Genesis Merchant Partners, LP v Gilbride, Tusa, Last & Spellane LLC 2015 NY Slip Op 31080(U) June 16, 2015 Supreme Court, New York County Docket Number: 653145/2014 Judge: Nancy M. Bannon is as good an example of the “but for” rule as one might ever read. Here is the story. Plaintiff makes loans to a debtor, and hires Defendant attorneys to do the transactional work on the loan. The loan has a security interest in real property, and the law firm forgets to file a mortgage for 18 months. During that delay, other lenders file their liens, and “jump in line” ahead of Plaintiff. When the foreclosure sale takes place there is not enough money to go around.
Problem for plaintiff is that it always knew it would be in second position, for a bank already had a first mortgage at the time of plaintiff’s loan. At the foreclosure sale, no one except the bank received any money. So, the Court held that no matter whether Defendant filed the mortgage on the day of the loan or 18 months later, Plaintiff would not have obtained any payment, either way.
“Gilbride produces the order of the Court of Common Pleas of Lancaster County, Pennsylvania, entitled “Absolute Confirmation of Distribution of Surplus Sale Proceeds,” from the Pennsylvania tax sale of the Pennsylvania property, which indicates that, of the $325,619.42 collected in the sale, $2,345.00 went to the Pennsylvania Department of Revenue, and $323,274.42 went to satisfy Farmer Boy’s lien placed on the property seven months before the closing of Loan 3. No other entity, including the mortgagees ahead of Genesis, obtained any sale proceeds. Although Genesis alleges that it received nothing as a result of the sale due to Gilbride’s failure to record the mortgage on the Pennsylvania property for a period of eighteen months, the documentation submitted by Gilbride establishes that Genesis did not suffer any losses due to Gilbride’s negligence. Rather, its losses were the result of the existence of a lienor with a greater claim to the sales proceeds than Genesis. Even if the mortgage had been recorded immediately after the closing of Loan 3, and even if Genesis’ lien sat directly after Farmer Boy as a lienor, Genesis would not have obtained any sale proceeds.
Because the documentary evidence establishes that there is no “but for” proximate cause, that portion of the first cause of action for legal malpractice seeking damages for Gilbride’s failure to record the mortgage is dismissed. See O’Callaqhan v Brunelle, 84 AD3d 581 (1st Dept. 2011 ). “