| Tydings v Greenfield, Stein & Senior, LLP |
| 2007 NY Slip Op 06734 [43 AD3d 680] |
| September 13, 2007 |
| Appellate Division, First Department |
| Frieda Tydings, Appellant, v Greenfield, Stein & Senior,LLP, Respondent. |
—[*1] Kavanagh Maloney & Osnato LLP, New York (James J. Maloney of counsel), forrespondent.
Order, Supreme Court, New York County (Marylin G. Diamond, J.), entered January 22,2007, which granted defendant's motion to dismiss the complaint, unanimously reversed, on thelaw, without costs, the motion denied and the complaint reinstated.
In 1993, nonparty Ricki Singer created an irrevocable inter vivos trust for the benefit ofherself and her son as a remainderman, with plaintiff Frieda Tydings, her aunt, designated as thesole trustee. Tydings thereafter acted as the trustee until January 1, 1997, when she resigned fromthat position and was replaced by Steven Singer, the grantor's brother, as successor trustee. Thetrust agreement did not require plaintiff to offer an accounting, nor is there any indication that thegrantor ever requested an accounting until on or about August 20, 2003, over six years later,when she filed a petition in the Surrogate's Court for a compulsory accounting and the suspensionof Steven Singer's authority pending a proceeding to remove him as trustee.
Plaintiff retained defendant Greenfield, Stein & Senior, LLP to represent her in theproceeding. While the firm submitted a notice of appearance dated September 9, 2003, it did notthereafter file an answer to the petition or any other response. As a result, on September 24,2003, the Surrogate issued an order directing both plaintiff and successor trustee Steven Singer toprovide an accounting.
Plaintiff thereafter retained a new attorney, and her final accounting was filed on November14, 2004. However, the grantor objected to the accounting and sought to surcharge plaintiff withrespect to certain matters that had purportedly occurred prior to her resignation as trustee.Plaintiff's new lawyer moved to dismiss the objections, relying on the applicable six year statuteof limitations (CPLR 213).
The Surrogate denied plaintiff's motion, holding that "the statute of limitations can begin torun on the beneficiary's right to an accounting only where the former fiduciary has failed to haveaccounted after a reasonable time to do so has passed" (Matter of Singer, 12 Misc 3d 621, 625 [2006]). This Courtaffirmed, but did so on the ground that the "former trustee waived her statute of limitationsdefense by failing to raise it in response to the grantor's petition to compel an accounting," andadded the explanation that "an accounting trustee's limitations defense does not run against theparticular acts allegedly committed by the trustee in violation of her fiduciary duties, but againstthe trustee's obligation to account" (Matter of Singer, 30 AD3d 211 [2006]). [*2]This Court's decision did not comment on the Surrogate's rulingthat the statute of limitations on an accounting matter does not begin to run until a reasonabletime has passed after the fiduciary's resignation without the fiduciary providing an accounting.
Plaintiff former trustee then commenced this legal malpractice action against her firstattorneys. Defendant law firm moved for dismissal on grounds of collateral estoppel, arguing thatthe Surrogate's determination in Matterof Singer (12 Misc 3d 621 [2006], supra), rejecting the statute of limitationsdefense, which decision was subsequently affirmed, established that plaintiff could not haveprevailed in the accounting proceeding in any event.
A cause of action for legal malpractice requires proof of the negligence of the attorney, thatsuch negligence was the proximate cause of the loss sustained and that actual damages resultedtherefrom (see Bishop v Maurer, 33AD3d 497, 498 [2006]). To establish proximate cause, the plaintiff must demonstrate that"but for" the attorney's negligence, the plaintiff would have prevailed in the matter in question(id.). The "failure to demonstrate proximate cause mandates the dismissal of a legalmalpractice action regardless of whether the attorney was negligent" (Leder v Spiegel, 31 AD3d 266,268 [2006], affd 9 NY3d 836 [2007]; see also Schwartz v Olshan Grundman Frome& Rosenzweig, 302 AD2d 193, 198 [2003]).
The assertion that defendant failed to file answering or opposition papers to the accountingpetition interposing the statute of limitations defense, clearly establishes grounds for claimingthat defendant was negligent. The question is whether, but for that negligence, plaintiff couldhave prevailed in getting the action against her dismissed.
Defendant relies on the doctrine of collateral estoppel, arguing that plaintiff could not haveprevailed on the limitations defense because plaintiff is bound by the Surrogate's Court ruling inMatter of Singer (12 Misc 3d at 625), as affirmed by this Court (30 AD3d 211 [2006]),that the six-year limitations period had not expired by the time the action for an accounting wascommenced.
Collateral estoppel precludes a party from relitigating an issue that was already raised andnecessarily decided against that party in another action (see Color by Pergament v O'Henry'sFilm Works, 278 AD2d 92, 93 [2000]). However, in this matter we are asked to givecollateral estoppel effect to an order that was thereafter reviewed on appeal, where the reviewingappellate court, while upholding the result, did not employ the same legal reasoning used by thecourt of first instance. That is, while this Court affirmed on appeal the Surrogate's rejection of theformer trustee's statute of limitations defense, it did not affirm because it agreed with theSurrogate's statement of law that the beneficiary's time to commence an action for an accountingagainst a former trustee did not begin to run upon her resignation and replacement, but at someindeterminate "reasonable time" after that. Rather, this Court rejected the proffered limitationsdefense because it was raised too late (i.e. after the accounting had been filed), and in a contextwhere it was inapplicable (i.e. in relation to specific objections filed against theaccounting).[FN*][*3]
Defendant relies upon the assertion that an alternativeholding must be afforded preclusive effect where the issue is actually litigated, squarelyaddressed, and specifically decided. It is true where the final determination of a matteroffers more than one basis for its decision, the doctrine of collateral estoppel is generally appliedto both grounds, even though arguably the alternative ground was not "necessarily" decided; eventhat ground is considered "actually litigated, squarely addressed and specifically decided" (seeMalloy v Trombley, 50 NY2d 46, 52-53 [1980]; Deck v Merrimack Mut. Fire Ins.Co., 245 AD2d 1019, 1020 [1997]). However, none of the cases relied upon by defendant forthis proposition give preclusive effect to a ruling that was not the final determination ofthe matter, in that an appellate court reviewing the order issued its own determination containingits own reasoning. Notably, in Deck v Merrimack Mutual, where preclusive effect wasgiven to an alternative ground used in a County Court decision which was then appealed, onappeal that decision had been affirmed "for reasons stated" (see Deck v Fumerelle, 237AD2d 984, 985 [1997]).
The motion court relied on the rule that a judgment is conclusive between the parties "untilreversed on appeal or set aside" (McLaughlin v Hernandez, 16 AD3d 344, 346 [2005]), to reasonthat absent a reversal of a trial-level ruling, or an affirmance that specifically disapproves of thereasoning of that ruling, the law as pronounced by the trial court stands as conclusive if it isaffirmed, regardless of the appellate court's rationale in support. We reject this suggestion.
First of all, cases permitting reliance on the preclusive effect of an order, appeal of which ispending (see Anonymous v Dobbs FerryUnion Free School Dist., 19 AD3d 522, 523 [2005]; Matter of Capoccia, 272AD2d 838, 847 [2000], lv denied 95 NY2d 769 [2000]), are not applicable to the presentsituation. An affirmance such as this Court's in Matter of Singer (30 AD3d 211 [2006], supra), does notnecessarily constitute a ratification of the legal reasoning in the order appealed from, when theaffirmance explicitly uses different reasoning from that employed by the court of first instance toreach the same result. Moreover, while it might be appropriate to give preclusive effect to factualfindings made by a trial court which are not disturbed on appeal, different considerations comeinto play where the trial court's ruling, for which preclusive effect is sought, is purely one of law(see O'Connor v G & R Packing Co., 53 NY2d 278, 282-283 [1981]), especially whenthat reasoning was, at least implicitly, disturbed on appeal. The basis for giving preclusive effectto an alternative ground for a decision is that the issue was "actually litigated, squarely addressed,and specifically decided" (see Matter of Atlantic Mut. Ins. Co. v Lauria, 291 AD2d 492,493 [2002]).
Here, once the reasoning of the Surrogate's Court was replaced by the reasoning of this Courtin its order on appeal, the legal reasoning used by the Surrogate's Court, even though not [*4]explicitly disapproved, could not then continue to stand as a viablestatement of the law: the issue was neither "squarely addressed" nor "specifically decided" by thisCourt in Matter of Singer.
The doctrine of collateral estoppel is an equitable one, and application of the doctrine againstplaintiff in these circumstances would be contrary to all concepts of equity. Unlike the manycases cited by defendant in which the failure to apply collateral estoppel in the second actionwould have deprived a party who prevailed in the earlier action of the fruits of that victory (see e.g. Peterkin v Episcopal Social Servs.of N.Y., Inc., 24 AD3d 306 [2005]), here, Singer's victory in the accounting matter isentirely unaffected by allowing plaintiff to sue her first lawyers on a theory of malpractice.
We therefore conclude that collateral estoppel cannot properly be relied upon to precludeplaintiff from demonstrating that but for defendant's alleged malpractice, she would haveprevailed in that accounting action, and the motion to dismiss is therefore denied.Concur—Tom, J.P., Mazzarelli, Saxe, Williams and Malone, JJ. [See 14 Misc 3d1233(A), 2007 NY Slip Op 50279(U).]
Footnote *: It is worth noting that settledlaw does not support that portion of the Surrogate's reasoning. The time within which aproceeding seeking an accounting must be commenced begins to run either when the fiduciary'saccount is judicially settled or when there is an open repudiation by the fiduciary of hisobligation to administer the estate to the knowledge of the beneficiary (Matter ofBarabash, 31 NY2d 76, 80 [1972]; Matter of Winne, 232 AD2d 956 [1996]). Caselaw establishes that the requisite repudiation may be accomplished by a defendant's resignationas trustee and surrender of the trusteeship to a successor (see Kaszirer v Kaszirer, 286AD2d 598 [2001]; see also Craig v Bank of N.Y., 169 F Supp 2d 202, 208 [SD NY2001]; Spallholz v Sheldon, 216 NY 205, 209 [1915]; Matter of Carpenter [AmericanSur. Co. of N.Y.], 271 App Div 71 [1946], affd 297 NY 498 [1947]).