Real estate and legal malpractice go hand-in-hand so often in New York that there is practically a sub-genre of Manhattan apartment legal malpractice cases. They involve construction litigation, water intrusion litigation and of course, mortgage law litigation.

RSD857 LLC v Wright 2024 NY Slip Op 31674(U) May 13, 2024 Supreme Court, New York County Docket Number: Index No. 158125/2022 Judge: Paul A. Goetz is one such case.

“Wright alleges that he is the victim of a predatory mortgage foreclosure rescue scam
perpetrated by Petrokansky, in concert with RSD857 and the other counterclaim defendants, to fraudulently induce him and his wife, Doreen Green (Green),
to convey title to the Property, then the subject of a residential mortgage foreclosure action, to RSD857 in a short sale transaction (id., ¶ 80). Wright and Green purchased the one- to two-family residential dwelling in 1998 for $95,000 and obtained a mortgage, and refinanced multiple times to finance repairs (id., ¶¶ 91 and 97, NYSCEF Doc No. 43, Wright amended answer, exhibit 5). In October 2006, Wright and Green obtained a loan in the principal sum of $1.151 million secured by a mortgage on the Property in favor of Mortgage Electronic Registration System, Inc., as nominee for Countrywide Bank, N.A. (the Wright Loan and Mortgage) (NYSCEF Doc No. 38, ¶ 98). Bank of America, N.A. subsequently acquired Countrywide Bank, N.A. (id., ¶ 99), and Nationstar, later known as Mr. Cooper, began servicing the Wright Loan and Mortgage (id., ¶ 102). The Wright Loan and Mortgage has been in default since April 2011 (id., ¶ 148), and the mortgagee
commenced a mortgage foreclosure action against Wright, Green and others captioned Deustche Bank National Trust Company v Green, et al., Sup Ct, NY County, index No. 850088/2017 (the Foreclosure Action) (id., ¶ 107; NYSCEF Doc No. 94, Bruno affirmation, exhibit C). Wright retained the Law Office of Yuriy Moshes, P.C. to represent him, though a loan modification agreement was never finalized or executed (NYSCEF Doc No. 38, ¶ 108).

In September 2017, Petrokansksy approached Wright on behalf of YKSNAK, stated that
he knew the Property was in foreclosure and offered to purchase it outright before offering to assist Wright in keeping his home (id., ¶¶ 109-110). Between September 2017 and October 2019, Petrokansky repeatedly represented that he could save the Property from foreclosure while allowing Wright to maintain his equity in the Property and to continue residing there if Wright agreed to pursue a short sale (id., ¶¶ 117 and 119). Petrokansksy purportedly showed Wright photographs of other distressed homeowners he had helped and allowed Wright to speak to one such person by telephone (id., ¶ 120). By early 2018, Petrokansksy had successfully persuaded
Wright to agree to a short sale to evade foreclosure (id., ¶ 121). In February 2018, Wright and Green executed a memorandum of contract in which they agreed to sell the Property to RSD857; the memorandum was recorded in the Office of the City Register nine days later (NYSCEF Doc No. 48, Wright amended answer, exhibit 10). RSD857, though, did not register to conduct business with the New York State Department of State until March 21, 2018 (NYSCEF Doc No. 49, Wright amended answer, exhibit 11). On Petrokansky’s advice, Wright filed for Chapter 13 bankruptcy on March 5, 2018 to stay further proceedings in the Foreclosure Action (id., ¶¶ 124- 125). Wright alleges that after the Law Office of Yuriy Moshes, P.C. withdrew its representation of him in late March, he relied on Petrokansky to represent his interests in the Foreclosure Action (id., ¶¶ 127-128; NYSCEF Doc No. 50, Wright amended answer, exhibit 12).

Thereafter, on April 4, 2018, Wright and Green executed a short sale contract to sell the
property to Joby for $520,000, and on April 9, 2018, Wright and Green executed a memorandum of option contract agreeing to sell the Property to YKSNAK (NYSCEF Doc No. 38, ¶¶ 129-130). In January 2019, Petrokansky allegedly arranged for two appraisals for the Property; Viscusi completed the second appraisal (id., ¶ 131). Wright alleges that Viscusi significantly undervalued the Property at $825,000 by failing to account for its value as a development site (id., ¶ 132). Wright further alleges that Viscusi’s appraisal from January 18, 2019 was a significant factor in convincing him and the mortgagee in the Foreclosure Action to agree to a short sale (id., ¶ 133). Petrokansky or his agents, purporting to represent Wright and Green, appeared at a court conference in the Foreclosure Action and “advocated for the court to issue an order that would pressure the foreclosing lender to review the pending short sale application for the benefit of Mr. Petrokansky” (id., ¶ 134). Wright and Green, at Petrokansky’s direction, also
executed a short sale approval application on October 17, 2019 (id., ¶ 136).”

“Cohen argues that Wright failed to plead fraud with particularity by failing to identify a
material misrepresentation Cohen made. Cohen further argues that Wright cannot demonstrate reasonable reliance on any purported misrepresentations by him given Wright’s prior statements that he was without counsel on the transaction and completely relied on Petrokansksy. Wright contends that he has adequately pleaded a cause of action for fraud based on a material omission. In reviewing the amended answer, Wright did not plead a specific affirmative misrepresentation made by Cohen (see CMB Export Infrastructure Inv. Group 48, LP v. Motcomb Estates, Ltd., 223 AD3d 513, 514 [1st Dept 2024] [complaint must plead specific facts about the time, place and manner of the alleged misrepresentation]), alleging only that he “relied on other’s representations, including those of … Cohen” (NYSCEF Doc No. 38, ¶ 144). However, a claim for fraud can be predicated upon an omission of material fact (Pasternack, 27
NY3d at 827), and here, Wright alleges that Cohen’s “silent acquiescence with Mr.
Petrokansky’s misrepresentations does not excuse him of liability” (NYSCEF Doc No. 115,
Wright mem of law at 2).

“Absent a confidential or fiduciary relationship, there is no duty to disclose, and mere
silence, without identifying some act of deception, does not constitute a concealment actionable as fraud” (NYCTL 1999-1 Trust v 573 Jackson Ave. Realty Corp., 55 AD3d 454, 454 [1st Dept 2008], affd 13 NY3d 573 [2009], cert denied 561 US 1006 [2010]). “A fiduciary relationship ‘exists between two persons when one of them is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relation’” (EBC I, Inc. v Goldman Sachs & Co., 5 NY3d 11, 19 [2005] [citation omitted]). Whether a fiduciary relationship exists is “necessarily fact specific” (id.). “‘If the parties … do not create their own relationship of higher trust, courts should not ordinarily transport them to the higher realm of relationship and fashion the stricter duty for them’” (id. at 20 [citation omitted]).

It is well settled that “[a]ttorneys have a fiduciary relationship with their clients” (Mutual
Benefits Offshore Fund, Ltd. v Zeltser, 172 AD3d 648, 649 [1st Dept 2019], lv dismissed 35 NY3d 933 [2020]). Wright argues that he and Cohen had a fiduciary relationship because Petrokansky stated that Cohen would act as Wright’s attorney. Wright, though, has averred in affidavits submitted in the Ejectment Action that the lawyers at the closing “were all lawyers for Mr. Petrokanksy” (NYSCEF Doc No. 103, Bruno affirmation, exhibit L, Wright 3/29/2021 aff ¶ 38), that “[a]ny alleged legal counsel all worked for Mr. Petrokansky and so did not have my best interests in mind” (id., ¶ 23), and that “there was no lawyer present there representing me to explain the documents that I was signing” (NYSCEF Doc No. 105, ¶ 24). Wright has also averred that “[t]he papers were put in front of me for the short sale and I had to completely rely on Mr. Petrokansky to advise me what he [sic] was signing” (NYSCEF Doc No. 103, ¶ 23). Although Wright’s affidavits filed in the Ejectment Action are not considered documentary evidence for purposes of CPLR § 3211 (a) (1) (Allen v Thompson, 224 AD3d 565, 568 [1st Dept 2024]), the statements therein constitute informal judicial admissions and, contrary to Wright’s
contention, those prior statements can be considered on a CPLR § 3211 motion testing the sufficiency of a pleading (see Kaisman v Hernandez, 61 AD3d 565, 566 [1st Dept 2009]; Biondi v Beekman Hill House Apt. Corp., 257 AD2d 76, 81 [1st Dept 1999], affd 94 NY2d 659 [2000]). In addition, the statements in Wright’s verified answer denying the existence of an attorneyclient relationship with Cohen constitute formal judicial admissions (see P. Zaccaro, Co., Inc. v DHA Capital, LLC, 157 AD3d 602, 602 [1st Dept 2018], lv denied 31 NY3d 907 [2018]; see also Jerome Prince, Richard on Evidence § 8-215 [Farrell 11th ed 1995]). Specifically, Wright alleges that he “had not previously met Mr. Cohen, had not signed an engagement agreement with Mr. Cohen, and had not otherwise entered into an attorney-client relationship” with Cohen (NYSCEF Doc No. 38, ¶ 140). Wright pleads no other facts from which to infer that he and Cohen enjoyed a relationship of trust and confidence so as to give rise to a duty to speak (see NYCTL 1999-1 Trust, 55 AD3d at 454).

Even accepting Wright’s allegation that, “[t]o the extent an attorney-client relationship
existed, … Mr. Cohen failed to discharge his fiduciary duties to Mr. Wright” (NYSCEF Doc No. 37, ¶ 141), Wright still fails to plead a cause of action for fraud. The allegations in Wright’s amended answer sound in legal malpractice. A cause of action for fraud is duplicative of a cause of action for legal malpractice where, as is the case here, the claims arise out of the same nucleus of facts and seek the same damages (see Barrett v Goldstein, 161 AD3d 472, 473 [1st Dept 2018]). In addition, a cause of action for legal malpractice is subject to a three-year statute of limitations (see CPLR § 214), and Wright did not bring a claim against Cohen until after the statutory period expired. Accordingly, Wright’s second counterclaim for fraud as against Cohen will be dismissed.”

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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.