Opinion
101440/09.
March 31, 2011.
DECISION
The following papers numbered 1 to 6 were fully submitted on the 18th day of February 2011.
1,2 3,4 5,6
Notice of Motion to Dismiss and Memorandum of Law In Support _______ Plaintiff's Affidavit and Affirmation In Opposition ________________ Defendant's Affidavit and Reply Memorandum of Law __________________Upon the foregoing papers, defendant's motion to dismiss the amended complaint for failure to state a cause of action is denied.
Plaintiff commenced this legal malpractice action against defendant-attorney after allegedly losing $500,000 in a real estate venture he entered with non-parties Nir Zeer and Shlomo Zeer for the acquisition of land and the development of condominiums at 486-488 Lefferts Avenue, Brooklyn, New York. While it is undisputed that plaintiff contributed $500,000 to the project, it is his position that he only intended to lend the Zeers money towards the project, rather than become an investor. To the extent relevant, it is plaintiff's contention that he retained defendant to represent him in the subject real estate venture; that he subsequently met with defendant to discuss his investment; and that his investment in the project was supposed to be protected by a first mortgage or first lien on the property. According to plaintiff, defendant had represented him on two prior occasions on which he had lent $100,000 and $120,000, respectively, to the Zeers, and that in both instances, defendant had obtained mortgages on his behalf against the underlying properties in order to secure those loans. Accordingly, plaintiff claims that he had no reason to question the nature of his representation by defendant with regard to the instant project.
Unable to attend due to an alleged illness, plaintiff maintains that defendant appeared on his behalf at the closing on June 16, 2008. In the complaint, plaintiff contends that he met with defendant several days thereafter in order to sign certain pertaining to the closing. Plaintiff admits that he signed the documents without reading them, only to learn that they included, inter alia, an "Operating Agreement" for a limited liability company, 486-488 Lefferts LLC, which identified plaintiff as a member/manager thereof. According to plaintiff, the Operating Agreement also provided that the LLC was the record owner of the property in question, and that the disbursement or reimbursement of funds to its members was only to occur after the entire development had been built and sold. In addition, plaintiff was not provided with either a first mortgage or other secured interest in the real estate. Plaintiff concedes that he also signed a "Certificate of Directors' Resolution to Mortgage Corporate Property" at defendant's request, the terms of which gave Madison Park Investors, LLC (hereinafter Madison Park) a first mortgage on the property as security for a loan of $650,000. On this issue, plaintiff was allegedly informed that the loan had been personally guaranteed by the Zeers, and that he had nothing to worry about. It is alleged that the Zeers later abandoned the project, and that the property is now in foreclosure.
As a result of these events, plaintiff accuses defendant of legal malpractice in an amended complaint in which he maintains the latter breached his duty to exercise the reasonable skill and knowledge commonly possessed by members of the legal profession with regard to plaintiff's representation in this real estate matter. More particularly, plaintiff alleges, inter alia, that defendant (1) failed to secure plaintiff's $500,000 investment with a first lien; (2) proceeded to close without informing plaintiff that a first mortgage on the property had been given to Madison Park instead rather than his client; (3) failed to advise plaintiff that by signing the Operating Agreement, he became a member of a company which was liable on a $650,000 loan; and (4) never disclosed to plaintiff a possible conflict of interest arising out of the Zeers' purported prior performance of construction work for defendant.
In moving to dismiss the amended complaint pursuant to CPLR 3211(a)(7), defendant maintains that plaintiff has failed to allege sufficient facts to support a claim of legal malpractice. According to defendant, (1) the documentary evidence flatly contradicts plaintiff's allegation that he was unaware of his lack of a first mortgage on the subject property; (2) plaintiff's allegations are inherently incredible and therefore not entitled to the favorable inferences ordinarily accorded the factual allegations contained in a complaint; (3) the Operating Agreement executed by plaintiff clearly explained both the terms of his investment and the fact of his membership in the LLC; and (4) said agreement also expressly provided the terms on which plaintiff's investment was to be repaid ( see ANSELMOs' Exhibit D, Disbursement of Funds provision under Article XIII). In addition, defendant contends that the Certificate of Directors' Resolution to Mortgage Corporate Property clearly and unambiguously provides Madison Park with a first mortgage on the subject property, thereby conclusively refuting plaintiff's claimed ignorance of his failure to obtain a first mortgage. In any event, since it is undisputed that plaintiff never read the documents before signing them, defendant argues that plaintiff cannot claim that he was unaware of their contents. Finally, defendant notes that plaintiff never raised any complaint with regard to the language of the agreements until he learned that the project had been abandoned and the property was in foreclosure.
The motion to dismiss is denied.
In determining a motion to dismiss the complaint for failure to state a cause of action, the facts alleged in the complaint must be accepted as true and accorded every possible favorable inference ( see Leon v. Martinez, 84 NY2d 83, 87-88). As the Court of Appeals has stated, "[o]n a motion to dismiss pursuant to CPLR 3211, the pleading is to be afforded a liberal construction. . . . [The court must] accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory" ( id. at 87-88). Thus, dismissal is warranted only where, e.g., even accepting the allegations as true, the complaint fails to state a cause of action ( cf. Cayuga Partners v. 150 Grand, 305 AD2d 527). However, allegations consisting of bare legal conclusions and factual claims that are flatly contradicted by the evidence will not presumed to be true on a motion to dismiss. Also, where evidentiary material has been offered in support of dismissal, the court is required to determine whether the proponent of the pleading actually has a cause of action, not merely whether she or he has stated one (Meyer v. Guinta, 262 AD2d 463, 464; see Leon v. Martinez, 84 NY2d at 88).
With specific reference to the elements of a cause of action for legal malpractice, it is well settled that the sufficiency of the pleading poses "a question of law which . . . [can] be determined on a motion to dismiss "(Rosner v. Paley, 65 NY2d 736, 738). The elements of such a cause of action require a plaintiff to prove that (1) defendant-attorney failed to exercise that degree of care, skill, and diligence commonly possessed and exercised by members of the legal community, and (2) this negligence was a proximate cause of the loss sustained. In this context, the concept of "loss" is construed to mean the actual damages incurred as a direct result of the attorney's action or inaction. Finally, it must be shown that but for the attorney's negligence, plaintiff would have prevailed in the underlying action or, as here, would not have sustained any damages ( see Ashton v. Scotman, 260 AD2d 332).
In this case, plaintiff's amended complaint and the papers submitted in opposition to defendant's motion are predicated, in principle part, on claims that defendant's negligence operated to deprive plaintiff of, e.g., a first mortgage on the underlying property as security for his investment. Accepting these allegations as true and according plaintiff the benefit of every possible favorable inference, it is the opinion of this Court that plaintiff has adequately demonstrated that a cause of action for legal malpractice exists (see CPLR 3211[a][13]). Although defendant has submitted documentary evidence intended to establish that the actual cause of plaintiff's loss was his failure to read the papers presented to him for signature, such documents are legally insufficient at this stage of the proceedings to conclusively establish a defense to the action as a matter of law ( see Leon v. Martinez, 84 NY2d at 88).
Defendant correctly notes that a party who signs a document without reading it is generally bounds by its terms notwithstanding any avowed lack of knowledge of its contents ( see Matter of Augustine v. BankUnited, FSB, 75 AD3d 596, 597; Martino v. Kaschak, 308 AD2d 698). Defendant is further correct in noting that (1) the terms of these documents are clear; (2) a quick reading thereof would have apprised plaintiff that he had not been granted a first mortgage on the subject property; (3) plaintiff was no novice to real estate investing; (4) there has been no claim that plaintiff was suffering from any disability at the time of execution or was prevented from reading the documents, and (5) plaintiff does not claim that he was forced or coerced into signing the documents, or was subjected to either fraud or misrepresentation ( see Matter of Augustine v. BankUnited, FSB, 75 AD3d at 597;Pistilli v. Gandin, 10 AD3d 353, 354; Pimpinello v. Swift Co., 253 NY 159, 162-163). However, plaintiff at bar has not challenged the binding nature of the documents which he signed or tried to avoid the terms of his agreements with the Zeers. Under similar circumstances, the Court of Appeals has held that "the binding nature of [the] agreement[s] between plaintiff and a third party is not a complete defense to the professional malpractice of [a lawyer or] law firm that [is alleged to have secured] an agreement [which operated to its client's detriment]" (see Arnav Indus., Inc. Retirement Trust v. Brown Raysman, Millstein, Felder Steiner, 96 NY2d 300, 304-305).
The culpable conduct of the plaintiff-client in a legal malpractice action may, nevertheless, be pleaded as a mitigating factor by way of an affirmative defense ( see Cicorelli v. Capobianco, 90 AD2d 524, affd 59 NY2d 626).
Accordingly, it is hereby:
ORDERED that defendant's motion to dismiss the amended complaint is denied.