In re STEPHEN YACUK and CHRISTINE YACUK v. Stephen Yacuk

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_________________________
No. 02-2926
_________________________
In re
STEPHEN YACUK and
CHRISTINE YACUK,
Debtors
NORTHERN NEW JERSEY LIMITED LIABILITY COMPANY, Successor-in-Interest to
Chemical Bank New Jersey, N.A.,
Appellant
v.
STEPHEN YACUK; CHRISTINE YACUK; RICHARD YACUK;
HOWARD B. LIPSTEIN, ESQ.
__________
On Appeal from the United States District Court
for the District of New Jersey
District Court Judge: The Honorable John W. Bissell, Chief Judge
(D.C. Civil No. 01-3433)
__________
Submitted Under Third Circuit L.A.R. 34.1(a)
July 21, 2003
Before: ALITO and FUENTES, Circuit Judges,
and SURRICK,* District Judge.
(Filed: August 20, 2003)
______________________________
*Sitting by designation: R. Barclay Surrick, District Judge, Eastern District of Pennslyvania.

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1The Bank’s motion for summary judgment against Stephen Yacuk, Christine Yacuk and
Richard Yacuk was granted at the same time.
1
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OPINION OF THE COURT
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PER CURIAM:
By complaint dated January 31, 1995, Chemical Bank New Jersey N.A., succeeded in
interest by Northern New Jersey Limited Liability Company, (“the Bank”) brought a fraudulent
conveyance action in the Superior Court of New Jersey against Stephen Yacuk, his wife
Christine Yacuk and his son Richard Yacuk. In March of 1995 Stephen and Christine Yacuk
filed for Chapter 7 Bankruptcy in the United States Bankruptcy Court for the District of New
Jersey. On May 1, 1998, the Bank removed the fraudulent conveyance action to the Bankruptcy
Court as an adversary proceeding. Thereafter, Howard B. Lipstein, Esquire was added as a
defendant in the fraudulent conveyance action. On February 16, 2000, the Honorable Novalyn L.
Winfield, Bankruptcy Judge, granted Lipstein’s motion for summary judgment.1 The decision of
the Bankruptcy Judge was affirmed by the District Court. The Bank has filed the instant appeal.
We have jurisdiction pursuant to 28 U.S.C. § 158(d). For the reasons that follow we will affirm
the District Court.
I. FACTS
The facts relevant to the instant appeal are as follows. As a corporate officer of Warren
Hills Development Corporation (“Warren Hills”), Stephen Yacuk provided a personal guarantee

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for a $1.95 million loan obtained by Warren Hills from the Bank. The Warren Hills loan went
into default, and on May 28, 1991, the Bank wrote to the Yacuks and informed them that they
were personally responsible for the repayment of the outstanding balance of the loan plus
interest. The total claim on the loan was $688,321.71.
After receiving this letter, the Yacuks decided to convey their personal residence, which
was valued at approximately $500,000, to their son Richard. The Yacuks retained Lipstein to
facilitate the transfer. The Yacuks told Lipstein that they wanted to convey the property to
Richard because he had been paying the mortgage and other bills on the property. Lipstein did
not question the Yacuks concerning Richard’s payments, when he began making the payments,
or whether there was documentation of the payments. Lipstein asked Stephen Yacuk whether
there were any judgments, liens, or claims against him and Stephen told him that there were
none. Lipstein did not specifically ask Stephen whether he had any outstanding loans for which
he was responsible either as a borrower or guarantor.
On July 9, 1991, the Yacuks conveyed the residence to Richard. Lipstein prepared the
documents including a letter stating that consideration for the conveyance was one dollar because
Richard had been paying the mortgage and other bills on the property. The letter stated, inter
alia, that as new title owner, Richard was responsible for continuing to pay the mortgage and
other residence expenses. It also stated that Lipstein had not done a title search on the property
and could not make any representations with regard to liens or encumbrances on the premises.
After this conveyance, the Yacuks continued to live at the residence.
On July 21, 1991, the Bank commenced an action against the Yacuks as personal
guarantors of the loan, and obtained a default judgment against them on March 2, 1992. Lipstein

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represented the Yacuks in the post-judgment collection proceedings. On September 15, 1992,
Stephen and Christine Yacuk were each deposed by the Bank. They each testified with regard to
the transfer of the residence to their son, and each testified that this conveyance was made
because they owed money to their son. No documentation supporting their obligation to their son
was provided.
On approximately May 20, 1993, United National Bank (“United”), the mortgagee on the
Yacuks’ residence, filed a complaint in foreclosure alleging payment defaults and failure to pay
property taxes. Lipstein again represented the Yacuks. The complaint was against all of the
Yacuks and also named the Bank as a defendant. The complaint contained a count alleging
breach of the terms of the mortgage by attempting to transfer all right, title, and interest in the
property to Richard. The Bank acknowledged service of United’s complaint on August 4, 1993,
and in court filings related to this foreclosure action, the Bank acknowledged that the transfer of
the residence to Richard was possibly a fraudulent conveyance.
On September 23, 1993, United filed a motion for summary judgment. The Bank was
served with this motion. One of the footnotes in United’s brief, stated that “it is believed that the
transfer of title rendered Stephen and Christine Yacuk insolvent and that it was made with the
intent to defraud [United] and other creditors.” Judgment in the foreclosure action was entered
against all three Yacuks.
On December 17, 1993, while being represented by Lipstein, Richard conveyed the
residence to bona fide purchasers for $345,000. At the closing, the Yacuks’ debt to United was
paid from the sale proceeds. The remainder of the proceeds, nearly $194,000, was paid to
Richard in the form of two checks which Lipstein delivered to the Yacuks. Richard endorsed the

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checks and gave them to his parents.
On January 12, 1995, during the Bank’s proceedings to enforce the default judgment
against the Yacuks on the Warren Hills loan, the depositions of Stephen, Christine, and Richard
Yacuk were taken. Lipstein represented Stephen and Christine at their depositions. Stephen and
Christine both testified again that their residence had been transferred to Richard in July 1991.
However, for the first time, Christine denied that Richard had made any mortgage or property tax
payments on the residence. Richard testified at his deposition not only that he had never made
any payments on any note, mortgage, or household bills related to the residence, but also that his
parents continued to pay these expenses from the time of the conveyance to Richard until he sold
the property on December of 1993.
II. STANDARD
A grant of summary judgment is proper only if it appears that “there is no genuine issue
as to any material fact and that the moving party is entitled to a judgment as a matter of law.”
Fed. R. Civ. P. 56(c); Fed. R. Bankr. P. 7056. Our review of a grant of summary judgment is
plenary. Rosen v. Bezner, 996 F.2d 1527, 1530 & n.2 (3d Cir.1990).
III. DISCUSSION
The question presented in this appeal is whether the Bankruptcy Court erred in
concluding that Lipstein, acting in his capacity as attorney for the Yacuks, owed no duty to the
Bank, a non-client, under New Jersey law. New Jersey has recognized certain situations in which
an attorney owes a limited duty to non-client third parties. See Petrillo v. Bachenberg, 655 A.2d
1354, 1357-58 (N.J. 1995). The New Jersey courts have found that an attorney “owes a fiduciary
duty to persons, though not strictly clients, who he knows or should know rely on him in his

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professional capacity.” Id. at 1358 (quoting Albright v. Burns, 503 A.2d 386, 389 (N.J. Super.
1986)).
In general, the New Jersey courts have limited finding any such duty to cases where an
attorney has taken affirmative action or made a representation to a non-client. For example, in
Stewart v. Sbarro, 362 A.2d 581, certif. denied, 371 A.2d 63 (N.J. Super. 1976), the court found
that where an attorney should foresee that a non-client may rely on the attorney’s promise to act,
he may be held liable for failing to do so. Id. at 593-94. In Albright v. Burns, 503 A.2d 386
(N.J. Super. 1986), the court found that an attorney who knowingly facilitated improper
transactions involving the holder of the decedent’s power of attorney, was liable to the
decedent’s estate even absent a showing of privity, where the attorney engaged in acts which,
“evidenc[ed] his acceptance of professional engagement on behalf of [the decedent’s] interests.”
Albright, 503 A.2d at 386. Similarly, in R.J. Longo Construction Co. v. Schrager, 527 A.2d 480
(N.J. Super. 1987), the court found that township attorneys who had prepared contract documents
to be used in a construction bid process could be held liable to the winning bidder for failure to
obtain certain easements explicitly required by the contract after the township had notified the
winning bidder to proceed with construction. Id. at 481-82. The court stated that an attorney
“owes a duty to persons, though not strictly clients, who he knows or should know rely on him in
his professional capacity,” finding that the plaintiff had reasonably relied on representations that
the township attorneys would obtain the necessary easements. Id. at 481. Significantly, the court
refused to hold the township attorneys liable for negligently drafting the contract at issue,
observing that because independent counsel could have been consulted regarding the contract,
“there was no reasonable reliance upon defendants.” Id. at 482. Finally, in Petrillo, 655 A.2d

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1354 (N.J. 1995), the New Jersey Supreme Court held that an attorney who had created a
misleading document had a duty to non-clients “not to misrepresent negligently the contents of a
material document on which he knew others would rely to their financial detriment.” Petrillo,
655 A.2d at 1362. The Petrillo court expressed the view that recognition of such a duty would
protect innocent third parties from negligent misrepresentations by lawyers without leading to
more costly and cumbersome legal services. Id.
In the instant case, Lipstein owed no duty to the Bank. Lipstein never affirmatively or
impliedly undertook any action on behalf of the Bank, nor did he make any representation to the
Bank or its attorneys which one would expect that the Bank would rely upon to its financial
detriment. At the time of the initial conveyance of the property, Lipstein had no reason to foresee
that the Bank would be adversely affected. Nothing in the record indicates that Lipstein made
any representation or omission to the Bank that would have prevented the Bank from discovering
the fraudulent conveyance. In fact, as early as September 1992, when the Yacuks testified that
they had transferred their residence to their son, and again in 1993, when the Bank filed
documents in the foreclosure action, the Bank and its attorneys were on notice of the possibility
of a fraudulent conveyance. The Bank is a sophisticated lender which was at all relevant times
represented by counsel. Lipstein was under no duty to advise the Bank and its attorneys
concerning that which they already knew.
We have carefully considered all of the Bank’s arguments and we conclude that they are
without merit. The final Order of the District Court affirming the decision of the Bankruptcy
Court is affirmed.

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