On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-1607-11.
The opinion of the court was delivered by: Kennedy, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted October 2, 2012
Before Judges Messano, Ostrer and Kennedy.
The opinion of the court was delivered by KENNEDY, J.A.D.
This appeal arises from a dispute between a creditor and the debtor's former attorney over entitlement to funds held in a trust account. The funds were apparently recovered by the creditor in an action he brought in Florida against both the debtor and a Florida corporation that owed the debtor money. The debtor hired counsel to represent it after the creditor obtained judgment against the debtor in New Jersey. When the creditor sought to collect on the judgment by bringing the suit in Florida against the Florida corporation, the debtor entered into a "contingency agreement" with its counsel for representation respecting the "unlawful retention" of money owed by the Florida corporation. The agreement provided for a fee based on a percentage of "money recovered for" the debtor.
We reverse the orders of the Law Division releasing the disputed funds to debtor's former counsel and remand the matter to the Law Division for further proceedings consistent with our opinion.
Slava Kornilov (Kornilov), a New Jersey resident, purchased two diamonds from East West Precious Metals of New York, Inc. (East West) for $245,865. When Kornilov did not receive the diamonds, he filed suit in Bergen County against East West seeking damages and injunctive relief (the New Jersey Action). Kornilov moved for default judgment after East West failed to answer or otherwise move with respect to the complaint. Kornilov's motion was granted on January 8, 2010, and the court ordered East West to give the diamonds to Kornilov within ten days, failing which Kornilov would be entitled to "place a hold" of $245,865 "[o]n any bank account held by East West in a Constructive Trust [sic] . . . ."
Two weeks later, after East West failed to deliver the diamonds, Kornilov filed a verified complaint in the Circuit Court of the 11th Judicial Circuit of Florida (the Florida Action) upon discovering East West was owed $253,972.33 by a Florida corporation, Republic Metals Corporation, Inc. (Republic). East West was also named as a party defendant in the Florida Action, which sought to recover and impose a "constructive trust" for the benefit of Kornilov on the money Republic owed to East West.
East West had earlier retained Schepisi & McLaughlin, P.A. (Schepisi) on an hourly basis to represent it in the New Jersey Action. Apparently, after learning of the pendency of the Florida Action, East West signed a second agreement with Schepisi agreeing to pay Schepisi a contingent legal fee based upon a percentage of "money recovered" for East West on the "unlawful retention" of money "due and owing" by Republic. By the time the agreement was entered, the Florida complaint had already been filed. Schepisi never entered an appearance in the Florida Action, although a Florida lawyer, Aaron Resnick, did file a "Notice of Limited Appearance" on behalf of East West in order to permit him to attend a status conference in that ...