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Albro v. Leonelli-Spina

August 3, 2010


On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-1277-04.

Per curiam.


Argued April 20, 2010

Before Judges Wefing, Grall and Messano.

In the fall of 1994, the Borough of Paramus (Paramus) offered "an early buy-out" retirement package to all police officers with at least twenty-five years of service. Plaintiff James R. Albro, who had been employed by Paramus as a police officer since 1969, applied for the retirement package and was effectively deemed retired as of January 1, 1995. By letter dated February 13, 1995, however, plaintiff attempted to withdraw his application for retirement and sought reinstatement; Paramus refused his request.

Plaintiff filed suit against Paramus, and defendant, Vincenza Leonelli-Spina,*fn1 represented plaintiff in the litigation which ultimately settled in September 2001. Pursuant to the consent order for judgment, plaintiff was promoted to the rank of captain, effective December 31, 1993; retired effective January 1, 1995 at a salary reflecting his promotion; received a lump sum payment of $270,000 for the release of all tort claims, as well as $30,619.47 for accumulated sick leave and miscellaneous benefits; received medical and dental insurance consistent with thirty-year veterans of the police department; and was "entitled to a promotional ceremony . . . ." Additionally, Paramus agreed to pay $165,000 for "[p]laintiff's attorneys['] fees and costs."

While his lawsuit was pending, however, the Division of Pensions considered plaintiff to be retired, and in March or April 1995, plaintiff began receiving monthly pension checks. He did not cash or deposit the checks, believing that the success of his lawsuit would be adversely affected if he did so. The payments were instead deposited in an escrow account that became the focus of this litigation.

On February 20, 2004, plaintiff filed a verified complaint seeking compensatory and punitive damages alleging that defendant: failed to make payments of estimated income taxes on the escrowed funds; improperly withheld the pension funds claiming they were payments for her legal fees; failed to provide him with information regarding the escrow account in violation of N.J.S.A. 2A:13-4; violated Rule 1:21-6 by failing to keep accurate accounting records; and failed to provide plaintiff access to, or information regarding, the escrow account in violation of the Rules of Professional Conduct (RPC) 1.4 and 1.5. Defendant filed her answer, together with a counterclaim for unpaid legal fees.

The issues of liability and compensatory damages were heard during a seven-day bench trial before the late Sybil R. Moses, A.J.S.C. On September 10, 2007, Judge Moses issued a written opinion setting forth her findings, awarding judgment in favor of plaintiff, and dismissing defendant's counterclaim with prejudice. On October 3, 2007, she entered an interlocutory order for judgment fixing plaintiff's total economic damages at $260,242.95.

Because of Judge Moses' death, a plenary hearing as to punitive damages and other relief was held before a second judge. On December 9, 2008, that judge issued a written opinion awarding plaintiff punitive damages in the amount of $350,000, attorneys' fees in the amount of $145,297.95, and $16,305.62 in costs. An order of final judgment was entered on January 12, 2009, incorporating these amounts, plus $23,710.62 in post-judgment interest, for a total judgment of $795,557.04. This appeal followed.

Defendant contends that Judge Moses "improperly amended plaintiff's . . . complaint to include claims for fraud and misappropriation of funds"; that her "decision was against the weight of the evidence; and that punitive damages should not have been awarded because defendant "ha[d] no ability to pay," and because plaintiff's testimony at the plenary hearing "contradicted his testimony at trial." We have considered these arguments in light of the record and applicable legal standards. We affirm.


It suffices to say that the trial testimony produced two widely divergent accounts of events. Plaintiff claimed that he first met with John J. Feczko, an attorney who employed defendant, regarding representation in his suit against Paramus. Feczko suggested that defendant handle the case because he lacked experience in labor and employment matters. Defendant told plaintiff that the firm would handle the litigation on a contingency basis, though plaintiff did not know exactly what that meant. No written retainer agreement was executed.

When plaintiff began to receive his pension checks, he met with defendant seeking her advice. She told him that she would research the issue, and in the fall of 1995, plaintiff's pension checks were returned to the Division of Pensions, which in turn issued a new, consolidated check for $17,061.75 that defendant suggested plaintiff place in an escrow account. A money market savings account was opened in the name of "John J. Feczko, Trustee for James R. Albro Retirement Account." Plaintiff endorsed the consolidated pension check and all subsequent pension checks he received and turned them over to defendant. Plaintiff never authorized Feczko or defendant to use the escrow account to pay their legal fees, and he never received any bank statements regarding the account.

In November 1996, defendant left Feczko's employ to open her own firm in the same building. She advised plaintiff that she would continue representing him in his lawsuit, he agreed, but no discussion of fees took place and no retainer agreement was executed.

In April 1998, plaintiff spoke with his accountant, Kenneth Chazotte, CPA, regarding the possible tax consequences of the pension payments. Chazotte advised plaintiff to make quarterly estimated tax payments and prepared vouchers which in turn plaintiff presented to defendant for payment from the escrow account. Defendant agreed to make the tax payments and made the first payment in front of plaintiff, who believed that defendant would continue in this regard. He delivered quarterly estimated tax vouchers prepared by Chazotte for 1999, 2000, and 2001. Defendant never objected to plaintiff's request or advised him that she would not make those payments.

At defendant's request, her husband, Patrick Spina, of the law firm of Averna and Spina, became involved in the litigation against Paramus. Plaintiff never entered into any verbal or written fee agreement with Spina or his firm, and he never agreed to pay them separately for their services. In the summer of 2001, plaintiff and his wife met with defendant and Spina to discuss potential settlement of the litigation. Plaintiff thought the settlement was fair and reasonable, believed that all legal fees would be paid by Paramus, and that all monies in the escrow account would be released to him. Plaintiff would not have settled the case if he thought additional legal fees would be assessed.

After entry of the consent judgment, neither defendant nor Spina ever told plaintiff that he was responsible for attorneys' fees above the $165,000 paid by Paramus, and plaintiff never received any invoices or statements from either defendant or Spina for legal services rendered. Before the distribution of the settlement proceeds in October 2001, defendant had plaintiff execute a one-page document which she told him was a "contract" with her firm. Plaintiff did not read it because he did not have his glasses and because he trusted defendant. When questioned about a purported three-page retainer agreement furnished by defendant during this litigation, plaintiff testified that he had never seen it prior to this lawsuit and never received a copy of it.

Pursuant to the settlement, Paramus paid a total of $465,000 in two checks made payable to the Averna and Spina Trust Account. The ledger sheet from that account indicates that defendant received $100,000 and that Averna and Spina distributed $67,082.21 to itself.

Plaintiff continued to give his monthly pension check to defendant until April 2002 because "[he] was led to believe that [the case] wasn't totally settled yet and [he] had to continue doing it." Defendant told plaintiff that she had to do a final accounting and deal with any tax issues before she could turn over the money. She did not tell him that she had used the escrow money in payment of her legal fees.

Plaintiff learned that defendant had not paid the quarterly estimated taxes when he received deficiency notices from the Internal Revenue Service (IRS). When he showed the notices to defendant, she claimed that she had made the tax payments and assured plaintiff she would look into the problem. Eventually, the IRS filed a federal tax lien on plaintiff's house and on his wife's bank account. In November 2003, plaintiff decided to purchase a farm in upstate New York. He advised defendant of his plans, and instructed her to wire monies from the pension escrow account. Defendant failed to do so, though plaintiff was nonetheless able to complete the purchase. He attempted to contact defendant and Spina to find out what had happened, but they simply ignored his calls and never returned any of his numerous messages. Thereafter, plaintiff retained legal counsel to represent his interests regarding the pension escrow account, and this litigation ultimately ensued.

Plaintiff's wife Judith testified and corroborated much of her husband's account.*fn2 Defendant told her and her husband that "we had a good case, and that we would go forward, . . . that the town would ultimately be responsible for the fees, [and] that when the case was settled . . . they would be paying the fees." After defendant opened her own firm, Judith and her husband met with her again. No written retainer was signed.*fn3

Judith claimed that none of the law firms involved ever sent the Albros an invoice or statement of services, and she and her husband never authorized defendant to withdraw monies from the escrow account to pay for legal services rendered.

When Judith received notice from the IRS that the taxes were past due, she was very upset and called defendant, who told her that she would look into the matter. Judith spoke with defendant several times thereafter and she always claimed to be working on the issue. The Albros and Chazotte met with defendant, who claimed she had made the estimated tax payments, exhibiting copies of the fronts of checks drawn on the escrow account. As a result of defendant's failure to pay the quarterly estimated taxes, the Albros had to pay penalties to the IRS and accounting fees to Chazotte.

Regarding the settlement reached with Paramus, Judith reiterated that while satisfied with the terms, she and plaintiff both believed that defendant's legal fees would be paid by Paramus, that the fees were limited to $165,000, and that the escrow monies would be returned to them and not be used by defendant to pay for legal services rendered.

Judith reviewed bills produced during discovery that defendant claimed were sent to the Albros. Judith took issue with many of the entries for legal services allegedly performed by defendant, denying, for example, that either she or plaintiff attended conferences with defendant on Sundays, holidays, or during times when they were vacationing out of state. Judith noted that one of the entries was for ...

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