We have often noted that real estate legal malpractice claims take up a large part of the New York legal malpractice world. FTF Lending, LLC v Mavrides, Moyal, Packman & Sadkin, LLP 2024 NY Slip Op 33115(U) September 6, 2024 Supreme Court, New York County Docket Number: Index No. 153620/2020 Judge: Margaret A. Chan is a prime example.

“Plaintiff FTF Lending, LLC (FTF) brings this action against defendants Mavrides, Moyal, Packman & Sadkin, LLP (MMPS) and Matthew Weinberger (Weinberger together with MMPS, defendants), asserting a claim for legal malpractice arising out of defendants’ representation of FTF in a loan transaction (the Loan Transaction) (NYSCEF # 1) .1 Before the court are (1) FTF’s motion, pursuant CPLR 3212, for summary judgment on its legal malpractice claim, and (2) defendants’ cross motion for summary judgment dismissing FTF’ s claim (NYSCEF #s 103, 130-131). For the following .reasons, both motions are denied.”

“Here, FTF has established the first element of its legal malpractice claim. At the outset, FTF has marshalled sufficient evident establishing that FTF had a duty to properly review the title report as part of its representation of FTF in the Loan Transaction. For example, FTF’s employees had understood and expected that MMPS would (1) draft and review all documents necessary to effectuate the Loan’s closing, including the Title Reports, (2) ensure that 2330 Dutch owned the Property, and (3) ensure that FTF was secured by a first-priority mortgage on the Property (see Rodak aff,r,r 14-16, 21; Kuclo tr 24:13-23, 31:17-22, 33:8-14, 125:3-126:18; Ferrante tr so:15-52:12). Packman and Weinberger, effectively corroborated FTF’s understanding by testifying that the responsibility of lender’s counsel was to “properly produce enforceable, recordable, and useful loan documents” and “to review the title report” (see Packman tr 39:14-23, 42:7-43:6, 57:13·16, 86:12-18; Weinberger tr 22=13·21, 40:2•15). FTF has further demonstrated that defendants breached that duty through their negligent conduct. As the record makes clear, the Title Reports were riddled with indicia of fraud-a fact that was only discovered by FTF after the Loan’s closing (see Pltf 19-a 11 25, 31; Defts 19-a 11 48·52; Rodak aff ,i,i 24-25). According to FTF’s expert, these discrepancies, as well as other anomalies with the Loan Transaction in general, should have, at minimum, caused defendants to have suspicion as to veracity of the documents that had been provided Borrowers and, in turn, triggered additional review, particularly given the importance of the title report in a typical real estate transaction (see Delshad aff 11 12, 14, 17, 16, 18·24 & exhs B & C). Yet neither defendants nor their legal staff · identified or flagged any issues with the Title Report to FTF prior to the Loan’s closing (see e.g., Packman aff 1 16). This failure to identify issues in the Title Report was seemingly accentuated by defendants’ lack of supervision over Lapka in her management of the Loan Transaction. Indeed, as Weinberger testified, she “should have noticed” the discrepancies in the Title Reports (see Weinberger tr 76:5-11). All told, these facts, considered in their totality, provide a sufficient basis to conclude that defendants’ representation of FTF fell below the ordinary and reasonable skill and knowledge commonly possessed by members of the profession (see Benitez v United Homes of N. Y., LLC, 142 AD3d 867, 867 [1st Dept 2016] [plaintiff made a prima facie showing of negligence where defendant “fail[ed] to advise that the subject property lacked a certificate of occupancy, fail[ed] to advise of the risk of funding the loan under these circumstances, and faiHed] to confirm that plaintiff’ met a condition of the loanD. In opposition, defendants fail to demonstrate the existence of material issues of fact on the issue of negligence or that FTF cannot otherwise meet this element of its claim. Defendants’ primary contention is that it had no duty to investigate, detect, eliminate, or rectify fraudulent activity or to otherwise be a guarantor of any particular result for FTF (see Defts 19-a ,i114, 16, 30, 54; Packman aff 1,i 11-12). Defendants’ self-serving attempt to narrow the scope of their duties are, however, belied by essentially unrefuted testimony in the record establishing that defendants were, in fact, responsible for ensuring FTF’s first-priority interest in the Property by, among other things, reviewing the title report (see Kuclo tr 24=13·23, 125:3-126=18; Packman tr 39:14-23, 86:12-18). The opinions set forth in the Hughes Report regarding defendants’ purported duties do not alter this conclusion. In fact, the Hughes Report seemingly corroborates the above conclusions by opining, based on his review of the record, that defendants had an obligation to “produce enforceable, recordable and useful loan documents” and “to review the title report” (see Hughes Report ,, 22, 28). Turning to the issue of proximate causation, FTF has made prima facie showing that defendants’ negligence was the “but for” cause of FTF’s damages. As various FTF employees have affirmed and/or testified, FTF’s decision to lend to Borrowers hinged on the security it felt it had in extending the Loan (see Pltf 19-a ,i 39; Rodak aff 11 18, 28; Kuclo tr 110: 13112:5; seealsoPackman tr 49:4-13). However, because the Loan Transaction did not, in fact, result in FTF obtaining a first-priority interest the Property, FTF was left without security for the Loan (Pltf 19-a ,r,r 25, 41; Defts 19-a ir,r 49·52; Rodak aff ,r 25; Packman tr 49:10-13). This was, of course, the precise security interest that both parties understood that defendants were working to secure through their review and approval of the Loan Transaction’s documents (see Rodak aff,r,r 14·16, 21; Ferrante tr 60:15-62:12; Packman tr 39:14-23, 86:12-18). Yet, despite the obvious errors in the Title Reports, defendants’ review failed to uncover any issues with the Title Reports or otherwise result in reasonable assurances that FTF would be protected in the event of a default following the Loan’s closing (see Delshad aff ,rir 12·27; Packman aff ,r 16). A trier of fact, when presented with this evidence, could reasonably conclude that “but for” defendants’ failure to identify and advise on these issues, FTF would have avoided entering into the Loan or otherwise haven taken remedial steps to protect itself in extending the Loan. Nevertheless, summary judgment in FTF’s favor is not warranted.4 The record undoubtedly supports a conclusion that defendants had a duty to properly review the Title Reports and ensure FTF’s security interest in the Property. But there is also evidence in the record that FTF had its own due diligence obligations as part of the Loan Transaction (see Term Sheet at 3-4; Defts 19·a ,r 86; Packman aff ,r,r 8·9). It was through this diligence that FTF seemingly obtained the credit reports and background checks identifying certain details about Samuels’s checkered financial history and potential liens/foreclosure actions on the Property (see Defts 19-a ,r,r 56[A], [D]-[E], 57; Rodak Reply aff ,r,r 6·10). Yet, despite being on notice of these issues-which seemingly conflicted with its own underwriting requirements for approving borrowers (see Hughes Report Ex. U)-FTF nevertheless approved the Loan. Presented with this evidence and testimony, a trier of fact could determine that, notwithstanding defendants’ negligent conduct, the proximate cause of FTF’s losses following Borrowers’ default was its own deficient diligence efforts (cf Garten v Shearman & Sterling LLP, 102 AD3d 436, 437 [1st Dept 2013] [affirming dismissal of complaint on summary judgment where defendant established that plaintiffs losses were caused by a borrower’s “poor financial condition” and plaintiffs “misjudgment of risk,” rather than defendant’s failure to prepare and procure documents necessary to provide plaintiff with a first-priority security interest]). As a result, although a close call, defendants proffered just enough evidence in admissible form to create a material issue of fact as to proximate causation. In sum, although FTF has established defendants’ negligence, material issues of fact on the issue of proximate causation preclude summary judgment. Accordingly, both motions are denied.”