Chapman Steamer Collective LLC v Jones    2017 NY Slip Op 30722(U)  April 13, 2017
Supreme Court, Kings County  Docket Number: 501809/16  Judge: Ellen M. Spodek asks the question of what happens when an attorney takes on a very difficult case, offers the only (weak) defense and loses the case.  Was the effort without any merit?

“In August 2007, Wang purchased real property located at 179 Dubois Street, in Newburgh, New York (the property). In September 2008, Wang transferred the property to Chapman, a limited liability company formed by her in order to purchase and renovate the property, which was an old firehouse. Wang was the sole member of Chapman. Wang planned a mixed use for the property and sought financing for this construction project through Keybank National Association (Keybank). In 2008, Chapman applied for a long-term construction loan in the sum of$700,000 with _Keybank (the permanent construction loan), which was to be a community development loan involving the potential grant of tax credits. In order to finance interim construction while waiting for the application process for the permanent construction Joan to be completed, plaintiffs sought a line of credit bridge Joan from Keybank. On October 14, 2008, Chapman signed a loan agreement, a note, and a mortgage on the property securing the note for a line of credit loan from Keybank in the sum of$221,000 (the bridge loan), which was personally guaranteed by Wang pursuant to a written guaranty executed by her. The loan documents provided that the bridge loan wrui for a 12-month term at the interest rate of the prime rate plus one percent, and the unpaid principal and interest was required to be paid in full by November 1, 2009. In addition, paragraph 25 of the mortgage bridge loan and the guaranty provided that plaintiffs waived the right to interpose any defense, setoff or counterclaim whatsoever to any action brought by Keybank to enforce its rights under such mortgage and guaranty. Chapman drew the entire $221,000 line of credit from the bridge loan. ”

“When the bridge loan became due on November 1, 2009 pursuant to the tenns of the I note antl mortgage, Chapman defaulted on the note and Wang defaulted on the guaranty. Consequently, on August 3, 2010, Keybank commenced an action in the Supreme Court, Orange County (the foreclosure action), to foreclose the mortgage and to recover on the guaranty to the extent of holding Wang liable for any deficiency remaining after the foreclosure sale. Keybank filed a summons, complaint, and a notice of pendency in the foreclosure action. Plaintiffs then retained defendant to.represent them with respect to defending them in the foreclosure action.”

“Defendant interposed an answer, on behalf of plaintiffs, in the foreclosure action, dated October 15, 2010, asserting 13 affirmative defenses and a counterclaim. The seventh . affirmative defense alleged that although Chapman had complied with all of Keybank’s lending requirements, it failed to proceed to closing on the permanent construction loan. The ninth affirmative defense alleged that Keybank was barred from proceeding with the foreclosure action because it promised and enticed plaintiffs to accept the note and mortgage of the bridge loan with the express promise that it would write a construction loan for the benefit of Chapman to fund the final phase of construction. The counterclaim asserted that Keybank was negligent in failing to close the permanent construction loan and sought to recover damages, alleging, ainong other things, that Keybank, as part of a series of predatory lending practices, induced plaintiffs into mortgaging the property pursuant to the bridge loan based on unfulfilled promises of access to further development funding, i.e., the permanent construction loan. ”

“Plaintiffs’ theory of recovery for legal malpractice is predicated on their allegations that there was no defense to Keybank’s complaint in the foreclosure action due to the waiver of defenses and counterclaims contained in paragraph 25 of the bridge loan mortgage. Plaintiffs contend that there was absolutely no defense to the foreclosure action that could have been claimed at the time that defendant filed the answer on their behalf. ”

“Plaintiffs’ argument and Berlandi’s opinion are rejected. Plaintiffs sought representation from defendant in ·the foreclosure action, and he interposed the only cognizable defense to the foreclosure action available to plaintiffs by interposing a counterclaim and defenses sounding in fraudulent inducement. In these defenses and counterclaim, defendant alleged that Keybank fraudulently induced plaintiffs to enter into the bridge loan based on the unfulfilled promise to provide additional permanent financing pursuant to the contemplated permanent construction loan. Defendant’s attempt to defend plaintiffs in this manner was not an unreasonable course of action, but a strategic decision to pursue the only available defense. The fact that plaintiffs’ counterclaim and defenses of fraud were unsuccessful, despite defendant’s efforts, is not a ground for a claim of legal malpractice. Plaintiffs’ present dissatisfaction with defendant’s strategic choice does not support a legal malpractice claim as a matter o flaw (see Tantleff v Kestenbaum & Mark, 131 AD3d 955, 958 [2d Dept 2015], Iv denied 27 NY3d 906 [2016]). “[A]n attorney is not a guarantor of a particular result … and may not be held liable in negligence for … the exercise of appropriate judgment that leads to an unsuccessful result” (Bua, 99 AD3d at 846- 84 7 [internal quotation marks and citation omitted]; see also Rubinbergv Walker, 252 AD2d 466, 467 [1st Dept 1998])  “