Legal malpractice cases in real estate transactions sometimes are about multi-million dollar losses, sometimes about smaller deals gone bad.  FTF Lending, LLC v Mavirides Moyal Packman & Sadkin, LLP  2021 NY Slip Op 31502(U) May 4, 2021 Supreme Court, New York County Docket Number: 153620/2020 Judge: Margaret A. Chan is about a smaller deal.

“On or about May 30, 2018, FTF retained MMPS, which held itself out as “experts in real estate financing,” to represent FTF in loan transaction with 2330 Dutch and 2330 Dutch’s sole member Dwayne A. Samuels (“Samuels”) (id., ¶’s 8, 9). Weinberg is an associate at MMPS, who practices in MMPS’s commercial real estate practice group (id., ¶ 3).

On or about May 26, 2018, FTF and Samuels executed a Term Sheet, which contemplated FTF providing a to-be named entity owned by Samuels a $375,000 loan related to first mortgage financing for 2330 Dutch Broadway, Elmont, New York 11003 (the “Property”) (id, ¶ 12). As part of the transaction, FTF required, inter alia, that the Property be transferred from Samuels to 2330 Dutch, a title insurance policy be secured, a closing protection letter, and a first mortgage lien on
the Property (id, ¶ 15). On May 30, 2018, MMPS sent a check list of these requirements to counsel for Samuels and 2330 Dutch, Robert Thony (id., ¶ 14). On June 8, 2018, Thony sent MMPS a copy of an unmarked and marked up purported title reports purportedly prepared by Fidelity National Title Insurance Company (“Fidelity”) and a purported closing protection letter (id., ¶¶16, 17). Both the marked and unmarked purported title reports contained a purported deed falsely evidencing the transfer of the Property by Samuels to 2330 Dutch (id., ¶ 18).

Defendants scheduled the loan to close on June 12, 2018, and, at that time, on advice of defendants, FTF entered into a certain loan with 2330 Dutch in the amount of $375,000 (id., ¶ 19). In connection with the loan, 2330 Dutch also executed a certain Mortgage and Security Agreement, and Samuels executed a guaranty, which guaranteed all of 2330 Dutch’s obligations under the loan (id., 20).

Neither 2330 Dutch nor Samuels ever made payments and, as a result, FTF sought to foreclose on the Property (id., ¶ 25). After conducting a title search, on or about June 30, 2019, FTF discovered that the unmarked purported title report and marked up purported title report provided by Thony to MMPS were entirely fraudulent; that the  Property was encumbered by numerous liens, judgments and
the subject of a pending foreclosure proceeding; that the Property was never transferred to 2330 Dutch; that the “recorded” mortgage provided by Thony was not actually recorded in the Nassau County Clerk’s Office; and that title insurance policy with Fidelity was fraudulent and title insurance was never secured (id., ¶’s
27-33). ”

““[A]n action for legal malpractice requires proof of three elements: the negligence of the attorney; that the negligence was the proximate cause of the loss sustained; and proof of actual damages” (Schwartz v Olshan Grundman Frome & Rosenzweig, 302 AD2d 193, 198 [1st Dept 2003]). Negligence is shown if a plaintiff can demonstrate that “the attorney failed to exercise that degree of care, skill and diligence commonly possessed by a member of the legal profession, and that this failure caused damages” (Cosmetics Plus Group, Ltd. v Traub, 105 AD3d 134, 140 [1st Dept ], lv denied 22 NY3d 855 [2013]).

Applying these principles, the court finds that FTF has sufficiently stated a claim for legal malpractice based on allegations that defendants breached their duty to FTF by not adequately reviewing the title report and various closing documents so as to ascertain that 2330 Dutch did not own the Property, and therefore caused damages to FTF. Moreover, defendants’ assertion that they relied on Thony’s status as an attorney does not provide grounds for dismissal based on the pleadings.

Additionally, contrary to defendants’ argument, evidence that FTF was
responsible for, and failed to exercise, due diligence, including in investigating Samuels, does not warrant the dismissal of the complaint for lack of causation. To survive a motion to dismiss under 3211(a)(7), “a pleading need only state allegations from which damages attributable to the defendant’s conduct may be reasonably
inferred” (Lappin v Greenberg, 34 AD3d 277, 279 [1st Dept 2006] [internal citations omitted]). And, at the pleading stage, a plaintiff “is not obligated to show…that it actually sustained damages” (Inkine Pharmaceutical Company, Inc. v Coleman, 305 AD2d 151, 152 [1st Dept 2003] [internal citation and quotation omitted]).

Here, the complaint sufficiently alleges that FTF’s damages are attributable to defendants’ failure to exercise the appropriate standard of care in examining the pre-closing documents. And, the cases relied on the defendants to argue lack of causation are inapposite as they were based on evidence refuting causation
submitted in support of summary judgment (see e.g. Stolmeier v Fields, 280 AD2d 342, 343 [1st Dept], lv denied 96 NY2d 714 [2001] [granting summary judgment dismissing plaintiff contractor’s legal malpractice claim against attorney based on attorney’s alleged failure to advise him of the need for a license based on “overwhelming evidence, including [plaintiff’s] own deposition testimony, that he
was aware prior to the [subject] contract” of the licensing requirement])”

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Andrew Lavoott Bluestone

Andrew Lavoott Bluestone has been an attorney for 40 years, with a career that spans criminal prosecution, civil litigation and appellate litigation. Mr. Bluestone became an Assistant District Attorney in Kings County in 1978, entered private practice in 1984 and in 1989 opened…

Andrew Lavoott Bluestone has been an attorney for 40 years, with a career that spans criminal prosecution, civil litigation and appellate litigation. Mr. Bluestone became an Assistant District Attorney in Kings County in 1978, entered private practice in 1984 and in 1989 opened his private law office and took his first legal malpractice case.

Since 1989, Bluestone has become a leader in the New York Plaintiff’s Legal Malpractice bar, handling a wide array of plaintiff’s legal malpractice cases arising from catastrophic personal injury, contracts, patents, commercial litigation, securities, matrimonial and custody issues, medical malpractice, insurance, product liability, real estate, landlord-tenant, foreclosures and has defended attorneys in a limited number of legal malpractice cases.

Bluestone also took an academic role in field, publishing the New York Attorney Malpractice Report from 2002-2004.  He started the “New York Attorney Malpractice Blog” in 2004, where he has published more than 4500 entries.

Mr. Bluestone has written 38 scholarly peer-reviewed articles concerning legal malpractice, many in the Outside Counsel column of the New York Law Journal. He has appeared as an Expert witness in multiple legal malpractice litigations.

Mr. Bluestone is an adjunct professor of law at St. John’s University College of Law, teaching Legal Malpractice.  Mr. Bluestone has argued legal malpractice cases in the Second Circuit, in the New York State Court of Appeals, each of the four New York Appellate Divisions, in all four of  the U.S. District Courts of New York and in Supreme Courts all over the state.  He has also been admitted pro haec vice in the states of Connecticut, New Jersey and Florida and was formally admitted to the US District Court of Connecticut and to its Bankruptcy Court all for legal malpractice matters. He has been retained by U.S. Trustees in legal malpractice cases from Bankruptcy Courts, and has represented municipalities, insurance companies, hedge funds, communications companies and international manufacturing firms. Mr. Bluestone regularly lectures in CLEs on legal malpractice.

Based upon his professional experience Bluestone was named a Diplomate and was Board Certified by the American Board of Professional Liability Attorneys in 2008 in Legal Malpractice. He remains Board Certified.  He was admitted to The Best Lawyers in America from 2012-2019.  He has been featured in Who’s Who in Law since 1993.

In the last years, Mr. Bluestone has been featured for two particularly noteworthy legal malpractice cases.  The first was a settlement of an $11.9 million dollar default legal malpractice case of Yeo v. Kasowitz, Benson, Torres & Friedman which was reported in the NYLJ on August 15, 2016. Most recently, Mr. Bluestone obtained a rare plaintiff’s verdict in a legal malpractice case on behalf of the City of White Plains v. Joseph Maria, reported in the NYLJ on February 14, 2017. It was the sole legal malpractice jury verdict in the State of New York for 2017.

Bluestone has been at the forefront of the development of legal malpractice principles and has contributed case law decisions, writing and lecturing which have been recognized by his peers.  He is regularly mentioned in academic writing, and his past cases are often cited in current legal malpractice decisions. He is recognized for his ample writings on Judiciary Law § 487, a 850 year old statute deriving from England which relates to attorney deceit.