Law firm consults on a group of three loans that Plaintiff plans to make. The loans are to be secured by life insurance policies as well as by real property in Pennsylvania. The law firm fails to file the correct lien documents and the loans are not secured. This is a big, multi-million dollar loss. The loans do not take place all on the same day, but are staggered. When does the statue of limitations begin to run?
In 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 the court discusses the statute of limitations.
“Gilbride represented Genesis in setting up the loans. Loan 2 closed on December 22, 2008, and Loan 3 closed on July 31, 2009. Loan 2 was to be secured by collateral in the form of a portfolio of five life insurance policies, having a value of approximately $84 million. Loan 3 was to be secured with one life insurance policy, as well as by a mortgage, in the amount of $1 million, on property located in Pennsylvania (Pennsylvania property). Seven months prior to the closing of Loan 3, a lien was placed on the Pennsylvania property by Farmer Boy Ag System, Inc. (Farmer Boy), in the sum of $234,006.27.
Genesis commenced this action on October 15, 2014, asserting four causes of action, as follows: (1) legal malpractice, arising from Gilbride’s alleged failure to perfect security interests in all three loans; (2) breach of contract; (3) negligence; and (4) disgorgement of fees. According to the complaint, Gilbride was retained to advise on all of the related loans between Progressive and Genesis through the maturity dates of the loans, including amending the loans and ensuring that Genesis’ security interests in the collateral were perfected. Gilbride was to structure and draft the Loan documents so as to perfect security interests in the Loan collateral. However, when Progressive defaulted on the Loans, it was discovered that the security interests had not been perfected. Genesis contends that Gilbride failed to perfect the security interest in the life insurance policies because Gilbride only attempted to perfect the collateral by the filing of UCC financing statements listing the policies, which are insufficient to perfect security interests in life insurance policies.
Gilbride is also alleged to have failed to record the mortgage on the Pennsylvania
property until one and one half years after the Loan 3 was made, allowing subsequent
mortgages to “jump in line” before Genesis’s mortgage was recorded. When the Pennsylvania
property was sold at a tax foreclosure sale, Genesis recovered nothing, as all of the sale
proceeds went to pay back taxes and to satisfy Farmer Boy’s lien. However, neither of the two
mortgages which “jumped in line” in front of Genesis received anything either. ”
“A cause of action for legal malpractice may be tolled by the continuous representation doctrine. See Glamm v Allen, 57 NY2d 87, 93 (1982). “[T]he rule recognizes that a person seeking professional assistance has a right to repose confidence in the professional’s ability and good faith, and realistically cannot be expected to question and assess the techniques employed or the manner in which the services are rendered … [a] person [is not] expected to jeopardize his pending case or his relationship with the attorney handling that case during the period that the attorney continues to represent the person [internal quotation marks and citation omitted].” Id. at 93-94. The statute of limitations will be tolled by the continuous representation doctrine “only so long as the defendant continues to represent the plaintiff ‘in connection with the particular transaction which is the subject of the action and not merely during the continuation of a general professional relationship.”‘ Transport Workers Union of Am. Local 100 AFL-CIO v Schwartz, 32 AD3d 710, 713 (1st Dept. 2006) quoting Zaref v Berk & Michaels, 192 AD2d 346, 348 (1st Dept. 1993); see West Vil. Assoc. Ltd. Partnership v Balber Pickard Battistoni Maldonado & Ver Dan Tuin. PC, supra. In the present matter, Gilbride fails to establish that the legal malpractice claim accrued more than three years prior to the commencement of this action and is, therefore, time-barred. Genesis alleges in the complaint, filed in 2014, that the parties always anticipated Gilbride’s continuing oversight of the Loans through their maturity dates in June 2012. Indeed, Gilbride performed legal work on behalf of Genesis relating to the Loans through, at least, 2011. Specifically, Gilbride completed amendments to the Loans in 2010 and 2011, “crosscollateralized” Loan 4 with the Loans, and consolidated the Loans with Loan 4 in August 2011. Gilbride was responsible for reviewing and revising the Loan documents to ensure the perfection of the collateral for the Loans and using the presumably perfected Loan collateral to “cross-collateralize” with Loan 4. In addition, Gilbride represented Genesis in a suit in Connecticut against Progressive with regard to the Loans. Genesis and Progressive entered into a conditional settlement, drafted by Gilbride, in which Progressive was to pay the aggregate outstanding value of the Loans by June 2012, plus interim monthly payments commencing in January 2012. Such work was done in connection with the Loans and was not merely the continuation of a general professional relationship between the parties. See Transport Workers Union of Am. Local 100 AFL-CIO v Schwartz, supra. Further, some of the work done during this period, including recording a $1 million mortgage on property included as collateral on Loan 3 eighteen months after the closing, was performed to rectify the alleged act of malpractice, i.e. 4 [* 4] failing to secure the Loans. See Red Zone LLC v Cadwalader. Wickersham & Taft LLP, 118 AD3d 581 (1st Dept. 2014). ”