March 4, 2008
CELESTE GUIA PINTO, PLAINTIFF/APPELLANT CROSS-RESPONDENT,
MCGOVERN, PROVOST & COLRICK, DEFENDANT/THIRD-PARTY PLAINTIFF/RESPONDENT CROSS-APPELLANT,
PAULO A. GUIA, THIRD-PARTY DEFENDANT.
On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, L-1251-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued: November 28, 2007
Before Judges Axelrad and Payne.
Plaintiff Celeste Pinto appeals from summary judgment dismissal of her legal malpractice complaint against her former attorney, Edward Colrick, and his law firm, McGovern, Provost & Colrick (collectively "MPC"). The Law Division dismissed the complaint on the ground that plaintiff's voluntary settlement of the underlying case as found by the Chancery Division barred her malpractice action as a matter of law based on the principles of Puder v. Buechel, 183 N.J. 428 (2005). On appeal, plaintiff argues the motion judge improperly made unsubstantiated observations of her credibility based on his review of the settlement of the underlying action that clouded his judgment and adversely impacted his decision. Plaintiff further contends summary judgment was improperly granted in view of the unrefuted sworn statements presented in opposition to the motion by herself and Jeffrey Rosen, the attorney representing her in the underlying settlement, as to her state of mind at the time of the settlement, which demonstrated she was facing a "litigation catastrophe." Plaintiff seeks reversal of summary judgment and remand to another judge for continuation of her malpractice action.
MPC cross-appeals from the court's May 26, 2006 order denying its motion to dismiss plaintiff's complaint with prejudice because of alleged deficiencies in the affidavit of merit. We are not persuaded that summary judgment was erroneously granted and affirm the court's January 5, 2007 order dismissing plaintiff's legal malpractice complaint. Accordingly, we need not address defendant's cross-appeal, and will not discuss the issue further in this opinion.
Plaintiff is a Portuguese national who has been in the United States since approximately 1988, but apparently is not conversant in English. She had employed the services of MPC in the purchase of five investment properties in Monmouth County in 2000-2001 and subsequently for related services. Because of the assistance of her son Paulo ("Paul") in the management of the properties, she wanted to devise him a 40% interest in her estate and only a 20% interest to each of her three remaining children. According to plaintiff, she told Paul, who is conversant in English, to have an attorney prepare a will for her; he contacted Colrick; and in December 2003, they went to the offices of MPC. Plaintiff contended Paul inaccurately translated Colrick's instructions and advised her in Portuguese that she was executing the will, but she later learned she was executing deeds that transferred the five properties from her sole ownership to herself and Paul as joint tenants.
In order to seek relief for the alleged wrong, plaintiff filed two actions. On March 26, 2004, plaintiff retained Rosen and filed suit against her son in the Chancery Division, alleging she was fraudulently induced into signing the deeds, and requesting the conveyances be set aside. Paul denied the allegations and counterclaimed, arguing he and his mother were business partners; he had contributed effort, labor and capital to the venture; and she had executed the deeds knowingly. On March l8, 2005, plaintiff also retained current counsel and filed a complaint in the Law Division against Colrick and MPC, alleging Colrick had breached his fiduciary duty in failing to advise her to obtain separate legal representation from her son and in failing to retain an independent interpreter for her.
The Chancery Division action was scheduled for trial before Judge Leher on June 6, 2005. Following a conference with counsel in chambers, the parties placed a settlement on the record through interpreters. The transcript reflects a detailed statement of the terms,*fn1 and a lengthy colloquy between the judge and plaintiff regarding her understanding and voluntary acceptance of the settlement, the waiver of her right to proceed to trial, and the potential impact of the settlement on her pending malpractice case, specifically that "someone may argue that because she settled this lawsuit, she does not have any damage." Judge Leher found plaintiff acted voluntarily, believed the settlement was fair, and understood the ramifications the settlement "may or may not have with respect to other litigation and [was] willing to accept those possible ramifications in light of this settlement . . . ." A consent judgment was entered on July 20, 2005, setting forth the specific terms of the agreement, and signed by both parties and their respective counsel. The order further provided that the court "retains jurisdiction to consider the matter further in the event the parties [are] unable to effect the terms of their settlement."
On January 20, 2006, pursuant to a motion filed by plaintiff's son, an order enforcing settlement was entered in the Chancery Division action. Both parties were represented by counsel and individually signed as consenting to the order. The order contained a similar provision to the settlement regarding the Chancery Division's retaining of jurisdiction.
In December 2006, MPC moved for summary judgment on plaintiff's Law Division complaint, arguing the tactical decision to settle the underlying action against her son barred her legal malpractice action based on the Supreme Court's decision in Puder. Plaintiff responded, raising for the first time, eighteen months after settlement, the issue of the voluntariness of the Chancery Division settlement. In opposition to the motion, plaintiff presented her certification and that of her attorney in the Chancery action. Rosen certified that during the settlement conference with Judge Lehrer, Paul's attorney declared his intention to cross-examine plaintiff regarding her use of an illegal social security number when obtaining the mortgages on the properties, to which the judge responded that such testimony at trial would trigger his judicial obligation to report under Sheridan v. Sheridan,*fn2 and urged Rosen to discuss the issue with his client. Rosen further certified he told plaintiff about the conversations and "[i]t was, in part, this fear that resulted in [plaintiff] agreeing to a settlement with her son" and "[w]ithout the Sheridan threat lurking, both I and [plaintiff] were fully prepared to proceed with a plenary hearing to prove her claims that she had been duped by her son, Paulo, into conveying to him an ownership interest in the five properties."
Plaintiff certified about the use of a social security number given to her by her husband when she arrived in the U.S., from that time through 2002, under the belief it was valid, and her disclosure to social security about the number and assignment of a new number following approval of her application for permanent residency status in 2002. She further explained she was prepared to proceed to trial in the Chancery action until Rosen had the post-conference conversation with her, and explained her "state of mind" at that time, in part, as follows:
My agreement to settle was neither voluntary nor without severe duress, believing that I would be arrested, [incarcerated, and possibly having my permanent residency status compromised]. To me this was frightening and chilling because I had through honest physical labor established a foundation for a modest living style in a count[r]y I have come to appreciate. The threat of losing it all was compelling in my decision to settle. . . .
Plaintiff noted her initial comment that the settlement was "not fair, but what else can I do?" during the colloquy with the Chancery judge, and acknowledged the ensuing colloquy in which the judge informed her she could proceed to trial and she agreed to accept the settlement. Plaintiff stated that "with the threat of being arrested, spending time in jail and possibly having [her] permanent residence permit revoked hovering over [her], [she] did not have a choice" not to settle the case.
Although plaintiff represented she did not voluntarily consent to the settlement of the underlying case because of her fear of Sheridan implications, she never moved before the Chancery Division judge to set that settlement aside. Moreover, she took the position at oral argument on the summary judgment motion that she "[did not] have to go back to Judge Lehrer and try to overturn the settlement in order to proceed with the malpractice." Nor did plaintiff argue to the Law Division judge that the underlying settlement should be set aside. Rather, plaintiff argued her situation was factually distinguishable from Puder, as she did not voluntarily make a "calculated decision" to settle the underlying case but did so only under the duress of a Sheridan threat. Thus, she argued the settlement should not be an absolute bar to her malpractice action but should be considered as mitigation of damages sustained by MPC's malpractice.
The motion judge noted the extensive dialogue between plaintiff and the Chancery Judge, and determined he was obligated to defer to Judge Lehrer's finding that plaintiff voluntarily entered into the settlement, believing it fair, and with understanding and acceptance of its potential ramifications on her malpractice action. He further noted plaintiff had not moved before the Chancery Division judge to set aside the settlement on the grounds now asserted in the malpractice action. The judge thus concluded that under Puder, plaintiff's malpractice case was barred as a matter of law, and by order of January 5, 2007, he granted summary judgment dismissal of plaintiff's complaint against MPC. These appeals ensued.
On appeal, plaintiff contends the motion judge's inappropriate and unsupported comments about plaintiff's understanding of English and overall credibility clouded his judgment and adversely affected his decision. She further argues that the certifications about her state of mind and the duress she was under from the Sheridan threat at the settlement of the Chancery action, which created a "litigation catastrophe," raised factual issues about the voluntariness of that settlement and distinguished her case from Puder. Therefore, the settlement of the underlying case should not automatically bar her malpractice action but should be considered only for mitigation of damages.
The motion judge made repeated, unsolicited comments indicating his incredulity of plaintiff's ability to speak English and of the merits of her claim of duress in settling the underlying case, as well as other determinations of fact adverse to plaintiff as the opposing party. These comments were unwarranted, inappropriate, and lacked foundation in fact; and were further contrary to the standards by which a summary judgment motion ought to be evaluated. That being said, however, we are satisfied the record supports the legal determination on summary judgment that plaintiff's settlement of her underlying Chancery action against her son bars her legal malpractice action against MPC.
In Ziegelheim v. Apollo, 128 N.J. 250 (1992), the Court reversed summary judgment dismissal of a legal malpractice action against a former matrimonial attorney despite the client agreeing on the record to a settlement and representing that she understood the terms, thought they were fair, and she was voluntarily entering into the agreement. Critical to the court's determination was: (1) Miriam Ziegelheim's claim that the professional incompetence leading to her improvident acceptance of the settlement was the attorney's own failure to discover hidden marital assets before negotiating and the negligent advice he gave her regarding the percentage of the marital estate she would likely be awarded if she went to trial, id. at 261-62, 265-66, and (2) the Family court's denial of her motion to set aside the divorce settlement agreement, leaving Ziegelheim only with her legal malpractice case, id. at 257-58.
In Puder, the client Kathleen Buechel responded to a collection action for unpaid legal fees by counterclaiming for malpractice, alleging her attorney negotiated an inadequate divorce settlement and failed to obtain informed consent before accepting it. Puder, supra, 183 N.J. at 430. During a plenary hearing on her husband's motion to enforce the settlement agreement, in which a new matrimonial attorney represented Buechel, a second divorce settlement was negotiated, substantially similar to the first one, which Buechel stated on the record was "acceptable" and a "fair compromise of the issues" in her matrimonial case. Id. at 433-34. The Supreme Court affirmed summary judgment dismissal of Buechel's malpractice counterclaim based on the public policy favoring conclusive settlements and the client's representations as to the acceptability and fairness of the second settlement, reflecting her satisfaction with the resolution of the underlying action. Id. at 437. The Court distinguished Ziegelheim, noting, among other items, that Buechel's malpractice claim was not her only remedy to the alleged malpractice. Id. at 442. Buechel could have allowed the trial court to decide whether the first agreement was enforceable, which might have alleviated the need to sue the former attorney for negligence, but instead, she made a "calculated decision" to accept a second settlement, negotiated by a new attorney. Id. at 442-43.
Moreover, because on the day Buechel accepted the second settlement, the trial court had not yet decided the motion and gave no indication whether or not the first agreement would be enforced, the Court found Buechel was not confronted with a "litigation catastrophe" that required her to accept a lesser settlement and pursue the perceived difference in future litigation. Id. at 440; cf. Covino v. Peck, 233 N.J. Super. 612, 619 (App. Div. 1989) (holding that a client's legal malpractice action instituted after his attorney failed to file suit in New Jersey within the statute of limitations was a reasonable response to a "legal catastrophe" and was not barred by the doctrine of mitigation of damages although the client could have filed suit against one of the underlying tortfeasors in Mississippi, which had a longer statute of limitations; the client was not required to litigate in an inconvenient forum in an attempt to extricate the defendant from his own wrongful act); Spaulding v. Hussain, 229 N.J. Super. 430, 444 (App. Div. 1988) (holding the plaintiff's inadequate settlement of his underlying claim at trial was a reasonable mitigation of damages in the professional malpractice action against his treating physician for failing to appear in court, as promised, because the plaintiff and his attorney were threatened with a "litigation catastrophe").
During the pendency of this appeal, we decided Prospect Rehab. Servs., Inc. v. Squitieri, 392 N.J. Super. 157 (App. Div.), certif. denied, 192 N.J. 293 (2007), in which we reversed summary judgment dismissal of a legal malpractice action filed after a voluntary settlement of the underlying case and dismissal of an appeal and several active lawsuits. We found the case was factually and legally distinguishable from Puder. Id. at 167. The plaintiff's principal never represented the settlement was a fair and satisfactory resolution of its underlying claims. Ibid. Moreover, like the client in Ziegelheim, the plaintiff unsuccessfully attempted to remedy its attorney's negligence in the trial court; it settled the underlying suit only after the trial court denied its new attorney's motion to amend the complaint to assert omitted claims that it contended constituted its former attorney's malpractice. Id. at 167-68. We held the plaintiff's choice to appeal the trial court's ruling and to file subsequent lawsuits against essentially identical corporate defendants asserting the precluded claims to preserve the statute of limitations pending appeal, and its subsequent decision, for a variety of reasons,*fn3 to settle before judicial determinations, did not preclude its malpractice claim as a matter of law. Ibid. We were satisfied the plaintiff had presented sufficient evidence that it was facing "legal catastrophes" resulting from its former attorney's alleged negligence and was entitled to a jury determination as to whether the plaintiff took reasonable steps to remedy such tortious conduct before pursuing its malpractice action under the mitigation principles of Spaulding and Covino. Id. at 168.
The facts, policy considerations, and equities of the present case are more akin to Puder than to Ziegelheim or Squitieri. Plaintiff, represented by an attorney other than the one she sued for malpractice, settled the underlying claim against her son on the day of trial. She testified on the record, through an interpreter, as to her understanding and voluntary acceptance of the settlement, the waiver of her right to proceed to trial, and her acknowledgement of the settlement's potential ramifications on her pending malpractice action. The only aspect plaintiff equivocated on was the "fairness" of the settlement, although she did state she "thought" it was "a fair and reasonable compromise to end [the] litigation." The Chancery judge made findings regarding plaintiff's understanding, acceptance and satisfaction with the resolution of the underlying action and with its impact on the pending malpractice case.
Plaintiff's claim against MPC was not her only remedy to the alleged malpractice. If, as plaintiff now asserts, her state of mind at the time she accepted the settlement was consumed with fears of arrest, incarceration and possible deportment based on Rosen's Sheridan discussion, she could have sought to vacate the settlement on duress or related grounds at any time during the intervening eighteen months.*fn4 The Chancery judge could have found the settlement with Paul to be invalid or unenforceable, enabling plaintiff to proceed to trial to vacate the deeds and potentially alleviating the need to sue MPC for malpractice. Plaintiff had a full and fair opportunity to litigate her damage claim before the Chancery judge, either on the day of trial, or in a subsequent motion to vacate the settlement. Under the circumstances of this case, we are satisfied plaintiff's "tactical decision" not to do so is fatal to her ability to pursue the malpractice claim.
Nor are we persuaded that plaintiff being confronted with the Sheridan issue is a "litigation catastrophe" justifying acceptance of a lesser settlement and pursuing the perceived difference in malpractice litigation. In Spaulding, Covino, and Squitieri, the defendants' tortious conduct caused the plaintiffs to lose complete relief in the underlying case - in Spaulding, the defendant physician, the plaintiff's key witness, did not show up for trial; in Covino, the defendant attorney failed to file suit within New Jersey within the statute of limitations; and in Prospect, the defendant attorney allegedly failed to timely assert additional claims in the complaint. Here, it is plaintiff's own conduct in placing herself in a potential Sheridan position that, accepting her and Rosen's certifications, compelled her to settle the underlying lawsuit with her son, and plaintiff's own decision, with the advice of new counsel, not to move to set aside the settlement, that caused her to lose complete relief in the underlying case.