Winters v. Dowdall

Full title: TERRY WINTERS Plaintiff, v. J. PATRICK DOWDALL, DOWDALL ASSOCIATES, P.C.…

Court: Supreme Court of the State of New York, New York County

Date published: Jan 26, 2009

2009 N.Y. Slip Op. 30167 (N.Y. Sup. Ct. 2009)

Opinion

106538/08.

January 26, 2009.

[EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.] WALTER B. TOLUB, J.

Motion sequences 001, 002, and 003 are consolidated for disposition and resolved in the following memorandum decision.

This is an action for legal malpractice and negligence arising in connection with the sale of real property.

According to the complaint., in May, 2006 plaintiff decided to sell real property located at 44 White Street in Manhattan. The transaction was to proceed under Section 1031 of the Internal Revenue Code, commonly known as "like-kind" or "Section 1031" property exchange (Complaint ¶ 9). Plaintiff retained defendants J. Patrick Dowdall and Dowdall and Associates, P.C. (collectively, "the Dowdall defendants") to provide legal representation in connection with the Section 1031 sale (Complaint ¶ 9) . Plaintiff then retained defendants Jay H. Litzman ("Litzman") and Kera Graubard. Litzman ("KG L") to provide legal representation at the closing of the sale (Complaint ¶ 14) .

Plaintiff claims that at the direction and advisement of defendant Dowdall and Associates, an entity known as Atlantic Exchange Company, LLC ("AEC") was designated to serve as the qualified intermediary for the purposes of the Section 1031 exchange in connection with the property closing (Complaint ¶ 18). Plaintiff executed an Exchange Agreement with AEC, whereby AEC was to hold the funds received from the Sale in a separate interest bearing account for plaintiff's benefit ("the FBO Account"). The mon.1es, pursuant to the agreement, were not to be commingled with the general assets of AEC (Complaint. 120) .

The property sale closed on February 17, 2007. Upon the completion of the closing, $1,292,290.52 was delivered to AEC to be held for plaintiff's benefit in accordance with the terms and conditions of the Exchange Agreement (Complaint ¶ 21). The monies were not, however, deposited into an FBO Account as agreed (Complaint ¶ 22). Rather, they were deposited into AEC's general business checking account maintained with defendant Citibank, N.A. ("Citibank") (Complaint ¶ 23). Plaintiff further claims that AEC's principal, nonparty Edward Hugh Okun ("Okun") withdrew nearly $605,000 from the general account for his own purpose (Complaint ¶ 24). This action followed. Comprised of two causes of action, plaintiff asserts claims of legal malpractice as against his former attorneys, and asserts a second cause of action as against defendant. Citibank for negligence.

Presently before this court are three independently made motions brought pursuant to CPLR 3211 to dismiss this action in its entirety. Motion sequence 001 is advanced by defendants J. Patrick Dowdall and Dowdall Associates, P.C. (collectively, "the Dowdall defendants"). Motion sequence 002 is advanced by defendants Jay H. Litzman ("Litzman") and Kera Graubard Litzman ("KG L") (collectively, "the Litzman defendants"). Motion sequence 003 is advanced by defendant Citibank, N.A. ("Citibank").

Discussion

As with any motion to dismiss, the only inquiry to be made by the court at this juncture is whether plaintiffs' facts, as alleged, "fit within any cognizable legal theory" upon which plaintiff may succeed (Leon v. Martinez, 84 NY2d 83, 87-88; Campaign For Fiscal Equity, Inc. v. State of New York, 86 NY2d 307, 318. See generally, Barr, Altman, Lipshie, and Gerstman; New York Civil Practice Before Trial [James Publishing 2008] § 36.01 et seq.).

Motion Sequence 003

Addressing the two asserted causes of action in reverse order, it appears that plaintiff seeks to impose liability upon Citibank based on a theory of negligence, specifically focusing on a claimed failure of Citibank to report: AEC's increased deposits to its general business checking accounts as "suspicious activity" in accordance with 31 CFR 103.18 and 12 CFR 208.62 (see, Complaint ¶¶ 39-53). Plaintiff's negligence theory also focuses on the Citibank's allowance of AEC to deposit plaintiff's Exchange funds in a general business account instead of an FBO account.

Under New York Law however, "banks do not owe non-customers a duty to protect them from the intentional torts of their customers" (In re Terrorist Attacks of September 11, 2001, 349 F.Supp2d, 765, 830 [S.D.N.Y. 2005]. See also, Century Business Credit Corp. v. North Fork Bank, 246 AD2d 395 [1^st Dept 1998]). Since there is no banking relationship as between Citibank and plaintiff, there is no duty owed to plaintiff, and as such, there can be no claim of negligence. According, the action as it pertains to defendant. Citibank, N.A. is dismissed.

Motion Sequence 001 and 002

The balance of plaintiff's complaint asserts claims of legal malpractice launched against the Dowdall defendants, who were retained to provide legal representation in connection with the Section 1031 sale, and defendants Litzman and KG L, who were retained to provide legal representation at the property closing.

To succeed against any and all of the remaining defendants in this action necessarily requires plaintiff to establish that (1) his attorney was negligent; (2) the negligence was the proximate cause of the loss sustained; and (3) actual damages (Reibman v. Senie, 302 AD2d 290 [1^st Dept 2003]; Between The Bread Realty Corp._v. Salans Hertzfeld Helibronn Christy Viener, 290 AD2d 380 [1^st Dept 2002], lv den. 98 NY2d 603) .

Whether plaintiff chooses to accept it or not however, the unfortunate loss which was sustained ultimately came at the hands of AEC. Defendants Litzman and KG L, who were hired solely in their capacity as real estate attorneys for the property closing (See Notice of Motion, Sequence 002, Exhibit A), can therefore cannot be held negligent to plaintiff in hiring AEC, and, in the absence of negligence, cannot be held liable for plaintiff's loss. Moreover, even if defendants Litzman and KG L could be held negligent, the intervening acts of AEC, without more, requires dismissal of the action as advanced against them (see, Brooks v. Lewin, 21 AD3d 731 [1^st Dept 2005] (summary judgment granted to defendant in professional malpractice case where intervening cause was responsible for injury); D.D. Hamilton Textiles, Inc. v. Estate of Mate, 269 AD2d 214 [1^st Dept 2000]). Accordingly, the claims advanced against defendant. Litzman and KG L are dismissed.

There is however, a valid claim advanced as against the Dowdall defendants. "A claim for professional negligence requires proof that there was a departure from accepted standards of practice and that the departure was a proximate cause of the injury"D. D. Hamilton Textiles, Inc., 269 AD2d 214. As such, dismissal is unwarranted (see, Leon, 84 NY2d 83; Campaign For Fiscal Equity, 86 NY2d 307) .

Accordingly it is

ORDERED that motion sequence 003, advanced by defendant Citibank, N.A., to dismiss the within complaint as against them is granted; and it is further

ORDERED that motion sequence 002, advanced by defendants Jay H. Litzman and Kera Craubard Litzman, to dismiss the within complaint as against them is granted; and it is further

ORDERED that motion sequence 001, advanced by defendants J. Patrick Dowdall and Dowdall Associates, P.C., to dismiss the within complaint is denied.

Counsel for the remaining parties in this action are directed to appear for a Preliminary Conference in IA Part 15, Room 335, 60 Centre Street, New York, New York at 11:00 a.m. on March 20, 2009.

This memorandum opinion constitutes the decision and order of the Court.