February 23, 2009
STANLEY SHU, PLAINTIFF-APPELLANT,
HOWARD BUTENSKY, ESQUIRE, DEFENDANT-RESPONDENT, AND THE ESTATE OF EARL C. PETERSON, THE ESTATE OF MARIE E. PETERSON, LAWRENCE E. PETERSON AND DONNA MARIE JONES, DEFENDANTS.
On appeal from Superior Court of New Jersey, Law Division, Camden County, Docket No. L-3167-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted December 8, 2008
Before Judges Winkelstein and Fuentes.
Plaintiff Stanley Shu sued defendant attorney Howard Butensky, alleging legal malpractice. Plaintiff's professional negligence case relates back to Shu's acquisition of real property in 1986 in which Butensky represented him as the buyer. The trial court granted Butensky's summary judgment motion, filed in lieu of an answer to plaintiff's complaint, finding that Butensky did not owe plaintiff what the court characterized as a "duty." Plaintiff now appeals, arguing that the trial court erred when it dismissed his legal malpractice cause of action at this juncture, and as a matter of law. We agree with plaintiff's position and reverse and remand.
We describe the following facts from the certifications and supporting documents made available to the trial court.
On November 10, 1986, plaintiff entered into a written contract with Earl and Maria Peterson to purchase real property located at 113 West Main Street, in the Borough of Tuckerton. Plaintiff retained Butensky to represent him in the transaction. Paragraph 26 of the sale contract gave Shu as the buyer a right of first refusal in connection with the future sale of the adjacent lot. Specifically, paragraph 26 read as follows: "Buyer shall have a 30 day right of first refusal to purchase the adjacent property being subdivided from the within lot. These terms shall survive the passage of time."
Sometime between 1986 and 2005, Earl C. Peterson died leaving his wife Maria as the sole owner the property subject to plaintiff's right of first refusal. Sometime thereafter, Maria Peterson transferred title to the property to her children, defendants Lawrence E. Peterson and Donna Marie Jones. On March 11, 2005, Peterson and Jones entered into a contract to sell the property to Robert Gaudiosi, Sr; Peterson and Jones retained Butensky to represent them in the sale.
Before the closing of title, Gaudiosi's attorney, Alphonse De Simone, discovered that a commercial structure and fence located on Shu's property encroached upon the Peterson property. De Simone informed Butensky that his client's title insurance company "will NOT insure the encroachment by the neighbor over the property line." As a means of resolving the problem, De Simone advised Butensky that his client was willing to close title provided that $10,000 be held in escrow "for the purpose of indemnifying [the buyer] for legal fees [incurred] relative to obtaining the removal of the encroachment."
On May 20, 2005, Butensky wrote a letter to Shu, not in his capacity as his former counsel, but as the legal representative of the "Peterson Estate." In this letter, Butensky informed the Shus of the pending sale and encroachment problem, and requested that Mr. Shu contact him to discuss it.
By letter dated May 27, 2005, Butensky again contacted Shu in connection with the encroachment issue. This letter refers to "conversations" that Butensky had had with Shu, as result of which Shu agreed to remove the encroachment "straddling the common lot line with Mr. Peterson's property." After discussing potential problems associated with obtaining the cooperation of Shu's commercial tenant, Butensky concludes the letter as follows:
As I indicated to you on the telephone, I have, due to our past relationship, vouched for you to Mr. Peterson and advised him that he may rely upon your attending to the removal. I would be remiss, however, if I did not point out that the failure to do so would constitute his pursuing an action against you for a forced removal which would give rise to damages. Since I have represented you in the past, I would decline from pursuing the claim myself but Mr. Peterson has access to ample legal talent and the case would be an easy one to win. (Emphasis added.)
Despite Butensky's admonition, Shu refused to remove the encroachment. In March 2006, Gaudiosi, as the new owner of the property, filed suit in the Chancery Division, General Equity Part, against the Shus seeking the removal of the encroachment and damages. The Shu's responsive pleading, dated May 17, 2006, included a counterclaim against Gaudiosi alleging trespass. The pleading did not mention, however, the right of first refusal or implicate Butensky in any way.
By letter dated June 16, 2006, Shu informed Butensky, through current counsel, of his intention to enforce the right of first refusal.*fn1 Four days later, Butensky responded as follows:
The right of first refusal language is indeed a surprise, apparently to everyone.
The transaction between Peterson and Gaudiosi closed May 27, 2005. At that time, Mr. and Mrs. Shu were fully aware of it as there was an encroachment issue which has escalated to litigation. . . . If there was any intent to pursue the right of first refusal, it certainly could have been articulated and appropriately addressed at that time. The seller was unaware of the apparent right of first refusal as they were the descendants [sic] to the prior owners.
Mr. Gaudiosi certainly had no knowledge nor, quite candidly, did I have any recollection of the 1986 transaction. Accordingly, there was no intent to deprive Mr. & Mrs. Shu of any entitlement. (Emphasis added.)
Shu settled the encroachment action in July 2006. On May 4, 2007, he filed this legal malpractice action against Butensky. In the complaint, Shu alleged that the first time he learned the adjacent lot was being sold was in May 2005, when
Butensky contacted him on behalf of the Peterson Estate. Shu also claimed that, at that time, he informed Butensky of his intention to enforce his right of first refusal. Based on these allegations, Shu asserts in the complaint that Butensky was "careless and negligent in that he failed to take appropriate action in the handling of the real estate transaction."
Against these facts, Shu argues that he presented a prima facie case of legal malpractice against Butensky. According to Shu, Butensky deviated from the standard of professional competence expected from an attorney by failing to record the contractual provision establishing his right of first refusal. He also argues that Butensky put himself in a position of conflict by representing the Peterson Estate in the sale of the property because, as former attorney for the Shus, Butensky was or should have been aware of the Shu's right of first refusal.
Butensky did not file a responsive pleading to plaintiff's legal malpractice action; he moved instead for summary judgment. On the return of this motion, Butensky's counsel argued that:
(1) Shu should have raised his right of first refusal in the encroachment action filed by Gaudiosi; and (2) Shu should have also named Butensky as a third party defendant in that case. According to Butensky, Shu's failure to do these things at that time now barred him from proceeding against him here under the entire controversy doctrine, as codified in Rule 4:30A.
As the following passage illustrates, Butensky's counsel framed his argument as an exception to the Supreme Court's holding in Olds v. Donnelly, 150 N.J. 424 (1997).
Your Honor, just briefly. The facts of this case are important in terms of why the exception to the entire controversy doctrine that was set forth [in] Olds v. Donnelly, isn't applicable here. . . . Your Honor, the issue was whether the entire controversy doctrine compels a client to sue his own lawyer, in an underlying case, when that lawyer is representing that client in that case. That's not what we have here Your Honor. What we have here is a set of transactions that occurred -- that subsequently gave rise to a litigation. In that litigation, Mr. Butensky was not involved; didn't represent anybody . . . Mr. Shu, knew, or should have known at least, that his right of first refusal hadn't been protected. He had the opportunity to bring Butensky into that case, and he didn't do that.
In response, plaintiff's counsel argued that, under Olds, attorney malpractice actions were exempt from the preclusive effect of the entire controversy doctrine.
Although the trial court granted Butensky's motion to dismiss plaintiff's legal malpractice action, the motion judge specifically rejected Butensky's argument based on the entire controversy doctrine. Instead, the court concluded that plaintiff had failed to state a claim upon which relief could be granted because Butensky did not owe him a "duty."
The motion judge did not elaborate or otherwise explain what this duty entailed. As framed by Shu in his complaint, however, we infer that the "duty" referred to by the court concerned whether Butensky should have taken the steps necessary to record or otherwise preserve Shu's contractual right of first refusal which, under the language used in paragraph 26, was "to survive the passage of time." The court gave the following explanation in support of its ruling:
[O]n the entire controversy doctrine, I think it's not barred. However, I believe that there's no duty that has been shown to your client in this case that was breached. . . . There's nothing you've shown me that would indicate that it would be improper to represent different people in a sale. Once that first sale is consummated, they've been there for a long time. It [referring to plaintiff's complaint] says 1986 to '05. I don't believe any duty was owed to your clients by Mr. Butensky or was breached, and absent anything you've shown me about some ethics violation in representing the later sellers, I'm going to grant summary judgment.
Against these facts, plaintiff now appeals arguing that the trial court erred in dismissing his cause of action. According to Shu, the facts pled in the complaint, taken together with the expanded record developed in defense of Butensky's summary judgment motion, and the affidavit of merit submitted by an attorney licensed to practice in this State, established a prima facie case of legal malpractice against Butensky.
We start our legal analysis by noting that, although framed by Butensky and the trial court as a summary judgment motion under Rule 4:46-2, Butensky's motion should have been treated as a motion under Rule 4:6-2. We are satisfied, however, that this procedural irregularity is inconsequential because Butensky's motion should have been denied regardless of which standard of review is applicable. In the interest of clarity, however, we will briefly summarize the differences between a motion for summary judgment under Rule 4:46-2, and a motion to dismiss under Rule 4:6-2.
A summary judgment motion brought under Rule 4:46-2 is ordinarily ripe for consideration after discovery has been completed. Velantzas v. Colgate-Palmolive Co., 109 N.J. 189, 192 (1988). The standard of review of a summary judgment motion is well-settled. When reviewing a motion for summary judgment, all factual allegations and supporting documentation must be construed in the light most favorable to the opposing party. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 524 (1995). Thereafter, the judgment sought shall be rendered only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Id. at 529 (quoting R. 4:46-2).
By contrast, a motion brought under Rule 4:6-2 is filed by a defendant at the outset of the litigation process, in lieu of a responsive pleading. When considering a motion under Rule 4:6-2, the trial court is required to search plaintiff's complaint in depth and with liberality to ascertain whether a fundament of a cause of action may be gleaned even from an obscure statement of claim, opportunity being given to amend if necessary. At this preliminary stage of the litigation the court is not concerned with the ability of plaintiffs to prove the allegation contained in the complaint. . . .
For purposes of analysis, plaintiffs are entitled to every reasonable inference of fact. . . . The examination of a complaint's allegations of fact required by the aforestated principles should be one that is at once painstaking and undertaken with a generous and hospitable approach. [Printing Mart - Morristown v. Sharp Electronics Corp., 116 N.J. 739, 746 (1989).]
Returning now to the issue at hand, we are satisfied that by applying either one of these standards, the trial court erred in dismissing Shu's complaint. Although Butensky's motion sought relief under the entire controversy doctrine, the court's ruling rejected this argument, finding instead that Butensky did not owe a "duty" to Shu. This latter legal conclusion is not supported by the limited record available to the trial court. Rova Farms Resort v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974).
Shu's cause of action against Butensky was based on a claim of legal malpractice. To establish a prima facie case, Shu must show: (1) the existence of an attorney-client relationship creating a duty of care by the defendant attorney; (2) the breach of that duty; (3) a causal link between that breach of duty and any claim for damages by the client. McGrogan v. Till, 167 N.J. 414, 425 (2001). Under the standard articulated in Printing Mart, supra, the court was obligated to scour the allegations in the complaint, giving Shu every favorable inference that could be gleaned even from an obscure statement or claim, to determine whether a prima facie case of legal malpractice had been pled. Printing Mart, supra, 116 N.J. at 746.
When Shu's complaint is reviewed under this standard, we can readily ascertain the existence of the three elements necessary to make out a prima facie case of legal malpractice. First, there is no question of the existence of an attorney/client relationship between plaintiff and defendant; Butensky represented Shu in the purchase of the real property at issue; the purchase contract gave Shu a right of first refusal on the adjacent lot; by clear unambiguous language, the owner of the lot burdened by Shu's right of first refusal intended for this right to "survive the passage of time." It can thus be argued that Butensky's professional responsibility as Shu's attorney included protecting Shu's right of first refusal.
Second, assuming the existence of this duty, it can be argued that Butensky breached the duty by failing to draft and record an appropriate instrument echoing the contractual language, thereby giving constructive notice of the encumbrance to any prospective purchaser of the adjacent lot. And third, from these facts, a rational jury can find that there is a causal link between Butensky's breach of his professional duty and the damages sustained by Shu in the form of the: (1) lost opportunity to acquire the adjacent lot; (2) monetary damages paid to Gaudiosi to settle the encroachment action; and (3) counsel fees incurred in defense of that action.
For the foregoing reasons, the trial court's order dismissing plaintiff's legal malpractice action cannot stand.
Reversed and remanded.