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Malysz v. Adlerstein

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NASSAU TRIAL/IAS PART 18
Nov 16, 2011
2011 N.Y. Slip Op. 33025 (N.Y. Sup. Ct. 2011)

Opinion

Index No. 013411/09 Motion Sequence 02, 03

11-16-2011

CHRISTINE MALYSZ, Plaintiff, v. ROBERT ADLERSTEIN, MERYL HALPERN, ESQ. AND RALPH H. PECORALE, ESQ., Defendants.


SHORT FORM ORDER

Present: HON.

JUSTICE

Papers Submitted:

Notice of Motion (Mot. Seq. 02)................x
Memorandum of Law..................................x
Affirmation in Opposition..........................x
Reply Affidavit...........................................x
Reply Memorandum of Law.......................x
Notice of Motion (Mot. Seq. 03).................x
Memorandum of Law..................................x
Affirmation in Opposition..........................x
Reply Affirmation.......................................x
Reply Memorandum of Law.......................x

Upon the foregoing papers, the motion by the Defendant, Ralph H. Pecorale, Esq. (Mot. Seq. 02) and the motion by the Defendant, Meryl Halpern, Esq. (Mot. Seq. 03), each seeking, inter alia, summary judgment dismissing the plaintiff's complaint, are determined as provided hereinafter.

This action arises out of the plaintiff's purchase of two properties located on Long Island, New York. Specifically, the Plaintiff, Christine Malysz ("Malysz") engaged in two separate real estate transactions, which were conducted in the same manner. In the first real estate transaction, on or about August, 2006, the Plaintiff purchased property located at 541 Guy Lombardo Avenue, Freeport, New York 11520 (the "Freeport Property"). She was represented in this transaction by the Defendant, Ralph H. Pecorale, Esq. ("Pecorale"). In the second real estate transaction, on or about October, 2006, the Plaintiff purchased property located at 30 Acacia Avenue, Hempstead, New York 11550 (the "Hempstead Property"). The Plaintiff was represented in this transaction by the Defendant, Meryl Halpern, Esq. ("Halpern").

It is undisputed that Pecorale was neither involved in nor did he represent the Plaintiff in the purchase of the Hempstead Property. Additionally, it is undisputed that Halpern was not involved in nor did she represent the Plaintiff in the purchase of the Freeport Property.

However, as to both transactions, the following facts are undisputed. The Plaintiff claims that the Defendant, Robert Adlerstein ("Adlerstein") presented the Plaintiff with real estate investment opportunities wherein the Plaintiff would purchase the Freeport and Hempstead properties and Adlerstein would make repairs, perform upkeep and place tenants in said properties to pay the rent thereat. The properties would be owned by the Plaintiff for a short time after which they would be sold and the profit from the sales would be split between Adlerstein and the Plaintiff. The Plaintiff made this side agreement with Adlerstein to use her name and credit history to purchase the two properties which she could not afford, in exchange for payments of $8,000 and $12,000 upfront for the Freeport and Hempstead properties, respectively, and half of the proceeds when the properties were sold.

It is undisputed that, the Plaintiff, who has a Bachelor's degree in Speech Therapy and a Master's degree in Special Education, did not ask any questions at either closing. She executed all documents thereat without any objection (PI. Tr., pp. 353-354). Indeed, at her sworn Examination Before Trial, the Plaintiff testified that at the closing, she was given documents to sign. She stated that although she signed and initialed the documents, she did not read any of them. She testified that she understood she was purchasing the properties when she signed the documents (PI. Tr., p. 272). She testified that she understood that she was signing a note and a mortgage, and that she knew that she was responsible for paying the sums back {Id., pp. 43, 296, 337). The Plaintiff also stated that she executed a Borrower's Certification & Authorization and Occupancy Agreement in which she falsely certified that she intended to occupy the properties as her primary residence (Pecorale Motion, Ex. I). The Plaintiff took two mortgages each to purchase both properties.

The Plaintiff alleges that after the closings, Adlerstein obtained tenants for both properties and collected rent on both. However, Adlerstein allegedly failed to make the monthly mortgage payments, which caused the Plaintiff to default on the first and second mortgages on both properties. Both properties ultimately fell into foreclosure.

In bringing this action against the Defendants, Pecorale and Halpern (collectively referred to herein as the Attorney Defendants), the Plaintiff claims that both attorneys, separately, engaged in fraud and breach of fiduciary duty by not stopping her from entering into the foregoing real estate investments. She claims that both attorneys failed to represent her in that they both failed to engage in a thorough review of the transactions and failed to engage in a meaningful discussion of the terms. In connection with her purchase of both the Freeport and the Hempstead properties, the Plaintiff alleges that Pecorale and Halpern, respectively, schemed with the Defendant, Adlerstein, to defraud her.

Specifically, the Plaintiff alleges that the Attorney Defendants failed, inter alia: to discuss her ability to pay the mortgages; advise her to obtain an independent engineer's report, termite inspection, appraisal or title report; suggest that the Plaintiff engage in comparative shopping; inform her that she could negotiate the sale price; review the affordability of the property; advise her to shop for alternative mortgage financing; and ensure that Adlerstein's promise to find a tenant was part of the transaction (Complaint, ¶¶ 28, 41). She alleges that in reliance on the Attorney Defendants' representations, or lack thereof, she entered into the real estate transactions with Adlerstein.

The Plaintiff asserts three causes of action in her complaint: fraud, breach of fiduciary duty, and violations of General Business Law ("GBL") § 349. However, she has since withdrawn and discontinued the third GBL cause of action.

As to the first cause of action for fraud, the Plaintiff alleges that the Attorney Defendants made false and deceptive representations and/or acts of fraudulent concealment to induce her to acquire the properties, including inflating the interest rates on her mortgages, altering documents from the closing, and failing to provide her with certain documentation prior to the closing.

In her second cause of action, the Plaintiff claims that the Attorney Defendants breached their fiduciary duties to act in her best interests and failed to disclose unspecified conflicts of interest.

Upon the instant motions, the Attorney Defendants each seek summary judgment dismissal of the plaintiff's complaint.

"On a motion for summary judgment pursuant to CPLR § 3212, the proponent 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]; Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851, 853 [1985]). "Failure to make such prima facie showing requires a denial of the motion, regardless of the sufficiency of the opposing papers" (Id).

Once the movant's burden is met, the burden shifts to the opposing party to establish the existence of a material issue of fact (Alvarez v. Prospect Hosp., supra at 324). The evidence presented by the opponent of summary judgment must be accepted as true and they must be given the benefit of every reasonable inference (Demishick v. Community Hous. Mgt. Corp., 34 A.D.3d 518, 521 [2d Dept. 2006]). FRAUD:

To recover damages for fraud, a plaintiff must prove (1) a misrepresentation or an omission of material fact which was false and known to be false by the defendant; (2) the misrepresentation was made for the purpose of inducing the plaintiff to rely upon it; (3) justifiable reliance of the plaintiff on the misrepresentation or material omission; and (4) injury (CPLR 3016(b); Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d413,421 [1996]; Channel Master Corp. v. Aluminum Ltd. Sales, 4 N.Y.2d 403, 407 [1958]). Fraud is not established by a mere expression of opinion of present or future expectations (Crossland Sav. v. SOI Dev. Corp., 166 A.D.2d 495 [2d Dept. 1990]). That is, "[a] cause of action alleging fraud may not be based on disappointment that a promised future benefit did not materialize" (Satler v. Merlis,252A.D.2d55l [2dDept. 1998]). "The mere fact that the expectations of the parties were frustrated is an insufficient ground upon which to predicate a claim of fraud" (Tutak v. Tutak, 123 A.D.2d 758 [2d Dept. 1986]).

In this case, the documentary evidence confirms that plaintiff's allegations of fraud as against both Attorney Defendants are unfounded. In fact, based upon a plain and simple reading of the documentary evidence submitted herein, including the deposition testimony of the Plaintiff herself, the representations upon which she relies to support her claim of fraud are not more than expressions of promises of future expectatioins from the investment that was voluntarily and knowingly entered into by the Plaintiff. The Plaintiff does not cite to any promises made by any of the Attorney Defendants; rather the promises upon which she predicates her fraud claim were clearly made only by Adlerstein.

The Attorney Defendants having made a prima facie showing of entitlement to judgment as a matter of law, the burden shifts to the Plaintiff to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact requiring a trial (Alvarez v. Prospect Hosp., supra). This, she fails to do (Gilbert Frank Corp. v. Federal Ins. Co., 70 N.Y.2d 966 [1988]).

At best, the Plaintiff s claims for fraud against the Attorney Defendants amount to their alleged failure to explain the loan documents to the Plaintiff. This clearly does not amount to a misrepresentation or an omission of a material fact. In any event, the Plaintiff also fails to demonstrate how she relied upon the Attorney Defendants' failure to explain the documents to her.

Inasmuch as the Plaintiff predicates her fraud claim on her allegation that the Attorney Defendants conspired with the Defendant, Adlerstein, to defraud her, said allegation is equally meritless, infra. The Plaintiff has failed to present any admissible evidence demonstrating that the representations made by Adlerstein in connection with the transactions can be imputed to the Attorney Defendants.

Therefore, in the absence of any proof establishing each of the elements of a fraud claim against the Attorney Defendants, this Court herewith dismisses the plaintiff's defective fraud claim as against the Attorney Defendants, Pecorale and Halpern. Breach of Fiduciary Duty:

Initially, it is noted that the Defendant, Pecorale's attempt to cast this cause of action as one for legal malpractice is unavailing. It is true that a claim for breach of a fiduciary duty may not be maintained where it merely restates a legal malpractice claim and seeks identical relief (Weil, Gotshal & Manges, LLP v. Fashion Boutique oj Short Hills, Inc., 10 A.D.3d 267 [1st Dept. 2004]). In this case however, the Plaintiff only asserts a breach of fiduciary duty cause of action; she does not maintain a cause of action for legal malpractice.

Having said that, a Plaintiff pursing a breach of fiduciary duty claim against an attorney must meet the same proximate causation standard as in a legal malpractice cause of action, namely that "but for" the alleged breach of fiduciary duty, the Plaintiff would not have sustained ascertainable damages (Id. at 271).

Accordingly, the Plaintiff is required to establish that the Attorney Defendants herein failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession and that the Attorney Defendants' breach of this duty proximately caused the Plaintiff to sustain actual and ascertainable damages (Rudolj v. Shayne, Dachs, Stanisci, Corker & Sauer, 8 N.Y.3d 438, 442 [2007]; Bilin v. Segal, Goodman & Goodman, LLP, 81 A.D.3d 680 [2d Dept. 2011]). "This requires a showing that but for the [Attorney Defendants'] negligence ... [the plaintiff] would have prevailed in the underlying action" (Walker v. Glotzer, 79 A.D.3d 737 [2d Dept. 2010]). A failure in any one element results in a dismissal of the claim (Albanese v. Hametz, 4 A.D.3d 379,3 81 [2d Dept. 2004]). Furthermore, unless the ordinary experience of the finder of fact provides a sufficient basis for judging the adequacy of the professional service, or the attorney's conduct falls below any standard of due care, expert testimony is also necessary to establish that the attorney breached a standard of professional care and skill (Demetriou v. Connexion I Real Estate Servs., Inc., 24 Misc.3d 127[A], [App. Term, 2nd, 11th & 13th Jud. Dists. 2009]).

In addition, in asserting a claim for a breach of a fiduciary duty, a plaintiff is obligated to set forth "the circumstances constituting the wrong...in detail" (CPLR § 3016 [b]; Daly v. Kochanowicz, 67 A.D.3d 78 [2d Dept. 2009]).

Initially, it is noted that inasmuch as the Plaintiff has admitted that the Attorney Defendants' sole role in the transaction was to act as her closing attorney and to assist her in acquiring title to both properties, this Court finds that this transaction was a garden variety real estate transaction that does not require the Attorney Defendants on the instant motions to furnish expert affidavits to establish that they did not breach any standard of professional care (Darby & Darby v. VSI Intl., 95 N.Y.2d 308,312 [2000]).

Furthermore, the evidence indicates that the Attorney Defendants did not proximately cause the Plaintiff to suffer any damages. The Plaintiff entered into the transaction knowing that she could not afford the mortgages and that she was not going to make the mortgage payments. While this Court is not convinced that the Attorney Defendants were not aware of the relationship between Adlerstein and the Plaintiff (because Adlerstein was the one who retained the Attorney Defendants on the plaintiff's behalf in the first place), the evidence nonetheless confirms that the Plaintiff did not discuss with the Attorney Defendants the side agreement that she had with Adlerstein. Moreover, even assuming that the Attorney Defendants knew or should have known of the relationship between Adlerstein and the Plaintiff, there is no evidence on this record that the Attorney Defendants were aware (or should have been aware) that the Plaintiff was fraudulently executing the mortgage documents.

While both Attorney Defendants acted as the plaintiff's counsel at their respective closings which necessarily created a fiduciary relationship, as stated above, there is no evidence that either attorney breached that duty in connection with the respective transactions, and furthermore, that said breach was the "but for" cause of any damages. In light of the foregoing, this Court finds that the Defendants have established their prima facie entitlement to judgment as a matter of law.

In opposition, the Plaintiff argues that the Attorney Defendants' actions furthered Adlerstein's interests at the expense of the Plaintiff. However, in the absence of any factual support for this argument, and certainly in light of the fact that the Plaintiff admits that she never disclosed her side agreement with Adlerstein to the Attorney Defendants, her conjecture and speculation do not prove her claims (Zuckerman v. City of New York, 49 N.Y.2d 557, 560 [1980]).

Moreover, in order to maintain a cause of action for aiding and abetting a breach of a fiduciary duty, the Plaintiff is required to establish (1) breach of a fiduciary duty; (2) that the Attorney Defendants knowingly participated in or induced the breach; and (3) that the Plaintiff suffered damages as a result of the breach {Kaufman v. Cohen, 307 A.D.2d 113 [ 1st Dept. 2003]). In order to establish that the Attorney Defendants "knowingly participated" in the breach, the Plaintiff is required to establish that the Attorney Defendants provided "substantial assistance" to Adlerstein, the primary violator (Id). Significantly, "constructive knowledge" of the breach of fiduciary duty to another is insufficient to establish aiding and abetting liability (Id). Here, there is no evidence that the Attorney Defendants knowingly participated in the alleged breach of Adlerstein's alleged fiduciary duty to the Plaintiff.

Therefore, in light of the foregoing, this Court finds that the Plaintiff has failed to present a triable issue of fact with respect to her breach of fiduciary duty (or her aiding and abetting a breach of fiduciary duty) cause of action.

Accordingly, the separate motions by the Defendants, Ralph H. Pecorale, Esq. and Meryl Halpern, Esq., each seeking summary judgment dismissing the plaintiff's complaint, are GRANTED. The plaintiff's complaint is DISMISSED as against each Attorney Defendant, only. The action as against the Defendant, ROBERT ADLERSTEIN, shall proceed.

The parties' remaining contentions have been considered by this Court and do not warrant discussion.

This constitutes the Decision and Order of the Court.

_______________

Hon. Randy Sue Marber, J.S.C.


Summaries of

Malysz v. Adlerstein

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NASSAU TRIAL/IAS PART 18
Nov 16, 2011
2011 N.Y. Slip Op. 33025 (N.Y. Sup. Ct. 2011)
Case details for

Malysz v. Adlerstein

Case Details

Full title:CHRISTINE MALYSZ, Plaintiff, v. ROBERT ADLERSTEIN, MERYL HALPERN, ESQ. AND…

Court:SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NASSAU TRIAL/IAS PART 18

Date published: Nov 16, 2011

Citations

2011 N.Y. Slip Op. 33025 (N.Y. Sup. Ct. 2011)