineffective and therefore no adjudication occurred rending the judgment entered void; or (2) service was effective, collection efforts were abandoned, the judgment remains in full force and effect and PIC, as successor, is liable for the policy limits. We disagree with both the way the issue is stated and with the argument.
First, the default judgment, unless and until it is set aside, is res judicata with respect to the parties and the issues joined therein. That is a different argument than urging that if the judgment is valid, PIC must pay it. As stated above, even if the judgment is valid against "The Ground Floor," PIC does not automatically have to satisfy it. If the default judgment is void, it does not mean that the period of limitations against EDPATCO, Inc., Hamrock and Kelly has been tolled. In our view, the statute of limitations as to them has run. Therefore, their insured, PIC, has no duty to pay on a barred claim against them.
Moreover, we also reject plaintiffs' claim that the statute of limitations has not run against the son. In LaFage v. Jani, 166 N.J. 412 (2001), plaintiff's complaint was filed two years and twenty seven days following the death of decedent. Id. at 418. The Supreme Court held that for reasons of fairness and equity, the legislative intent behind the Wrongful Death Act, N.J.S.A. 2A:31-1 to -6, permits equitable tolling of its two-year statute of limitations for minors whose wrongful death claims were filed twenty-seven days late. Id. at 426. However, this holding is in the context of a minor's first filing. Id. at 418.
Here, the son's claim was asserted by his mother in the first action. Hence, that precluded a second action. In Kubiak v. Robert Wood Johnson University Hospital, 332 N.J. Super. 230 (App. Div. 2000), we held that, although the two-year personal injury statute of limitations, N.J.S.A. 2A:14-21, is tolled during an injured person's minority, once an action is filed on behalf of the minor, failure to comply with the affidavit of merit statute as required by N.J.S.A. 2A:53A-27, will result in a dismissal with prejudice. Id. at 233. The same governing principle applies here.
Plaintiff also contends that, "[d]efendants reap no benefit of the Weiner settlement since it was a separate independent tort." We disagree.
In a legal malpractice claim, the goal "is to put a plaintiff in as good a position as he [or she] would have been had the [attorney] kept his [or her] contract." Bailey v. Pocaro & Pocaro, 305 N.J. Super. 1, 5 (App. Div. 1997) (quoting Saffer v. Willoughby, 143 N.J. 256, 271 (1996)). For that reason:
Plaintiff's loss proximately resulting from the attorney's malpractice is deemed to be measured only by the amount of the judgment that could have been collected against the main defendant. To that extent evidence of the main defendant's financial status and solvency may be considered, although it is not entirely clear as to the period of time that should be taken into account for that purpose. [Hoppe v. Ranzini, 158 N.J. Super. 158, 165 (App. Div. 1978) (emphasis added).]
Thus, in a legal malpractice action, plaintiff recovers from the negligent attorney: 1) what they could have recovered from the underlying claim; 2) they are not responsible to pay for any of the negligent attorney's fees from the original action; and 3) they are entitled to recover from the negligent attorney, present attorney fees for litigating the legal malpractice action. Saffer, supra, 143 N.J. at 269-70; Distefano v. Greenstone, 357 N.J. Super. 352, 360 (App. Div.), certif. denied, 176 N.J. 278 (2003).
Generally, plaintiff must show such damages by "introducing evidence establishing the viability and worth of the claim that was irredeemably lost." Gautam v. DeLuca, 215 N.J. Super. 388, 397 (App. Div. 1987). Hence, it follows that the legal malpractice judgment is in place of, not in addition to, the lost judgment from the original action; in order to protect against an unjust double recovery. See Grunwald v. Bronkesh, 131 N.J. 483, 492 (1993) (finding that "a legal-malpractice action accrues when an attorney's breach of professional duty proximately causes a plaintiff's damages"); see e.g., Johns-Manville Products Corp. v. Dronebarger, 211 N.J. Super. 520, 526 (Law Div. 1986) (holding that in a workers' compensation case, an injured worker is not entitled to recover both workers' compensation from their employer and also to recover from their attorney for failure to prosecute a third-party action); Cf. Donohue v. Kuhn, 150 N.J. 484 (1997) (reaffirming the holding of Olds v. Donnelly, 150 N.J. 424 (1997) that the entire controversy doctrine does not compel joinder of legal malpractice claims in underlying actions) (emphasis added).
Here, the widow sued Weiner on behalf of the Estate and her son, for damages resulting from Weiner's mishandling of their wrongful death claim. The settlement represents the damages that they could have recovered against EDPATCO, Inc., Hamrock and Kelly. In order to avoid a double recovery, PIC, if required to pay at all, must receive a credit for the $270,000 legal malpractice settlement.