| Russo v Rozenholc |
| 2015 NY Slip Op 06029 [130 AD3d 492] |
| July 9, 2015 |
| Appellate Division, First Department |
[*1]
| Louis A. Russo, as Executor of Ronald E. Pecunies,Deceased, Respondent-Appellant, v David Rozenholc et al.,Appellants-Respondents, et al., Defendant. |
Furman Kornfeld & Brennan LLP, New York (Andrew S. Kowlowitz ofcounsel), for David Rozenholc and David Rozenholc & Associates,appellants-respondents.
Roberts & Roberts, New York (Michael J. Roberts of counsel), for MaheshAgashiwala, Loma Agashiwala, John C. Alexander, Theodore Baer, Bertina Baer NolanBaer, Judy Becker, Johanna Bennett, Mariel Bennett, Jack Biderman, Isabel BarnardBiderman, Barbara E. Bishop, Terry Chabrowe, Paula Chabrowe, Amy R. Cousins,Cathy Marshall, Lori Metz, Brigid O'Connor, Debra Lyn Schinasi, Hyman Schinasi, JeanSchinasi, Kalia Shalleck and Jean Schimotake, appellants-respondents.
Nicholas J. Damadeo, P.C., Huntington (Nicholas J. Damadeo of counsel), forrespondent-appellant.
Order, Supreme Court, New York County (Joan A. Madden, J.), entered October 22,2013, which denied defendants-appellants' motions to dismiss the complaint as againstthem, and denied plaintiff's cross motion for partial summary judgment on his cause ofaction for breach of contract, unanimously affirmed, without costs.
In May 2006, the nonparty building owner filed an application with the Departmentof Housing and Community Renewal (DHCR) seeking to demolish the building locatedat 220 Central Park South in Manhattan and evict the tenants. As a result, a group ofrent-stabilized tenants formed a tenants' association to rebuff the building owner's efforts.One of those tenants was plaintiff's decedent Ronald E. Pecunies (the decedent), wholived with his girlfriend Emel Dilek in apartment 16AB—a large unit created byconverting two apartments into one.
The tenants retained defendants David Rozenholc and David Rozenholc andAssociates (collectively, DR&A) to represent them in the DHCR proceeding and tonegotiate with the building owner. In the retainer agreement, dated April 3, 2009, thetenants represented and warranted that they had "agreed to share equally in anysettlement offer made by [the owner]." The retainer agreement also stated that eachapartment represented a single share, but specifically stated, "it is further agreed that[decedent], who occupies combined apartment 16 AB[,] will receive two (2) shares andagrees to pay two (2) shares of any legal fees owed."
In April 2009, DHCR issued an order permitting the building owner to evict thetenants. In February 2010, after unsuccessfully challenging the order, DR&Acommenced a CPLR article 78 proceeding on behalf of the tenants, including decedent.However, decedent died on May 22, 2010, after the commencement of the article 78proceeding but before any settlement could be reached with the building owner. OnSeptember 24, 2010, counsel for decedent's estate wrote to DR&A, authorizing it tocontinue to represent the estate's interest. According to the estate's counsel, this authoritycame from plaintiff, who was the executor of decedent's estate.
[*2] A dispute later apparently arose between plaintiff andDilek as to Dilek's rights with respect to the apartment. Plaintiff and Dilek each hadcounsel, both of whom remained in communication with DR&A. According toattorney Rozenholc, the building owner refused to offer any money to either Dilek or tothe estate, taking the position that no one had any succession rights to the apartmentunder the Rent Stabilization Code.
The tenants and the building owner ultimately settled the article 78 proceeding formore than $33 million. At approximately the same time, plaintiff, Dilek, and the buildingowner, entered into an agreement, dated December 2, 2010 (the Dilek buyoutagreement), in which the plaintiff recited that as executor of the estate, he had no claim toapartment 16AB after decedent died on May 22, 2010. Plaintiff also recited that Dilekhad occupied apartment 16AB before decedent's death "and succeeded to his tenancy."The signatories to the Dilek buyout agreement agreed that in exchange for Dilek'svacating apartment 16AB, the building owner would pay her a single share's worth of the$33 million settlement—namely, $1,562,500 ($1,700,000 less $187,500 in counselfees). The Dilek buyout agreement further stated that DR&A represented plaintiffand Dilek in connection with that agreement.
In February 2012, plaintiff, on behalf of decedent's estate, commenced this actionagainst the DR&A defendants and the defendants-tenants,[FN*] asserting two causes ofaction—namely, legal malpractice (against the DR&A defendants) andbreach of contract (against the DR&A defendants and the defendants-tenants).
As to the legal malpractice claim, the complaint alleged that DR&A breached itsduty to the estate when it failed to inform the estate that there was a retainer agreementand that the retainer agreement contained an express agreement among the tenants to"share equally" in any settlement proceeds. Likewise, the complaint alleged thatDR&A breached its duty to the estate by failing to inform it that the retaineragreement explicitly recognized decedent's right to receive the two shares of thesettlement proceeds based on his occupancy of two apartments. Thus, plaintiffconcluded, DR&A committed legal malpractice when it failed to advise plaintiff ofthe estate's rights under the retainer and instead advised plaintiff to sign the settlementdocuments, thus forfeiting its right to settlement proceeds.
As to the breach of contract claim, the complaint alleged that the two settlementshares owed to decedent had wrongly been distributed to defendants-tenants, and that alldefendants breached the retainer agreement by failing to pay the estate the value of thoseshares.
In May 2012, DR&A moved under CPLR 3211 (a) (7) to dismiss the complaint.On the motion, DR&A stated that plaintiff had actually suffered no damagesbecause in fact, estates cannot succeed to rent-stabilized tenancies. Thus, DR&Aconcluded, because the estate was never entitled to a portion of the settlement, plaintiffhad no legal right to decedent's apartment under the Rent Stabilization Code.DR&A also argued that plaintiff's relinquishment of any rights to the apartment hadnothing to do with any malfeasance by DR&A or attorney Rozenholc, but resultedsolely from the fact that plaintiff recognized that, in fact, he had no legal basis to assertany claim under the Rent Stabilization Code.
In July 2012, defendants-tenants cross-moved under CPLR 3211 (a) (7) to dismissthe breach of contract cause of action as against them. In their cross motion,defendant-tenants argued that the estate relinquished all rights to decedent's leaseholdbecause none of decedent's family members had statutory succession rights under theRent Stabilization Code. Similarly, defendants-tenants argued that decedent's deathextinguished his buyout rights as a matter of law.
Plaintiff then cross-moved in August 2012 for partial summary judgment underCPLR 3212 on its second cause of action for breach of contract. On the cross motion,plaintiff argued that DR&A breached the retainer agreement by failing to collect anddistribute the settlement proceeds in accordance with the agreement's terms. Likewise,plaintiff asserted that defendants-tenants breached the agreement when they failed to"pool" the settlement and pay two shares to decedent. Plaintiff also argued thatdefendants-tenants were unjustly enriched by receiving [*3]amounts exceeding their rightful shares.
In an affidavit in opposition to defendants' motions and in support of plaintiff's crossmotion, plaintiff stated that had attorney Rozenholc "informed [plaintiff] of the RetainerAgreement's terms, or provided [plaintiff] with a copy in advance of the settlement,[plaintiff] would not have agreed to any settlement which resulted in no money to the[e]state." Plaintiff further stated that although the estate forfeited its rights to theapartment under the Rent Stabilization Code, it "did not knowingly or intentionallyforfeit its rights to two shares of the settlement under the Retainer Agreement." Plaintiffalso specifically stated that "but for" attorney Rozenholc's failure to properly advise theestate of its rights under the retainer, plaintiff "would not have consented to thesettlement in its final form but rather would have insisted on payment of the two sharesfrom the total proceeds."
As to the breach of contract claim, the IAS court properly denied the motion todismiss that claim. Of course, on a motion to dismiss under CPLR 3211 (a) (7), a courtmust determine whether the factual allegations taken as a whole manifest any cause ofaction cognizable at law (see Ackerman v 305 E. 40th Owners Corp., 189 AD2d665, 666 [1st Dept 1993]).
Despite defendants-tenant's arguments otherwise, the breach of contract cause ofaction is not defeated by the provisions of the Rent Stabilization Code. On the contrary,the breach of contract action against defendants-tenants rests upon plaintiff's allegationthat by the retainer agreement's express terms, the tenants, including decedent, agreed to"pool" the money they received from the building owner—that is, to share equallyin any settlement—and then pay to decedent two shares of the pooled money.Plaintiff asserts that to the extent the defendants-tenants failed to pay decedent his twoshares under the retainer agreement, they are in breach of the retainer agreement, or havebeen unjustly enriched.
These allegations are directed specifically to defendants-tenants' actions with respectto the money they actually received in the settlement with the building owner; this issueis separate from a tenant's rights of succession under the Rent Stabilization Code.Whether or not the decedent had succession rights is not relevant to the allegations of thecomplaint at this stage of the litigation; the tenants had already received settlementmoney and, according to the complaint, had agreed to share it equally. Given theallegations in the complaint—namely, that defendants-tenants, contrary to theirexpress agreement, did not share equally in the money they received in settlement, andwere unjustly enriched—plaintiff has sufficiently stated a claim for breach ofcontract.
Likewise, there is no merit to DR&A's argument on appeal that for the purposesof the breach of contract claim, the estate was not a signatory to the retainer agreementand therefore cannot assert decedent's rights under that agreement. Nor is there any meritto DR&A's argument on appeal that the estate lacks standing to assert a malpracticeclaim against it. On the contrary, the estate stepped into decedent's shoes and indeed,specifically authorized DR&A to represent the estate's interests under the retaineragreement (see generally Estateof Schneider v Finmann, 15 NY3d 306 [2010]).
DR&A makes a similarly unavailing argument that the estate's waiver of rightsto decedent's apartment operates as a binding judicial admission and a complete bar tothe action. A party asserting a waiver of rights has the burden of establishing that thepurported waiver constituted an intentional, voluntary relinquishment of a known right(see Jefpaul Garage Corp. v Presbyterian Hosp. in City of N.Y., 61 NY2d 442,446 [1984]; White v Church of Our Lady of Sorrows, 255 AD2d 109 [1st Dept1998]). Here, plaintiff alleges that DR&A never informed it of the retaineragreement's existence and that, had plaintiff known of the agreement, he would not haveconsented to a transfer of its rights to Dilek. In light of these allegations, DR&A hasnot met its burden on its waiver defense.
Turning now to the legal malpractice claim, we find that the motion court properlyallowed the cause of action for legal malpractice to proceed. A viable claim for legalmalpractice requires that a complaint allege " 'the negligence of the attorney; thatthe negligence was the proximate cause of the loss sustained; and actualdamages' " (O'Callaghanv Brunelle, 84 AD3d 581, 582 [1st Dept 2011], lv denied 18 NY3d 804[2012], quoting Leder vSpiegel, 31 AD3d 266, 267 [2006], affd 9 NY3d 836 [2007], certdenied 552 US 1257 [2008]). Here, the logic for the [*4]legal malpractice cause of action is similar to the logic insustaining the breach of contract claim: whether decedent had rights under the RentStabilization Code is beside the point for purposes of the pleadings here. The relevantissue is not whether decedent had rights to the rent-stabilized apartment but whetherdecedent had rights to his two shares under the retainer agreement. Indeed, plaintiff doesnot argue that but for DR&A's negligence, the estate would have prevailed in thearticle 78 proceeding; he argues that DR&A failed to tell him about the existence ofthe retainer agreement and to make sure that the estate received the settlement monies towhich it was entitled under the settlement agreement.
The affidavits in support of the complaint assert, among other things, that hadattorney Rozenholc informed plaintiff of the retainer agreement's terms, plaintiff wouldnot have agreed to any settlement that resulted in no money to the estate. The affidavitsalso state that "but for" attorney Rozenholc's failure to properly advise the estate of itsrights under the retainer, plaintiff "would not have consented to the settlement in its finalform but rather would have insisted on payment of the two shares from the totalproceeds." These averments, in addition to the allegations of the complaint, are sufficientto state a claim for legal malpractice.
We have considered the parties' remaining arguments, including plaintiff's remainingarguments for affirmative relief, and find them unavailing. Concur—Sweeny, J.P.,Renwick, Moskowitz, Feinman and Kapnick, JJ. [Prior Case History: 2013 NY SlipOp 33608(U).]
Footnote *:Defendants-tenantsconsist of all defendants other than David Rozenholc and David Rozenholc &Associates.