January 7, 2009
BARBARA COLLINS, CPA, PLAINTIFF-RESPONDENT,
JOHN MENZA AND LISA MENZA, DEFENDANTS/THIRD-PARTY PLAINTIFFS-APPELLANTS,
IRVIN L. SOLONDZ, ESQ., THIRD-PARTY DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Law Division, Somerset County, Docket No. L-631-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted November 10, 2008
Before Judges Sapp-Peterson and Alvarez.
Defendants John Menza and Lisa Menza appeal from a July 8, 2005 order suppressing their expert's report in an accounting malpractice counterclaim against plaintiff Barbara Collins, their accountant. The Menzas also appeal an October 6, 2006 order dismissing their third-party complaint for legal malpractice against third-party defendant Irvin L. Solondz, Esq. We affirm both orders.
On April 21, 2004, plaintiff filed a complaint against the Menzas, who are brother and sister, for accounting fees totaling $80,831 incurred for work performed incidental to defendants' unsuccessful attempts to purchase a bakery. Defendants filed an answer and counterclaim on June 18, 2004. On July 6, 2004, plaintiff served interrogatories on defendants. Plaintiff filed an answer to the counterclaim on September 21, 2004. On December 16, 2004, defendants' answer and counterclaim were suppressed as a result of their failure to answer interrogatories. The affidavit of merit*fn1 was not forwarded to plaintiff until January 13, 2005, fifty-four days out of time.
Before their answer was reinstated on February 4, 2005, defendants filed a motion seeking to extend the discovery period. It is not clear whether this was the first or second time that defendant filed such an application.
On April 15, 2005, the answer and counterclaim were reinstated, conditioned on defendants' completion of discovery and submission of an expert's report within thirty days. The order reinstating the answer and counterclaim indicated that the court would, if discovery was not completed by the May 15, 2005 deadline, "consider suppression with prejudice or other sanctions." The expert's report was not served until sometime after June 10, 2005. On July 8, 2005, oral argument was conducted on defendants' application, as they characterized it, to extend the time for discovery and to permit them to serve their expert's report "nunc pro tunc." The request was denied, and the expert report was suppressed as provided beyond the discovery deadline.
The third-party complaint seeking damages for legal malpractice was filed by defendants on August 19, 2005. No affidavit of merit was ever filed regarding that claim.
Defendants' counterclaim was dismissed on November 7, 2005, due to the unavailability of their expert's report. On October 6, 2006, summary judgment was granted to the third-party defendant dismissing plaintiff's third-party complaint. The matter proceeded to trial and, ultimately, plaintiff obtained a jury award of $25,000 in accounting fees in quantum meruit.
Plaintiff provided accounting services for defendants during their protracted efforts at purchasing a bakery. The prospective sale ended in litigation, during which defendants counterclaimed for damages against the seller. In the verified counterclaim in that lawsuit, defendants claimed that they personally incurred $53,831 in accounting fees for services rendered by plaintiff related to the purchase of the bakery. That lawsuit eventually settled, and defendants obtained a judgment against the prospective seller for $100,000.
In their third-party complaint against the third-party defendant in this case, defendants alleged that their attorney committed malpractice when he prepared and submitted the verified pleading in the first lawsuit in which they admitted to personal liability for accounting fees. Defendants asserted that their attorney should instead have drafted the counterclaim in the first lawsuit so as to allege that accounting fees were incurred solely in the name of the corporation eventually formed for the sole purpose of acquiring the bakery business.
In their answer to plaintiff's complaint, defendants denied owing plaintiff any accounting fees whatsoever. They claimed that either plaintiff performed the services for free or she understood that the services were rendered solely on behalf of the shell corporation.
At deposition, plaintiff testified that she absolutely expected to be paid for the work that she performed. She also said that she would never have agreed to bill defendants' shell corporation because she was well aware that it had no assets. Plaintiff also testified that the third-party defendant had nothing to do with the bakery lease, which defendants negotiated directly with the landlord of the bakery premises. Plaintiff specified that a copy of the signed lease was sent to the attorney, third-party defendant, months after it was signed. When deposed, John Menza could not recall if he spoke to the attorney before or after the lease was signed. Lisa Menza recalled that only plaintiff was involved in the negotiation of the lease.
Defendants' first contention on this appeal is that because plaintiff did not allege that any prejudice resulted from the late service of the expert's report, the motion court should not have suppressed it. Defendants rely upon Ponden v. Ponden, 374 N.J. Super. 1 (App. Div. 2004), certif. denied, 183 N.J. 212 (2005), and Tucci v. Tropicana Casino and Resort, Inc., 364 N.J. Super. 48 (App. Div. 2003), in support of their position. Their reliance is misplaced.
Other than attributing the delay to tax season, defendants' attorney did not offer any explanation to the court for the late submission of the expert's report beyond the extended discovery date. He did not explain why the expert's report had not been procured long before the discovery deadline, given that many months had elapsed between the filing of defendants' answer and counterclaim and the order suppressing the counterclaim.
The law is well-settled that even for discretionary extensions of discovery deadlines, in the absence of a scheduled arbitration or trial date, good cause must be shown. See Ponden, supra, 374 N.J. Super. at 9-11. Although such extensions are to be liberally granted, there must nonetheless be some showing of good cause. No cause whatsoever was established by defendants.
Furthermore, an arbitration notice was received by defendants sometime before the motion to extend discovery was decided.*fn2 Arguably, exceptional circumstances were required to be shown in order for discovery deadlines to be extended. See id. at 10. Such circumstances were patently absent in this proceeding.
As the motion judge noted, the original discovery end date was November 2004. The first extension carried defendants to January 2005. The second extension was granted on April 15 for thirty days. The expert's report, dated June 10, 2005, was received shortly thereafter and was nearly a month beyond the second extended discovery deadline. In reliance on Rivers v. LSC Partnership, 378 N.J. Super. 68, 78 (App. Div.), certif. denied, 185 N.J. 296 (2005), the court declined to allow the late filing. The court found that defendants had not established the exceptional circumstances required because the matter had been scheduled for arbitration. Having presented the motion judge with no justification for the delay, much less good cause or exceptional circumstances, defendants cannot rely on either Ponden or Tucci. In both cases, there was good cause for the delay in addition to the absence of prejudice to the adverse party. See Ponden, supra, 374 N.J. Super. at 11; Tucci, supra, 364 N.J. Super. at 54.
Defendants' assertion that no prejudice would enure to the plaintiff from late service is not the equivalent of exceptional circumstances. Naturally, once the expert report was suppressed, the counterclaim had to be dismissed. See Sanzari v. Rosenfeld, 34 N.J. 128, 135 (1961); Glass v. Suburban Restoration Co., 317 N.J. Super. 574, 583 (App. Div. 1998); Crews v. Garmoney, 141 N.J. Super. 93, 95-96 (App. Div. 1976).
Defendants' position that summary judgment issued improvidently on their counterclaim is not sustainable. As the judge said:
On the basis of these facts, I cannot find that counsel Mr. Solondz has in any way breached a duty of care... to these folks. The defendants claim that they were aware the counterclaim against Mr. [Sauer] contained a claim for accounting fees. They signed the counterclaim and the verification stating that they were forced to incur additional and otherwise unnecessary accounting fees in the amount of $53,831 and while they argue that they signed the verified counterclaim based on the fact that they were told this was done for litigation purposes only because plaintiff said she would not come after them for fees, if that's true, they submitted a false certification to the court.
This certification was used in the underlying claim against Mr. [Sauer] in which a consent judgment was entered in favor of defendants for $100,000.
Defendants also argued that had they signed the verified complaint as [Gutta's] Sweets and not as individuals, they would not be personally liable. Of course, that was a counterclaim and [Gutta's] Sweets was not named and wasn't a party to the transaction with Mr. [Sauer].
Again--I have said it several times--the argument reduces to the proposition that the lawyer should have assisted them in... perpetrating a better fraud.
The defendants have also obtained an expert witness report, which states that no discussion was had as to the risks and benefits of the defendants signing the verified pleading and the defendants had no idea they were personally [guaranteeing] the accounting fees.
There is no other conclusion to draw from that expert report. That is nothing more than net opinion.
In the counterclaim they filed in this action, the defendants reconfirm that [plaintiff] was retained to perform accounting services and business advice to the defendants and that the plaintiff was paid over $11,000 for services negligently performed.
The bulk of those fees, as I noted, is by personal check by Lisa Menza on May 20, 2004, in the sum of $8,245.
The note on the check states: "Due diligence."
Plaintiff's argument is expressly premised on the fact that they filed a false pleading, knowing it was false in order to gain advantage in litigation, and now assert their lawyer should have helped them craft a better fraud. Even if I could assume somehow that there was a breach of duty to these clients, the third element, legal malpractice, proximate causation of the damages cannot be established.
As we have often recognized, an appellate court reviews a grant of summary judgment de novo, applying the same standard governing the trial court under Rule 4:46. See Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007). Generally, the court must "consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995); see also Rule 4:46-2(c).
The basis for the third-party complaint was the attorney's alleged failure to protect his clients from personal liability for unpaid accounting fees that might arise after the first lawsuit ended. The motion court characterized defendants' real complaint as being that third-party defendant should have helped them to commit a "better fraud," as they now claim that they owed no accounting fees at all. As a matter of law, defendants cannot establish that their attorney breached a professional duty because an attorney is not obligated to assist his clients in committing a fraud and may be disciplined for doing so. See In re Seelig, 180 N.J. Super. 234, 236-37 (2004). Either defendants owed the fees individually as they claimed in the first lawsuit, and are being disingenuous in this litigation, or they were disingenuous in the earlier litigation to their substantial advantage.
Defendants also contend that the lease agreement entered into incidental to the aborted bakery deal, is a separate basis for their third-party malpractice complaint. Those facts, although asserted at oral argument on the motion for summary judgment, were not alleged in defendant's third-party complaint. Even if they had been properly pleaded, we would concur with the motion judge that defendants have no factual basis for the claim. Plaintiff testified unequivocally at her deposition that the third-party defendant was unaware of the lease negotiations, or even that a lease had been signed, until months later. John Menza, when asked about the lease in depositions, testified that he could not remember what role, if any, third-party defendant played in the negotiations. If the only available information establishes that the attorney had no involvement with the negotiations and preparation of the lease, he is certainly entitled to judgment as a matter of fact and law. There is no evidence that would permit a rational factfinder to resolve the dispute in favor of the non-moving party. See Brill, supra, 142 N.J. at 540. Consequently, awarding of the summary judgment to the third-party defendant was proper.