On appeal from the Superior Court of New Jersey, Law Division, Bergen County, L-9915-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Winkelstein, Fuentes and Gilroy.
Plaintiffs Steven Geranio and World Class Leather, Inc. appeal from the amount of a fee award in their favor following a bench trial in which they were successful in a legal malpractice action against Anthony Gualano and his law firm, Lucariello & Gualano (the attorney defendants), who cross-appeal from the judgment of legal malpractice.*fn1 With the exception of the amount of the fee award, we affirm.
In 1994, Geranio was the president and a shareholder of World Class Leather, which purchased two residential lots from LHW Development Corp. (LHW). The seller corporation was owned by Warren Lebers. When World Class Leather purchased the property, LHW took back a mortgage for $190,000. At closing, plaintiff received an amortization schedule prepared by LHW's attorney, showing the required monthly payments of principal and interest, which were payable over eight years, to be paid in full no later than August 12, 2002.
When, in 1998, plaintiffs sought to refinance, they applied for a mortgage from defendant, FEC Mortgage Corp. (FEC). FEC's attorney, Gualano, represented FEC in the loan transaction. FEC advised plaintiff that Gualano would prepare the necessary paperwork. Plaintiff did not sign a retainer agreement with Gualano, nor did he contact Gualano to request his services for the refinance transaction. According to plaintiff, Gualano contacted him one week before closing to obtain the name and contact information for LHW, so Gualano could obtain the payoff amount for the LHW mortgage. Plaintiff believed that Gualano would "help [him]" and "represent [him] on the paperwork" at the closing. Gualano asserted that he never communicated with plaintiff prior to closing.
At closing, plaintiff did not have his own attorney. Gualano presented plaintiff with the settlement sheet and told him that the principal payoff amount was $121,749.27, as it appeared on the settlement sheet. Plaintiff had not reviewed his amortization schedule, which he had misplaced, to confirm that the payoff amount was correct; he relied on Gualano's representation that it was the correct amount. Plaintiff signed the settlement sheet; Gualano issued a check from his attorney trust account to pay off the existing LHW mortgage; and he issued a check to plaintiffs for the net balance of the FEC loan.
Four years later, plaintiff found the LHW mortgage amortization schedule and discovered that he had overpaid the LHW mortgage by approximately $15,000. Rather than only paying off the principal amount as of the closing date, $106,216.33, he paid $121,749.27, representing the total outstanding loan balance of principal plus interest as if the mortgage had been paid through the end of its eight-year term. Plaintiff asked Lebers for reimbursement, and although Lebers acknowledged that he was overpaid, he refused to repay plaintiffs. Plaintiff also told Gualano of the error, who, according to plaintiff, responded that it was not his fault.
Plaintiffs filed suit against Gualano, his partner, Hugh Lucariello,*fn2 and their law firm for "professional negligence." Plaintiffs also brought claims against LHW for unjust enrichment and conversion, and against FEC for breach of duty, negligence and consumer fraud. Soon after the trial began, the parties settled the overpayment issue, and defendants, including Gualano, agreed to pay plaintiffs the full amount of the overpayment plus prejudgment interest, each paying one-third of the total settlement of $20,353. The court dismissed plaintiffs' claims against LHW and FEC, and the only remaining claim to be tried was plaintiffs' claim for professional negligence against the attorney defendants; damages were limited to counsel fees, costs and expert fees.
Following a bench trial, the court found that Gualano "knew or should have known that plaintiff expected that [he] would protect their interests." The court stated:
Mr. Gualano, according to his testimony, was aware that at least in all probability an amortization schedule had been prepared at the original closing and affixed to the mortgage. To my mind, it makes no sense and would, therefore, constitute a deviation from the standard of reasonable care to decline to secure a copy of the amortization schedule and to rely on the prior lender's representation alone. The accuracy of which could not be known.
In that respect, as well as several others, I find that Mr. Gualano deviated from the applicable standards of care and failed to exercise a reasonable care on behalf of the plaintiffs.
I find that Mr. Gualano's failure to secure a payoff statement was negligent. That his failure to secure an amortization schedule before the closing, or at the very latest at the closing, was a deviation from the standard of care and was negligent. That his failure to ask [plaintiff] if the payoff ...