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Estate of Spencer v. Gavin

April 23, 2008

THE ESTATE OF KATHRYN E. SPENCER; THE ESTATE OF ANNA E. SPENCER; AND THE ESTATE OF MADELINE S. KING, PLAINTIFFS-APPELLANTS/ CROSS-RESPONDENTS,
v.
DANIEL J. GAVIN, ESQ.; AND THE ESTATE OF DANIEL J. GAVIN, DEFENDANTS/CROSS-RESPONDENTS, AND ROBERTA GAVIN, A/K/A ROBERTA DESANCTIS A/K/A ROBERTA BERGSTEIN, INDIVIDUALLY AND AS EXECUTRIX OF THE ESTATE OF DANIEL J. GAVIN; EDNA BERGSTEIN; IRVING BERGSTEIN; ALBERTA FOSTER, ESQ.; SANDRA GONZALEZ; MERCY RODRIGUEZ A/K/A MERCY DELGADO; STEVEN MORIARTY; SUZY ANDERSON, ISA, INDIVIDUALLY AND T/A HERITAGE ANTIQUES AND APPRAISAL SERVICES; AND WESTERN SURETY COMPANY, ITS SUCCESSORS OR ASSIGNS AS THEIR INTERESTS MAY APPEAR, DEFENDANTS, AND DEAN AVERNA, ESQ.; AND AVERNA & GARDNER, ESQS., DEFENDANTS-RESPONDENTS/ CROSS-APPELLANTS, AND FIRST STATE BANK, N/K/A SOVEREIGN BANK, A BANKING INSTITUTION OF THE STATE OF NEW JERSEY, ITS SUCCESSORS OR ASSIGNS AS THEIR INTERESTS MAY APPEAR, DEFENDANT-RESPONDENT.



On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket Nos. L-5935-00, L-2999-03 and L-6027-04.

The opinion of the court was delivered by: Sabatino, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued December 17, 2007

Before Judges Lintner, Sabatino and Alvarez.

The professional liability issues in this case arise out of circumstances in which a lawyer, while acting in his capacity as an executor and administrator, stole $400,000 or more from his clients' three related estates. Within months after absconding with those funds and dissipating them, the lawyer-executor died of cancer.

The primary question before us is whether a fellow attorney who evidently did not participate in the thievery, but who had a close and interdependent business relationship with the lawyer-executor, and who concurrently performed legal work at the lawyer-executor's request for at least one of the same estates, had a duty to report the lawyer-executor's malfeasance upon allegedly learning of it. We hold that a reporting duty in such circumstances is mandated by principles of legal ethics, tort law, and public policy, so long as the attorney is shown to have had actual knowledge of the other lawyer's wrongdoing.

Because the trial court failed to recognize this duty as a matter of law, and because there are genuine issues of material fact as to whether the defendant attorney was actually aware of any of the lawyer-executor's multiple thefts, we vacate summary judgment the court entered in the attorney's favor. We thus remand for a trial to adjudicate the attorney's potential liability to the financially-depleted estates. If the attorney's actual knowledge of wrongdoing is proven, the jury also will need to determine whether his inaction proximately caused any injury to the estates.

We sustain, however, the trial court's separate ruling that no de facto partnership existed between the defendant attorney and the lawyer-executor. We also affirm the court's entry of summary judgment in favor of the bank that paid checks drawn on the estate accounts to the lawyer-executor and his fiancé.

I.

This case involves a sad chronology of opportunism, deception and the plundering of client assets by a terminally-ill lawyer. The pertinent facts are substantially undisputed, except for the pivotal question of the actual knowledge of the lawyer's thefts by another attorney, who allegedly could have done something to prevent further harm to the estates, but who failed to do so.

The three plaintiffs are the respective estates of Anne E. Spencer and of her two daughters, Madeline (Spencer) King and Kathryn E. Spencer. Anne Spencer died in 1960, leaving Kathryn as the executrix of her estate. Madeline died in 1985. She likewise appointed her sister Kathryn as her executrix.

Madeline had retained defendant Daniel J. Gavin, a lawyer with a solo practice, to prepare her Last Will and Testament.

Through her will, Madeline requested that Gavin be retained for any additional legal services needed in connection with her estate.

Kathryn Spencer resided on Main Street in Woodbridge. Beginning in 1985, Gavin operated his law practice out of an office building located on Main Street across from Kathryn's house. As her sister had requested, Kathryn retained Gavin to represent Madeline's estate and to assist in its administration. Similarly, Kathryn, in her own Last Will and Testament, named Gavin as her executor. Kathryn also lent Gavin $50,000 in 1986 so that he could purchase the building on Main Street that housed his law office.

During this time, Gavin was in a long-standing personal relationship with Roberta Bergstein, now known as Roberta Gavin.*fn1

Bergstein worked for Gavin in various capacities as a legal secretary, paralegal, and notary public. Gavin eventually married Bergstein in 1994.

In addition to operating his own law practice there, Gavin leased space in his Main Street office to several other attorneys. Among those tenants in the early to middle 1990s were defendant Dean Averna, Esq., and Michael Gardner, Esq., who practiced together as Averna & Gardner, P.C.*fn2 Gavin also rented space in his building to defendant Alberta Foster, an attorney, as well as to attorneys Maria Plinio, Natalee Picillo, and Toni Ann Marcolini.

Averna's Relationship With Gavin

Averna became a licensed attorney in New Jersey in 1990. He rented space in Gavin's building from March 1992 until April 1995. Around this same time, Gavin was beginning to decrease his caseload, often arranging for other attorneys in his building to work on files on a per diem basis. According to Bergstein's deposition testimony, Gavin had told her that he hoped to take on a partner and go into semi-retirement. Gavin's long-term goal was to transfer all of his client files and just manage the building.

The record shows that, during the relevant time frame, Gavin most often turned to Averna for assistance. This help included Averna performing discrete tasks on Gavin's files, as well as Gavin referring entire matters to him. Averna testified at his deposition that during his three years working out of the Main Street office, Gavin referred him about ten to fifteen cases. Averna usually paid Gavin one-third of any fee that he earned on those cases.*fn3 Most of those referred matters were personal injury cases.

Other attorneys in the building perceived a close working relationship between Averna and Gavin. In her deposition, Plinio recalled that Gavin spent "substantially more" time with Averna than with anyone else in the building. Plinio testified "[i]t was open knowledge . . . of all of the attorneys [in the building] . . . that most of the work was given [by Gavin] to [Averna] and that [Gavin] was in [Averna's] office most of the time and working on most of the files with [Averna] on a regular basis." Plinio recalled Averna often going to court on behalf of clients who had originally been represented by Gavin.

According to Plinio, Averna regularly used legal forms that had Gavin's name on them. This likely was a result of Averna taking on Gavin's former legal assistant and receptionist, defendant Mercy Delgado (a/k/a Mercy Moriarity), to work in his practice. Delgado confirmed in her own deposition that, about one month after Averna became a tenant in Gavin's building, he moved into Gavin's old office. At the same time, Gavin informed Delgado that she would now be working for Averna.

It was common knowledge in the building, according to Plinio, that Averna was "slowly taking over [Gavin's] practice." She recalled that:

[Averna] was taking over [Gavin's] caseload. He was taking over his secretary. He was then going to take over the office. He was going to then buy the building, but they could not agree on a price. He was going to . . . take over everything, as far as I was aware.

This perception was corroborated by Marcolini, who testified in depositions that Gavin had told her that he was "grooming [Averna] to take over his practice."

Averna denies that he had any professional relationship or anticipated partnership with Gavin. During the course of discovery, Averna submitted a certification in 2003 stating that, "[a]lthough Gavin would occasionally refer cases to me, I was at no time his partner or in any way associated with his firm." In a subsequent certification in 2005, Averna reiterated that "I have never been formally or informally associated with Daniel Gavin in the practice of law."

Aside from the observations of Plinio and Marcolini, other evidence tends to contradict Averna's denial of any association with Gavin. For instance, Bergstein testified at her deposition that Gavin had told her that he had discussed a partnership with Averna, although their plans were never implemented.

The discovery process further uncovered a noteworthy letter that had been sent in September 1994 to the Tribus Companies, Averna's professional liability insurance carrier. The letter announced a forthcoming change in the name of Averna's law firm. That letter, dated September 28, 1994, stated:

Pursuant to your telephone conversation with my office, this letter shall serve as confirmation that as of October 1, 1994[,] Averna & Gardner, P.C. will change its name to Gavin, Averna & Gardner, P.C. With this change, the firm will also be employing Daniel J. Gavin, Esq., who is retired, in an "of counsel" role[,] and Frank Baffige, Esq. as an associate.

The letterhead on that correspondence bears the name "Gavin, Averna & Gardner, A Professional Law Corporation." The letter was purportedly signed by Averna.

Averna disclaims responsibility for the September 1994 letter to Tribus. Specifically, Averna certified that he "did not write, prepare, approve or sign" it.*fn4 In any event, the partnership was never formally constituted and the firm's name change was never effectuated.

Gavin's Thefts from the Estates

Kathryn Spencer passed away on May 27, 1994, at the age of eighty-eight, leaving behind a sizable estate. Gavin was appointed Kathryn's executor, pursuant to her will. As Kathryn had been the executrix of her mother's and sister's estates, both of which were still open*fn5 at the time of Kathryn's death, Gavin administered all three estates. Gavin's role as substitute administrator for Anne's estate was formalized in August 1994.*fn6

About the same time as Kathryn died, Gavin began to develop serious health problems of his own. He was in pain and lost a significant amount of weight. As a result, he was not able to work full-time on his clients' files.

In August 1994, Gavin was diagnosed with terminal lung cancer. He underwent chemotherapy and radiation treatment for the next five months. After learning that he was seriously ill, Gavin and Bergstein, his longtime companion and assistant, married on September 17, 1994.

After Kathryn's death, rumors began to circulate throughout Gavin's building that he was acting improperly in his handling of the three Spencer estates. In particular, Marcolini testified that she had heard reports that Gavin was stealing funds and property from Kathryn's estate. Marcolini recalled in this regard a conversation she had with Gavin's nephew, who was a janitor in the building. The nephew told her that he had helped Gavin remove several suitcases from Kathryn's house and place them in Gavin's car trunk. According to Marcolini, the nephew stated that he suspected that those suitcases contained cash. Marcolini had also heard that other employees, including Gavin's former assistant Delgado, had received personal property from Gavin that had been removed from Kathryn's house. There also were rumors circulating in the building, which were never confirmed, that Averna possessed a gun that had been taken from Kathryn's estate.*fn7

Averna's Nexus to the Spencer Estates

In June 1994 Gavin asked Averna to form the Spencer Foundation, a non-profit corporation intended to manage and disburse a portion of the assets of Kathryn's estate for charitable purposes. Averna worked on this assignment from June through September 1994, and successfully created the Foundation. He billed $2,500 for this work, submitting invoices to Gavin on July 31 and September 30, 1994.

As a second project, Gavin asked Averna in September 1994 to draft a contract between the Foundation and a builder named Anthony Laycock, for construction and repairs on the Woodbridge Methodist Church.*fn8 After preparing the contract as requested, Averna submitted a $350 invoice to Gavin on September 30, 1994. Other than these two discrete matters, Averna insists he had no connection to the plaintiffs' estates, and that he never worked on any other related files.

Averna emphatically denies that he knew at the time that Gavin was stealing funds or property from the plaintiffs' estates, or that Gavin had otherwise acted improperly. He asserts he first learned of Gavin's conduct when the present lawsuit was filed in July 2000. Averna also claims that he was unaware that Gavin had been representing the estates of Anne Spencer and Madeline King, in addition to Kathryn's estate.

Nonetheless, there is considerable proof in the record that, if believed by a factfinder, circumstantially indicates that Averna was not ignorant of Gavin's misdeeds. The principal source of this counterproof is the deposition testimony of Marcolini. In particular, Marcolini attested that Averna told her, at some point before Gavin's death, that Gavin was "raping and pillaging" Kathryn's estate. She elaborated:

He left the impression that he thought [Gavin] was stealing from the estate . . . . He didn't give us [Marcolini and Plinio] too many facts of what he was specifically talking about, nor did [Plinio] or I have ...


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