Opinion
Index No.652273/2013
06-01-2015
SARAH WEINBERG, Plaintiff, v. LESLIE SULTAN, ET AL., Defendants.
DECISION/ORDER
HON. CYNTHIA S. KERN, J.S.C. Recitation, as required by CPLR 2219(a), of the papers considered in the review of this motion for :__________
| Papers | Numbered |
| Notice of Motion and Affidavits Annexed | 1,2, |
|---|---|
| Affirmations in Opposition to the Motion | 3 |
| Reply Affidavits | 4.5 |
| Exhibits |
This action was commenced by plaintiff Sarah Weinberg against various defendants to challenge the sale of a building owned by her located at 371 West 46th Street (the "Building"). After plaintiff filed an amended complaint and the defendants made motions to dismiss the complaint, the court issued a decision dismissing all of the causes of action except for the first and second causes which were converted to motions for summary judgment, with the parties being given an additional opportunity to brief the summary judgment motions. The two remaining defendants have now brought motions for summary judgment to dismiss the first and second causes of action for legal malpractice on the ground, inter alia, that plaintiff has not suffered any damages as a result of the sale of the Building. As will be explained more fully below, the motions by defendants for summary judgment dismissing the first and second causes of action are granted.
The following facts are not disputed. For forty years, up until 2013, plaintiff was the owner of the Building. In 2008, plaintiff entered into a cash-out mortgage on the Building in the amount of $2,325,000.00. Plaintiff failed to make the required payments on the loan secured by the mortgage and the default provisions of the mortgage, including a 24% penalty rate, were invoked in 2012. In January 2013, the holder of the mortgage on the Building commenced a foreclosure action against plaintiff and a receiver was appointed for the Building with the authority to manage the property and collect rents. During the foreclosure action, a conference was held before Justice Singh on February 19, 2013. During that conference, at which plaintiff was present, the court allowed the plaintiff a 30 day stay to explore the possibility of refinancing the mortgage on the Building and avoiding the foreclosure. At that hearing, the Judge specifically informed plaintiff as follows:
Folks, while you are out of the room my proposal is as follows: We first try to do a refinancing to see where it goes. The bank's attorney has raised a valid point which both attorneys have to review, and that is that it's going to be a private lender.The plaintiff did not refinance the Building and the lender moved for summary judgment in the foreclosure action, by notice of motion dated April 10, 2013. After the lender brought the motion for summary judgment in the foreclosure action, plaintiff entered into a contract to sell the Building to the purchaser (the "Purchaser") on April 22, 2014. The Purchaser purchased the Building from the plaintiff for $3,500,000.00 by deed dated May 22, 2013. Of that amount, approximately $2,800,000.00 was used to pay off the mortgage which was in the process of being foreclosed. The balance of the proceeds, after the payment of certain expenses, was placed in escrow for plaintiff and potentially for the Purchaser pursuant to two escrow agreements which were executed at the closing.
No bank is going to want to touch this property. The question then becomes if it's refinanced, is there enough money to make it work, because what you don't want to do is lose the equity, and then get foreclosed upon by the private lender, and you've lost the equity, and the building is gone.
So it needs to be done quickly because just now you're paying a 24 percent interest rate with a default rate of interest.
At the closing, plaintiff executed an escrow agreement whereby she agreed to deposit $100,000.00 in escrow, which she would receive when she vacated the building, which was supposed to be no later than two weeks after closing. The escrow agreement provided that the $100,000.00 would be held in escrow to secure plaintiff's removal from the Building which was to occur no later than May 15, 2013. The agreement further provided that in the event plaintiff failed to vacate the Building, the $100,000.00 would be applied to all costs incurred by Purchaser in connection with removing plaintiff from the Building, including fair use and occupancy at the rate of $5,000 per month. Plaintiff continued to reside in the Building arid did not pay any use and occupancy other than $5,000 ordered by the Housing Court. The court held in its previous decision that the Purchaser was entitled to the $100,000.00 held in escrow pursuant to the plaintiff's continued occupancy of the Building for more than 20 months after the closing.
The second escrow agreement plaintiff executed at the closing set aside $62,152.00, representing the security deposit paid to plaintiff by the first floor commercial tenant. The escrow agreement provided that in the event that the security deposit was less than $62,152.00, plaintiff would be given six months to provide the Purchaser an estoppel letter from the tenant setting forth the correct amount. If plaintiff did not obtain the estoppel letter, the escrow amount was to be paid over to the Purchaser. The court held in its previous decision that the Purchaser was entitled to the $62,152.00 being held in escrow because more than six months had passed since the closing and plaintiff had not provided the Purchaser with an estoppel letter.
On a motion for summary judgment, the movant bears the burden of presenting sufficient evidence to demonstrate the absence of any material issues of fact. See Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324 (1986). Once the movant establishes a prima facie right to judgment as a matter of law, the burden shifts to the party opposing the motion to "produce evidentiary proof in admissible form sufficient to require a trial of material questions of fact on which he rests his claim." Zuckerman v. City of New York, 49 N.Y.2d 557, 562 (1980). However, "mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient" to defeat summary judgment. Id.
In order to state a claim for legal malpractice, "the plaintiff must plead factual allegations which, if proven at trial, would demonstrate that counsel had breached a duty owed to the client, that the breach was the proximate cause of the injuries, and that actual damages were sustained." Dweck Law Firm, LLP v. Mann, 283 A.D.2d 292, 293 (1st Dept 2001). Moreover, "the client must plead specific factual allegations establishing that but for counsel's deficient representation, there would have been a more favorable outcome to the underlying matter. Dweck Law Firm. LLP , 283 A.D.2d at 293. "Unsupported factual allegations, conclusory legal argument or allegations contradicted by documentation, do not suffice." Id.
In the instant case, the moving defendants have made a prima facie showing that even if they were negligent in their representation of plaintiff, plaintiff cannot make out a claim for legal malpractice because she cannot sufficiently establish that she has suffered any actual damages as a result of any alleged negligence in allowing the sale of the Building to go forward for an amount below market value. It is undisputed that the Building was the subject of a foreclosure action at the time of the sale based on plaintiff's failure to make the mortgage payments on her $2,325,000.00 first mortgage note secured by the Building and that a summary judgment motion for a judgment of sale and foreclosure was then pending. Plaintiff does not allege that she had any valid defense to the foreclosure action or that she had any basis for stopping the impending foreclosure. It is also undisputed that plaintiff was granted a thirty day stay of the foreclosure action to allow her the opportunity to refinance the Building and that she failed to do so. Based on the foregoing, defendants have sufficiently established that the only reason plaintiff sold the Building was to avoid the imminent foreclosure which was about to occur and not because of any deficient representation on the part of the defendants-she sold the Building because she did not have any other options to avoid the foreclosure.
Moreover, plaintiff has failed to raise a disputed issue of fact with respect to her claim that she could have achieved a more favorable outcome to the foreclosure action but for the alleged negligence of the moving defendants. Her bare conclusory allegation that there were other options available to her other than the sale of the Building to avoid foreclosure are insufficient to raise an issue of fact. Her allegation that it would have taken months to achieve a judgment of foreclosure, which would have given her an opportunity to sell the Building with a real estate broker or refinance the building rather than sell the Building to the Purchaser is insufficient as she fails to identify any evidence, other than mere speculation, that she would have been able to sell or refinance the Building in the time frame between the pending summary judgment motion and the foreclosure of the Building. She has not identified a single prospective purchaser who was willing to pay market value for the Building or a lender or investor who was willing to refinance the delinquent mortgage. To the contrary, plaintiff was unable to refinance the Building during the 30 day stay period provided by the court presiding over the foreclosure action.
Plaintiff's submission of the appraisal of the Building for a price greater than that paid by the Purchaser of the Building is also insufficient to raise an issue of fact as to whether plaintiff could have sold the Building at a higher price as it is completely speculative as to whether plaintiff would have been able to secure a buyer for the Building for the amount contained in the appraisal under the circumstances in which plaintiff was attempting to sell it. At the time plaintiff sold the Building to the Purchaser, there was a foreclosure proceeding pending and the lender had already moved for summary judgment. The failure of the appraisal to consider what the Building would have been worth based on the pendency of the foreclosure proceeding makes it completely inapplicable to the actual circumstances under which the sale took place. Similarly, plaintiff's allegation that she would have done better if the Building had gone into foreclosure rather than selling the Building is conclusory and unsupported by any evidence.
Plaintiff's allegation that she could have filed for bankruptcy rather than sell the Building to the Purchaser and therefore stopped the default interest accruing on the mortgage is without basis. Because the value of plaintiff's Building was undisputably more than the debt it secured, interest would have continued to accrue on plaintiff's debt even in bankruptcy until the entire residual value of the Building was extinguished. See 11 U.S.C. § 506(b)("To the extent that an allowed secured claim is secured by property the value of which...is greater than the amount of such claim, there shall be allowed ...interest on such claim.")
Plaintiff's allegations that she could have achieved a more favorable result by selling the air rights to the Building rather than selling the Building to the Purchaser is insufficient to raise an issue of fact as it is based on pure speculation and is unsupported by any evidence. She fails to present any evidence to support her bare allegation that she could have sold the air rights. She does not present any evidence that any such sale was even possible, that the air rights would have had any value, that there was a prospective purchaser for her air rights or that the proceeds of any such sale would have satisfied her debt. The allegation by plaintiff that she could have taken on an investor with her other property rather than sell the Building to the Purchaser is also insufficient to raise an issue of fact as she fails to identify any potential purchaser or to provide any evidence that she could have obtained such an investor.
Defendants have also made a prima facie showing that plaintiff was not damaged by entering into the escrow agreement at the closing providing that she pay $100,000.00 into escrow to secure her departure from the Building within two weeks and plaintiff has not raised any disputed factual issue. Plaintiff does not dispute that she resided in the Building for more than 20 months after the closing of the Building without paying any use and occupancy and that $5,000.00 per month for use and occupancy is fair market value for her use and occupancy of the Building.
Defendants have made a prima facie showing that plaintiff did not incur any damages as a result of the $62,150.00 escrow amount being turned over to the Purchaser. Pursuant to the terms of the escrow agreement, the Purchaser was entitled to the amount being held in escrow unless the plaintiff produced an estoppel certificate that the amount of the security was less than that amount, which she never did. In response, plaintiff has failed to raise an issue of fact as to whether she was damaged by the Purchaser obtaining this amount as she has failed to present any evidence that the commercial tenant had not paid $62,152.00 as a security deposit. Although her lawyer alleges in a conclusory fashion that she incurred $66,000.00 in damages based on the defendants' failure to explain to plaintiff that she was required to obtain an estoppel certificate from the commercial tenant who had no security, the lawyer for plaintiff does not have any personal knowledge as to whether the commercial tenant had paid a security deposit and plaintiff does not address the issue of whether the tenant had paid any security deposit in her affidavit at all, much less provide any evidence that the tenant had not paid a security deposit.
Defendants have made a prima facie showing that plaintiff was not damaged by paying counsel fees to various attorneys at the closing and plaintiff has failed to raise an issue of fact with respect to these fees. Initially, to the extent plaintiff is claiming that the payment of fees to any of her lawyers was improper on the ground that they were not properly earned, such a claim would constitute a breach of contract claim rather than a legal malpractice claim. To the extent plaintiff is challenging the payment of fees and costs associated with the closing, that claim has no basis based on the court's finding that plaintiff has failed to establish that she had any viable alternative other than selling the Building to the Purchaser. Moreover, there is no evidentiary support for the conclusory allegations of plaintiff's counsel that the payment of any of the fees were improper. Similarly, plaintiff has not shown how she was damaged by any omission on the part of the defendants in not disclosing to her that she would incur capital gains tax as a result of the transaction.
To the extent plaintiff contends that summary judgment should be denied pursuant to CPLR § 3212(f) because discovery remains outstanding, such argument is unavailing. It is well settled that "a claimed need for discovery, without some evidentiary basis indicating that discovery may lead to relevant evidence, is insufficient to avoid an award of summary judgment." Hariri v. Amper, 51 A.D.3d 146, 152 (1st Dept 2008). In the instant case, plaintiff has failed to sufficiently allege that any discovery would lead to admissible evidence sufficient to defeat the present motions for summary judgment dismissing the legal malpractice claims.
Based on the foregoing, the motions for summary judgment dismissing the first and second causes of action for legal malpractice are granted and the first and second causes of action are dismissed. Dated: 6/1/15
Enter:/s/_________
J.S.C.