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Lawrence v. Schenck Price Smith & King, L.L.P

Superior Court of New Jersey, Appellate Division

July 30, 2013

GAIL LAWRENCE, Plaintiff-Appellant,
SCHENCK PRICE SMITH & KING, L.L.P., and JEREMY M. GARLOCK, ESQ., Defendants-Respondents, and SCHILLER and PITTENGER, P.C., and THEODORE E. SCHILLER, ESQ., Defendants.


Argued January 30, 2013.

On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L-632-09.

Harmon H. Lookhoff argued the cause for appellant.

Marshall D. Bilder argued the cause for respondents (Sterns & Weinroth, attorneys; Mr. Bilder, of counsel and on the brief; Robert J. McGuire, on the brief).

Before Judges Grall and Accurso.


Plaintiff Gail Lawrence appeals from a February 28, 2012 summary judgment dismissing her complaint for legal malpractice against a lawyer with whom she was not in privity. Because the facts were not in dispute and defendants Schenck Price Smith & King, L.L.P. (Schenck) and Jeremy M. Garlock, Esq. (Garlock) owed no duty to plaintiff, and thus were entitled to judgment as a matter of law, we affirm.

The facts have never been in dispute. Plaintiff's two daughters wanted to buy a business and plaintiff and her late husband agreed to help them do so. Accordingly, in December 2004, plaintiff and her husband borrowed $75, 000 from Valley National Bank (Valley), which they gave to their daughters for that purpose. The daughters, Bonnie and Linda Lawrence, required more money for their purchase, however, and arranged to obtain a small business loan of $160, 000 from Valley in their own names.

Plaintiff's daughters subsequently retained Schenck and Garlock to represent them in connection with their purchase of Buddy's Homemade Ice Cream. Plaintiff acknowledges that Schenck and Garlock did not represent her and that she and her husband had no other relation with the firm or Garlock.

The loan closing took place on February 9, 2005 in the offices of the bank's counsel.[1] Plaintiff was advised by Bonnie that Garlock said it was necessary for plaintiff to attend. Bonnie did not tell her why (Bonnie claims Garlock did not say) and plaintiff assumed, and mentioned to Bonnie, that it must have something to do with the $75, 000 she and her husband had borrowed for their daughters in December. Plaintiff's husband, however, had passed away in January, and she alone attended the closing in the company of her daughters and Bonnie's fiancée.[2]

Plaintiff contends, and defendants accepted her contentions for purpose of summary judgment, that only Garlock understood that plaintiff was there "to incur very substantial financial obligations or exposure to liabilities in addition" to the $75, 000 she and her husband had borrowed for their daughters. The parties agree that Garlock did not discuss the transaction with plaintiff or her role in it. Garlock did not ask plaintiff whether she understood that she would be exposing herself to personal liabilities in excess of $160, 000 and agreeing to a lien on her home to secure those obligations. He did not ask her whether she was represented by an attorney or wished to consult one before proceeding with the closing.

Garlock sat at one end of the closing table with a stack of documents that he said needed to be signed. Plaintiff sat at the other end of the table. Garlock passed all the papers plaintiff signed down the table, including a secured guarantee of the loan and of her daughters' obligations on a lease, with the words "this is 'just' the mortgage or this is 'only' the note." In other words, Garlock identified the documents by reading aloud their titles, and advising who needed to sign which document. Plaintiff does not contend that Garlock said anything else.

The ice cream venture did not turn out as hoped. Plaintiff's daughters defaulted on their obligations and filed for bankruptcy. Plaintiff was forced to borrow additional sums against her home to pay off $133, 000 owed on her guarantee. In addition, an arbitrator determined that plaintiff was responsible for an additional $96, 720.41 in connection with the premises' lease.

After discovery, defendants moved for summary judgment. Judge Hansbury heard oral argument and determined on the undisputed facts that defendants owed no duty to plaintiff under Petrillo v. Bachenberg, 139 N.J. 472 (1995), and Banco Popular N. Am. v. Gandi, 184 N.J. 161 (2005). This appeal followed.

We review the grant of summary judgment using the same standard as the motion judge. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J.Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). As the parties agree that there was no dispute as to the material facts, our task is limited to determining whether the trial judge's ruling on the applicable law was correct. Walker v. Atl. Chrysler Plymouth, Inc., 216 N.J.Super. 255, 258 (App. Div. 1987).

In Petrillo, our Supreme Court abandoned the rule, still pertaining elsewhere, that no cause of action exists for attorney malpractice by one not in privity of contract. Petrillo, supra, 139 N.J. at 483-84. The Court recognized in Petrillo a defined duty on the part of a lawyer to a non-client to not misrepresent negligently the contents of a material document on which the lawyer knows, or should know, the non-client would rely to his or her financial detriment. Id . at 489. In explaining the Court's holding, Justice Pollock emphasized its limited reach in the last line of the opinion. "In many situations, lawyers, like people generally, may not have a duty to act, but when they act, like other people, they should act carefully." Ibid.

Ten years later, in Banco Popular, Justice Long wrote that "infusing Petrillo" was the focus on the relationship between the lawyer and the third party.

If the attorney's actions are intended to induce a specific non-client's reasonable reliance on his or her representations, then there is a relationship between the attorney and the third party. Contrariwise, if the attorney does absolutely nothing to induce reasonable reliance by a third party, there is no relationship to substitute for the privity requirement. Indeed, in Petrillo, we noted that "when courts relax the privity requirement, they typically limit a lawyer's duty to situations in which the lawyer intended or should have foreseen that the third party would rely on the lawyer's work." Put differently, the invitation to rely and reliance are the linchpins of attorney liability to third parties.
[Banco Popular, supra, 184 N.J. at 180 (citations omitted).]

On appeal, plaintiff contends that the trial court erred in granting summary judgment because she relied on Garlock's "reassuring preface" of "just the guarantee, " in executing the documents. She acknowledges, however, as she has throughout, that Garlock made no misrepresentations to her. Notwithstanding, she maintains that she would never had acquiesced in her daughters' request that she sign a guarantee of their $160, 000 business loan had she understood that she was exposing herself to "very substantial financial obligations." Plaintiff maintains that the entire problem could have been averted had Garlock simply explained the nature of a guarantee and asked plaintiff whether she understood that she was obligating herself to pay the loan in the event her daughters defaulted.

Our law, however, does not impose such an affirmative duty on the part of a lawyer to a non-client. As Justice Long noted in Banco Popular, the Court never suggested in Petrillo, "even obliquely, that a duty would arise in [ ] circumstances . . . involving no representations" by the lawyer to a third party. Id . at 182. We agree with Judge Hansbury that even viewing Garlock's conduct in the light most favorable to plaintiff, passing a guarantee to plaintiff for signature with the words "this is just the guarantee" cannot be construed as intending to induce reliance in plaintiff. As Garlock did "absolutely nothing" to induce plaintiff to reasonably rely upon him, no relationship existed between them which could give rise to any duty on his part to explain the documents to plaintiff.

Because we agree that Garlock owed no duty to plaintiff on the undisputed facts, we need not address defendants' arguments that imposing the duty plaintiff seeks would create a conflict of interest, or that plaintiff failed to make out a prima facie case for malpractice because of the net opinion of her expert.


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