| Fielding v Kupferman |
| 2009 NY Slip Op 06151 [65 AD3d 437] |
| August 11, 2009 |
| Appellate Division, First Department |
| Seth Fielding, Appellant, v Stephanie Kupferman et al.,Respondents. |
—[*1] Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, New York (Brett A. Scher of counsel),for respondents.
Judgment, Supreme Court, New York County (Walter B. Tolub, J.), entered January 9, 2009,dismissing the complaint, and bringing up for review an order, same court and Justice, enteredJanuary 29, 2009, which granted defendants' motion to dismiss the complaint for failure to statea cause of action, unanimously reversed, on the law, without costs, and the complaint reinstated.Appeal from the order unanimously dismissed, without costs, as subsumed in the appeal from thejudgment.
In this legal malpractice action, defendant law firm represented plaintiff in connection with adivorce action commenced by plaintiff's wife; defendant Stephanie Kupferman handled thematter. Based on Kupferman's advice, plaintiff entered into a stipulation of settlement datedApril 30, 2007 that was subsequently incorporated into the judgment of divorce. The stipulationprovided, among other things, that in exchange for the marital residence, a cooperativeapartment, plaintiff would pay his wife the sum of $1,597,013 by relinquishing any claim to thefunds in accounts in her name, making a payment of $1,200,000, and paying the balance inmonthly installments; the $1.2 million payment was to be made "within 30 days after theexecution [of the stipulation of settlement] . . . in immediately availablefunds" (emphasis added).
Plaintiff, having discussed the stipulation and its contents with Kupferman, planned to obtaina mortgage or home equity line of credit on the cooperative apartment prior to the divorcebecoming final. The complaint alleges that "although there was substantial equity in theapartment, this was an unrealistic contemplation because without a finalized divorce, no lenderwould give plaintiff the money that he needed to effectuate the settlement." Plaintiff did notbecome aware that he would be unable to obtain a mortgage or home equity line of credit untilafter he signed the settlement stipulation. The complaint further alleges that plaintiff signed thedocument "[a]s a result of defendants' failure to give [him] proper advice under thecircumstances—or to advise him to get advice elsewhere."
According to the complaint, upon being unable to obtain a mortgage or home equity line ofcredit, plaintiff informed defendants "that the settlement was unrealistic and should have been[*2]better explained to him" but "they refused to attempt torenegotiate the settlement, or to apply to the court for relief therefrom." Defendants advised himto "stop wasting time and get a mortgage" and his wife's counsel threatened to obtain a judgmentagainst him.
In order to comply with the stipulation, plaintiff ultimately withdrew the money from aretirement account resulting in a "huge tax burden." The complaint asserts that defendants failedto advise plaintiff that withdrawing assets from that account, even for the purpose of giving themto his wife to satisfy the divorce judgment, would result in a significant tax burden. Additionally,it asserts that not only did defendants fail to provide the proper advice, they were apparentlyunaware of the tax consequences. Thus, the complaint states: "[w]hen plaintiff attempted towithdraw half of his retirement account to comply with the terms of the settlement agreement,and was unable to withdraw the entire amount because of the tax burden, Ms. Kupferman was sosurprised she called plaintiff's broker to ask why." It further states that by that point, "time wasrunning out" so "plaintiff had to swallow the tax burden, beg and borrow to cover the deficit,obtain an interest-only mortgage after the divorce . . . became final, and then bringthis lawsuit."
After plaintiff commenced this action and filed an amended complaint, defendants moved todismiss the complaint pursuant to CPLR 3211 (a) (1) and (7), arguing that the stipulation thatwas incorporated into the divorce judgment constituted documentary evidence refutingconclusively plaintiff's claim because he represented therein that the funds were "immediatelyavailable." Defendants maintained that plaintiff's "attorney should [not] be held responsible for[his] inability to adequately finance the divorce settlement." They further maintained thatplaintiff failed to plead that Kupferman's purported negligence was the proximate cause of hisdamages or that he suffered actual and ascertainable damages.
"[A]n action for legal malpractice requires proof of the attorney's negligence, a showing thatthe negligence was the proximate cause of the injury, and evidence of actual damages. In orderto survive dismissal, the complaint must show that but for counsel's alleged malpractice, theplaintiff would not have sustained some ascertainable damages" (Russo v Feder, Kaszovitz,Isaacson, Weber, Skala & Bass, 301 AD2d 63, 67 [2002] [citations omitted]). Here, plaintiffalleges that, but for defendants' malpractice in advising him to sign the stipulation of settlementwithout advising him properly of the tax consequences arising out of his withdrawal of moneyfrom retirement accounts, he would have avoided actual ascertainable damage, i.e., the taxliability resulting from the withdrawal of the money. He further alleges that defendants were notknowledgeable with regard to the tax consequences and failed to advise him to obtain tax advicefrom another source.
"[A]n attorney is obligated to know the law relating to the matter for which he/she isrepresenting a client and it is the attorney's duty, 'if he has not knowledge of the statutes, toinform himself, for, like any artisan, by undertaking the work, he represents that he is capable ofperforming it in a skillful manner' " (Reibman v Senie, 302 AD2d 290, 291 [2003],quoting Degen v Steinbrink, 202 App Div 477, 481 [1922], affd 236 NY 669[1923]). Defendants assert that they should not be held liable for plaintiff's representation thatthe money was immediately available when it was not. Indeed, they argue that plaintiff should be"judicially estopped from now alleging that he suffered damages" because he signed thestipulation stating that the funds were available immediately and now claims "a contraryposition, to wit, that he incurred damages by not having funds immediately available." Thus,defendants submitted the stipulation of settlement and divorce judgment in support of theirmotion to dismiss, arguing that it is documentary evidence which refutes conclusively plaintiff'sclaim.
Defendants' documentary evidence not only fails to refute plaintiff's allegations [*3]conclusively, it supports plaintiff's claim of malpractice ina key respect. The stipulation identifies four accounts in plaintiff's name representing hisfinancial assets and states that $894,530 of the total ($1,258,854) is in a "Profit Sharing KeoghAccount," a retirement account that has specific rules regarding the withdrawal of funds andrequires that significant taxes be paid upon preretirement withdrawal. Thus, the stipulationmakes clear that the sum of money that plaintiff needed to comply with its requirements was not"immediately available," yet defendants advised plaintiff to sign it. Given that the ground forplaintiff's claim of malpractice is apparent from the face of the stipulation, the allegationscontained in the complaint are not conclusory and plaintiff properly has pleaded a cause ofaction for legal malpractice.
The Court of Appeals recently stated that "the conclusiveness of [an] underlying agreementdoes not absolutely preclude an action for professional malpractice against an attorney fornegligently giving to a client an incorrect explanation of the contents of a legal document" (Bishop v Maurer, 9 NY3d 910,911 [2007]). Although the Court found that the complaint in Bishop was devoid of anynonconclusory allegations that incorrect legal advice was given to the plaintiff, the facts of thatcase are distinguishable.
The documents at issue in Bishop were estate planning instruments executed by theplaintiff who believed that he was giving his wife a life estate and was not limiting his access tohis life savings (Bishop, 33 AD3d 497, 501 [2006], affd 9 NY3d 910 [2007]). Healleged that the defendant attorneys wrongly advised him of the meaning of the estate planningdocuments, that he " 'was not advised that those documents limited his right to alter hisdispositions of' " his property, and that he " 'was not informed, and was not aware' when heexecuted the trust and the agreement that his wife could do as she pleased with his assets, to thedetriment of his own issue, if he predeceased her" (id.). The documents signed by theplaintiff and his wife each contained an acknowledgment that both parties read and understoodthe documents and waived any conflict of interest due to their joint reliance on the sameattorneys in executing the estate documents (id. at 498-499). On their face, thedocuments were proper and did not establish that the defendants had provided improper adviceor engaged in any act of malpractice. This Court found that the "plaintiff's allegations thatdefendants attorneys failed to perceive that they had a conflict of interest, and failed to informhim as to the provisions of the estate planning instruments he executed, do not state a cognizableclaim for legal malpractice in view of the clear and unambiguous documentary evidence"(id. at 498). The Court of Appeals affirmed, finding that the plaintiff's allegations thatincorrect advice was given were conclusory (9 NY3d at 911).
Here, not only are the allegations of the giving of incorrect advice sufficient andnonconclusory, as noted above, the documentary evidence provides significant support forplaintiff's claim. It clearly establishes that the overwhelming majority of plaintiff's funds,including the amount necessary to satisfy the obligation to his wife, were not, as characterized bythe stipulation, "immediately available." Plaintiff alleges that he did not know that under theapplicable tax laws the necessary funds were not "immediately available"—we mustaccept that allegation as true (see Leon v Martinez, 84 NY2d 83, 87 [1994])—andthat a reasonably competent matrimonial attorney who read the stipulation would not haveadvised him to sign it. Given these allegations, the stipulation may constitute evidence ofdefendants' negligence and does not constitute a defense to the malpractice claim (see Mandel, Resnik & Kaiser, P.C. v E.I.Elecs., Inc., 41 AD3d 386 [2007]; IMO Indus. v Anderson Kill & Olick, 267AD2d 10 [1999]).
Furthermore, defendants' assertion that plaintiff's alleged damages are too speculative [*4]lacks merit. To survive a pre-answer motion to dismiss pursuant toCPLR 3211 (a) (7), "a pleading need only state allegations from which damages attributable tothe defendant's conduct may reasonably be inferred" (Lappin v Greenberg, 34 AD3d 277, 279 [2006]). At this earlystage of the proceedings, plaintiff " 'is not obliged to show . . . that [he] actuallysustained damages,' " but only that "damages attributable to [defendants' conduct] might bereasonably inferred" (InKine Pharm. Co. v Coleman, 305 AD2d 151, 152 [2003],quoting Tenzer, Greenblatt, Fallon & Kaplan v Ellenberg, 199 AD2d 45, 45 [1993]).
The complaint sufficiently asserts that "but for" defendants' faulty advice that plaintiff signthe stipulation, he would not have incurred the tax liability that resulted from the withdrawal offunds from his retirement account (see Lappin, 34 AD3d at 279-280; Tenzer,Greenblatt, Fallon & Kaplan, 199 AD2d at 45). We do not regard as pure speculationplaintiff's contention that in no event would he have incurred that liability if the settlement hadnot been reached. Concur—Saxe, J.P., McGuire, Moskowitz and Acosta, JJ.