March 25, 2008
RIGOBERTO GAMONEDA AND LINDA GAMONEDA, PLAINTIFFS-APPELLANTS,
HELEN SHEEHAN, DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Chancery Division, Hudson County, C-16-99.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted February 5, 2008
Before Judges Fuentes, Grall and Chambers.
Plaintiffs, Rigoberto Gamoneda and Linda Gamoneda, appeal from an order denying their motion to vacate a settlement. Plaintiffs brought this lawsuit to enjoin an encroachment on their property. Without their express authority, their attorney entered into a settlement of the case in 1999, whereby plaintiffs would deed the disputed property to defendant Helen Sheehan in exchange for $1,000, representing one-half of the value of the property. Plaintiffs' attorney advised the court that the case was settled, and the case was then dismissed by the court. The settlement was never consummated, however. No written settlement agreement was made; no releases were exchanged; no deed was executed; and no monies were exchanged. Plaintiffs continue to pay the property taxes on the property. Plaintiffs did not learn of the purported settlement until 2003, when they retained new counsel, after reading in the newspaper that their attorney had been disbarred. They testified that, in the intervening years, their attorney had told them that the case was still pending.
After conducting a plenary hearing, the trial court denied plaintiffs' application to set aside the settlement. We reverse because, under the circumstances here, plaintiffs' attorney had no authority to enter into the settlement on behalf of plaintiffs.
Plaintiffs purchased property on West 36th Street in Bayonne in 1996. Plaintiff Rigoberto Gamoneda testified that when he first did a walk through of the property in 1996, the fire door in the back of the property was operable. According to plaintiffs, when they took possession of the property after the closing in December 1996, they discovered that the back fire door could not be opened due to a pool and deck that defendant had constructed on their property.
Plaintiffs retained Gerald Fitzpatrick, an attorney at the time, who had represented plaintiffs at the closing and in previous legal matters. Over the course of about two years, Fitzpatrick and Edward DePascale, Esq., counsel for defendant, attempted to resolve the dispute. During that time, Fitzpatrick conveyed defendant's first settlement offer in the sum of $900 to plaintiffs, which they refused. After an appraisal*fn1 of the property was obtained by Fitzpatrick, which indicated that the disputed property was worth $2,000, a second settlement offer was made by defendant in the sum of $500, which was also refused by plaintiffs, who indicated that they wanted the pool removed.
Plaintiffs commenced suit in 1999 to compel removal of the encroachment. A case management conference was held on April 29, 1999, and Fitzpatrick and DePascale appeared for their respective clients. At that time, the discussion turned to settlement. According to Fitzpatrick, the judge stated that he would not order defendant, a widow, to move her pool. Following the conference, DePascale sent a letter dated May 3, 1999, to Fitzpatrick stating that he had his client's authority to offer $1,000 to settle the case.
According to Fitzpatrick, he told his clients that they had "better settle this case," that they "had to settle the case" and that "there is nothing else we can do about this, really." He knew plaintiffs were not happy with the offer, but he thought that they had to settle it. At the plenary hearing, the trial judge specifically asked Fitzpatrick the following questions concerning his authority to settle the case:
COURT: Did they [plaintiffs] authorize you to settle the case?
FITZ: It was left in limbo, I think.
COURT: Well be more specific . . .
FITZ: Well, I told them there is nothing else we can do about this, really, and that is where we left it.
COURT: And you took that as authority to settle the case?
FITZ: Discretion is the better part of valor at times, your Honor, I think we had to settle this case.
Plaintiffs do not recall receiving the offer. Fitzpatrick told DePascale that the offer was accepted, and he advised the court that the case was settled. An order of dismissal was entered by the trial court on May 27, 1999. Plaintiffs testified that based on communications with Mr. Fitzpatrick over the years, they believed that the case was pending.
In 2003, when plaintiffs learned from the newspapers that Fitzpatrick had been disbarred, they retained new counsel and thereafter learned of the purported settlement.*fn2 Plaintiffs, represented by new counsel, moved to vacate the settlement and reinstate the original complaint. After conducting a plenary hearing on February 6, 2006 and January 24, 2007, in which plaintiffs, Fitzpatrick and DePascale testified, the trial court found, in a decision placed on the record on March 29, 2007, that Fitzpatrick had the apparent or implied authority to settle the case on behalf of plaintiffs, and denied the application. This appeal followed.
In reviewing the trial court's decision, we are mindful that "our appellate function is a limited one: we do not disturb the factual findings and legal conclusions of the trial judge unless we are convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice." Rova Farms v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974). We give special deference to the trial court's findings on credibility, since the trial court has had the opportunity to hear and observe the witnesses and is therefore in a better position to judge their credibility.*fn3 Cesare v. Cesare, 154 N.J. 394, 412 (1998).
However, we need not give the trial judge any special deference on questions of law. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995). Here, we overturn the trial court's decision due to its misapplication of the law to the facts of this case.
The starting point for our analysis is the fundamental principle that an attorney does not have the authority to settle a case without the consent of the client. See Amatuzzo v. Kozmiuk, 305 N.J. Super. 469, 475 (App. Div. 1997) ("The general rule is that unless an attorney is specifically authorized by the client to settle a case, the consent of the client is necessary.").
An attorney may, however, bind his client to a settlement if his client has expressly authorized him to do so. Ibid. In addition, a client may be bound by his attorney's agreement to a settlement where "the client's voluntary act has placed the attorney in a situation wherein a person of ordinary prudence would be justified in presuming that the attorney had authority to enter into a settlement, not just negotiations, on behalf of the client." Ibid.
Our review of the record finds no factual basis for the trial judge's holding that Fitzpatrick had the authority to settle the case for plaintiffs. He certainly did not have actual authority to do so. Both plaintiffs testified that they did not authorize the settlement, and Fitzpatrick himself did not say that they expressly authorized him to settle the case.
Indeed, the trial judge made no finding that Fitzpatrick had actual authority to settle the case, and the record contains no factual basis for such a holding.
Further, based on the facts in this case, there is no basis in law to find that Fitzpatrick had the apparent or implied authority to bind plaintiffs to the settlement. Where an attorney represents a client in litigation, the client will be bound by a settlement made by his attorney only "where the client by words or conduct communicated to the adverse attorney, engenders a reasonable belief that the attorney possesses authority to conclude a settlement." Id. at 475-76. The words or conduct of the attorney alone, however, are not sufficient to give the attorney the apparent authority to settle the case on behalf of his client. Id. at 476. Thus, the fact that an attorney represents a party in litigation does not automatically confer upon that attorney the authority to settle the case on the client's behalf. The attorney will be cloaked with the apparent authority to settle the case only where the conduct of the client creates that apparent authority. The adversary cannot rely on the conduct of the attorney to conclude that the attorney has the apparent authority to settle the case. The focus is on the client's conduct, not the attorney's conduct.
There is authority for the proposition that when a client sends an attorney to attend a settlement conference, the attorney presumptively has the authority to settle the case. Seacoast Realty Co. v. W. Long Branch Borough, 14 N.J. Tax 197, 204-05 (Tax 1994). However, that is not the circumstance here; Fitzpatrick attended a case management conference, not a settlement conference. Plaintiffs did not cloak Fitzpatrick with the apparent authority to settle this litigation merely by allowing him to explore settlement on their behalf prior to the litigation and to represent them in this litigation.
Accordingly, the denial of the motion to set aside the settlement is reversed.