Opinion
Index Nos. 158575/2016 596070/2019 Motion Seq. Nos. 008 009
02-09-2023
ELIAS TSIONIS and GEORGE TZOULAFIS, Plaintiffs, v. SEKAS LAW GROUP, LLC, NICHOLAS G. SEKAS, ESQ., JOHN and JANE DOES 1-4, and XYZ CORPORATIONS, Defendants. SEKAS LAW GROUP, LLC, Third-Party Plaintiff, v. ROSENBERG & ESTIS, P.C., Third-Party Defendant.
Unpublished Opinion
MOTION DATE: 02/08/2022, 07/21/2022
DECISION+ ORDER ON MOTION
HON. DAVID B. COHEN, Justice
The following e-filed documents, listed by NYSCEF document number (Motion 008) 266, 267, 268, 269, 270, 271, 272, 273, 274, 275, 276, 277, 278, 279, 280, 281, 282, 283, 284, 285, 286, 287, 288, 289, 290, 291, 292, 293, 323, 324, 325, 326, 327, 328, 329, 330, 331, 332, 333, 334, 335, 336, 337, 338, 339, 340, 341, 342, 343, 344, 345, 346, 347, 348, 349, 350, 352, 353, 354, 355, 356, 357, 358, 426, 427, 428, 429, 430, 431, 432, 433, 434, 435, 436, 437, 438, 439, 440, 441, 442, 443, 444, 445, 446, 447, 448, 449, 450, 451,452,453,454,455,456,457,459 were read on this motion to/for SUMMARY JUDGMENT (AFTER JOINDER
The following e-filed documents, listed by NYSCEF document number (Motion 009) 295, 296, 297, 298, 299, 300, 301, 302, 303, 304, 305, 306, 307, 308, 309, 310, 311, 312, 313, 314, 315, 316, 317, 318, 319, 320, 321, 322, 359, 360, 361, 362, 363, 364, 365, 366, 367, 368, 369, 370, 371, 372, 373, 374, 375, 376, 377, 378, 379, 380, 381, 382, 383, 384, 385, 386, 387, 388, 389, 390, 391, 392, 393, 394, 395, 396, 397, 398, 399, 400, 401, 402, 403, 404, 405, 406, 407, 408, 409, 410, 411, 412, 413, 414, 415, 416, 417, 418, 419, 420, 421, 422, 423, 424, 425, 458 were read on this motion to/for SUMMARY JUDGMENT (AFTER JOINDER)
This legal malpractice action arises out of the representation of plaintiffs by defendant/third-party plaintiff Sekas Law Group, LLC (the Firm) and defendant Nicholas G. Sekas, Esq. (together, SLG) in a mortgage foreclosure action. In motion sequence nos. 008 and 009, SLG moves, pursuant to CPLR 3212, for summary judgment dismissing the complaint.Plaintiffs oppose and cross-move for summary judgment in their favor. Third-party defendant Rosenberg & Estis, P.C. (R&E) cross-moves for summary judgment dismissing the third-party complaint.
The two motions filed one month apart are identical.
I. PERTINENT BACKGROUND
A. The Property at issue
In January 2005, plaintiffs, as owners, sold commercial property located at 60-72 Route 303, Tappan, New York (the property) to nonparties So Young Choi, Sarah Kim and Mi-Hyang Yang (collectively, the Original Mortgagors) (NYSCEF 268). The contract of sale provides that a portion of the sale price, or $1.65 million, was secured by a purchase money mortgage and note given to plaintiffs from, and personally guaranteed by, the Original Mortgagors (id.; NYSCEF 292).
Sekas represented plaintiffs on the transaction and prepared the loan documents, including a Term Loan Note dated January 12, 2005 (the Note), which provides for repayment of the principal over 10 years at 6.25% interest per annum (NYSCEF 268; 363; 368). Article I, Section 27 of the First Term Loan Mortgage dated January 12, 2005 (the Mortgage) prohibited the Original Mortgagors from causing a second mortgage or other encumbrance, apart from certain permitted encumbrances, to be placed on the Property without plaintiffs' written consent (id. at 29).
In 2006, the Original Mortgagors sold the Property to nonparty Eriora Corp. (NYSCEF 292). Pursuant to an assignment and assumption agreement dated March 13, 2006, Eriora agreed to assume all responsibility on the Note and Mortgage, and Eriora's principals, nonparties Kwang Kil Moon and Sun Ok Moon (together with Eriora, the Subsequent Mortgagors) agreed to execute personal guarantees (NYSCEF 363). Plaintiffs consented to the transaction (id. at 6), and Sekas prepared the assignment and assumption agreement (id. at 4).
The complaint in this action identifies "Sun Ki Moon," not Sun Ok Moon, as a Subsequent Mortgagor (NYSCEF 269, H 12).
On April 8, 2010, Eriora's president, Kwang Kil Moon, executed a mortgage note in the principal sum of $800,000 payable to nonparty Soo I Yong (Yong) in full by March 31, 2011 with interest at 24% per annum (NYSCEF 270). The note was secured by a mortgage (the Yong Mortgage) on the Property.
Beginning in March 2011, the Subsequent Mortgagors defaulted on paying the installment due that month and every month thereafter (NYSCEF 361). Plaintiffs retained SLG to pursue the rights and remedies available to them to recover the monies due on the Note and Mortgage, but they did not execute a written retainer (id., ¶l| 7-8; NYSCEF 386), because, according to Sekas, he and plaintiffs had a longstanding business and personal relationship, and plaintiffs "weren't much into retainers" (NYSCEF 386 at 199).
Despite the absence of a written retainer, plaintiffs asked SLG to assist them in foreclosing on the mortgages placed on the Property, and ultimately to reacquire it (NYSCEF 362). Sekas and two junior associates, John McKenna, Esq. and Philip Taylor, Esq., worked on the matter for the Firm.
B. Foreclosure action
On June 9, 2011, SLG commenced a mortgage foreclosure action captioned Tsionis, et ano. v Eriora Corp., et al, Sup Ct, Rockland County, index No. 30126/2011 (the Foreclosure Action) against the Original Mortgagors, the Subsequent Mortgagors, Yong and others, by e- filing a summons and complaint, in which it is alleged that Yong held a subordinate mortgage on the Property (NYSCEF 344).
The e-filing protocols in effect in Supreme Court, Rockland County at that time required that, except for certain actions, all civil actions be commenced electronically, and that all papers in e-filed actions include an identifying "E" code after the index number (NYSCEF 389). McKenna drafted and signed the complaint under Sekas's supervision (NYSCEF 384), but it lacked the requisite "E" designation (NYSCEF 446).
In July 2011, a receiver was appointed in the foreclosure action (NYSCEF 14, in index 30126/11), as the Property was allegedly in disrepair (NYSCEF 384).
On July 5, 2011, SLG filed an ex parte order permitting service by publication upon the Subsequent Mortgagors and Yong (NYSCEF 12, in index 30126/11), as plaintiffs had learned that Eriora's principals had moved to Korea (NYSCEF 386). The justice presiding in the foreclosure action signed the order on July 21, 2011 and it was entered on August 9, 2011 (NYSCEF 13, in index 30126/11).
However, SLG's process server apparently personally served Yong with process in June 2011 (NYSCEF 396), although an affidavit of service was never filed (NYSCEF 332; 386). Yong retained Alan M. Kapson, Esq. to represent him, and on July 25, 2011, Kapson contacted McKenna to inquire about a payoff (NYSCEF 289). Kapson allegedly told Sekas that Yong wished to purchase or reinstate the Note because he wanted to own the Property (NYSCEF 386).
According to Sekas, plaintiffs verbally instructed him not to engage in further conversations with Kapson, as they wanted to take over the Property as quickly as possible, and their "main goal was to secure the receiver, and subsequently secure their position as owner and receiver and go to the sale" (id.). The plaintiffs were also angered to learn that a second lien had been placed on the Property without their consent as required under the Mortgage (id.), and they believed Yong's mortgage was fraudulent because the note and checks furnished to them by Yong's counsel were insufficient to prove the existence of an actual loan between Yong and the Subsequent Mortgagors (NYSCEF 387).
On September 1, 2011, Richard S. Piedmont, Esq. informed Sekas by email and letter that he had replaced Kapson as Yong's counsel, and he advised that Yong did not intend to challenge the foreclosure complaint and would monitor the action and participate in bidding at a foreclosure sale and in a surplus money proceeding (NYSCEF 386). Piedmont wrote that "[Yong's] plan involves acquiring the underlying title to the property, if possible, and then negotiating with you to bring your clients back to their position prior to the [Subsequent Mortgagors'] default" (id.). Although Piedmont included a notice of appearance as an attachment to the email and sent the notice to SLG by courier (id.), he did not file it with the court.
On October 26, 2011, SLG filed an ex parte motion for a default judgment, on the ground that traditional service upon Kwang Kil Moon, Sun Ok Moon and "So Yong Choi" was unsuccessful, and that plaintiffs had served those defendants by publication (NYSCEF 402). McKenna also drafted and filed a proposed order granting plaintiffs a judgment of foreclosure and sale, but Yong's name as a defendant was omitted from the caption on the notice of motion, Sekas's affirmation, and the proposed order.
On February 29, 2012, while the motion was still pending, Piedmont e-filed a notice of appearance and demand for surplus monies (NYSCEF 33, in index 30126/11). That same day, the justice signed the proposed foreclosure order and judgment, which fixed the amount due on the Note; barred and foreclosed "So Yong Choi, holder of an invalid second mortgage ... upon all interest, equity, and rights to redeem with regard to the Mortgaged Premises"; directed that the Property be sold; relieved the receiver of all duties; and allowed plaintiffs to re-enter and retake the Property until the sale took place (NYSCEF 271). The justice then issued an amended order dated March 6, 2012 (the March Order), changing all references to "So Yong Choi" to Yong and appointing a referee to compute the amount due and conduct the sale (NYSCEF 405).
Thereafter, Yong moved to vacate his default, arguing that his counsel was unaware the action had been e-filed and was not notified that plaintiffs had moved for a default judgment (NYSCEF 406). The motion was denied (NYSCEF 408), as was the subsequent motion to reargue (NYSCEF 57, in index 30126/11). A later order directed that the Property be sold by the court-appointed referee (NYSCEF 421). Yong appealed the March and September Orders (NYSCEF 50, in index 30126/11).
While the appeal was pending, according to Sekas, Piedmont reached out to discuss settlement, but plaintiffs "dismissed it outright... [and] said that they would not negotiate with them, whatsoever" (NYSCEF 385). Although Sekas explained the potential consequences of plaintiffs' refusal to consent to vacate Yong's default, "they chose otherwise" (NYSCEF 386).
Meanwhile, Yong's motion to stay the foreclosure sale was unsuccessful (Tsionis v Eriora Corp., 2013 NY Slip Op 69353[U] [2d Dept 2013]), and the referee conducted the sale on March 21, 2013, and executed and delivered a referee's deed to plaintiffs, who were the winning bidders (NYSCEF 269). Plaintiffs moved to confirm the referee's report, and Yong cross-moved to set aside the sale (NYSCEF 59 and 70, in index 30126/11). The motion was granted, the cross motion was denied (NYSCEF 77, in index 30126/11), and plaintiffs subsequently conveyed the Property to nonparty 62-76 Route 303 LLC (303 LLC), an entity they controlled (NYSCEF 276).
On December 3, 2014, the Appellate Division, Second Department, reversed the September Order and granted Yong's motion to vacate the March Order (Tsionis v Eriora Corp., 123 A.D.3d 694, 694-695 [2d Dept 2014]). The Court found that Yong had not defaulted because he had timely served a notice of appearance upon plaintiffs' counsel (id. at 695), and Yong's counsel was not required to e-file the notice because "[Yong] did not have proper notice that this action was e-filed" (id. at 696). The Court also determined that Yong was not required to serve an answer because "[t]he complaint contained no allegations about [him], except to state that he had a second mortgage on the property," and thus, service of a notice of appearance was proper (id.). Moreover, the Court found that the March Order "improperly exceeded the relief sought in the complaint," as the complaint did not allege that Yong held an invalid mortgage (id.).
Sekas informed plaintiffs of the outcome of the appeal by letter dated December 11, 2014, describing the decision as effectively "nullifying the validity of the foreclosure sale, which was possible only with the default judgment" (NYSCEF 275). While Sekas believed that the decision was a setback, he concluded that there were several ways to "move forward to secure [plaintiffs'] ultimate interest in the property" (id.).
Sekas therefore presented plaintiffs with three options: (1) to seek further appellate review; (2) to restart proceedings at the trial level, which would involve conducting discovery to attack the Yong Mortgage; or (3) to pursue settlement (id.). Sekas wrote that he did not believe further appellate review was cost-effective or that a settlement could be reached at that time, and therefore he recommended pursuing the second option (id.).
On January 12, 2015, SLG filed an amended complaint, which included specific claims against Yong (NYSCEF 348). At a January 26, 2015 court conference, Sekas and Piedmont informed the presiding justice that the Second Department's decision did not affect the judgment of foreclosure and sale against the Subsequent Mortgagors who had defaulted (NYSCEF 276). The court directed Yong to serve and file an answer and a lis pendens within 30 days, and the parties to complete paper discovery within 90 days and depositions within 120 days (id. at 6).
The next day, Alexandras E. Tsionis (Alex), Tsionis's son and plaintiffs' intermediary (NYSCEF 386) confirmed that plaintiffs had authorized Sekas to extend a settlement offer of $800,000 to Yong, conditioned upon receipt of a valid and verified closing package for the Yong Mortgage (NYSCEF 432, 433). Alex testified that plaintiffs "were running out of money from relitigating the matter" and considered whether it made more economic sense to pay off Yong or litigate the validity of the Yong Mortgage (NYSCEF 432). Piedmont rejected the offer because Yong wanted an additional $100,000 for his legal fees (NYSCEF 386, 387).
On March 2, 2015, Yong served an answer with counterclaims and a third-party complaint against 303 LLC (NYSCEF 347).
Thereafter, SLG sent plaintiffs a written retainer requiring a $20,000 fee (NYSCEF 414), in response to which plaintiffs told Sekas they needed different counsel (NYSCEF 432; 386). Plaintiffs then retained R&E pursuant to an engagement letter dated April 17, 2015 (NYSCEF 277). SLG and R&E executed a consent to change attorney form on April 23, plaintiffs executed it on May 11 (NYSCEF 278), and R&E e-filed it on June 10 (NYSCEF 331).
Timothy Fierst, Esq. of R&E appeared in court for a June 11 conference, but Piedmont did not (NYSCEF 278). Fierst informed the court that plaintiffs' prior counsel had not served the amended complaint on the other defendants or served a reply to Yong's counterclaims, nor had any discovery been exchanged. The presiding justice stated:
"The case is marked off, marked off the calendar until a note of issue is filed. You got two options: You can agree to continue discovery on your own. The case will remain marked off. Once the Note of Issue is filed, the case will be put back on the calendar. Or you can
file the Note of Issue immediately. Make it subject to all discovery that's left over. And I'll put the case back on the calendar. But I will not put it back on the calendar until a Note of Issue is filed. So, it is marked off. Let the other side know about that. And you can choose whatever you want to do. A lot of people just file the Note of issue and make it subject to whatever discovery is left over ... you can make it subject to that. And then you have a year to complete that"(id. at 4-5).
According to Fierst, he met with plaintiffs after the conference, and told them that they could continue with the litigation, since the court granted them leave to conduct discovery and plaintiffs had to reply to Yong's counterclaims. Fierst explained that if plaintiffs succeeded in extinguishing the Yong Mortgage, another foreclosure sale would be held, at which Yong or another entity could outbid plaintiffs for the Property, and it was unclear if plaintiffs would be able to recoup their expenses in repairing the Property because a referee may not approve them. If plaintiffs decided to pursue litigation, he told them, they would incur additional costs and legal fees, although the costs would not likely exceed $800,000 (NYSCEF 415).
However, according to Alex, Fierst told plaintiffs the "discovery deadline had been blown" (NYSCEF 432), and Tzoulafis understood that plaintiffs could lose the Property if someone outbid them at a second auction (NYSCEF 338).
After Fierst advised plaintiffs of their options, including moving forward with the litigation or settling, plaintiffs told him that it was their primary goal to own the Property free of all liens and encumbrances and directed him to discuss settlement with Piedmont (NYSCEF 415). Tsionis explained that Fierst "told us to settle the case because it will cost a lot of money in order to go through," and that they ultimately chose to settle because litigating would cost them money (NYSCEF 415). Even though Sekas had made the same suggestion months earlier, Tsionis admitted that he did not listen to Sekas because he thought plaintiffs had a case against
Yong (id.). According to Tzoulafis, plaintiffs wanted to settle with Yong to avoid competing with other bidders at a future foreclosure sale and because it would have cost "a lot more in the end [to litigate], and we probably still don't own the property" (NYSCEF 338).
If plaintiffs settled with Yong, Fierst told them that holding a second foreclosure sale would be unnecessary because the Second Department's decision vacated the judgment of foreclosure and sale against Yong, and the litigation against every other party had been resolved (NYSCEF 415). He suggested structuring a settlement whereby Yong would stipulate he was subject to the judgment of foreclosure and sale, and would consent to entry of judgment against him and to plaintiffs' conveyance of the Property to 303 LLC (NYSCEF 337). Plaintiffs authorized Fierst to settle the action for $800,000 and later increased that amount to $900,000 (NYSCEF 340), and the action settled for that amount (NYSCEF 326).
C. The instant action
Plaintiffs commenced this action on October 12, 2016 by filing a summons and complaint asserting three causes of against SLG for: (1) legal malpractice; (2) breach of fiduciary duty; and (3) breach of contract. They allege in the complaint that SLG failed to: properly commence the Foreclosure Action and/or provide proper notice of it to Yong, who had appeared in the action; comply with the court-ordered discovery schedule; supervise junior attorneys; and ensure that plaintiffs did not expend monies unnecessarily. Plaintiffs contend that they were caused to spend money to improve the Property before Yong's appeal was decided; incur additional legal fees to cure SLG's negligence; and enter into an economically disadvantageous settlement with Yong (NYSCEF 269).
SLG interposed an answer and commenced a third-party action against R&E for contribution and common-law indemnification. R&E served an answer to the third-party complaint.
In a decision and order dated June 5, 2017, this court partially granted SLG's motion for pre-answer dismissal of the complaint by dismissing the breach of fiduciary duty and breach of contract claims, and denied the motion as to the legal malpractice claim (NYSCEF 59).
SLG now moves for summary judgment dismissing the complaint against it. Plaintiffs oppose and cross-move for summary judgment in their favor. R&E cross-moves for summary judgment dismissing the third-party complaint.
II. ANALYSIS
A party moving for summary judgment under CPLR 3212 "must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact" (Alvarez v Prospect Hosp., 68 N.Y.2d 320, 324 [1986]). The "facts must be viewed in the light most favorable to the non-moving party" (Vega v Restani Constr. Corp., 18 N.Y.3d 499, 503 [2012] [internal quotation marks and citation omitted]). Once the moving party has met this prima facie burden, the burden shifts to the non-moving party to furnished evidence in admissible form sufficient to raise a material issue of fact (Alvarez, 68 N.Y.2d at 324). The moving party's "[f]ailure to make such prima facie showing requires a denial of the motion, regardless of the sufficiency of the opposing papers" (id.).
A. SLG's Motion and Plaintiff s Cross-Motion for Summary Judgment
1. Contentions
SLG argues that its actions did not proximately cause plaintiffs' damage, and submits an affidavit from Bruce J. Bergman, Esq., an attorney with experience in mortgage foreclosure litigation. According to Bergman, the goal in a foreclosure action is to make the foreclosing party or lender whole, which is achieved when, at a foreclosure sale, an entity bids above the sum due to the lender, or if no one bids more than the debt, the lender submits a "credit bid" and takes title. If entities holding subordinate interests encumbering the foreclosed property were served, their interests are extinguished at the foreclosure sale, and if they were not served, their interests may be extinguished in a separate, strict foreclosure action against them. Bergman opines there was no need to settle with Yong because he was served and his subordinate mortgage would have been extinguished at the sale (NYSCEF 284).
Bergman further opines that, given that the Property's appraisal value exceeded the amounts owed to plaintiffs, plaintiffs would have been fully paid on the debt even if they were outbid at a sale, thus satisfying the goal of foreclosure. He thus concludes that SLG's conduct comported with the standard of care possessed by attorneys representing lenders in mortgage foreclosure actions (id.).
SLG argues that, because plaintiffs' goal was to acquire title free and clear of liens and encumbrances and not repayment of the Subsequent Mortgagors' debt, litigating the Foreclosure Action to its conclusion would have still required the extinguishment of Yong's Mortgage. Moreover, SLG contends that plaintiffs elected to settle with Yong to avoid the risk that Yong or another party could outbid plaintiffs at a future foreclosure sale.
Regarding the missed discovery deadline, SLG claims that R&E had sufficient time to conduct discovery into the validity of the Yong Mortgage but failed to do so. SLG also argues that plaintiffs' claim for costs incurred in repairing the Property should be dismissed because plaintiffs spoliated evidence, by performing repairs without sufficient notice to SLG and its expert, who has been deprived of the opportunity to inspect the Property in its unaltered condition.
In opposition, plaintiffs cite numerous instances where SLG was negligent, including the failure to give proper notice that the Foreclosure Action had been commenced electronically and SLG's failure to acknowledge receipt of Piedmont's notice of appearance, which forced plaintiffs to restart the litigation against Yong. Plaintiffs assert that Bergman's opinion is irrelevant because he focused solely on the proper way to litigate a foreclosure action, but SLG was retained for more than representation in the Foreclosure Action.
In addition, plaintiffs claim they relied on Sekas's advice before paying to repair the Property, and, by doing so, they may not have been able to recover those costs at the conclusion of the Foreclosure Action. Plaintiffs also deny that they spoliated evidence, as they never denied SLG access to the Property, SLG never availed itself of the opportunity to inspect it, and SLG never sought to depose third parties with specific knowledge of the repairs (NYSCEF 362). Moreover, plaintiffs contend that SLG had first-hand knowledge of the Property's condition, as it negotiated at least one lease for a new tenant there (NYSCEF 365, 366), and that SLG spoliated evidenced as it failed to protect its files related to the Foreclosure Action.
In reply, SLG argues that plaintiffs' failure to tender an expert affidavit warrants granting it summary judgment. In a supplemental affidavit, Bergman avers that an attorney representing a lender in a foreclosure action cannot guarantee more than full payment of the debt, and that a lender who wishes to own the foreclosed property may credit bid the full amount due to it at the foreclosure sale but if another entity bids more than the credit bid amount, then the lender must bid more than that party if it wishes to secure the property. Here, Bergman states that Yong would have had to outbid plaintiffs if he wished to own the Property, but plaintiffs settled with him, and because of the settlement, Bergman opines that it is impossible to predict how Yong would have acted at any sale. He concludes that plaintiffs' decision to settle with Yong was a business decision because Yong's junior mortgage would have been extinguished if the parties had litigated the Foreclosure Action to its conclusion (NYSCEF 452).
Plaintiff, in reply, maintains that Bergman's opinion is inadmissible because it is the court's function to determine if SLG's acts or omissions constituted malpractice, and argues again that SLG's mistakes are the "but for" cause of their damages.
2. Analysis
The plaintiff client bears a heavy burden of proof on a legal malpractice claim (Lindenman v Kreitzev, 7 A.D.3d 30, 34 [1st Dept 2004]), and to prevail on the claim, the plaintiff must prove: (1) the attorney's negligence; (2) that the negligence was the proximate cause of the plaintiffs loss; and (3) actual damages (Leder v Spiegel, 31 A.D.3d 266, 267 [1st Dept 2006], affd 9 N.Y.3d 836 [2007], cert denied sub nom. Spiegel v Rowland, 522 U.S. 1257 [2008]). The first element requires the client to show" 'that the attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession'" (Nomura Asset Capital Corp. v Cadwalader, Wickersham & Taft LLP, 115 A.D.3d 228, 236 [1st Dept 2014], affd 26 N.Y.3d 40 [2015], rearg denied 27 N.Y.3d 957 [2016] [citation omitted]).
As to the second element of causation, "the client must meet the 'case within a case' requirement, demonstrating that 'but for' the attorney's conduct the client would have prevailed in the underlying matter or would not have sustained any ascertainable damages" (Weil, Gotshal & Manges, LLP v Fashion Boutique of Short Hills, Inc., 10 A.D.3d 267, 272 [1st Dept 2004] [internal quotation marks and citation omitted]). The damages recoverable in a legal malpractice claim include the" 'litigation expenses incurred in an attempt to avoid, minimize, or reduce the damage caused by the attorney's wrongful conduct'" (Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 N.Y.3d 438, 443 [2007] [citations omitted]), and the fees the plaintiff paid to alternate counsel to perform the services for which the original attorney was retained (Affiliated Credit Adjustors, Inc. v Carlucci & Legum, 139 A.D.2d 611, 613 [2d Dept 1988]).
The defendant-attorney moving for summary judgment dismissing a legal malpractice claim must demonstrate that the plaintiff cannot prove at least one essential element of the claim (Frankel v Vernon & Ginsburg, LLP, 101 A.D.3d 447, 447 [1st Dept 2012]).
Generally, "[settlement of an action will not preclude an award of legal malpractice" (Fusco v Fauci, 299 A.D.2d 263, 263 [1st Dept 2002]). "Where ... the underlying action has been settled, the focus becomes whether 'settlement of the action was effectively compelled by the mistakes of counsel'" (Chamberlain, D Amanda, Oppenheimer & Greenfield, LLP v Wilson, 136 A.D.3d 1326, 1328 [4th Dept 2016], rearg denied 138 A.D.3d 1513 [4th Dept 2016], Iv dismissed 28 N.Y.3d 942 [2016], quoting Bernstein v Oppenheim & Co., 160 A.D.2d 428, 430 [1st Dept 1990]). In that instance, the client must "demonstrate that the settlement entered into was improvident and that [the client] would have been entitled to a more beneficial settlement, but for the [attorney's] alleged misconduct" (RappvLauer, 229 A.D.2d 383, 384 [1st Dept 1996]).
Even assuming that SLG failed to exercise the ordinary and reasonable skill and knowledge commonly possessed by a member of the legal profession, it demonstrates that plaintiffs are unable to prove that but for SLG's conduct, they would not have sustained damages. After the Second Department restored the foreclosure case against Yong, SLG advised plaintiffs that they could continue to litigate the case or try to settle with Yong, and plaintiffs decided to settle the case, but their settlement offer was initially rejected by Yong, and they were unwilling at that point to pay the additional $100,000 requested by Yong for his legal fees.
Moreover, according to SLG's expert, if plaintiffs had proceeded with litigating the foreclosure action and a sale was held for the Property, plaintiffs were assured of being "made whole" as the appraised value of the property was more than the amount owed to plaintiffs, and thus plaintiffs would have suffered no damages if they had chosen to litigate the foreclosure action rather than settling with Yong.
To the extent that SLG should not have moved for a default judgment against Yong, the Second Department found that the presiding justice erred in granting the judgment and compounded the error by granting plaintiffs relief against Yong that SLG had not requested in the foreclosure complaint. If the default judgment had instead been correctly denied in the first instance, then plaintiffs would have been in the same position that they were in following the Appellate Division's reversal, namely, having to either litigate the validity of Yong's mortgage or settle with him. Thus, SLG shows that any errors it may have made related to the default judgment motion did not result in any detrimental change to plaintiffs' position regarding the Yong's mortgage.
Nor were plaintiffs barred from continuing the foreclosure action or seeking discovery related thereto, as the justice marked the case off of the calendar but permitted them to continue with discovery. SLG thus demonstrates that plaintiffs had the choice and opportunity to litigate rather than settle with Yong and therefore, they were not forced to settle with Yong due to any mistakes or malpractice by SLG.
In addition, if plaintiffs had continued to pursue the foreclosure action rather than settling, they faced the risk of having Yong or another person or entity outbid them at the sale for the Property, and thus, they made the business decision to settle with Yong, in part, to avoid losing the Property. Such a business decision does not constitute malpractice (Marder 's Antique Jewelry, Inc. v Bolton, 2018 NY Slip Op 31828[U], *5 [Sup Ct, NY County 2018], affd 179 A.D.3d 619 [1st Dept 2020]). Also, given the possibility that plaintiffs may not have been the successful bidders at a foreclosure sale, they cannot prove that they would have obtained a more favorable outcome had they not settled with Yong (Schiller v Bender, Burrows and Rosenthal, LLP, 116 A.D.3d 756 [2d Dept 2014]).
While plaintiffs contend that their damages include the fees they paid to R&E, there is no evidence that R&E took any new action on plaintiffs' behalf or cured SLG's mistakes, and the ultimate settlement agreement that it procured for plaintiffs was the same amount that Yong had counteroffered to plaintiffs when SLG represented them and which they had rejected at that time. SLG therefore shows that plaintiffs cannot demonstrate that they incurred additional litigation expenses in an attempt to avoid, minimize, or reduce the damage caused by SLG's wrongful conduct or that plaintiffs paid R&E to perform services which SLG had failed to perform.
In any event, as R&E represented plaintiffs at the time of the settlement, and as R&E had the opportunity and time to pursue discovery and litigate the foreclosure action rather than settling with Yong, SLG demonstrates that it cannot be held liable for the resulting settlement (see Hufstader v Friedman andMolinsek, P.C., 150 A.D.3d 1489 [3d Dept 2017] ["element of proximate cause cannot be established where a plaintiff has entered into a settlement while represented by successor counsel" and counsel had enough time and opportunity to protect plaintiffs rights]; New Kayak Pool Corp. v Kavinoky Cook LLP, 125 A.D.3d 1346 [4th Dept 2015] [even if first attorney failed to properly investigate matter, new attorney had time to conduct its own investigation before settling action]; Somma v Dansker & Aspromonte Assocs., 44 A.D.3d 376 [1st Dept 2007] [malpractice claim properly dismissed as defendants did not represent plaintiff when he agreed to settle dispute and new counsel had time and opportunity to protect plaintiffs rights]).
In opposition, plaintiffs fail to raise a triable issue, especially as they do not demonstrate that they would have successfully foreclosed on and retained the Property but for SLG's alleged mistakes, and as they failed to submit an expert affidavit to rebut the opinion's of SLG's expert (see Nuzum v Field, 106 A.D.3d 541 [1st Dept 2013] ["plaintiffs failure to provide an expert affidavit as to the standard of care and professional competence in this area, to rebut defendant's expert affidavit, is fatal to her claim."]).
The court has considered the other arguments advanced by the parties and finds them unavailing.
B. R&E's Cross-Motion for Summary Judgment
R&E's cross motion for summary judgment dismissing the Firm's third-party complaint seeking contribution and common-law indemnification is granted as the complaint has been dismissed in its entirety (Turchioe v AT&T Communications, 256 A.D.2d 245, 246 [1st Dept 1998]).
Accordingly, it is
ORDERED that the motions of defendant/third-party plaintiff Sekas Law Group, LLC and defendant Nicholas G. Sekas, Esq. for summary judgment dismissing the complaint (motion sequence nos. 008 and 009) are granted, and the complaint is dismissed in its entirety with costs and disbursements to said defendants as taxed by the Clerk upon the submission of an appropriate bill of costs; and it is further
ORDERED that the cross-motion of third-party defendant Rosenberg & Estis, P.C. for summary judgment dismissing the third-party complaint (motion sequence no. 008) is granted, and the third-party complaint is dismissed in its entirety with costs and disbursements to said third-party defendant as taxed by the Clerk upon the submission of an appropriate bill of costs; and it is further
ORDERED that the cross-motion of plaintiffs Elias Tsionis and George Tzoulafis for summary judgment (motion sequence no. 009) is denied; and it is further
ORDERED that the Clerk is directed to enter judgment accordingly.