March 25, 2008
DONALD W. RINALDO, PLAINTIFF-RESPONDENT/ CROSS-APPELLANT,
GARY E. SOMMER, DEFENDANT/THIRD-PARTY PLAINTIFF-APPELLANT/ CROSS-RESPONDENT,
ROBERT VREELAND, THIRD-PARTY DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Law Division, Ocean County, L-1668-03.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued telephonically January 22, 2008
Before Judges Coburn, Fuentes and Chambers.
Defendant Gary Sommer, appeals from the trial court's order of October 18, 2006, which denied Sommer's motion to substitute Butchris, Inc. as a named defendant-counterclaimant and third-party plaintiff. The order also dismissed Sommer's counterclaim and third-party complaint. We reverse, finding that Sommer should have been able to substitute Butchris, Inc. as a named counterclaimant and third-party plaintiff. Accordingly, the counterclaim and third-party complaint should not have been dismissed.
Plaintiff filed a cross-appeal from the trial court's order of October 18, 2006, contending that the trial judge failed to rule on whether the legal malpractice claims of Butchris, Inc. belong to the bankruptcy trustee and whether the claim is barred by the statute of limitations. We decline to address these issues. Once the trial court refused to allow the amendment to bring Butchris, Inc. into the case, these issues regarding Butchris, Inc. became moot. Now that this court is allowing the amendment, these issues may be raised again below.
This litigation began on April 1, 2003, when Rinaldo, formerly a practicing attorney, filed a complaint to collect from Sommer, his former client, certain expert fees incurred while representing Sommer in a real estate matter. In July 2003, Sommer filed a counterclaim against Rinaldo and a third-party complaint against third-party defendant Robert Vreeland, an attorney. In those pleadings, Sommer alleged that Rinaldo and Vreeland had committed malpractice when they represented Sommer's corporation, Butchris, Inc., in a bankruptcy matter. This bankruptcy matter was separate from the real estate transaction involved in Rinaldo's complaint. Sommers asserted that the legal malpractice claims had been assigned to him by the corporation.
In July, 2006, Rinaldo moved to dismiss the counterclaim and Vreeland moved to dismiss the third-party complaint. The motions raised a number of arguments, including the contention that Sommer, an individual, could not assert the claims of the corporation and that any attempt to assign the malpractice claims to him was void. Sommer moved, under Rules 4:9-1 and 4:9-3, to amend his pleadings and name Butchris, Inc. as a defendant-counterclaimant and third-party plaintiff.
In a written decision dated October 18, 2006, the trial court held that Sommer could not assert the claims of the corporation and denied Sommer's motion to add Butchris, Inc. to the pleadings. Since Sommer could not assert the claims of the corporation, the trial court granted Rinaldo and Vreeland's motions for dismissal of the legal malpractice claims against them.
We concur with the trial court's decision that the corporation could not assign its legal malpractice claims to Sommer. A legal malpractice claim is a negligence action, and hence sounds in tort. McGrogan v. Till, 167 N.J. 414, 425 (2001). Assignment of a tort action prior to judgment is void as against public policy. Village of Ridgewood v. Shell Oil Co., 289 N.J. Super. 181, 195-96 (App. Div. 1996). Accordingly, Sommer could not assert the legal malpractice claims on behalf of his corporation.
Under these circumstances, however, Sommer should have been allowed to amend his pleadings under Rules 4:9-1 and 4:9-3 to add the corporation to the counterclaim and third-party complaint. Rule 4:9-1 provides that leave to amend "shall be freely given in the interest of justice." Rule 4:9-3 allows the amendment to relate back to the date of the original pleading under certain circumstances. The Rule provides that where the amendment seeks to change the identity of the party against whom the claim is made, the amendment will relate back where the new party:
(1) has received such notice of the institution of the action that the party will not be prejudiced in maintaining a defense on the merits, and (2) knew or should have known that, but for a mistake concerning the identity of the proper party, the action would have been brought against the party to be brought in by amendment.
While the rule as drafted assumes that the amendment will change the identity of the party being sued, it has been interpreted to allow an amendment that changes the identity of the claimant to also relate back. Siligato v. State, 268 N.J. Super. 21, 28-29 (App. Div. 1993).
Under the circumstances here, the substitution of the corporation, Butchris, Inc., in place of Sommer as the counterclaimant and third-party claimant should have been permitted under Rules 4:9-1 and 4:9-3. The substitution does not prejudice Rinaldo or Vreeland. They had notice of the malpractice claims against them when they were served with the answer and third-party complaint. Further, as the attorneys for the corporation, they knew that the malpractice claims arising out of their representation of the corporation belonged to the corporation and thus they "knew or should have known that, but for a mistake concerning the identity of the proper party," the action would have been brought by the corporation. Thus, the standards for relating back to the amendment under Rule 4:9-3 are met. Accordingly, Sommer's motion to amend his pleadings and substitute Butchris, Inc. as the named defendant- counterclaimant and third-party plaintiff should have been granted, and the motions to dismiss the counterclaim and third-party complaint should have been denied. We reverse the trial court's order of October 18, 2006, in its entirety.
We will not address any of the bankruptcy or other issues raised in these appeals since the trial judge did not reach those questions, and hence no trial decision on those issues is before us.
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