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Fioretti v. Cangialosi

February 25, 2009

JOHN FIORETTI, CONRAD FIORETTI, AND ELI COMPANY, PLAINTIFFS-RESPONDENTS,
v.
THOMAS J. CANGIALOSI, ESQ., SCHUMANN, HANLON, DOHERTY, MCGROSSIN & PAOLINO, P.C., DEFENDANTS/THIRD-PARTY PLAINTIFFS-RESPONDENTS, AND CHICAGO TITLE INSURANCE COMPANY; MELVIN L. GOLD ASSOCIATES, INC./ PENSION PLAN NO. 2; MELVIN GOLD INDIVIDUALLY; AND PANEPINTO, PAOLINO & DOHERTY, ESQ., DEFENDANTS/THIRD-PARTY PLAINTIFFS,
v.
IRVING TOBIN AND GLUCK & TOBIN, THIRD-PARTY DEFENDANTS-APPELLANTS.



On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-2898-03.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted January 12, 2009

Before Judges Lisa, Reisner and Sapp-Peterson.

Third-party defendant, Irving Tobin, appeals from a $17,000.08 judgment entered against him in favor of third-party plaintiff, Thomas J. Cangialosi, on May 2, 2007 after a bench trial. We find unpersuasive the numerous arguments Tobin presents on appeal, and we affirm.

I.

Cangialosi and Tobin are attorneys. In the 1980s, Cangialosi represented a condominium development in Jersey City known as Sherman Estates. The fifty-four unit condominium project was encumbered by two mortgages. The first was a $5 million construction loan from United Jersey Bank Commercial Trust. The second mortgage, in the amount of $500,000, was held by Melvin L. Gold Associates, Inc. Pension Plan No. 2 (Pension Plan). Tobin represented the Pension Plan.

Plaintiffs, Conrad and John Fioretti, purchased unit D-2 from Sherman Estates in July 1988 for $139,900. Cangialosi represented them in the purchase. To obtain clear title, both mortgage liens would have to be released with respect to unit D-2. The second mortgage lien was not released, and the discovery years later of that circumstance and the events that transpired to obtain the release became the subject matter of this litigation and provided the basis for the judgment now under review.

The condominium developer's public offering statement provided:

The property is also encumbered by a second mortgage give[n] to Pension Plan Number 2, Melvin L. Gold, Trustee, in the principal amount of $500,000. This lender agrees to release its lien on all encumbered units for nominal consideration until the construction loan referred to above is paid in full. Thereafter, this second mortgage will become a first lien on the property and the lender will release its lien on the remaining units upon the payment of $100,000 principal, plus any accrued unpaid interest as of the date of release. [Emphasis added.]

Cangialosi testified that when a unit was sold, he would contact Tobin and send him a partial release covering the unit being conveyed, and Tobin would have the release executed and returned. The release would recite only nominal consideration of $1, and no money would change hands.

Tobin testified that he believed the mortgage required the payment of $4000 plus 16% interest compounded monthly in order to obtain a release. He relied upon a provision to that effect in a mortgage document. However, the mortgage upon which he relied covered a different property in Newark.

Judge Steven F. Smith, Jr. presided over the trial. He found Cangialosi's testimony credible and Tobin's incredible. Further, documentary evidence was produced at trial demonstrating that a series of releases signed by Melvin Gold for other units in the Sherman Estates development during that timeframe were executed for the nominal amount of $1. Cangialosi testified that those releases were issued for that nominal consideration only.

In connection with the Fiorettis' purchase of unit D-2, Cangialosi corresponded with Tobin on July 21, 1988, sending him the partial release for the unit. However, the release was never executed or returned. Tobin did not advise Cangialosi there was any problem with signing the release, nor did he ask for any modification of the release document. Cangialosi apparently did nothing further to get the release. The Fiorettis completed settlement, unaware of any problems with the release of the second mortgage.*fn1

In 2001, the Fiorettis transferred unit D-2 to an entity they owned, Eli Company, which then entered into a contract to sell the unit to a third party, Melissa Southwell. Eli Company retained Rosemary Gencarelli to represent it in the transaction. When a title search revealed that the Pension Plan mortgage remained a lien on the property, Gencarelli contacted Tobin. In a November 8, 2001 letter, she offered $500 for a release of the mortgage. Tobin told Gencarelli that more than $300,000 was due on the Pension Plan mortgage and the Pension Plan would be willing to accept $20,000 for a release. After negotiations, Eli Company agreed to pay $15,000 for the release. In her March 4, 2002 letter to Tobin, Gencarelli stated that "this payment is made without prejudice to any of my client's rights which are expressly reserved herein." The $15,000 was paid by check payable to Tobin's law firm. Thus, payment was made under protest.

Tobin testified that the check was deposited in his firm's trust account and that he withheld approximately $2000 to $4000 in fees, and turned over the remainder of the money to Melvin Gold. Judge Smith ordered Tobin to submit records of the receipt and disbursement of the funds, but Tobin did not comply.

The dispute regarding release of the Pension Plan mortgage caused a delay of about five months in completing settlement, thus resulting in additional damages to the Fiorettis, over and above the $15,000 they were required to pay.

Contrary to Tobin's trial testimony that Gold instructed him to demand the $20,000 payment for the release, Gold gave deposition testimony to the contrary, stating that he left the decisions about the negotiations up to Tobin. The record reflects that by the time of the 2001 events, the Pension Plan was an inactive or defunct corporation. Based upon the evidence presented and drawing inferences from that evidence, Judge Smith found that in 2001 there was no viable Pension Plan, Tobin extorted this money from the Fiorettis, and divided it up with Gold.

The Fiorettis produced at trial attorney Anthony Ambrosio, as a legal malpractice expert. He testified that the general standard for demonstrating legal malpractice is that an attorney must exercise the reasonable degree of skill normally exercised by attorneys in similar circumstances, and that if the attorney deviates from that skill requirement, the deviation must actually result in damages.

Ambrosio testified that Cangialosi had deviated from the standard of care and committed legal malpractice by failing to remove the second mortgage lien. This was such a clear deviation that he did not believe expert testimony was necessary, as it would be clear to a lay person that an attorney could be held accountable for not providing lien-free title. He further testified that Cangialosi's negligent conduct was a direct cause of the Fiorettis' damages.

When cross-examined by counsel for Cangialosi, Ambrosio testified that a claim for contribution can be made even in the absence of privity between a lawyer and the plaintiff, as long as there is established reliance upon that lawyer's doing something, where that reliance is reasonable, and something happened by virtue of that reliance. Tobin had a duty to get the release signed and returned to Cangialosi, or to proffer a reason why the release would not or could not be signed. Further, Cangialosi had a right to rely on the fact that Tobin would in fact respond and do what he was required to do. Tobin's conduct, therefore, was a direct cause of the Fiorettis' losses.

Finally, Ambrosio testified that Tobin's conduct "in extracting $15,000 when he was asked as a lawyer to do an administerial [sic] act" to provide a release that should have been provided previously "had no justification." However, Tobin's conduct did not excuse or relieve Cangialosi, as Cangialosi still had a continuing duty to get a lien-free title for his client. But at the same time, Cangialosi clearly had a right to rely upon another lawyer providing that which is a ministerial act to obtain a release within a reasonable amount of time.

At the conclusion of the trial, Judge Smith set forth his findings in an oral decision on January 4, 2007. He found that although there was some testimony regarding other properties that were subject to the Pension Plan mortgage that were released for higher sums of money, "they were probably held separate and apart from the Sherman Avenue properties and the Sherman Avenue properties had a history of release for the nominal consideration mentioned." The judge found that settlement was supposed to take place conveying unit D-2 from Eli Company to Southwell in September 2001, but was delayed until March 2002 because of the negotiations to obtain a release. The $15,000 check for the release was made payable to Tobin's law firm and deposited into his trust account. The judge found that Tobin's failure and unwillingness to produce the trust account records reflecting receipt and disbursement of the money allowed him to draw the inference that the money was divided between Tobin and Gold individually, and no portion went to the Pension Plan, which was inactive or defunct.*fn2

The judge found that this was an improper windfall to Tobin and Gold, and they essentially extorted money from the Fiorettis to which they were not entitled. The judge further found that Cangialosi and Tobin both owed a duty to the Fiorettis to obtain and file the release of the Pension Plan lien. Cangialosi breached the duty by not obtaining the release and not advising his clients that he had not obtained it. Cangialosi's breach caused damage to his clients.

The judge further concluded that, although expert testimony was presented, it was not necessary because it was clear that the attorneys involved had a duty to have liens discharged and deliver clear title. For the reasons we will discuss more fully later in this opinion, the judge found that Cangialosi was entitled to contribution from Tobin pursuant to the third-party complaint.*fn3

In addition to the $15,000, the judge determined that the Fiorettis and Eli Company were entitled to carrying charges for the five-month delay. The May 2, 2007 judgment therefore awarded those parties $17,277 against Cangialosi.*fn4

The judgment included a provision that judgment be entered in favor of Cangialosi against Tobin in the amount of $17,000.08, together with ...


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