Opinion
16598/04.
3-22-2010
CARUSO, CARUSO & BRANDS, P.C., Plaintiff, v. NACHAMA HIRSCH, Defendant.
Wendy B. Shepps, Esq., Caruso, Caruso & Branda, Plaintiff Attorney. Andrew Lavoott Bluestone, Esq., Littleton Joyce Ughetta & Park, Defendant Attorney.
In this action, plaintiff Caruso, Caruso & Brands, P.C. (the law firm) moves for an order, pursuant to CPLR 3212, granting it summary judgment and, pursuant to the same statute, dismissing the counterclaim brought against it by the defendant, Nachama Hirsch. Ms. Hirsch cross-moves for an order, pursuant to CPLR 3212, granting partial summary judgment on her counterclaim.
On or about March of 1999, Ms. Hirsch retained the plaintiff law firm to represent her in the divorce proceeding between Ms. Hirsch and her ex-husband Benjamin Hisrsh (Hirsch v Hirsch, Kings County Index No. 20231/1997 [the underlying divorce proceeding]). That proceeding continued for several years and culminated in a trial which concluded on or about July, 2002. The law firm billed Ms. Hirsch a total of $249,000.00 for its representation, of which she has apparently paid $160,616.40. After Ms. Hirsch failed to respond to the law firm's "Notice to Arbitrate Fee Dispute Pursuant to Part 136 of the Rules of the Chief Administrator," the plaintiff commenced this action seeking an award of damages in the amount of the outstanding balance, $88,418.43.00. In her answer, Ms. Hirsch asserts a counterclaim, alleging that the law firm negligently represented her in the underlying divorce action and claiming that she is entitled to a return of the legal fees already paid to the plaintiff, as well as an order that she is not obligated to pay the balance allegedly owed.
A finding of legal malpractice precludes the award of legal fees for the services negligently provided by the attorney (see Ulica Cas. Co. v Wilson Elser, Moscowitz, Edelman, & Dicker, 56 AD3d 1 [2008]; Altamore v Friedman, 193 AD2d 249 [1993]). Because there does not appear to be a dispute as to the fact that Ms. Hirsch did not pay the balance of the attorney's fees, absent a finding of legal malpractice, summary judgment would be appropriate on the plaintiff's claim. Thus, the court will turn to the cross-motion to determine whether Ms. Hirsch has demonstrated that a question of fact exists on the issue of whether the law firm committed malpractice in its representation of Ms. Hirsch in the underlying divorce proceeding.
At the outset, the court notes that while the cross-motion was untimely served, the court will entertain it on the merits since the issues raised therein relate to the same relief sought in the timely motion made by the plaintiff (see e.g. Rosa v R.H.Macy Co. Inc, 272 AD2d 87 [2000]). Ms. Hirsch's claim of malpractice relates to her loss of a number of properties that were awarded to her as part of the divorce judgment which was rendered after the matrimonial trial. In a decision dated May 10, 2002 (the divorce decision), Justice Virginia Yancey found, inter alia, that Mr. Hirsch had fraudulently and in violation of a court order, transferred certain real property owned by him to a family trust, and to entities owned by the trust, allegedly in an attempt to defeat or impair Ms. Hirsch's right to equitable distribution of the marital assets. The court, thus, set aside those conveyances, pursuant to Debtor Creditor Law Section 278, and held that ownership of those properties would revert back to the husband.
In its equitable distribution of the marital estate, the court awarded Ms. Hirsch $2,444,111.80, which constituted fifty per cent (50%) of the value of the marital property. As part of that award, the court ordered that Ms. Hirsch would have title to 10 properties, with a total equity value of 333,063.62; the remainder of the award, equaling $2,111,048.80, would be paid in fifteen equal yearly installments by Mr. Hirsch.
The court ordered that the judgment, which also included child support and maintenance awards, be settled within 60 days of the May 10, 2002 order, or by July 10, 2002. On or about June 25, 2002, the judgment of divorce was settled and presented to the court, and it was entered on July 1, 2002.
On June 21, 2002, Mr. Hirsch and a number of "entity debtors," (a term used by the Bankruptcy Court to identify several companies of which Mr. Hirsch apparently has an ownership interest) filed for Chapter 11 Bankruptcy in the United States Bankruptcy Court in the Eastern District of New York (the Bankruptcy Court). In his petition, Mr. Hirsch listed the ten properties awarded to Ms. Hirsch in the divorce decision as part of the marital estate and in the schedules attached to the petition, he listed Ms. Hirsch as an unsecured creditor. On or about November 18, 2002, Ms. Hirsch filed complaints in Bankruptcy Court against her ex-husband and the entity debtors seeking, (1) a declaratory judgment that the ten properties awarded to her in the divorce judgment were not part of the debtors' estates; (2) the transfer of title of those properties to her name and the payment of the $149,736.54 distributive award due for 2002, and, (3) a declaratory judgment that section 544(a) of the Bankruptcy Code was not available to debtors as a means to avoid her ownership interests or equitable liens on the properties.
Thereafter, Ms. Hirsch moved, and Mr. Hirsch and the entity debtors cross-moved, for summary judgment on the issue of whether the ten properties were part of the bankruptcy estate. In a decision dated March 31, 2003, the Bankruptcy Court found that all but two of the properties to which title had been given to defendant in the divorce judgment became property of Mr. Hirsch's estate as of the filing date of his bankruptcy petition. The remaining two properties, explained the judge, had, in fact, already been titled to Ms. Hirsch at the time of the filing and, thus, had never become part of the estate.
Citing In re Cole, 202 BR 356 [1996], the court stated that, under New York law, the spouse's rights in marital property do not vest until entry of the judgment dissolving the marriage and, thus, since the bankruptcy petition was filed before the divorce judgment had been entered, Ms. Hirsch had no vested rights in the eight properties. The court concluded that the subject properties awarded Ms. Hirsch in the divorce judgment, save for the two that were already titled in her name, were the property of Mr. Hirsch's estate, and that Ms. Hirsch had an unsecured claim for the $2,444,111.80 awarded to her in the divorce judgment, minus the equity value of the two properties. Ms. Hirsch appealed the Bankruptcy Court's decision and, in a decision dated December 13, 2004, that decision was affirmed by the United States District Court, Eastern Division.
In her counterclaim to the plaintiff's action for unpaid attorney's fees, Ms. Hirsch alleges that the law firm committed malpractice in the underlying divorce action by failing to take steps to protect her ownership interests in the subject property. Specifically, Ms. Hirsch contends that the law firm should have filed a notice of pendency, also known as a lis pendens, and that such a filing would have prevented the property from becoming part of the debtor's estate. Recovery for professional malpractice against an attorney requires proof of three elements: "(1) the negligence of the attorney; (2) that the negligence was the proximate cause of the loss sustained; and (3) proof of actual damages" (Ulico Cas. Co. v. Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1, 10 [2008]; see Mendoza v Schlossman, 87 AD2d 606, 607 [1982] Mendoza v Schlossman, 87 AD2d 606, 607 [1982]). Here, for the reasons that follow, the court concludes that Ms. Hirsch has failed to demonstrate that any negligence on the part of the law firm led to her failure to obtain title to the subject property, and, thus, that her counter-claim must be dismissed. Moreover, because it is not disputed that Ms. Hirsch has not fully compensated the law firm for their representation, plaintiff's motion for summary judgment must be granted.
The main fallacy in Ms. Hirsch's argument is her premise that a notice of pendency would have protected her interest in the property. A notice of pendency does not create a lien on property; instead it gives "notice to the world of the remedy being sought in the lawsuit"(Diaz v Pataki, 368 F Supp 265, 277 [2005]). A notice of pendency is available during the pendency of an action "only if the judgment sought would affect title to or the possession, use or enjoyment of real property." The plaintiff is not entitled to such relief simply because the residence may be subject to equitable distribution" (Farkis v Farkis, 177 AD2d 540, 543 [1991], citing Gross v Gross, 114 AD2d 1002 [1985]). Here, it was not the lack of notice that deprived Ms. Hirsch of her vested interest in the property. Indeed, as made clear in its decision, the Bankruptcy Court was fully aware that Ms. Hirsch had been awarded title to the subject property in the divorce judgment.
Thus, the reason that Ms. Hirsch was damaged was not because the Bankruptcy Court was not provided with notice of her claim to the property, but, instead, as the Bankruptcy Court correctly found, because under New York law, her rights to the property awarded in the divorce decision did not vest until the date that the divorce judgment was filed (see In re Anjum, 288 B.R. 72 [2003]; In re Cole, 202 B.R. 356 [1996]; Leibowits v. Leibowits, 93 AD2d 535, 549, 462 NYS2d 469, 478 (1983)(O'Connor, J., concurring). Where, as here "... bankruptcy intervenes before the state court enters the judgment, the trustee's status as hypothetical lien creditor cuts off the non-debtor spouse's inchoate rights in marital property,In re Becker, 136 B.R. 113, 118 (Bankr.D.N.J.1992), and leaves her with a general unsecured claim. Goldberg v. Hilsen (In re Hilsen), 100 B.R. 708, 711 (Bankr.S.D.N.Y.1989), rev'd on other grounds, 119 B.R. 435 (S.D.N.Y.1990); In re Palmer, 78 B.R. at 406; see In re Greenwald, 134 B.R. at 731." In re Cole, 202 B.R. 356, 360 Bkrtcy.S.D.NY.
Ms. Hirsch does not contend and no evidence is presented that the law firm negligently delayed either settling or filing the judgment in the divorce proceeding, which was accomplished within the 60 days ordered by the court. Moreover, despite Ms. Hirsch's contention to the contrary, there is no evidence that the law firm knew or should have known that Mr. Hirsch was planning to file for bankruptcy.The court has considered Ms. Hirsch's remaining contentions and find them to be without merit.
Accordingly, the plaintiff's motion is granted and; Ms. Hirsch's cross motion is denied. Settle judgment with allowances for any deduction with respect to any prior payments made by defendant or by Benjamin Hirsch in accordance with the judgment of divorce, as well as any money received by the plaintiff in its status as an unsecured creditor in the bankruptcy proceeding.
The foregoing is the decision and order of the Court.