Opinion
EF2020-68128
02-11-2021
Angela VERNUM, as Executrix of the Estate of Clay A. Beaudet, Plaintiff, v. Sharon FREYER, Defendant.
Stafford, Carr & McNally, P.C., Lake George (Nathan Hall and Bruce Carr of counsel), for plaintiff. Cabaniss Casey LLP, Albany ( David Cabaniss of counsel), for defendant.
Stafford, Carr & McNally, P.C., Lake George (Nathan Hall and Bruce Carr of counsel), for plaintiff.
Cabaniss Casey LLP, Albany ( David Cabaniss of counsel), for defendant.
Robert J. Muller, J.
Defendant is a licensed attorney in New York who focuses her practice primarily on real estate transactions. In May 2017 she was retained by plaintiff, as executrix of the estate of Clay A. Beaudet (hereinafter Clay), to represent her in the sale of two parcels of land located at 9 Rhode Island Avenue and 0 Rhode Island Avenue in the Town of Queensbury, Warren County. 9 Rhode Island Avenue is .14 acres in size and improved by a single-family dwelling. 0 Rhode Island Avenue—which is located immediately adjacent to 9 Rhode Island Avenue—is .21 acres in size and unimproved. At the time of this initial retainer, plaintiff had contracted to sell both parcels of land to DKC Holdings, Inc. (hereinafter DKC). These contracts were subsequently cancelled, however, when certain title issues were discovered and DKC was unwilling to await their resolution.
Specifically, defendant discovered that Clay never held title to 0 Rhode Island Avenue. Both 9 Rhode Island Avenue and 0 Rhode Island Avenue were previously owned by Dorothy Skellie (hereinafter Dorothy) and her husband, Ernest Skellie (hereinafter Ernest), as tenants by the entirety. Ernest died in 1998, leaving his interest in the property to Dorothy, who then married Clay. In 2006, Dorothy executed a warranty deed conveying 9 Rhode Island Avenue from herself to herself and Clay as tenants by the entirety. She did not, however, convey title to 0 Rhode Island Avenue, which she continued to own individually until dying intestate in 2013. Upon her death, Clay acquired an ownership interest in 0 Rhode Island Avenue as Dorothy's surviving spouse. Defendant advised that an investigation was necessary, however, to determine whether Dorothy had other heirs who might also have an interest in the property.
In January 2018, plaintiff contracted to sell 9 Rhode Island Avenue to Ashley Jameson for $52,500.00, and 0 Rhode Island Avenue to Ron Jameson Contractor, LLC for $10,000.00. While the buyers were nominally different, they were related and shared the same address and attorney. The sale was thus handled as a single transaction.
After the second contracts were signed, the purchasers ordered title insurance from Westcor Title Insurance Company through its title agent, Maple Abstract & Realty Corporation (hereinafter Maple Abstract). Plaintiff had previously apprised defendant of a mortgage on 9 Rhode Island Avenue which had been given by Dorothy to Household Finance Realty Corporation of New York in August 2007 to secure the principal sum of $62,997.71. During its title search, Maple Abstract discovered that the mortgage taken out by Dorothy in 2007 contained a description of 0 Rhode Island Avenue—as opposed to 9 Rhode Island Avenue. That being said, because the mortgage expressly stated that the property described was "improved by a one or two family residence," defendant advised plaintiff that the property description "was clearly a mistake, [with] the mortgage ... intended to cover the property improved with the house.... "Defendant further advised "that both the purchaser's attorney and the title agent required the mortgage to be paid off and satisfied as a condition to closing on the sale of the parcels." Plaintiff thus agreed to a payoff of the mortgage from the proceeds of sale for 9 Rhode Island Avenue.
Meanwhile, defendant proceeded with the investigation of whether Dorothy had other heirs who might also have an interest in 0 Rhode Island Avenue. This investigation revealed that Dorothy had two children, Tracey Skellie (hereinafter Tracey) and Bernard Skellie (hereinafter Bernard). Tracey died in 2013, unmarried and without issue, leaving Bernard as Dorothy's sole heir. Defendant thus concluded that Clay's estate and Bernard each owned a 50% interest in 0 Rhode Island Avenue. Maple Abstract agreed to accept an affidavit of heirship from a disinterested person — as opposed to an administrator's deed—and defendant secured such an affidavit in November 2017. A payoff statement was then issued relative to the mortgage by Rushmore Loan Management Services in January 2018 and both sales closed on February 26, 2018, with the mortgage being satisfied from the proceeds of sale for 9 Rhode Island Avenue. The mortgage was then discharged.
Plaintiff commenced this legal malpractice action on August 10, 2020 alleging, in pertinent part:
"At all times defendant held herself out as competent as a real estate attorney ... and capable of performing the legal services for which plaintiff retained her. Plaintiff and defendant had an attorney/client relationship, while at the same time, defendant represented the interests of Bernard ... in the sale of the vacant lot. Defendant incorrectly satisfied the mortgage from the proceeds of the sale of ... 9 Rhode Island Avenue, rather than the adjacent vacant lot."
Plaintiff seeks damages in the amount of $48,162.95, the payoff amount of the mortgage. Presently before the Court is defendant's pre-answer motion to dismiss the complaint and plaintiff's cross motion to treat both the motion and cross motion as ones for summary judgment and grant judgment in her favor. The motion and cross motion will be addressed ad seriatim.
Defendant's Motion to Dismiss
Defendant first contends that the complaint must be dismissed because the action is barred by documentary evidence ( see CPLR 3211 [a] [1] ). A motion to dismiss on these grounds " ‘may be appropriately granted only where the documentary evidence utterly refutes ... plaintiff's factual allegations, conclusively establishing a defense as a matter of law’ " ( Mason v First Cent. Natl. Life Ins. Co. of NY , 86 AD3d 854, 855 [2011], quoting Goshen v Mutual Life Ins. Co. of NY , 98 NY2d 314, 326 [2002] ; see Leon v Martinez , 84 NY2d 83, 88 [1994] ).
"In an action to recover damages for legal malpractice, a plaintiff must demonstrate that the attorney ‘failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession’ and that the attorney's breach of this duty proximately caused plaintiff to sustain actual and ascertainable damages" ( Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer , 8 NY3d 438, 442 [2007], quoting McCoy v Feinman , 99 NY2d 295, 301-302 [2002] [internal quotation marks and citation omitted]).
Here, plaintiff sets forth two causes of action. First, plaintiff alleges that defendant failed to exercise the ordinary reasonable skill and knowledge commonly possessed of an attorney by simultaneously representing her in the sale of 9 Rhode Island Avenue and her and Bernard in the sale of 0 Rhode Island Avenue. Second, plaintiff alleges that defendant failed to exercise the ordinary reasonable skill and knowledge commonly possessed of an attorney by paying off the mortgage from the proceeds of sale for 9 Rhode Island Avenue, rather than from the proceeds for 0 Rhode Island Avenue. Plaintiff further alleges that she sustained $48,162.95 in damages as a result. To refute these causes of action, defendant has submitted the following documentary evidence:
While the complaint does not separate these causes of action — instead combining them in a single paragraph — they have been separated for purposes of this discussion and will hereinafter be referred to as plaintiff's first and second causes of action, respectively.
(1) copies of several email exchanges wherein plaintiff assisted defendant in the heirship investigation relative to Dorothy, providing contact information for Bernard, among others;
(2) copies of the January 2018 sale contracts for 9 Rhode Island Avenue and 0 Rhode Island Avenue, respectively;
(3) a copy of the mortgage;
(4) a copy of the payoff statement issued by Rushmore, which lists the "property address" as "9 Rhode Island Av[e]";
(5) receipts of property tax payments for 9 Rhode Island Avenue from 2010 to 2017, which demonstrate that the taxes were paid in the form of a "bank payment" using escrowed funds from the mortgage payments; and
(6) receipts of property tax payments for 0 Rhode Island Avenue from 2013 to 2017, which demonstrate that the taxes were unpaid until paid by plaintiff in 2016.
Defendant has also submitted her own affidavit which details her representation of plaintiff.
The Court finds that the documentary evidence succeeds in refuting plaintiff's first cause of action. It is clear that—until defendant discovered the title issues with respect to 0 Rhode Island Avenue—plaintiff believed the property was owned by her father. Indeed, she paid the property taxes on 0 Rhode Island Avenue in 2016 as the executrix of his estate. It is likewise clear that plaintiff wanted defendant to contact Bernard and in fact assisted defendant in contacting him to ensure that she could close on the sale of 0 Rhode Island Avenue simultaneous with the sale of 9 Rhode Island Avenue, as intended. In this regard, it bears noting that plaintiff signed the January 2018 sales contract for 0 Rhode Island Avenue as "seller." At the time of signing, she was aware of the title issues relative to the property and was actively assisting defendant in resolving them. The record thus demonstrates that plaintiff was fully aware of and consented to defendant's simultaneous representation of her in the sale of 9 Rhode Island Avenue, and her and Bernard in the sale of 0 Rhode Island Avenue.
That being said, the Court declines to find that this documentary evidence refutes plaintiff's second cause of action. At the outset, it appears that the mortgage was intended to cover 9 Rhode Island Avenue, but erroneously included a description of 0 Rhode Island Avenue. Indeed, the mortgage expressly states that the property covered is improved by a one or two-family residence—and 0 Rhode Island Avenue is unimproved. Further, the mortgagee clearly believed that the mortgage covered 9 Rhode Island Avenue, as it paid the property taxes on 9 Rhode Island Avenue from escrowed funds and included the address of the property in its payoff letter. Finally, a mortgagee would unlikely accept a vacant parcel like 0 Rhode Island Avenue as security for a $62,997.71 loan. The problem, however, is that the mortgage was no longer valid at the time the properties were sold. As such, the mortgage should not have been paid from the proceeds of any sale—be it the sale of 9 Rhode Island Avenue or the sale of 0 Rhode Island Avenue.
As set forth above, 9 Rhode Island Avenue was owned by Dorothy and Clay as tenants by the entirety. The mortgagee's interest in the property was thus extinguished when Dorothy, the sole mortgagor, died. In V.R.W., Inc. v Klein (68 NY2d 560 [1986] ), the Court of Appeals explained this scenario as follows:
"[T]here is nothing in New York law that prevents one of the co-owners [of property owned as tenants by the entirety] from mortgaging or making an effective conveyance of his or her own interest in the tenancy. To the contrary, each tenant may sell, mortgage or otherwise encumber his or her rights in the property, subject to the continuing rights of the other. Since the status of a tenant by the entirety is reserved exclusively to those co-owners who are married to each other, the interest acquired by a grantee or mortgagee of such a unilateral conveyance is not denominated a tenancy by the entirety, but rather is labeled a tenancy in common. Nonetheless, the grantee's or mortgagee's rights in the property are essentially the same as those possessed by the grantor or mortgagor: a right to shared possession and ownership subject to the original cotenants' reciprocal rights of survivorship.
"Since the grantee or foreclosing mortgagee, in effect, steps into the shoes of the grantor or mortgagor, his survivorship rights are measured by reference to the lifetimes of the original parties to the tenancy by the entirety. If the grantor or mortgagor predeceases the spouse whose interest in the property has been retained, the grantee or mortgagee is left with no interest in the property at all. Conversely, if the latter predeceases the former, the grantee or mortgagee acquires full rights to the property, unencumbered by the deceased spouse's former interests" ( id. at 565; see Matter of Sklar v Gestetner , ––– AD3d ––––, 2021 NY Slip Op 00179, *2 [2021]; Deutsche Bank Natl. Trust Co. v Feliciano , 105 AD3d 889, 890 [2013] ).
Here, only Dorothy mortgaged her interest as tenant by the entirety in 9 Rhode Island Avenue; Clay was not a party to the mortgage. As such, when Dorothy died this "confer[red] on [Clay,] the surviving spouse[,] a right to absolute ownership of [9 Rhode Island Avenue]" ( Matter of Sklar v Gestetner , 2021 NY Slip Op 00179 at *2). The mortgagee was left with no interest in the property at all ( see V.R.W., Inc. v Klein , 68 NY2d at 565 ). While defendant contends that the mortgage remained as against Dorothy's estate, this contention is without merit. Where property is held as tenants by the entirety, "upon the death of [a wife], [her] interest [does] not pass to [her] estate, rather, it passe[s] to [her husband]" ( W. 109 St. Realty Corp. v Ichida , 67 Misc 3d 137[A], 2020 NY Slip Op 50573[U], *1-2 [App Term, 1st Dept 2020]). Of course, the rights of the lender under the terms of the loan agreement remained as against Dorothy's estate.
Defendant next contends that the complaint must be dismissed because it fails to state a cause of action ( see CPLR 3211 [a] [7] ). "[T]he standard to be applied on a motion [of this type] is both familiar and well settled—‘[the Court] must afford the complaint a liberal construction, accept as true the allegations contained therein, accord the plaintiff the benefit of every favorable inference and determine only whether the facts alleged fit within any cognizable legal theory’ " ( Rodriguez v Jacoby & Meyers, LLP , 126 AD3d 1183, 1185 [2015], lv denied 25 NY3d 112 [2015], quoting He v Realty USA , 121 AD3d 1336, 1339 [2014] [internal quotation marks and citation omitted]; see Snyder v Brown Chiari, LLP , 116 AD3d 1116, 1117 [2014] ).
To survive a defendant's motion to dismiss in a legal malpractice action, "it [is] incumbent upon plaintiff to, among other things, ‘plead specific factual allegations establishing that but for counsel's deficient representation, there would have been a more favorable outcome to the underlying matter’ " ( Rodriguez v Jacoby & Meyers, LLP , 126 AD3d 1183, 1185-1186 [2015], lv denied 25 NY3d 112 [2015], quoting Dweck Law Firm v Mann , 283 AD2d 292, 293 [2001] ; see Schiller v Bender, Burrows & Rosenthal, LLP , 116 AD3d 756, 758 [2014] ; Tortura v Sullivan Papain Block McGrath & Canavo, P.C. , 21 AD3d 1082, 1083 [2005], lv denied 6 NY3d 701 [2005] ).
Having found that defendant established her entitlement to dismissal of the first cause of action based upon documentary evidence, the Court focuses solely upon whether she is entitled to dismissal of the second cause of action on the grounds of failure to state a claim. In this regard, it is impossible to say whether the outcome in the underlying matter would have been more favorable to plaintiff had the mortgage not been paid from the proceeds of sale for 9 Rhode Island Avenue. To the extent that the purchasers were related and their title agent, Maple Abstract, required the mortgage to be paid off and satisfied as a condition to issuance of the title policies, it is possible that the sales would have fallen through had defendant not paid the mortgage off. Plaintiff would thus have remained responsible for the properties and their concomitant costs until another buyer came along. If the sales had somehow gone forward notwithstanding plaintiff's refusal to pay off the mortgage and she had walked away with the $48,162.95, then litigation of some sort surely would have resulted. While it does not appear that Clay's estate would have born any liability for the amount due and owing under the loan, his estate would likely have been named in the litigation—thus resulting in legal fees for plaintiff.
The President of Maple Abstract has submitted an affirmation confirming that "[i]f the mortgage had not been satisfied and discharged, Maple Abstract would not have issued the title policies in [the sales] transactions."
The Court notes that the loan agreement is not part of the record.
In any event, mindful that plaintiff must be accorded the benefit of every favorable inference, the Court finds that defendant has failed to establish her entitlement to dismissal of the second cause of action on the grounds of failure to state a cause of action.
Based upon the foregoing, defendant's motion to dismiss is granted to the extent that plaintiff's first cause of action is dismissed, and the motion is otherwise denied.
Plaintiff's Cross Motion
For the reasons set forth above, the Court is not able to make any findings "as a matter of law" at this juncture ( CPLR 3212 [b] ). Plaintiff's cross motion pursuant to CPLR 3211 (c) to treat both the motion and cross motion as ones for summary judgment and grant judgment in favor of plaintiff is therefore denied.
Briefly, the Court notes that plaintiff has submitted the affidavit of Bruce Carr, Esq. in support of her cross motion. While Carr is a partner in the law firm that represents plaintiff, the affidavit presents his expert opinion as "principal in the title company known as Caldwell Abstract and Title, Inc." Defendant contends that this expert opinion raises the prospect of possible disqualification of plaintiff's counsel under Rules of Professional Conduct (22 NYCRR 1200) rule 3.7 (b) (1), which provides that "[a] lawyer may not act as advocate before a tribunal in a matter if another lawyer in the lawyer's firm is likely to be called as a witness on a significant issue other than on behalf of the client, and it is apparent that the testimony may be prejudicial to the client." More specifically, defendant contends that she will subpoena Carr and representatives from his title company as witnesses—if this matter proceeds to trial—and establish that they would not in fact have issued title without the mortgage payoff, which would be prejudicial to plaintiff. The Court, however, finds this contention to be premature.
Counsel are hereby directed to appear for a preliminary conference on March 9, 2021 at 10:00 A.M. , with the conference to be conducted virtually using Microsoft Teams. Further instruction in this regard will be sent under separate cover. In lieu of this appearance, counsel may also complete a Preliminary Conference Stipulation and Order—which form is available online at http://ww2.nycourts.gov/courts/4jd/motion-terms-rules.shtmlNo.r—and submit the same to the Court at least forty-eight (48) hours prior to the conference.
Therefore, having considered NYSCEF documents 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29 and 33, and oral argument having been heard on January 13, 2021 with Bruce Carr, Esq. appearing on behalf of plaintiff and David Cabaniss, Esq. appearing on behalf of defendant, it is hereby
ORDERED that defendant's motion to dismiss is granted to the extent that plaintiff's first cause of action is dismissed, and the motion is otherwise denied; and it is further
ORDERED that plaintiff's cross motion to treat both the motion and cross motion as ones for summary judgment and grant judgment in favor of plaintiff is denied in its entirety; and it is further;
ORDERED that counsel shall appear for a preliminary conference on March 9, 2021 at 10:00 A.M. , with the conference to be conducted virtually using Microsoft Teams or, in lieu of this appearance, counsel may complete a Preliminary Conference Stipulation and Order and submit the same to the Court at least forty-eight (48) hours prior to the conference.
The original of this Decision and Order has been e-filed by the Court. Counsel for plaintiff is hereby directed to promptly obtain a copy of the e-filed Decision and Order for service with notice of entry upon defendant in accordance with CPLR 5513.