Weinberg v Sultan   2015 NY Slip Op 30932(U)  June 1, 2015  Supreme Court, New York County
Docket Number: 652273/2013  Judge: Cynthia S. Kern is the story of a building owner who let a valuable building on West 46th Street slip out of her hands after 40 years.  Is the attorney to blame?

“The following facts are not disputed. For forty years, up until 201,3, plaintiff was the owner of the Building. In 2008, plaintiff entered into a cash-out mortgage on the Building in the amount of $2,325,000.00. Plaintiff failed to make the required payments· on the loan secured by the mortgage and the default provisions of the mortgage, including a 24% penalty rate, were invoked in 2012. In January 2013, the holder of the mortgage on the Building commenced a  foreclosure action against plaintiff and a receiver was appointed for the Building with the  authority to manage the property and collect rents.

The plaintiff did not refinance the Building and the lender moved for summary judgment in the foreclosure action, by notice of motion dated April 10, 2013. After the lender brought the motion for summary judgment in the foreclosure action, plaintiff entered into a contract to sell the Building to the purchaser (the “Purchaser”) on April 22, 2014. The Purchaser purchased the Building from the plaintiff for $3,500,000.00 by deed dated May 22, 2013. Of that amount, approximately $2,800,000.00 was used to pay off the mortgage which was in the process of being foreclosed. The balance of the proceeds, after the payment of certain expenses, was placed in escrow for plaintiff and potentially for the Purchaser pursuant to two escrow agreements which were executed at the closing.

At the closing, plaintiff executed an escrow agreement whereby she agreed to deposit $100,000.00 in escrow, which she would receive when she vacated the building, which was ‘ supposed to be no later than two weeks after closing. The escrow agreement provided that the $100,000.00 would be held in escrow to secure plaintiffs removal from the Building which was to occur no later than May I 5, 2013. The agreement further provided that in the event plaintiff failed to vacate the Building, the $100,000.00 would be applied to all costs incurred by Purchaser in connection with removing plaintiff from the Building, including fair use and occupancy at the rate of $5,000 per month. Plaintiff continued to reside in the Building and did not pay any use and occupancy other than $5,000 ordered by the Housing Court. The court held in its previous decision that the Purchaser was entitled to the $100,000.00 held in escrow pursuant to the plaintiffs continued occupancy of the Building for more than 20 months after the closing. The second escrow agreement plaintiff executed at the closing set aside $62,152.00, representing the security deposit paid to plaintiff by the first floor commercial tenant. The escrow agreement provided that in the event that the security deposit was less than $62,152.00, plaintiff would be given six months to provide the Purchaser an estoppel letter from the tenant setting forth the correct amount. If plaintiff did not obtain the estoppel letter, the escrow amount was to be paid over to the Purchaser. The court held in its previous decision that the Purchaser was entitled to the $62, 152.00 being held in escrow because more than six months had passed since the closing and plaintiff had not provided the Purchaser with an estoppel letter.

In the instant case, the moving defendants have made a prima facie showing that even if they were negligent in their representation of plaintiff, plaintiff cannot make out a claim for legal malpractice because she cannot sufficiently establish that she has suffered any actual damages as a result of any alleged negligence in allowing the sale of the Building to go forward for an amount below market value. It is undisputed that the Building was the subject of a foreclosure action at the time of the sale based on plaintiffs failure to make the mortgage payments on her $2,325,000.00 first mortgage note secured by the Building and that a summary judgment motion for a judgment of sale and foreclosure was then pending. Plaintiff does not allege that she had any valid defense to the foreclosure action or that she had any basis for stopping the impending foreclosure. It is also undisputed that plaintiff was granted a thirty day stay of the foreclosure action to allow her the opportunity to refinance the Building and that she failed to do so. Based on the foregoing, defendants have sufficiently established that the only reason plaintiff sold the Building was to avoid the imminent foreclosure which was about to occur and not because of any deficient representation on the part of the defendants-she sold the Building because she did not have any other options to avoid the foreclosure. Moreover, plaintiff has failed to raise a disputed issue of fact with respect to her claim that she could have achieved a more favorable outcome to the foreclosure action but for the alleged negligence of the moving defendants. Her bare conclusory allegation that there were other options available to her other than the sale of the Building to avoid’foreclosure are insufficient to raise an issue of fact. Her allegation that it would have taken months to achieve a judgment of foreclosure, which would have given her an opportunity to sell the Building with a real estate broker or refinance the building rather than sell the Building to the Purchaser is insufficient as she fails to identify any evidence, other than mere speculation, that she would have been able to sell or refinance the Building in the time frame between the pending summary judgment motion and the foreclosure of the Building. She has not identified a single prospective purchaser who was willing to pay market value for the Building or a lender or investor who was willing to refinance the delinquent mortgage. To the contrary, plaintiff was unable to refinance the Building during the 30 day stay period provided by the court presiding over the foreclosure action. “