Leser v Multi Capital Group LLC  2015 NY Slip Op 50272(U)  Decided on March 2, 2015  Supreme Court, Kings County
Demarest, J. reads like a poorly conceived story of corporate greed.  It does teach several important lessons in legal malpractice.  The first is how essential privity of contract between the attorney and the client remains.  The second is how powerful the statute of limitations remains, and the rare, rare application of the exception that a cause of action remains vital until all elements of the claim exist.  Here, this argument did not work.

“Abraham Leser (plaintiff), an experienced real-estate investor, alleges that non-party Eli Verscheliser (Verscheliser), the principal of defendant mortgage broker, Multi Capital Group LLC (Multi), approached plaintiff in late 2006 concerning two projects: one residential tower in Philadelphia and another in Seattle. Verscheliser allegedly proposed that plaintiff serve as each project’s “sponsor,” which, plaintiff explains, required making no investment whatsoever, but acting as “the public persona of the project for underwriting purposes and for reassurance to other joint venture partners.” In return for this role, plaintiff alleges that he was promised 20% of the eventual profits. Verscheliser apparently assured plaintiff that he would not bear responsibility for any losses and would not have to sign any personal guaranties for the projects.”

“Verscheliser purportedly told plaintiff that he would act as an authorized signatory for VTE, but that VTE, Multi and its attorneys would carefully review any documents prior to plaintiff’s signing “to ensure that all parties involved were adequately protected and to make sure that this deal would not be a liability to [plaintiff].” Multi negotiated two loans from US Bank to finance the projects: $17.5 million for the Philadelphia project and $21 million for the Seattle project. Plaintiff explains that, in July and November 2007, respectively, Multi delivered to him, for signature, loan documents for[*2]the Philadelphia and Seattle projects. In both instances, plaintiff alleges that he received a large stack of documents with flags indicating locations where he should sign. He recounts that Multi represented to him that it and its attorneys had reviewed the documents and that he would not be signing anything in his personal capacity. Plaintiff explains that he signed both sets of documents alone, in his office, without any further review by himself or others, and returned the documents to Multi. Among the documents that plaintiff signed were agreements of guaranty and suretyship for the loans, which rendered plaintiff guarantor of each in his personal capacity. Plaintiff asserts that he later learned that Buchanan Ingersoll had acted as counsel for Multi and VTE throughout the course of these deals.

In February 2009, plaintiff learned, in a meeting with representatives from US Bank, that the loans were in default and that US Bank considered him as the loans’ personal guarantor. Plaintiff thereafter commenced an action in the United States District Court for the Eastern District of New York and sought a declaration that the guaranties were forged and not enforceable against him ^[FN1] . US Bank commenced a counterclaim seeking to enforce the guaranties against plaintiff. On January 14, 2013, the jury in that action returned a verdict finding the guaranties enforceable against plaintiff, and the court thereafter issued a judgment in favor of US Bank against plaintiff for $52,946,419.15.”

“Plaintiff argues that an attorney-client relationship does not require a formal retainer or payment of a fee and that the complaint adequately alleges that Buchanan Ingersoll performed legal work for plaintiff’s benefit by forming entities and listing plaintiff as the owner or managing member. He thus asserts that Buchanan Ingersoll “performed actual legal work on behalf of [plaintiff] (even if formally retained by [Buchanan Ingersoll]’s good friend Eli Verscheliser of [Multi]).” Plaintiff contends that Buchanan Ingersoll subsequently “represented US Bank in lending money to the Leser Entities and their affiliated entities, hid a personal guaranty from [plaintiff] within loan documents, did not alert [plaintiff] of the same, represented VTE . . . , and failed to communicate at all with [plaintiff]^[FN2] .” He characterizes his inability, during the declaratory-judgment action, to identify Buchanan Ingersoll by name as irrelevant, and he urges that only discovery of material exclusively within Buchanan Ingersoll’s possession can prove the extent to which it represented him. Plaintiff argues, in any case, that malpractice liability may accrue even without privity in a case involving fraud, which he [*5]has explicitly alleged.

Plaintiff argues that the statute of limitations does not bar his malpractice claim, because such a cause of action does not accrue until damages occur and legal relief becomes available. He contends that his damages were not “fully liquidated” until the judgment entered against him in the Eastern District of New York in May 2013. Plaintiff urges that he could not have sued before that date, as future damages are unrecoverable in legal-malpractice actions. In the alternative, plaintiff argues that the limitations period was tolled by Buchanan Ingersoll’s continuous representation, and he urges that the full length of its engagement is unknown.”

“Here, plaintiff essentially asserts that Buchanan Ingersoll’s failure to warn him about the presence of personal guaranties in the loan documents he signed constituted a breach of its duty to exercise reasonable knowledge and skill in representing him. He fails, however, to plead facts from which it could be inferred that an attorney-client relationship existed. Indeed, plaintiff states that he never had any communication or contact with Buchanan Ingersoll, and he admits that he was not aware of its identity until after he had signed the loan documents. Even if Verscheliser or Multi told plaintiff that its unidentified attorneys would review the loan documents for his benefit and that he need not hire his own attorney, such representations could not give rise to an attorney-client relationship between plaintiff and Buchanan Ingersoll. Similarly, plaintiff’s allegation that Multi retained Buchanan Ingersoll to form entities naming plaintiff as owner or managing member does not establish any direct relationship between plaintiff and Buchanan Ingersoll (see Federal Ins. Co. v North Am. Specialty Ins. Co., 47 AD3d 52, 60 [2007] [“(w)hile . . . third parties may be interested in the actions by another’s attorney and even benefit therefrom, that circumstance does not give rise to a duty on the part of the attorney to that third party”]; see also Fortress Credit Corp. v Dechert LLP, 89 AD3d 615, 616 [2011],lv denied 19 NY3d 805 [2012]).

In any event, even if plaintiff could establish that Buchanan Ingersoll owed him any sort of duty, all elements of the alleged cause of action had accrued, at latest, by February 2009, when US Bank informed plaintiff that it was planning to enforce the [*9]personal guaranties against plaintiff due to default on the loans (see McCoy v Feinman, 99 NY2d 295, 301 [2002]; Ackerman v Price Waterhouse, 84 NY2d 535, 541 [1994], amend denied 85 NY2d 836 [1995]). Hence, the three-year statute of limitations applicable to legal-malpractice claims requires dismissal of this claim (see CPLR 214 [6]; Zorn v Gilbert, 8 NY3d 933, 933-934 [2007]; Farage v Ehrenberg, 124 AD3d 159, 163-164 [2014]). Plaintiff’s argument that continuous representation should permit tolling of the limitations period lacks merit, as there is no evidence of any representation, particularly after 2007.”