Circle Chevrolet Co. v. Giordano, Halleran & Ciesla

662 A.2d 509, 142 N.J. 280, 1995 N.J. LEXIS 532
Supreme Court of New Jersey·Decided August 1, 1995·Published·Cited by 113 cases

Opinions

The opinion of the Court was delivered by

HANDLER, Justice.

This case involves the scope of the entire controversy doctrine as it applies to joinder of parties. At issue in this' case, as well as, Mystic Isle Development Corp. v. Perskie & Nehmad, 142 N.J. [285]*285310, 662 A.2d 523, is whether the entire controversy doctrine applies to a malpractice action against an attorney who represents a client in the underlying transaction.

The case is before us as a result of a dissent in the Appellate Division. R. 2:2-l(a)(2). On appeal, the Appellate Division ruled, in a reported opinion, 274 N.J.Super. 405, 644 A.2d 626 (1994), that the entire controversy doctrine applied and, accordingly, dismissed the action.

I

Plaintiff Circle Chevrolet Co. (Circle) is a privately-owned corporation that operates a car dealership in Shrewsbury, New Jersey. 274 N.J.Super. at 409, 644 A.2d 626. Thomas J. DeFeliee, Sr. (DeFeliee) is the president and sole shareholder of Circle. Ibid. The dealership is located on land owned by Masward II, a partnership consisting of DeFeliee, his brother Edward DeFeliee, and Albert North, each of whom own a one-third interest. Ibid.

In 1972, Circle entered into a thirty-year lease with Masward II for rental of the property. The lease, drafted by John Giordano of Giordano, Halleran & Ciesla, P.C. (GH & C), includes four additional option periods at the conclusion of the thirty-year term. Ibid. Pursuant to the lease, base rent for the land was $24,000 per year for the first ten years. Ibid. The lease contains a clause that provides for rent increases in the eleventh, sixteenth and twenty-first years after commencement of the lease, as well as upon the initiation of any five-year renewal period. Ibid. The lease provides for rent increases based on a percentage of increases in the Consumer Price Index (CPI).1

[286]*286In March 1985, Circle and Masward II began discussions regarding the first rent increase. At the time of these discussions, Masward II was represented by the law firm of Gaughran & Steib (Gaughran), while Circle was represented by defendant GH & C. Id. at 409-10, 644 A.2d 626. The dispute was finally settled by Circle agreeing to pay the increased rent based on a formula devised by Gaughran, which calculated the rent increase based upon the actual increase in the CPI from February 1973 to February 1983. Id. at 410, 644 A.2d 626. On March 22, 1985, Gaughran sent a letter containing the amount of the rent increases to Circle’s attorney, Thomas Pliskin, a partner at GH & C. Pliskin then forwarded the letter to Thomas DeFelice of Circle, asking him to review the letter and advise GH & C as to his desired course of action. DeFelice asked his accountants, Petries, Meskin, Nassaur & Dambach (Petries) to review the formula. Petries found that the calculations were accurate, assuming that the CPI numbers were correct. Circle’s lawyers, GH & C, did not question the accountants’ review, and the formula was incorporated into the settlement agreement. Ibid.

Unfortunately, the Gaughran formula was wrong. It calculated the rent increase based upon actual increases in the CPI. The lease, however, explicitly states that increases would be based upon percentage increases in the CPI. Id. at 409, 644 A.2d 626. It was not until February 24, 1988, on receipt of notice from Gaughran that another increase was about to take effect, that Pliskin reviewed Gaughran’s calculations and discovered that an error had been made. As a result, Circle overpaid its rent by $37,699.98. Pliskin informed Gaughran of the error by letters dated March 9, 1988 and March 11, 1988. Ibid. Circle was also informed of the mistake at that time. Ibid.

In April 1988, GH & C filed a declaratory action against Masward II on behalf of Circle to reform the 1985 settlement [287]*287agreement to reflect the correct rental increase calculation (hereinafter, the “reformation litigation”). Ibid. The reformation remedy was premised on the theory that a mutual mistake of fact had been made. Ibid. While that litigation was pending, Masward II also filed a suit against Thomas DeFelice in his individual capacity. That suit was consolidated with the reformation litigation.

In November 1988, during the course of the reformation litigation, GH & C withdrew as counsel for Circle because of a conflict of interest. Id. at 410-11, 644 A.2d 626. The law firm of Blaustein & Wasserman (Wasserman) took over representation of Circle on January 1989, after an initial meeting between Alan Wasserman and Circle. Id. at 411, 644 A.2d 626. Circle and Wasserman differ on the advice that Wasserman offered his client. Circle contends that Wasserman never informed it of any possible claims against GH & C and the accounting firm of Petries while the reformation litigation was pending. Ibid. Circle states that it was advised of the existence of a claim against GH & C only after the reformation litigation had ended. Ibid. Wasserman, on the other hand, claims that not only did he inform Circle of “some culpability” on the part of GH & C and the existence of a “viable case against Petries,” but also that he notified Circle that the firm would not represent Circle if Circle decided to join GH & C as a defendant because GH & C had referred the case to Wasserman. Ibid. Wasserman also claims that in response to that information, Thomas DeFelice indicated that he had no intention of suing Petries because of his close relationship with the accounting firm and that he did not want to sue GH & C. Ibid. GH & C and Petries were not joined as defendants in the reformation litigation. Ibid. However, Circle did call them as witnesses in the action. Ibid.

The reformation litigation was eventually tried. Ibid. In August 1990, the trial court found that the Gaughran calculations were incorrect as a matter of law, and were not the result of a mutual mistake of fact. Ibid. The litigation ultimately ended in a settlement that was memorialized in an order of judgment, filed on [288]*288December 14, 1990. In the settlement agreement, signed by the court, the court found that there had been an overpayment of rent in the amount of $37,699.98. The settlement provided Circle with a $37,699.98 credit in its lease payments to Masward II. Thus, the court calculated that Circle did not need to pay rent for 4.6 months, commencing on September 1, 1990. From January 1, 1991 onward, Circle’s monthly rental payments would be $5,420.

Subsequently, on September 6, 1991, Circle commenced a malpractice action against GH & C. Circle alleged that GH & C had negligently reviewed the rental-increase calculations, resulting in overpayment of rent by Circle and payment of unnecessary legal fees and costs. Ibid. GH & C then filed a third-party complaint against Petries, and Circle subsequently amended its complaint to include Petries as a named party-defendant.

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Circle Chevrolet Co. v. Giordano, Halleran & Ciesla, 662 A.2d 509, 142 N.J. 280, 1995 N.J. LEXIS 532 (N.J. 1995).

662 A.2d 509 (Circle Chevrolet Co. v. Giordano, Halleran & Ciesla) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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