1997 Decisions

Opinions of the United

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Precedential or Non-Precedential: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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Recommended Citation

"Villanueva v. Brown" (1997). 1997 Decisions. Paper 5.

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1

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. 
2

 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.” 
3

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 
4

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 
5

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 
6

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 
7

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 

 

 

2The 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. 
8

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. 
9

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). 

 

4Sometime 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. 
10

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. 
11

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 
12

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 
13

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."). 

 

7The defendants do not contest Mr. Wachs’ status as an 

expert witness. 
14

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 

 

 

8Appellant 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. 

 
15

"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 
16

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 
17

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 
18

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. 
19

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 
20

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, 
21

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 attorneysin-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 
22

 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. 
23

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 
24

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. 
25

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. 

 

13The 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. 
26

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 
27

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 
28

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 
29

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.