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Wachovia Bank, N.A., As Assignee of Ann J. Herrera, Conservator For v. Richard J. Weiner

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


February 10, 2012

WACHOVIA BANK, N.A., AS ASSIGNEE OF ANN J. HERRERA, CONSERVATOR FOR JALIL NAGER JONES, A MINOR, PLAINTIFF-APPELLANT,
v.
RICHARD J. WEINER, ESQ., DEFENDANT-RESPONDENT, AND WEINER, CARROLL & STRAUSS, SUCCESSOR TO WEINER & GALL, DEFENDANT.

On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-5757-10.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued January 11, 2012

Before Judges Fuentes, Graves, and Harris.

This appeal addresses Wachovia Bank, N.A.'s (Wachovia) standing to pursue assigned causes of action in its two-count complaint to recover at least $647,156.96 from defendants for the supposed improper disbursement of settlement proceeds to a minor. We provisionally affirm.

I.

The genesis of this case is found in the Law Division action filed in the Essex Vicinage in 1996: Jalil Jones, an Infant by his Guardian Ad Litem, Wadia Hill[*fn1 ] and Wadia Hill, Individually v. Ruth Bey, and Public Service Electric & Gas Company, Superior Court of New Jersey, Law Division, Essex County, Docket No. ESX-L-10777-96 (the personal injury action). Defendant Weiner & Gall was the attorney of record and defendant Richard J. Weiner, Esq. was individually assigned to represent the plaintiffs in the personal injury action.

On March 20, 2001, the Law Division entered an order (the Jones order) approving a structured settlement in favor of the minor, Jalil Jones (Jones), pursuant to Rule 4:44-3. A separate order approved a structured settlement in favor of Wadia Hill (Hill) individually.*fn2

The Jones order entered judgment in favor of the minor in the amount of $4,500,000. This amount was expressly ordered to be satisfied in the following manner:

a. The amount of $2,366,667.00 shall be paid by the defendant PSE&G, to procure a lifetime annuity for infant plaintiff, Jalil Jones;

b. The amount of $2,133,333.00 shall be paid to Jalil Jones, an infant by his guardian ad litem, and Weiner & Gall, Attorneys and shall be distributed as follows: $647,156.96 shall be paid for the benefit of the infant Jalil Jones and held in accordance with the dictates of the appropriate authorities in the State of Georgia;[*fn3 ] $129,895.72 shall be paid to satisfy the Medicaid lien of the State of New Jersey; $1,227,300.00 shall be distributed to the firm of Weiner & Gall on account of legal fees; and $128,980.32 shall be paid to the firm of Weiner & Gall on account of expenses.

On April 10, 2001, a check in the amount of $647,156.96 was issued from an attorney trust account entitled, "Richard J. Weiner, P.C. Trust Account," payable to "Wadia Hill, as guardian for infant Jalil Jones." At that time Hill had not qualified to serve as Jones's guardian under Georgia law. On April 11, 2001, this check was deposited in a guardianship account at Wachovia's predecessor, First Union National Bank. The guardianship account was entitled, "Gdnship of Jalil N. Jones, Wadia Hill Guardian." On the same day, Hill withdrew $350,000 from this account and thereafter deposited that sum in her personal "CAP Account" at an affiliate of First Union National Bank. She then paid Weiner $280,000 from her personal account.

In January 2007, the Probate Court of Fulton County, Georgia initiated a proceeding to inquire into the disposition of the settlement proceeds generated by the personal injury action in New Jersey. It does not appear that any of the parties to this appeal were parties in the probate proceedings. After conducting a testimonial hearing, the Georgia court appointed a conservator for Jones: Ann J. Herrera (Herrera), as the Fulton County Conservator. In its order of appointment, the Judicial Hearing Officer noted the following:

Ms. Hill expressed frustration with how financial matters were handled and that she had been mislead by prior counsel. She stated that the personal injury attorney requested additional fees from the trial court at the time of settlement, that court had denied the request, however the personal injury attorney compelled her to pay those fees without the knowledge of the trial court. She stated that the personal injury attorney set up guardianship bank accounts in New Jersey into which funds were deposited and withdrawn, however she did not have full records for those accounts and claims she did not establish the accounts.

On November 24, 2008, Herrera filed suit against Wachovia, its affiliate Wachovia Securities, LLC, and Hill*fn4 in Georgia. She alleged that Wachovia had breached its fiduciary duties to Jones by allowing Hill to open the guardianship account without proper qualification and documentation. Defendants on appeal were not parties to that action.

On September 14, 2009, a settlement was reached between Herrera and Wachovia for $300,000. As part of their arrangement, Herrera assign[ed] and convey[ed] to Wachovia Bank any claim, right or action she [had] or may have [had] on behalf of Jones against Richard J. Weiner, former attorney for Jones and Hill-Muhammad in the Jones Case, and Richard J. Weiner's law firm . . . that represented Jones in the Jones Case . . ., including without limitation those claims relating to the Jones Settlement Payments or Guardianship Accounts ("Weiner Claims").

Herrera also assigned the default judgment entered against Hill and the "corresponding FiFa"*fn5 to Wachovia.

On July 13, 2010, rather than proceeding under the auspices of the personal injury action, Wachovia, as Herrera's assignee, filed a two-count complaint against Weiner and defendant Weiner, Carroll & Strauss, as the successor to Weiner & Gall. The first count alleged that defendants violated their duty to disburse the settlement proceeds awarded to Jones in accordance with the Jones order. The second count alleged that defendants were liable for the conversion of the portion ($280,000) of the settlement proceeds that Hill had paid using the funds from the First Union National Bank guardianship account. Wachovia did not join Hill as a party to this action.

In December 2010, defendants filed a motion for summary judgment. After considering both sides' papers and oral argument, the motion court granted summary judgment dismissing Wachovia's complaint with prejudice. In its oral decision, the court rejected the argument that Wachovia's claims were barred by the entire controversy doctrine. However, dismissal was deemed appropriate because the court concluded that the claims in the complaint were based upon the torts of professional negligence and conversion, rather than upon a contract theory, thereby "rendering the assignment of the claim[s] by the Georgia conservator invalid," because they had not been reduced to judgment. This appeal followed.

II.

Orders granting summary judgment are reviewed de novo, and we apply the legal standard employed by the Law Division. Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010). In performance of our appellate function we consider, as did the motion court, "'whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party.'" Ingraham v. Ortho-McNeil Pharm., 422 N.J. Super. 12, 20 (App. Div. 2011) (quoting Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995)). Because this matter comes before us on appeal from the motion court's grant of summary judgment in favor of defendants (the moving parties), we view the evidence, as we must, in the light most favorable to Wachovia. Polzo v. County of Essex, ___ N.J. ___, ___ (2012) (slip op. at 15 n.4).

We also review the Law Division's "interpretation of the law and the legal consequences that flow from undisputed facts" without giving any "special deference" to its legal conclusions. See Frumer v. Nat'l Home Ins. Co., 420 N.J. Super. 7, 13 (App. Div. 2011) (citing Alfano v. BDO Seidman, LLP, 393 N.J. Super. 560, 573 (App. Div. 2007) (quoting Manalapan Realty, L.P. v. Twp. Comm., 140 N.J. 366, 378 (1995)). Notwithstanding Wachovia's efforts to engender a dispute of fact on the motion record, we are satisfied that no such material dispute exists and the questions before us are exclusively legal in nature.

The motion court granted summary judgment after finding that Wachovia did not have standing to bring its claims because the rights it asserted under the assignment were not assignable under N.J.S.A. 2A:25-1. The court explained that Weiner was "not a party in interest," nor was he "named in the suit," but rather "was acting as an attorney," and therefore the Jones order was "not a contract because Mr. Weiner was not a party to the judgment." Wachovia's claim was, therefore, found to be rooted in tort and thus barred from assignment prior to judgment under N.J.S.A. 2A:25-1.

The assignment of claims in New Jersey is governed by N.J.S.A. 2A:25-1:

All contracts for the sale and conveyance of real estate, all judgments and decrees recovered in any of the courts of this State or of the United States or in any of the courts of any other state of the United States and all choses in action arising on contract shall be assignable, and the assignee may sue thereon in his own name.

Because the statute is silent on tort claims, New Jersey courts have inferred that the Legislature did not intend for tort claims to be assignable prior to the entry of judgment.

Vill. of Ridgewood v. Shell Oil Co., 289 N.J. Super. 181, 195 (App. Div. 1996)(holding that a tort claim cannot be assigned prior to judgment). "The essential purpose of this prohibition is 'to prevent unscrupulous strangers to an occurrence from preying on the deprived circumstances of an injured person.'" Kimball Intern., Inc. v. Northfield Metal Prod., 334 N.J. Super. 596, 611 (App. Div. 2000) (quoting Caldwell v. Ogden Sea Transp., Inc., 618 F.2d 1037, 1048 (4th Cir. 1980)), certif. denied, 167 N.J. 88 (2001).

We find no provenance in the law to support Wachovia's attempt to transform its foundational theory of a breach of fiduciary duties under the Jones order into a breach of contract. We start with the language of the complaint drafted by Wachovia in this matter, treating it elastically to understand its underlying theory, but not so sinuous as to render the pleading meaningless.

Wachovia alleges that by dint of the Jones order, defendants "acted as a receiving and disbursing agent for the settlement proceeds." By failing to dispose of those proceeds precisely as countenanced by the Jones order -- "[defendants] were under a duty . . . to disburse the settlement proceeds in accordance with the [o]rder" -- defendants were alleged to have "breached their duty as the receiving and disbursing agent of the settlement proceeds." Thus, according to the express language of Wachovia's complaint, defendants were "strictly liable for their failure."

Wachovia's first count plainly asserts a tort-based theory of recovery. Defendants were not intended to be contracting parties as a result of the Jones order. The only contract that existed at that time was between the litigants: Jones and Hill as plaintiffs on one side, and the settling putative tortfeasors as defendants on the other.

"A settlement agreement between litigating parties is a contract[.]" Grow Co. v. Chokshi, 403 N.J. Super. 443, 464 (App. Div. 2008) (citing Pascarella v. Bruck, 190 N.J. Super. 118, 124 (App. Div.), certif. denied, 94 N.J. 600 (1983)). "[C]courts do not rewrite contracts in order to provide a better bargain than contained in their writing[.]" Ibid. (citing Christafano v. N.J. Mfrs. Ins. Co., 361 N.J. Super. 228, 237 (App. Div. 2003)). Weiner was under a judicial command to perform in a certain way, but it was not the result of a judicially-imposed contract or even upon Weiner's consensual agreement.

The core grievance embodied in Wachovia's first count is a breach of fiduciary duty, perhaps legal malpractice, both tortious in nature. See e.g., Grunwald v. Bronkesh, 131 N.J. 483, 492 (1993)("A legal malpractice action derives from the tort of negligence."); Circle Chevrolet Co. v. Giordano, Halleran & Ciesla, 274 N.J. Super. 405, 413 (App. Div. 1994)("Professional malpractice actions are grounded in the tort of negligence."), aff'd, 142 N.J. 280, 289 (1995).

Even if we put aside any labels that Wachovia seeks to affix to its pleading, see, e.g., Applestein v. United Board & Carton Corporation, 60 N.J. Super. 333, 348-49 (Ch. Div.), aff'd o.b., 33 N.J. 72 (1960); In re Farnkopf, 363 N.J. Super. 382, 394 (App. Div. 2003), and consider the substance of the complaint and not its form, we conclude that the allegations of wrongful conduct touch and concern interests far afield from the realm of a negotiated contract. Wachovia accuses Weiner of acts that border upon, if not cross the line of, criminality.*fn6 These serious allegations, if proven, are the concerns of tort law, not contract law. Accordingly, because Wachovia seeks to address them before having being reduced to judgment, they are neither assignable nor cognizable in the Law Division at present. In other words, Wachovia lacks standing to pursue these claims as composed, and the motion court's decision was correct.

The second count of Wachovia's complaint fares even worse under this analysis. There, Wachovia asserts that defendants tortiously "converted a portion of the settlement proceeds." The common law tort of conversion is the following: the "'intentional exercise of dominion or control over a chattel which so seriously interferes with the right of another to control it that the actor may justly be required to pay the other the full value of the chattel.'" Chicago Title Ins. Co. v. Ellis, 409 N.J. Super. 444, 454 (App. Div.) (quoting Restatement (Second) of Torts § 222A(1) (1965)), certif. denied, 200 N.J. 506 (2009). [Bondi v. Citigroup, Inc., No. A-2654-08 (App. Div. December 22, 2011) (slip op. at 75).]

We have differentiated conversion claims from breach of contract claims, distinguishing the situation where "money [was] converted by a tortfeasor . . . [that] belonged to the injured party" from "a mere debt . . . [w]here there is no obligation to return the identical money . . . ." Advanced Enters. Recycling, Inc. v. Bercaw, 376 N.J. Super. 153, 161 (App. Div. 2009)). Wachovia's conversion claim is non-assignable before judgment and Wachovia's present pursuit of remedies is forbidden due to its lack of standing.

We view as entirely inapposite the line of cases involving assignments of conversion claims to the New Jersey Lawyer's Fund for Client Protection (the Fund). The Fund was created by the New Jersey State Bar Association "to administer and operate, in accordance with [its] rules, . . . the reimbursement, to the extent and in the manner provided by [its] rules, of losses caused by the dishonest conduct of members of the bar of this State." N.J. Lawyer's Fund for Client Prot. v. Pace, 186 N.J. 123, 126 (2006) (citing R. 1:28-1(a)). To effectuate this goal, Rule 1:28-3(e) authorizes the trustees to "require as a condition to payment that the claimant execute such instruments, take such action or enter into such agreements as the trustees require, including assignments . . . ."

Wachovia posits that the validity of assignments to the Fund are not based upon contract rights. Rule 1:28-3(a) neither imposes the requirement on eligible claims that they allege a breach of a retainer agreement, nor does it require the presence of a contract in the form of a check. N.J. Lawyer's Fund for Client Prot. v. Pace, 374 N.J. Super. 57, 61 (App. Div. 2005)("The Fund now asserts its rights as assignee against Summit for strict liability for conversion of negotiable instruments."), aff'd, 186 N.J. 123 (2006).

Nevertheless, we are unpersuaded by Wachovia's argument that its claim can proceed on a conversion theory as an assignee in the same fashion as the Fund proceeds. Rule 1:28 has a narrow scope, only authorizing the assignment of eligible claims to the Fund, not to another entity -- Wachovia -- pursuing a lawyer for alleged mishandling of client monies. The Rule does not purport to authorize the assignment of conversion claims more generally. Interpreting this rule as authorizing assignment between private parties would erode the public policy considerations behind the prohibition on the assignability of tort claims generally. Unlike the Fund, which is closely monitored by the Supreme Court, see Pace, supra, 186 N.J. at 126, the conduct of private parties is unregulated when it comes to the assignment of conversion claims, thereby leaving open the potential mischief that such an assignment would take advantage of a vulnerable injured party.

III.

Having concluded that Wachovia lacks standing to pursue its assigned tort claims, we should affirm the judgment of the Law Division. However, given our parens patriae responsibility to protect the welfare of children, we are unable to ignore that such a disposition could result in a manifest injustice. See, e.g., Fawzy v. Fawzy, 199 N.J. 456, 474-75 (2009) (applying the well-settled principle that the judiciary has an obligation, under the parens patriae doctrine, to intervene where it is necessary to prevent harm to a child). Due to the fact that this controversy has its genesis in a Rule 4:44-3 order involving a minor, where the minor's attorney willingly accepted court-ordered responsibilities to ensure that the terms of the judgment would be performed for the benefit of his minor client, we have no hesitation in exercising our parens patriae jurisdiction to avoid a possible miscarriage of justice.

We cannot help but be struck by the incongruity of allowing an alleged wrongdoer to not be held accountable to an injured party -- particularly a minor such as Jones -- if at fault. We conclude that the interests of effective judicial administration would be appropriately served by allowing Herrera to substitute for Wachovia pursuant to Rule 4:34-3 as the plaintiff rather than requiring Wachovia to file a separate motion in aid of litigant's rights against defendants in the personal injury action. See Marshall v. Raritan Valley Disposal, 398 N.J. Super. 168, 176-79 (App. Div.), certif. denied, 196 N.J. 592 (2008). Although such a motion by Wachovia, as assignee of the Jones order, in the personal injury action pursuant to Rule 1:10-3 would not suffer the same standing defect as here, we do not dictate one course of action or another.

Accordingly, we remand the case to the Law Division to enable Herrera to substitute for Wachovia as plaintiff. If Herrera elects, for whatever reason, not to pursue the claims against defendants in her own name within sixty days of the issuance of this opinion, Wachovia's complaint should be dismissed for lack of standing.

The judgment dismissing the complaint is provisionally affirmed, and the case is remanded for further proceedings in conformity with this opinion.


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