An Overly Generous Decision is Pruned Back, Plaintiff Still Loses in Legal Malpractice

Relentlessly applying analysis to the "but for" portion of a legal malpractice claim, the 2d Department modified a CPLR 3211 decision by Supreme Court.  Here, it reversed dismissal under CPLR 3211(a)(1) yet the case remains dismissed under CPLR 3211(a)(7) because the client could not pay the mortgage.

in Cervini v Zanoni ;  2012 NY Slip Op 03582   Decided on May 8, 2012   Appellate Division, Second Department  went through the argument.  Plaintiff sues defendant attorney for failing to make sure there was a three day rescission in the mortgage.  He still loses the legal malpractice case based upon the complaint which alleged that he was having significant problems paying the mortgage anyway.
 

"The Supreme Court, however, properly granted that branch of the defendant's motion which was to dismiss the complaint pursuant to CPLR 3211(a)(7). In considering a motion pursuant to CPLR 3211(a)(7), the facts alleged in the complaint are generally accepted as true and the plaintiffs are afforded the benefit of every possible inference (see Reid v Gateway Sherman, Inc., 60 AD3d 836, 837; Roth v Goldman, 254 AD2d 405, 406). In determining a motion to dismiss pursuant to CPLR 3211(a)(7), the court is concerned with only whether the facts as alleged fit within any cognizable legal theory (see AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 5 NY3d 582, 591; Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d at 326; Leon v Martinez, 84 NY2d at 87-88; Peery v United Capital Corp., 84 AD3d 1201).

"The equitable goal of rescission under TILA is to restore the parties to the status quo ante' . . . [I]t was not the intent of Congress to reduce the mortgage company to an unsecured creditor or to simply permit the debtor to indefinitely extend the loan without interest" (American Mtge. Network, Inc. v Shelton, 486 F3d 815, 820-821 [citations omitted]). Accordingly, "[e]ffective rescission under the [TILA] requires the borrower to make restitution of the amounts expended by the lender" (Clemmer v Liberty Fin. Planning, Inc., 467 F Supp 272, 276; see Bustamante v First Fed. Sav. & Loan Assn. of San Antonio, 619 F2d 360, 365). Thus, in order to state a cause of action for rescission of a loan and mortgage under the TILA, a mortgagee must assert both the mortgagor's alleged TILA disclosure violation and that he or she can tender to the mortgagor the principal of the loan (see Berkeley Fed. Bank & Trust v Siegel, 247 AD2d 498).

Here, in alleging that the defendant committed legal malpractice by failing to answer and by failing to rescind the subject mortgage and loan pursuant to the TILA, the complaint fails to allege that the plaintiffs were able to tender to Wells Fargo the principal of the mortgage loan. Moreover, the plaintiffs admit in their proposed amended complaint that they "could not make their mortgage payments under [a] forbearance agreement" they had entered into while represented by the defendant herein. Accordingly, both the complaint and the proposed amended complaint failed to state a cause of action for legal malpractice based on the defendant's failure to rescind the subject loan and mortgage pursuant to Wells Fargo's alleged violation of the TILA. Therefore, the Supreme Court properly granted that branch of the defendant's motion which was to dismiss the complaint pursuant to CPLR 3211(a)(7).

Since the proposed amended complaint was patently devoid of merit, the plaintiffs' cross motion for leave to amend the complaint should have been denied on the merits (see CPLR 3025[b]; Martin v Southern Container Corp., 92 AD3d 647, 649). [*3]"

 

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