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Note: Together with his wife and neighbors, Eric Stoeckel (Property Owner) purchased two lots from Developer in a subdivision that was approved for development by the local government in the Township of Knowlton, New Jersey (Township). To provide assurance that Developer would build a road and install utilities, an LC, which expired approximately one year after Property Owner purchased the property, was issued in favor of Township. Property Owner's attorney in connection with the purchase, Ira Cohen (Attorney 1), did not investigate the LC and did not advise Property Owner about the implications of purchasing the property without a completed access road to the development. Property Owner mistakenly believed that a bond secured the building of the road and that Township was obligated to build the road without regard to the bond.

When the road was not built and after the LC had expired, Property Owner contacted Charles O'Connell (Municipal Attorney) regarding the status of the bond. Municipal Attorney did not correct Property Owner's mistaken belief about the existence of the bond.

Subsequently, Property Owner retained another attorney, Norman Chidiac (Attorney 2). Attorney 2 believed Property Owner could sue Attorney 1 for malpractice, but did not know if there was a cause of action against Township. Attorney 2 took no further action.

Later, Property Owner went to the township offices, searched the records, and discovered that an LC had been used to secure the building of the road.

Using another attorney, Property Owner sued Township in federal court for inverse condemnation. The federal claims were dismissed and the action was remanded to state court. Property Owner had also sued Municipal Attorney for negligence and misrepresentation, and Attorney 1 and Attorney 2 for legal malpractice.

The state trial court entered summary judgment in favor of all Defendants. On appeal, the Appellate Division of the Superior Court of New Jersey, Miniman, J. (temporarily assigned) affirmed in part but reversed the summary judgment in favor of attorneys.

Property Owner claimed that Municipal Attorney "breached a duty to Property Owner in failing to advise the township of the risks and consequences inherent in the use of a letter of credit, in failing to oversee the township's monitoring and redeeming of the letter of credit, and in failing to monitor and demand payment of the letter of credit if the township did not do so." Property Owner also alleged that Municipal Attorney misrepresented the nature of security device in allowing Property Owner to mistakenly believe it was a bond. The appellate court found that Property Owner was barred from making claims against Municipal Attorney except for tortious conduct under the statute of limitations of the New Jersey Tort Claims Act. N.J. Stat. Ann. §§ 59:2-4, 3-3, 3-5 (West 2006). The court remanded the issue of whether the Property Owner had a claim for intentional conduct.

With respect to Attorney 1, the appellate court noted that an expert opinion proffered on behalf of Property Owner provided sufficient evidence by which a jury could reasonably conclude that Attorney 1 was negligent.

Property Owner's expert opined that Attorney 1 had a duty to Property Owner:

To advise [Property Owner] of the risks of closing title to the lot under the circumstances as existed at the time of closing. [Attorney 1] also owed a duty to determine the full extent of the risk, to insist that a bond be posted rather than a letter of credit which would expire under its own terms, or at the very minimum to monitor the expiration date to protect the client from exactly what occurred - the expiration of the letter of credit and the loss of the security to pay for the required improvements... Nor did defendant [Attorney 1] advise or inform his client of what had to be done to protect his interest such as obtain a copy of the bond or letter of credit and to monitor the actions of the township concerning the performance of the developer or of the township in completing the improvement using the posted security.

The appellate court also upheld the denial of Attorney 1's motion to dismiss the expert testimony noting that "the expert's opinion was based on the facts of record, to which he applied generally accepted standards of care."

The court also noted that summary judgment in favor of Attorney 2 was improper because Attorney 2 also failed to advise Property Owner of his rights and his negligence combined with the negligence of Attorney 1.

[JEB/al]

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