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Schiavo v. Baron


October 16, 2009


On appeal from the Superior Court of New Jersey, Chancery Division, Burlington County, Docket No. C-141-07.

Per curiam.


Argued September 22, 2009

Before Judges Wefing, Grall and LeWinn.

Plaintiff appeals from a trial court order granting summary judgment to defendant and dismissing plaintiff's complaint with prejudice. After reviewing the record in light of the contentions advanced on appeal, we affirm.

This litigation has its genesis in plaintiff's unsuccessful efforts to develop a parcel of land more than thirteen acres in size in Mount Laurel. It is necessary to set forth the history of those efforts to understand the context in which this appeal arose.

The parcel in question was originally owned by Thomas Patsaros. Plaintiff and Patsaros formed New Jersey Star Properties ("NJ Star"), a limited liability company, for the purpose of developing the land. Schiavo, Patsaros and NJ Star entered into a joint venture agreement under which the property would be held for the benefit of the joint venture.

The relationship between Schiavo and Patsaros eventually deteriorated to the point that Schiavo commenced suit, naming Patsaros and NJ Star as defendants and filing a lis pendens against the property. Schiavo contended that Patsaros was not making the appropriate financial contributions to the joint venture, and in his complaint, Schiavo sought authorization to pursue the approvals necessary to develop the site and to prevent Patsaros and NJ Star from interfering with his efforts. Patsaros and NJ Star opposed Schiavo's efforts in this regard and filed a counterclaim against him. This litigation naturally brought development efforts to a halt.

On November 26, 2003, the trial court entered an order in that litigation which recited that it had "concluded that the parties have reached a dead lock [sic] which jeopardizes the potential value of the subject real estate and the economic return to the parties" and that the appointment of a Special Master "would advance the interests of all the parties...." The order appointed defendant Jeffrey Baron, a New Jersey attorney who concentrated his practice in the area of land use law, as that Special Master and authorized him "to file the necessary applications, procure the necessary development plans, reports, studies, investigations, etc. from the professional engineer and other professionals originally utilized by [NJ Star]...."

The order also contained the following provisions:

Any third party offers to purchase the Property shall be submitted to the Special Master. The parties are encouraged to obtain offers from third parties to maximize the ultimate financial gain to the parties. The Special Master shall review any offers, conduct any negotiations deemed necessary in the Special Master's opinion, consult with the attorneys for the parties as to the various offers and, if appropriate, pursue a written agreement of sale for the purchase of the Property. Any such agreement of sale shall be submitted to this Court for approval so as to permit the parties an opportunity to comment upon or object to any proposed purchase of the Property.

If a willing third party purchaser submits a written offer on terms and conditions recommended by the Special Master and accepted by the parties, the Property shall be sold and each party shall be entitled to reimbursement from the proceeds of the sale for the costs and expenses allowed by the Court after reviewing the accountings and the parties' one-half (1/2) expenditure of expenses and fees pursuant to this Order. Following the sale of the Property, each party shall be entitled to apply to this Court for such reimbursement of expenses. The balance of the purchase price for the Property, after the aforementioned reimbursement of expenses pursuant to this Order, shall be escrowed in an interest-bearing trust account for the interests of the parties as determined by a final adjudication of the Court in this matter.

In addition, the order specifically authorized defendant to remove the lis pendens that plaintiff had filed.

Prior to Baron's appointment, plaintiff had filed an application with the Mount Laurel Planning Board for major subdivision approval of the property. In December 2003, shortly after Baron's appointment, the municipal planning board determined that the application was incomplete as submitted and thus could not be considered. In addition, the Burlington County Planning Board in January 2004 rejected the application plaintiff had filed with it for approval because it was deemed technically incomplete. Baron requested that the engineer Schiavo had utilized to prepare these applications cure the noted deficiencies.

It took the engineer more than three months to correct the various deficiencies. After he did so, the boards requested further corrections. This, combined with other scheduling delays, led to the Mount Laurel Planning Board not granting preliminary major subdivision approval until November 2004, nearly one year after the trial court had appointed Baron as Special Master.

In the interim, Baron arranged for the submission of bids from prospective purchasers. He deemed five of the bids appropriate for consideration and after analyzing their respective terms, advised the trial court that he recommended that the property be sold to OHB Homes, Inc. He noted that while OHB had not offered the highest price per lot, other aspects of its bid, including that it would assume the cost of obtaining the necessary approvals, made its offer ultimately the most beneficial for the parties. Schiavo objected, wanting the property sold to U.S. Homes, which had offered substantially more per lot. The trial court approved Baron's recommendation that the property be sold to OHB.

Before this sale could be consummated, however, and before final major subdivision approval was obtained from the planning board, Mount Laurel instituted a moratorium on new water service, thus precluding all development on the tract for an unspecified period of time. The proposed sale to OHB collapsed.

Finally, Mount Laurel decided that it wished to acquire the property for park purposes, and it offered to purchase the property, rather than proceed by way of eminent domain. Again, Schiavo objected to various aspects of the proposed transaction. The trial court entered an order in July 2005 that authorized the Special Master to execute all the documents necessary to complete this transaction in the event Schiavo refused to do so.

During the period from Baron's appointment in November 2003 through completion of the sale, Schiavo bore the burden of the carrying costs of the property as well as the expenses associated with obtaining the needed approvals. When he concluded he could no longer afford those expenditures, he filed a petition with the United States Bankruptcy Court. One of the effects of that filing was to stay the litigation he had commenced as well as the efforts to sell the property until relief from the automatic stay was obtained in September 2005. The order granting relief from the automatic stay directed that if the property were not sold within ninety days, Schiavo could seek to have the stay reinstated.*fn1

Schiavo continued to object to the sale of this land to Mount Laurel. The trial court entered a further order in December 2005, directing the parties to proceed to close this transaction, authorizing the Special Master to sign all documents necessary in connection with the closing, and authorizing him to retain the proceeds of sale pending further order. Eventually Schiavo and Patsaros negotiated an agreement on the disposition of the proceeds of sale; this agreement was incorporated into an order entered June 14, 2006. The trial court directed the following language be incorporated in that order: "The Special Master, Jeffrey I. Baron, Esquire acted in a quasi-judicial capacity and the extent to which judicial immunity shall attach to the duties performed by the Special Master in this matter is reserved for further proceedings and determinations by this Court."

In September 2007, Schiavo commenced this action against Baron, contending that his conduct as Special Master was negligent and constituted legal malpractice. Plaintiff's appeal is from the trial court order granting summary judgment to Baron and dismissing this action.

We are satisfied that the trial court's conclusion was entirely correct in the context of this matter. Schiavo contends that an attorney-client relationship existed between himself and Baron and that even if it did not, Baron can be held liable to him.

Our review of this record satisfies us that the trial court correctly rejected Schiavo's arguments in this regard because Baron did not owe a duty of care to Schiavo. First, an attorney-client relationship could not have existed between Schiavo and Baron because of the clear conflict of interest such a relationship would pose. The trial court's order of November 26, 2003, appointed defendant Baron "to represent and advance the interests of N.J. Star Properties, L.L.C...." At the time of Baron's appointment, Schiavo was suing NJ Star; indeed, it was that suit which led to Baron's appointment. Baron could not ethically represent the party suing the entity whose interests he was appointed to advance.

The court's order did not appoint Baron to represent and advance the interests of Schiavo. Baron, charged with the responsibility of representing and furthering the interests of NJ Star, could not put the interests of Schiavo over the interests of NJ Star.

We recognize that an attorney may, in certain contexts, be held liable to a non-client.

Privity between an attorney and a non-client is not necessary for a duty to attach "where the attorney had reason to foresee the specific harm which occurred." Further, "attorneys may owe a duty of care to non-clients when the attorneys know, or should know, that non-clients will rely on the attorney's representations and the non-clients are not too remote from the attorneys to be entitled to protection." To determine if that duty exists, a court conducts an "inquiry [that] involves a weighing of the relationship of the parties, the nature of the risk, and the public interest in the proposed solution." The primary question in this inquiry is one of fairness. [Estate of Albanese v. Lolio, 393 N.J.

Super. 355, 368-69 (App. Div. 2007) (citations omitted).]

In that matter, we concluded that the attorney retained by the executrix of an estate did not owe a duty to the beneficiaries of the estate with respect to the individual income tax consequences of certain actions. Id. at 377.

The Supreme Court has recently considered the principles underlying those instances in which a non-client may properly assert a claim of liability against an attorney and concluded that there must be both reliance upon the attorney by the non- client and that the reliance be reasonable. Banco Popular N. Am. v. Gandi, 184 N.J. 161, 179-82 (2005). Here, Schiavo did not rely upon Baron. Indeed, he resisted Baron's efforts at almost every turn. Further, even under the summary judgment prism, which calls for us to view the actions of the parties in the light most favorable to Schiavo, reliance by Schiavo on Baron's actions, to the extent that any such reliance existed, would not be reasonable in light of the clear conflict of interest we noted above.

Our conclusion that Baron did not owe a duty of care to Schiavo in the context of this matter makes it unnecessary for us to consider Schiavo's remaining contentions.

The order under review is affirmed.

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