Villanueva v. Brown

Opinions of the United
1997 Decisions States Court of Appeals
for the Third Circuit

1-6-1997

Villanueva v. Brown
Precedential or Non-Precedential:

Docket 95-5072

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 UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 95-5072

JACK VILLANUEVA, ADMINISTRATOR PENDENTE LITE
OF THE ESTATE OF ELLA OSTROFF,
Appellant
v.
G. MICHAEL BROWN; GUY MICHAEL; BROWN & MICHAEL;
GREENBERG MARGOLIS

HELEN CONN; SAMUEL RUBIN; JOSEPH RUBINSTEIN

Third Party Defendant

ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

(Civil No. 92-CV-02268)

Argued MARCH 22, 1996
Before: BECKER and McKEE, Circuit Judges, and
POLLAK, District Judge*
(Opinion filed: January 8, 1997)

BRUCE S. MARKS, ESQ. (Argued)
Spector, Gadon & Rosen
1700 Market Street, 29th Floor
Philadelphia, PA 19103
Attorneys for Appellant

LAWRENCE P. ENGRISSEI ESQ. (Argued)
Law Offices of Thomas Dempster, III
*
The Honorable Louis H. Pollak, United States District
Judge for the Eastern District of Pennsylvania, sitting by
designation.

1
 Centerpointe at East Gate
161 Gaither Drive, Suite 201
Mount Laurel, NJ 08054
Attorneys for Appellees, G. Michael
Brown, Guy Michael and Brown &
Michael

DAVID G. LUCAS, JR., ESQ. (Argued)
Wolff, Helies & Duggan
188 East Bergen Place
Red Bank, NJ 07701
Attorneys for Appellee, Helen Conn

KEITH L. ANDERSON, ESQ.
Law Office of Keith L. Anderson
Washington Professional Campus
728 Black Horse Pike, Suite B-2
Turnersville, NJ 08012
Attorney for Appellee, Samuel Rubin

JOSEPH RUBINSTEIN
501 White Horse Pike
Collingswood, NJ 08108
Appellee, Pro Se

OPINION OF THE COURT

McKEE, Circuit Judge

Jack Villanueva, Administrator pendente lite of the Estate

of Ella Ostroff, appeals from a directed verdict in favor of the

law firm of Brown and Michael, its partners: G. Michael Brown and

Guy Michael (hereinafter the firm and its partners are

collectively referred to as “Brown & Michael”), and Helen Conn, a

notary.1 For the reasons discussed below, we will affirm the

1
As is noted below, Ella Ostroff died prior to the time
this suit went to trial and Jack Villanueva was subsequently
appointed administrator pendente lite. Accordingly, we will refer
to the appellant herein as “the Estate.”

2
judgment in favor of Brown & Michael, but will reverse the

judgment in favor of Helen Conn, and remand for a determination

of (1) whether Ostroff's acts constituted a ratification of the

disbursements of her funds from the attorneys' trust account; and

(2) whether -- if Ostroff's acts did not constitute ratification

-- Conn's negligence caused injury to Ostroff and, if so, what

damages ensued.

I. Background

This case is about a sophisticated investor in the twilight

of her years named Ella Ostroff, her accountant (Joseph

Rubinstein), a “deal maker” (Samuel Rubin), a law firm (Brown and

Michael), its two named partners, and a notary public (Helen

Conn). The issues before us arise from Ms. Ostroff’s involvement

with, and investment in, a real estate project in St. Lucia.

The saga began in 1988 when Samuel Rubin was working on a

project that was to become the St. Lucia Hotel and Casino (the

"Project"). After concluding negotiations with St. Lucian

government officials, Rubin entered into numerous agreements to

incorporate the St. Lucia Hotel Corporation ("Corporation"). In

the spring of 1989, Rubin began to look for "seed money"

investors to pay Corporation expenses until the financing was in

place. Joseph Rubinstein was an accountant at the time, and one

of his clients was Ella Ostroff. The Estate claims that

Rubinstein induced Ostroff to place $250,000 in the trust account

of the New Jersey law firm of Brown and Michael. It is alleged

that Rubinstein told Ostroff that Brown and Michael was the

3
Corporation’s law firm, that her funds were to be used to pay

ongoing Corporation expenses, and that the Project was a good

investment opportunity for her. According to the Estate,

although Ostroff had not met Rubin, she placed the money into the

account pending receipt of additional information about the

Project. The Estate also asserts that, sometime in April of

1989, Rubin and Rubinstein told Ostroff she would receive a 3%

interest in the Project in return for her investment, and that

her investment would be returned to her in stages.

Eventually, Rubin introduced Rubinstein to G. Michael Brown

and Guy Michael, the named partners in the law firm of Brown and

Michael. That firm represented Sam Rubin and the Corporation.

Rubinstein informed Brown and Michael that he was Ostroff's

accountant; however, he apparently did not represent himself to

be Ostroff's financial or business advisor. Messrs. Brown and

Michael were apparently aware that Rubinstein was the accountant

for both Ostroff and the Corporation.

The instant legal dispute is rooted in a series of three

checks that Rubinstein wrote between May 19, 1989, and June 26,

1989. Each of the checks was drawn on Ostroff's account, written

by Rubinstein, signed by Ostroff, and made payable to, and

deposited in, the Brown and Michael trust account. The checks

were in the respective amounts of $25,000, $100,000 and $125,000.

Brown and Michael did not inform Ostroff that they had received

any of these checks nor did they obtain any agreement directly

from Ostroff governing release of the proceeds. Brown and

Michael assert that the money was deposited into their trust

4
account because no bank account had yet been opened in the

Corporation’s name. Brown and Michael asked Rubinstein to

provide them with written consent from both Ostroff and

Rubinstein giving them and the law firm the authority to disburse

the funds from the trust account when requested by either Rubin

or the Corporation.

After the first two checks had been deposited in the trust

account, either Rubin or Rubinstein requested that the law firm

release $25,000 of the proceeds. That request was not

immediately honored, however, Rubinstein as Brown and Michael

refused to release the funds without Ostroff’s written approval.

Consequently, Brown, Michael and Rubinstein agreed that a limited

power of attorney would be furnished that would provide the

requested authorization, and a limited power of attorney was

prepared in mid June of 1989. The Estate contends that this

limited power of attorney was prepared by Brown and Michael, not

by Ostroff, and claims that Rubinstein arranged for Brown and

Michael to receive the power of attorney directly, rather than

giving it to Ostroff. Whether in fact Brown and Michael prepared

the power of attorney is not clear; but it is clear that the

power of attorney stated that Ostroff's name was "Della," rather

than "Ella," in two different places.

Whatever may have been the provenance of the power of

attorney, Rubinstein admitted that he signed Ostroff's name to

it. However, claims that he signed Ostroff's name at her

direction. Helen Conn, a notary public under the laws of New

Jersey, admitted notarizing what purported to be Ostroff’s

5
signature on that document as a favor to Rubinstein. She

concedes that she did so even though she did not witness the

signature and did not know Ostroff. The notarized limited power

of attorney was then returned to Brown and Michael.

It is undisputed that Ostroff never signed the power of

attorney and the Estate claims that she never authorized

Rubinstein to sign for her. The Estate also claims that when

Brown and Michael received the limited power, they noticed the

misspelling of Ostroff’s first name and either they or Rubinstein

corrected the misspelling with “white-out”.

Under the terms of the limited power, Ostroff appeared to

appoint Rubinstein her attorney-in-fact for the limited purpose

of:
[a]uthorizing the law firm of Brown & Michael to
release funds held by it, deposited by me, in
its Attorney Trust Account.

(A1027). In addition to the power of attorney, Brown and Michael

also received a fax transmission of a letter from Rubinstein,

dated June 15, 1989, authorizing Brown and Michael to release the

funds from the firm's trust account upon Rubin’s request. The

letter was addressed to Michael and stated in part:
You are hereby authorized to release funds from your
firm's trust account, upon the request of Sam
Rubin, for the use and benefit of St. Lucia
Hotel Corporation.

(A1029).

Beginning on June 15, 1989, Brown and Michael issued a

series of checks from their trust account pursuant to Rubin’s

requests. The first check was in the amount of $25,000, the

6
second was for $25,000, and the third was for $200,000 which was

the balance of Ostroff’s funds. Brown and Michael did not notify

Ostroff of any of these disbursements, nor did they provide any

accounting to Ostroff. Rather, they relied solely upon the

limited power of attorney, the fax from Rubinstein, and Rubin’s

requests that funds be released.

However, on July 27, 1989, an Investment Agreement

“materialized.” That Agreement, which recites that it is between

the St. Lucia Hotel Corporation and Ella Ostroff and which is

apparently signed by Sam Rubin, as President of the Corporation,

and Ella Ostroff, provides that Ostroff will pay the Corporation

$250,000 in return for a 3% interest in the Corporation, and

specifies how and when she is to be repaid.2 (Sa001-002). The
2
The relevant portion of the Investment Agreement provides:

IT IS, on this 27th day of July, 1989, hereby agreed
between the parties as follows:

1. Ella Ostroff shall pay to St. Lucia Hotel
Corporation the sum of Two Hundred Fifty
Thousand Dollars ($250,000).

2. In consideration of the payment of the Two
Hundred Fifty (sic) Dollars ($250,000)
described in Paragraph 1 above, Ella Ostroff
shall receive a three percent (3%) interest
in St. Lucia Hotel Corporation. This
interest will not be diluted in any way
without the prior written consent of Ella
Ostroff.

3. St. Lucia Hotel Corporation shall apply the Two
Hundred Fifty Thousand Dollars ($250,000)
referred to in Paragraph 1 above as follows:

a. One Hundred Twenty-Five Thousand Dollars
($125,000) shall be applied to the
casino project in Rodney Bay, St.
Lucia.

7
Estate attacks the authenticity of this document and asserts that

neither Brown, Michael, nor Rubin ever saw a signed original, and

that Ostroff did not recall signing it. In addition, the Estate

hints that Rubinstein “doctored” Ostroff’s signature on the

Agreement. Rubinstein claims that Ostroff did sign the

Investment Agreement and that it is genuine. Although Ostroff

apparently intended the funds in the trust account to be held to

pay the Corporation’s legitimate and ongoing expenses, she never

had any contact with Brown & Michael nor did she ever see any

bills. Nevertheless, at her deposition Ostroff contended that:
“That $250,000 was -- I think the checks, it was three,
and they went to Brown & Michael, a law firm
in Atlantic City that I understood
represented the hotel corporation. They were
to pay bills that I approved, not just pay,
but that I knew about and approved of.”

Ostroff deposition at A1192-1193. Ostroff claimed that the money

was not an investment. “Not the way I understood it. . . It was

an escrow. I understood they were holding it in escrow, Brown

b. One Hundred Twenty-Five Thousand Dollars
($125,000) shall be applied to the
condominium project at Rodney Bay,
St. Lucia.

4. St. Lucia Hotel Corporation shall repay to Ella
Ostroff the sum of One Hundred Twenty-Five
Thousand Dollars ($125,000) upon the full and
final funding of bond to be underwritten by
Kirchner Moore & Company estimated to occur
on or before November 30, 1989.

5. St. Lucia Hotel Corporation shall repay to Ella
Ostroff an additional sum of One Hundred
Twenty-Five Thousand Dollars ($125,000) at
such time that construction financing for the
condominium project at Rodney Bay, St. Lucia
is fully received.

8
and Michael.” Id. at 1193-1194.

It is undisputed that Ostroff was actively involved in the

Project from June 1989 through April 1990. She traveled to St.

Lucia, Hong Kong and New York in connection with the Project, and

she paid the firm of Laventhal & Horwath to study the Project.

However, at a meeting in her home, Ostroff told Rubin that she

had no intention of proceeding with the financing that Rubin was

relying upon.

Finally, in April of 1990, Ostroff wrote a letter to

Rubinstein complaining that he had misled her as to the

Corporation’s ownership of the land on which the Project was to

be built. In August or September of 1990, Laventhal & Horwath’s

feasibility study confirmed that the Corporation did not own that

land.

Numerous law suits ensued, the details of which are not

relevant to our inquiry.3 The instant suit was filed against the

law firm of Brown and Michael, G. Michael Brown, Guy Michael and

Greenberg Margolis4 as successor to Brown & Michael. The

defendants in turn filed a third-party complaint for

3
Ostroff v. Rubinstein, No. 90-1601 (C.C.P. Phila., filed
November 8, 1990)(referred to as the Rubenstein Document Suit by
the Estate); Ostroff v. Rubinstein, No. 90-1225 (C.C.P. Phila.,
filed November 8, 1990)(the Rubenstein Fraud Suit); Ostroff v.
Ruben (sic), No. 90-7197 (E.D.Pa., filed November 9, 1990)(the
Rubin Fraud Suit); Ostroff v. Resolution Trust Corp. as Receiver
for Security Savings Bank, 1992 U.S. Dist. Lexis 12639, aff’d,
993 F.2d 225 (3d Cir. 1993).
4
Sometime in 1990 Brown and Michael dissolved their
partnership and joined the law firm of Greenberg, Margolis.
However, after the filing of Ostroff’s complaint, they left
Greenberg, Margolis and re-established Brown & Michael.

9
indemnification against Rubinstein, Rubin and Conn. Conn then

cross-claimed against Rubinstein and Rubin, and Rubin, in turn,

cross-claimed against Ostroff. Ostroff then dismissed Greenberg,

Margolis and amended her complaint to assert a direct claim

against Conn. Prior to the matter going to trial, however, Ms.

Ostroff died and Jack Villanueva was appointed administrator

pendente lite of her estate and was substituted as plaintiff.

That brings us to the instant complaint which alleges that

the release of funds from Brown & Michael’s trust account without

authorization from, or notice to, Ostroff constitutes conversion

and a breach of: the escrow agreement, the fiduciary duty owed

to Ostroff, and the lawyers' duty of good faith and loyalty. The

instant suit also alleges that Conn was negligent, and that she

breached her professional duty as a notary public by notarizing

the limited power of attorney without actually witnessing

Ostroff’s execution of that document.

The suit proceeded to trial, and at the conclusion of

Ostroff’s case, the district court granted the defendants’ motion

for judgment as a matter of law pursuant to Fed. R. Civ. P.

50(a), and entered an order dismissing the complaint.5 The

5
By Orders dated December 20, 1994 and January 10, 1995,
the district court dismissed Ostroff’s complaint against Brown &
Michael, and Conn. The defendants’/third party plaintiffs’
complaint against Conn, Rubin and Rubinstein; and Rubin’s
counterclaim against Ostroff were dismissed by agreement of the
parties. However, the district court's dismissal of Ostroff's
complaint was incorrect because once judgment as a matter of law
was entered, that judgment disposed of the entire case. Thus,
it was improper to also dismiss the complaint. However, since
judgment was entered, we will ignore that procedural anomaly and
address the substance of the court's action.

10
court’s action was based upon its rulings that (1) Brown and

Michael had a right to rely on the limited power of attorney and

the letter from Rubinstein when they made the disbursements from

the trust account; (2) the Estate failed to demonstrate a causal

connection between Ostroff's alleged loss and Brown and Michael

disbursing the funds; and (3) Ostroff’s actions constituted a

ratification of the use of her funds for the Project.

This appeal followed.

II.

The standard for granting judgment as a matter of law is set

forth in Fed. R.Civ. P. 50(a). That Rule provides:
If during a trial by jury a party has been fully heard
on an issue and there is no legally
sufficient evidentiary basis for a reasonable
jury to find for that party on that issue,
the court may determine the issue against
that party and may grant a motion for
judgment as a matter of law against that
party with respect to a claim or defense that
cannot under the controlling law be
maintained or defeated without a favorable
finding on that issue.

Fed.R.Civ.P. 50(a). Our review of the district court’s grant of

judgment as a matter of law is plenary. St. Paul Fire and Marine

Ins. Co. v. Lewis, 935 F.2d 1428, 1431 (3d Cir. 1991). We apply

the same standard as the trial court. Rotondo v. Keene Corp.,

956 F.2d 436, 438 (3d Cir. 1992). The question is whether,

viewing the evidence in the light most favorable to the losing

party, no jury could decide in that person's favor. Walter v.
Holiday Inns, Inc., 985 F.2d 1232, 1238 (3d Cir. 1993). The

11
focus of our inquiry is not on whether there is literally no

evidence supporting the unsuccessful party, but whether there is

evidence upon which a reasonable jury could properly base its

verdict. Gomez v. Allegheny Health Services, Inc., 71 F.3d 1079,

1083 (3d Cir. 1995). A judgment as a matter of law must be

sustained if the record is critically deficient of the minimum

quantum of evidence from which the jury might reasonably afford

relief. Id. However, "[i]f the evidence is of such character

that reasonable [persons], in the impartial exercise of their

judgment may reach different conclusions, the case should be

submitted to the jury." J.I. Hass Co., Inc. v. Gilbane Bldg.

Co., 881 F.2d 89, 92 (3d Cir. 1989)(citation omitted).

III.

It is appellant’s idée fixe that Ostroff was an elderly

woman whose failing health caused her to fall victim to the

outrageous fraud allegedly perpetrated by Rubin and Rubinstein.

The accuracy of that assertion, however, is immaterial to the

resolution of this appeal. The appellant does not allege any

fraudulent conduct on the part of Brown, Michael or Conn.

Although appellant alleges that Rubinstein forged Ostroff's

signature to the limited power of attorney, there is no

allegation that either Brown or Michael knew of the alleged

forgery or had any reason to suspect that the limited power of

attorney was the product of a forgery or was otherwise invalid.

The Estate does mention the misspellings of Ostroff's name on the

limited power of attorney, and Brown and Michael's correction of

12
that error, but concedes that Brown and Michael disbursed the

funds in reliance upon the documents they were presented with.6

The Estate contends that Brown and Michael were not

justified in relying on the limited power in releasing the funds.

The Estate argues that even though there was a limited power of

attorney, Brown and Michael had a duty to (1) notify Ostroff that

her $250,000 had been received; (2) secure a written agreement

governing the disbursement of those funds; (3) provide notice of

the requests to release the funds; and (4) provide Ostroff with

an accounting. In essence, Ostroff argues that, had Brown and

Michael notified her of each requested disbursement, she would

have been in a position to review the request and possibly

withhold approval. However, because Brown and Michael did not

notify her of Rubin’s requested disbursements she lost $250,000.

At trial, Ostroff produced the testimony of Edward Wachs who

testified as an expert.7 Wachs is a New Jersey attorney who

testified that he has practiced real estate and probate law for

over 25 years and has had extensive experience handling attorney

trust accounts. He opined that Brown and Michael "breached the

duty of care which [they] owed to Ostroff based on the standard
6
See ¶ 41 of Amended Complaint (“Brown & Michael relied
upon the Limited Power of Attorney notarized by Conn, a New
Jersey notary, and upon Conn’s Certificate of Acknowledgment in
releasing the funds.”); and Brief of Appellant at 11 ("In
reliance on the altered Limited Power of Attorney, which Brown &
Michael believed to be valid because of Conn's notarization of
Mrs. Ostroff's signature, by check dated June 15, 1989, Brown &
Michael paid $25,000 from Mrs. Ostroff's funds upon Rubin's
request to Carnicon.").
7
The defendants do not contest Mr. Wachs’ status as an
expert witness.

13
of care of the average New Jersey attorney."8 Brief of Appellant

at 16. According to Wachs, the duty of care included a duty to

notify Ostroff of the receipt of each of her three checks; to

obtain a written agreement with Ostroff governing the release of

the funds; and, absent such agreement, to notify Ostroff of each

request for a distribution. He testified that the duty also

included a duty to notify Ostroff that they had received the

limited power of attorney from Rubinstein, to notify her of the

distribution of the funds, and to provide an accounting. Wachs

opined that each duty was independent of the existence of the

limited power of attorney. In short, in Wachs' view, Brown and

Michael were not justified in relying on the limited power of

attorney in making the disbursements from the trust account.

In rejecting this view the district court properly held that

an attorney's duty under New Jersey law is a question of law to

be decided by the court. See Wang v. Allstate Ins. Co., 592 A.2d

527, 534 (N.J. 1991) ("The question of whether a duty exists is

a matter of law properly decided by the court, not the jury, and

is largely a matter of fairness or policy.").

The Estate bases the duty it asserts on three New Jersey

Supreme Court cases. It cites In re Carlsen, 111 A.2d 393, 397
(N.J. 1955), for the general proposition that an attorney's
8
Appellant characterizes this case as one of legal
malpractice and repeatedly speaks of Brown and Michael's breach
of the standard of care of the average New Jersey attorney.
However, it has been neither alleged nor established that there
was ever an attorney-client relationship between Ostroff and
Brown or Michael or their firm. In fact, appellant concedes that
Brown and Michael represented the Corporation and not Ostroff.

14
"professional obligation reaches all persons who have reason to

rely on him even though not strictly clients." It cites In re

Gavel, 125 A.2d 696, 704 (N.J. 1956) for the proposition that

"money of the client or money collected for the client or other

trust property coming into the possession of the lawyer should be

reported and accounted for promptly. . . ." Finally, the Estate

relies heavily upon In re Power, 451 A.2d 666 (N.J. 1982) to

support its contention that Brown and Michael were not justified

in relying upon the limited power of attorney.

However, these cases do not support the proposition urged by

the Estate. In In re Power, a New Jersey attorney (Power),

represented a builder (Day), who agreed to convey a parcel of

land on which he was to build a house for the Handwerkers. Power

prepared a binder for Day, pursuant to which the Handwerkers paid

a deposit of $1,000 which Power deposited into his trust account.

The binder recited that the Handwerkers' $1,000 deposit would be

returned in the event a contract was not executed within 15 days.

No contract was ever executed, and the Handwerkers

eventually wrote to Power and requested that their deposit be

returned. However, before receiving that request, Day had

contacted an architect, and Day owed that architect an

outstanding balance of $955. Day and the Handwerkers disputed

who was responsible for that bill, but despite that dispute,

Power disbursed $955 of the Handwerker’s deposit to Day who used

the money to pay the architect's bill. However, Power

subsequently obtained the money from Day and returned it to his

trust account. Power attempted to rely upon Day’s representation

15
that the Handwerkers had approved the disbursement in defending

against a complaint that the Handwerkers filed with the

Disciplinary Board. The local Ethics Committee and the

Disciplinary Review Board concluded that Power's unauthorized

disbursement in the face of an "express written prohibition" was

conduct that adversely reflected upon his fitness to practice

law. Id. at 667. The Supreme Court of New Jersey agreed saying:
[R]espondent was not justified in relying solely on his
client's representation, particularly in the
face of the written demand from complainants,
who were unrepresented by counsel, that their
deposit be returned. A simple telephone call
or short letter to complainants seeking
confirmation of the disbursement arrangement
would have fulfilled the ethical obligation
and avoided or at least foreshortened an
entirely unnecessary acrimonious dispute.

Id. That is clearly not our case. Here, Brown & Michael had no

written request from Ostroff for the return of her funds. On the

contrary, they had a writing (in the proper form) that

purportedly allowed them to make the disbursements at issue.

In In re Carlsen, an attorney entered into a business

relationship with his client. The attorney misled the client,

and never made the contributions to the deal that he was

obligated to make under agreements between him and the client.

The venture eventually failed, and the client discovered that the

attorney had not lived up to his end of the bargain. The

attorney attempted to justify his conduct by arguing that he was

not functioning as the client’s attorney, but as his business

partner, and therefore, did not owe a heightened duty to

disclose. The court was less than impressed by that argument.
[The attorney] denies there was ever any

16
 attorney-client relationship between Bush and
himself insofar as the Puerto Rican venture
was concerned, but we reject this position
without hesitation. Bush was a general client
and was brought to the venture by his general
attorney. True, they . . . both participated
as principals but that did not remove the
trust and confidence of their relationship. .
. . [T]his court [has] expressly recognized
that an attorney who wishes to be a business
man must act in his business transactions
with high standards and that his professional
obligation reaches all persons who have
reason to rely on him even though ‘not
strictly clients.’

17 N.J. at 345-6.

In In re Gavel, an attorney who was trying to sell a

client’s property made false and misleading representations to

that client and to banks involved in financing. In the process

of attempting to extricate the client from financial

difficulties, the attorney conveyed the client's real estate to

his own wife and remortgaged the real estate to pay the client's

debts while retaining the profits from the refinancing for

himself. He also commingled the client’s funds with his own and

regularly used client trust funds for unauthorized purposes. In

finding the attorney had violated the Canons of Professional

Ethics the court spoke specifically of his pattern of

reprehensible conduct, and noted the duty an attorney owes to

clients, and the public in general.
To the public [a lawyer] is a lawyer whether
he acts in a representative capacity or
otherwise. . .
‘The fiduciary obligation of a lawyer
applies to persons who, although not
strictly clients, he has or should have
reason to believe rely on him.

22 N.J. at 265. Here, the limited power of attorney defined the

17
scope of Ostroff's purported reliance. She was relying upon them

to make disbursements when requested; and that is what they did.

Although we agree with the Estate’s contention that Brown

and Michael are required to conduct their practice in accordance

with the Code of Professional Responsibility, the record before

us does not establish that their conduct breached that Code.

Brown and Michael did not receive any funds on Ostroff’s behalf

from a financial institution or any other person or institution.

Instead, they received three checks which Ostroff admittedly

signed and caused to be mailed to them. The Estate cites us to

no authority that supports its position that an attorney who

receives funds properly mailed to him or her has a duty to inform

the sender when those funds are received, and we are aware of no

such authority. Moreover, although it can not be denied that an

attorney owes a duty to the public in general9, the evidence

before the district court was addressed specifically to an

attorney’s duty to Ostroff, and whether Brown and Michael

breached that duty individually, or acting as the law firm.

Significantly, Brown and Michael did not convert Ostroff’s funds

to a personal use. They neither derived any personal gain from

her funds nor did they attempt to. They merely disbursed the

funds to a project that she had intended receive them. The fact

that she later became dissatisfied with the Project she was
9
In Gavel the court noted: "In addition to the duties and
obligations of an attorney to his client, he is responsible to
the courts, to the profession of the law, and to the public . . .
."

22 N.J. at 264.

18
investing in hardly translates into a breach of duty on the part

of Brown & Michael.

We cannot agree with appellant’s rather strained argument

that Brown and Michael had a duty to notify Ostroff of the

receipt of funds she had mailed to them in the first place. Had

Ostroff wanted to be notified when the funds were received she

could have, and we suspect would have, so requested or used a

method of delivery that would have so informed her.

We believe that any duty that Brown & Michael owed to

Ostroff springs not from any duty of an attorney, but from the

law of agency governing powers of attorney. “A power of attorney

is an instrument in writing by which one person, as principal,

appoints another as his agent and confers upon him the authority

to perform certain specified acts or kinds of acts on behalf of

the principal." Kisselbach v. County of Camden, 638 A.2d. 1383,

1386 (N.J. Super. Ct. App. Div. 1994). The primary purpose of a

power of attorney is not to define the authority conferred on the

agent by the principal, but to provide third persons with

evidence of agency authority. Id. “It should be construed in

accordance with the rules for interpreting written instruments

generally.” Id.
Here, Rubinstein presented Brown and Michael with a limited

power of attorney, which contained a notarial seal. Ostroff

thereby purported to appoint Rubinstein her agent, and appeared

to give him the authority to authorize Brown and Michael to

release the funds she had deposited with them. “Authority may be

created by words or conduct that agent reasonably believes

19
indicate principal’s desires, but no more is authorized.” Id.

(citing Restatement 2d of Agency §§ 26 and 33 (1958)).

Rubinstein's alleged forgery of the document does not support an

inference that Brown & Michael were parties to any impropriety.

They were entitled to conclude that they had been given the

authority to make disbursements on behalf of Ostroff.

Furthermore, Rubinstein provided Brown and Michael with a letter

authorizing them to release funds for the use of the Project upon

Rubin’s request. Brown and Michael properly relied upon the

limited power, and Rubinstein’s letter, to make disbursements

from their trust account. We find nothing in the circumstances

before us that would require Brown and Michael to notify Ostroff

each time Rubin made a request for a distribution.

Rather, we find the reasoning of the court in Heine v.

Newman, Tannenbaum, Helpern, Syracuse & Hirschtritt, 856 F. Supp.

190 (S.D. N.Y. 1994), aff’d, 50 F.3d 2 (2d Cir. 1995),

persuasive. There, Heine retained an attorney named Ashley to

help sell a condominium that Heine owned. Ashley did procure a

buyer and so informed Heine. Heine then executed a power of

attorney giving Ashley “the power to ‘take all steps’ necessary

to execute the sale of the condominium.” Id. at 192. Pursuant

to the power, Ashley retained the law firm of Newman, Tannenbaum,

Helpern, Syracuse & Hirschtritt (“Newman, Tannenbaum”) to

represent Heine and to handle the closing. Ashley served as

Heine’s attorney-in-fact at the closing, and Newman, Tannenbaum

served as Heine’s counsel. The proceeds of the sale were

disbursed in five checks, four of which were payable to Ashley,

20
and one of which was payable to Heine. Ashley misappropriated

Heine’s check and Heine sued Newman, Tannenbaum asserting that

despite the existence of the power of attorney, the firm breached

the duty of care it owed to Heine. Heine argued that the breach

occurred by the firm “complying with Ashley’s instructions and by

permitting the checks to be drawn payable to and delivered to

Ashley without first communicating with Heine. . . .” Id. The

court rejected that argument stating:
If parties were required to verify with the
principal each instruction given to them by
an attorney-in-fact, the authority given to
attorneys-in-fact would be eviscerated. No
party to a transaction would rely on the
statements of attorneys-in-fact without
independent verification from the principal,
and, accordingly, an attorney-in-fact would
not be authorized to take any and all acts as
fully as the principal. If a principal were
permitted, at a future point in time, to
decide that a particular instruction should
have been verified, parties to a contract
could not and would not be able to rely on
the statements or instructions of attorneys-
in-fact.

Id. at 195 (citations omitted).

We agree. We realize that here, unlike in Heine, the

validity of the power of attorney is in question. However,

since Brown & Michael did not know that Ostroff's signature was a

forgery that distinction is of no consequence. If Ostroff was a

victim of a fraud, she was a victim of Rubinstein and/or Rubin’s

fraud, and not one perpetrated by Brown & Michael. Accordingly,

the district court did not err in awarding judgment to Brown &

Michael as a matter of law.10
10
The amended complaint also contains a count alleging that
Brown and Michael converted Ostroff’s funds. The district court

21
 The Estate seeks to distinguish Heine by pointing out that

it concerned a general power of attorney, not a limited power of

attorney as we have here. See Estate's Brief, at 35-6. That is

a distinction without a difference. It goes only to the scope of

the authority conferred upon the principal. It does not alter or

diminish the right of a third party to rely upon it when dealing

with a principal who appears to be acting within the scope of his

or her authority. Kisselbach, supra.
IV.

As noted above, Ostroff has asserted a direct claim against

Conn alleging that Conn was both negligent and guilty of a breach

of a professional duty in notarizing the limited power of

attorney without actually witnessing Ostroff's signature. The

court did not specifically address the claims against Conn.

Rather, the court ruled that the defendants did not breach any

duty, and if they did, Ostroff’s conduct amounted to a

ratification of the defendants’ actions thereby absolving them of

any liability. However, Conn’s conduct here is quite different

from that of Brown & Michael. We must first decide if she

breached any duty and, if she did, we must decide if the record

establishes a ratification by Ostroff.

Conn notarized the limited power of attorney without

witnessing Ostroff's execution of it and Ostroff's purported

ratification of the disbursements by Brown and Michael is

did not discuss this particular allegation. However, it is clear
that appellant produced no evidence that either Brown or Michael
used any funds Ostroff deposited in the trust account for their
own purposes.

22
irrelevant to any determination of whether Conn breached her duty

as a notary in doing so. A notary is a public officer and owes a

duty to the public to discharge his or her functions with

diligence. Immerman v. Ostertag, 199 A.2d 869, 872-873 (N.J.

Super. Ct. Law Div. 1964). However, under New Jersey law, a

notary is not an insurer and is not liable except for negligence.

Commercial Union Ins. Co. v. Burt Thomas-Aitken Construction

Co., 253 A.2d 469, 471 (N.J. 1969). A notary has a duty to

refrain from acts or omissions which constitute negligence. That

is “a duty which he owes not only to persons with whom he has

privity but also to any member of the public who, in reasonable

contemplation, might rely on the officer’s certification.”

Immerman v. Ostertag, 199 A.2d at 872. “With respect to the

identities of signers, the law requires nothing more of the

notary than the use of a reasonable care to satisfy himself or,

in other words, to become satisfied in his own conscience that

the signers are the persons they purport to be.” Id. at 873.

It is apparent that Conn affixed her notarial seal to the

limited power of attorney only as a favor to Rubinstein without

taking any steps reasonably calculated to insure the genuineness

of the signature. This was clearly negligent and breached the

duty that Conn owed to the public as a notary.

However, it is not enough that a notary’s negligence be

shown in order for a plaintiff to recover against a notary. A

causal relationship between the notary’s negligence and Ostroff’s

loss must be shown. Id. at 874. From the record developed thus

far, it appears that Brown & Michael relied upon the authority

23
they thought the notarized power of attorney evidenced.11

Accordingly, we must determine if the district court correctly

concluded that Ostroff ratified the disbursements from the trust

account. If Ostroff did ratify the disbursements, Conn’s

negligence was of no consequence.

In Thermo Contracting Corp. v. Bank of New Jersey, 354 A.2d

291, the New Jersey Supreme Court wrote:
Ratification is defined in Section 82 of the
Restatement of Agency 2d (1957):

Ratification is the affirmance by a person of a
prior act which did not bind him
but which was done, or professedly
done on his account, whereby the
act, as to some or all persons, is
given effect as if originally done
by him.

Ratification requires intent to ratify plus full
knowledge of all the material facts.
Ratification may be express or implied, and
intent may be inferred from the failure to
repudiate an unauthorized act, from inaction,
or from conduct on the part of the principal
which is inconsistent with any other position
than intent to adopt the act.

A ratification, once effected, cannot later be revoked,
even where the ratification may have been
induced by the anticipation of benefits which
fail to accrue.

**********************

A principal must either ratify the entire transaction
11
We cannot determine from the record whether Conn was
employed by Brown & Michael. Nonetheless, we note that a private
employer of a notary public is not vicariously liable for the
notary’s negligence or breach of duty unless the private employer
participated in the breach or negligence or unless the private
employer led another to believe that the notary was acting for it
and on its behalf. Commercial Union Ins. Co. of New York v. Burt
Thomas-Aitken Const. Co., 230 A.2d 498, 501 (N.J. 1967). Here,
there is no allegation in the amended complaint that either basis
of vicarious liability is present.

24
 or repudiate it entirely, and cannot pick and
chose only what is advantageous to him.

(emphasis added). 354 A.2d at 361-362. In holding as a matter of

law that Ostroff ratified the disbursements, the district court

made the following findings.12 First, the power of attorney and

the letter from Rubinstein to Brown & Michael indicated a

"continuing authorization to deal with the funds." (A1010).

Second, the Investment Agreement itself contains no conditions

and no restraints on the release of the funds. (A1011-12). Third,

Ostroff brought three lawsuits against Rubin and Rubinstein and

in each lawsuit she used the Investment Agreement as evidence

that she invested her $250,000 in the Project.13 (A1012).

Fourth, a note written by the plaintiff which indicates that she

is to be repaid $125,000. The court found the use of the word

"re-pay" to be "consistent with the Investment Agreement."

(A1013). Fifth, Ostroff was an active player in the Project.

She attempted to arrange financing, traveled to St. Lucia, New

York and Hong Kong, and paid to have a study done by Laventhal

and Howarth. (A1013-14). On the basis of all these occurrences,

the court concluded:
12
The district court did not issue a written opinion. The
court’s ruling on the defendants' Rule 50(a) motion was given
from the bench. Thus, the citations and references from the
district court’s opinion are references to the appellant’s
appendix which contains the transcript of the court’s ruling.
13
The district court was mistaken in its finding that
Ostroff used the Investment Agreement as evidence that she
invested $250,000 in the Project in the three different lawsuits
she filed against Rubinstein and Rubin. The Investment Agreement
and Ostroff’s investment in the Project are referred in only two
of the suits, i.e. in the Rubinstein Fraud Suit at ¶¶ 6 and 25
and in the Rubin Fraud Suit at ¶¶ 5 and 6. There is no reference
to the Investment Agreement in the Rubinstein Document Suit.

25
Therefore, without evidence in the record, this court
can't have this jury speculate that the
monies that were spent would not have been
authorized by her because in fact it came at
a time when, if anything, she was working to
insure the success of the project. It if
(sic) failed in that early stage because of
lack of financing, why is it not reasonable
to conclude that it was because of her
inability to line up financing. But it's not
for us to speculate whether or why there was
the failure of the project, but just to view
what her activities were at that time. Now
it could very well be that she was deceived
by Rubin and Rubinstein. But a party who
deals through agents can't then turn around
and have the failures of that agent visited
upon someone else without that someone else
having some information, some notice which
appears to be the very thing that the
plaintiff was attempting to do here with
respect to Brown and Michael.

And I do feel that under all the circumstances and
certainly there is more in the record that
all her activities and actions indicate that
she was an active participant, fully aware of
what the up-to-date financing of the project
was. She was the prime mover up to that
point. She expended money from the
Corporation. She cannot now without any
record facts turn around and say I've
suffered a loss of two hundred fifty thousand
dollars, a loss that was never alleged in
prior litigation.

(A1015-16).

We disagree with the conclusion of the learned trial judge.

We do not believe that this record supports a finding of

ratification as a matter of law. First, Ostroff claims that she

had no recollection of signing the Investment Agreement and the

original Agreement apparently no longer exists. The authenticity

of that document is therefore, clearly in dispute. Second, even

if Ostroff did sign the Investment Agreement, she did so on July

27, 1989, which was well over a year before the time when Ostroff

26
claims she first became aware of the disbursements from the Brown

& Michael trust account. Her act of signing the Investment

Agreement clearly does not ratify an event which had not yet

occurred. She can not ratify an action that she is not aware of.

Thermo Contracting Corp., 354 A.2d at 361. All of Ostroff’s

activities on behalf of the Project took place before October of

1990, when it is alleged that she first learned of the

disbursements. Once Ostroff learned of the disbursements in

October of 1990, she immediately started suit against Rubinstein

and Rubin to recover the $250,000. The institution of two

lawsuits to recover the funds is certainly not consistent with

ratification of the disbursements. Third, as the Estate argues,

even if the Investment Agreement is genuine, its terms do not

expressly contradict the contention that no funds would be

disbursed from the trust account without Ostroff’s approval.

We believe that the evidence here is of such a character

that “reasonable [persons], in the impartial exercise of their

judgment may reach different conclusions” on the resolution of

the ratification issue. J.I. Hass Co., Inc. v. Gilbane Bldg.

Co., 881 F.2d at 92. Thus, we find that the district court’s

grant of judgment as a matter of law on the ratification issue

improperly deprived the appellant of a jury fact-determination as

to Conn's liability. Accordingly, we must remand to the district

court for a factual determination of the ratification issue as to

Conn.

In addition, because the district court inappropriately

granted judgment as a matter of law as to Conn, there remains the

27
further issue of whether Conn’s negligence was the proximate

cause of any loss or damage to Ostroff should it ultimately be

determined that Ostroff’s actions did not constitute

ratification. Although it could be argued that any damages the

Estate can prove are equal to the amount of Ostroff's deposits

into the trust account, we do not think that the matter can be so

easily resolved. On this record, it appears that all of

Ostroff's funds did go to the Project that she intended to

finance. While she did not receive the return that she no doubt

anticipated when she sent the checks to Brown & Michael, that may

be because the Project was not a profitable one, not because her

funds were diverted to an unintended use. Therefore, it is

possible that, notwithstanding Conn's breach and notwithstanding

a lack of ratification, the Estate will not be able to prove that

it was damaged to the extent claimed. However, we take no

position as to the Estate's ability to establish whether Ostroff

suffered any damages or the amount of any such damages. Rather,

upon remand the district court will have to determine the amount

of damages, if any, to which the Estate is entitled if it is

determined that Ostroff did not ratify the disbursements, and

that Conn's breach caused such damages.
V.

Finally, the Estate contends that the district court

improperly precluded it from introducing evidence of Rubinstein’s

conviction for wire fraud and Ostroff’s alleged poor health. The

Estate wanted to introduce evidence of Rubinstein’s wire fraud

conviction to show "a signature pattern of fraud, i.e., modus

28
operandi." Appellant's Brief at 40. It wanted to introduce

testimony about Ostroff’s alleged poor health in order “to

provid[e] a rationale for the belief of Rubinstein and Rubin that

they could succeed with the fraud, which is self-evident: they

thought (correctly) that she was going to die and thus there

would be no witness against their version of the transaction."

Appellant's Brief at 41-42.

The Estate forgets that this case is against Brown & Michael

and Conn. There are no allegations that they participated in any

fraud against Ostroff or that they believed Rubinstein or Rubin

were victimizing her. Thus, any evidence of Rubinstein’s prior

conviction or of Ostroff’s health is totally irrelevant to the

claim against these defendants.

VI.

For the above reasons, we will affirm the grant of judgment

as a matter of law to the law firm of Brown and Michael, G.

Michael Brown and Guy Michael, reverse the grant of judgment as a

matter of law to Helen Conn, and remand for further proceedings

consistent with this opinion.

29