filed: March 9, 1992; As Corrected March 11, 1992.
On Appeal from the United States District Court for the District of New Jersey. (D.C. Civil Action No. 90-02461)
Before: Sloviter, Chief Judge, Scirica and Roth, Circuit Judges
In this legal malpractice action, the district court granted summary judgment for defendants on the ground of collateral estoppel.*fn1 We will reverse.
This case arises out of a mortgage loan from Appellant Arab African International Bank to Sencit S/G Development Company, upon which Sencit defaulted. The Bank, a foreign corporation chartered under the laws of Egypt, maintains a place of business in New York. Jonathan Epstein, Richard Goldman, and the law firm of Goldman & Epstein (Appellees) represented Sencit, a New Jersey partnership. On June 20, 1984, Sencit borrowed $3.25 million from the Bank. The loan documents initially provided that they would be executed in New Jersey and that New Jersey law would apply. These provisions were subsequently changed to designate New York as the state in which the documents were executed and whose law would apply, because the New Jersey Banking Act, 17:9A N.J. Stat. Ann. § 330 (West 1984), prohibited foreign banks from doing business in that state.
At the Bank's request, Goldman & Epstein issued an opinion letter signed by Epstein. The letter stated, in part:
The Mortgage and Note . . . constitute binding, and enforceable agreements of the Partnership in accordance with their terms (subject as to enforcement of remedies to applicable bankruptcy, reorganization, insolvency, moratorium or other laws or equitable principles affecting the enforcement of creditor's rights, generally from time to time in effect).
Since February 15, 1985, Sencit has failed to pay principal, interest, or real estate taxes. Under the terms of the Note, Sencit is indebted to the Bank in an amount exceeding $5 million.
In August 1985, the Bank initiated foreclosure proceedings in the Superior Court of New Jersey, Chancery Division. Sencit contested the foreclosure, and raised as a defense the New Jersey Banking Act, which provides:
A. A foreign bank shall not be entitled to maintain any action in any court of this State on any cause arising out of its transaction of business in this State in violation of the provisions of this article.
B. A foreign bank which violates any of the provisions of this article and its directors, officers, agents and employees who participate in any such violation shall be guilty of a misdemeanor.
17:9A N.J. Stat. Ann. § 330. The Bank contended that Sencit was estopped from raising the New Jersey Banking Act as a defense, because Sencit's attorney (Epstein) had represented in his opinion ...