Nexus Capital Invs. v. Fleischmann

2022 NY Slip Op 30808(U)

NEXUS CAPITAL INVESTMENTS LLC, Plaintiff, v. DAVID FLEISCHMANN ESQ. and LAW OFFICES OF DAVID FLEISCHMANN, P, C.., Defendants,

Index No. 512222/2021

Supreme Court, Kings County

March 10, 2022

Unpublished Opinion

PRESENT: HON. LEON RUCHELSMAN, Judge.

DECISION AND ORDER

Hon Leon Ruchelsman JSC.

The defendants have moved seeking to dismiss the complaint pursuant to CPLR_: §3211. The plaintiff opposes the motion. Papers were submitted by the parties and arguments held. After reviewing all the arguments this court now makes the following determination.

According to the complaint, on October 4, 2018 the plaintiff loaned $5 200, 000 to an entity ca 11 ed NY Ave Lofts LLG.-. The defendant David Fleischmann Esq. drafted the loan documents on behalf of the plaintiff. In connection with the loan the borrower executed a mortgage in the amount of the loan against 132 Walnut Street, 25-31 New York Avenue and 13-23 New York Avenue, ail located in Newark New Jersey. Further the defendant also drafted an Assignment of Leases and Rents and recorded a UCG-1 against the above named mortgaged properties. In addition, Jacob Tauber executed a guaranty concerning the outstanding loan.

The borrower failed to make all the required payments and defaulted in April 2019. To avoid foreclosure of the properties Tauber requested the ability to borrow money from TBG Funding LLC to pay off the debt. Further, TBG agreed to lend additional funds, subordinate to the first loan, in efforts to develop the properties. Thus, a two-tiered loan by TBG was executed wherein the first mortgage remained a lien on the property and TBG loaned the borrower $3, 000, 000 as a paydown and an additional $2, 470, 000 in the form of a new note and mortgage which was intended to be subordinate to plaintiff's remaining lien. Amended loan documents including: an amended note and mortgage were executed reflecting a new loan balance of $2, 47 0, 000. Further, as noted, the plaintiff agreed that its mortgage would be subordinated to TBG's loan. According to the amended complaint "upon receipt of the partial Payoff, Defendants, as Lender's counsel, were required to immediately and simultaneously satisfy the First Mortgage and record the Amended Mortgage. This arrangement would have been equivalent to a subordination agreement, providing TBG a priority lien while maintaining the Lender's lien (as reduced by the payment)" (see. Amended Complaint, 122). The amended complaint alleges the amended loan documents were never recorded.

On June 17, 2019 TBG recorded a construction loan in the amount of $8.4 million and Tauber allowed four additional loans to be recorded by an entity called M..P. Management LLC, Thus, while the plaintiff agreed to permit TBG to maintain priority over the plaintiff, the failure to record the amended loan documents effectively placed the plaintiff in third place, behind TBG. and M.P. Management LLC.

The plaintiff instituted a malpractice action against its counsel asserting that the counsel's failure to properly record the amended loan documents negatively affected their priority among other mortgage holders. The complaint further alleges the same defendant also assisted M.P. Management LLC in recording the second place: mortgages. The defendants have now moved seeking to dismiss the complaint on the grounds the plaintiff cannot demonstrate it was damaged in any way by any failure to record such loan documents;. The plaintiff opposes the motion.

Conclusions of Law

It is well settled that upon a motion to dismiss the court must determine, accepting the allegations of the complaint as true, whether the party can succeed upon any reasonable view of those facts (Struian v. Kaufman & Kahn. LLP 168 A.D.3d 1114, 93 N.Y.S.3d 334 [2d Dept., 2019]). Further, all the allegations in the complaint are deemed true and all reasonable inferences may be drawn in favor of the plaintiff (Weiss v, Lowehberq, 95 A.D.3d 405, 944 N.Y.S.2d 27 [1^st Dept., 2012]). Whether the complaint will later survive a motion for summary judgment, of whether the plaintiff will ultimately be able to prove its claims, of course, plays no part in the determination of a pre-discovery CPLR §3211 motion to dismiss (see, Moskowitz v. Masliansky, 198 A.D.3d 637, 155 N.Y.S.3d 414 [2021]).

To succeed on a claim for legal malpractice it must be shown that the attorney failed to act with the "ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession" (Darby & Darby, . P.C. v. VSI International, Inc., 95 N.Y.2d 308, 716 N.Y.S.2d 378 [2.000]). Those terms cannot be defined with precision but are rather fact specific and must be judged against the actual representation afforded the client in each particular case. Moreover, the client must further establish that the malpractice was a proximate cause of any loss sustained and the client must also demonstrate 'actual damages' (Prudential Insurance Company v. Dewey Ballantine, Bushby, Palmer & Wood, 170 ftD2d 108, 573 N.Y.S.2d 981 [1^st Dept., 1991]). Moreover, in Lindenman v. Kreitzer, 7 A.D.3d 30, 775 N.Y.S.2d 4 [1^st Dept., 2004], the court held "a plaintiff's burden of proof in a legal malpractice action is a. heavy one. The plaintiff must prove first the hypothetical outcome of the: underlying litigation and, then, the attorney's liability for malpractice: in connection with that litigation" (id).

It is well settled that a legal malpractice action is not yet ripe if based upon other matters which have not yet concluded (Stonewell Corp., v.. ConestOaa Title Insurance Company, 678 F.Supp.2d 203 [S.D.N.Y. 2010]). Therefore, a party could not assert a legal malpractice action: in a mortgage foreclosure action if the foreclosure action was still pending (Kahan Jewely Corp., v. Rosenfeld, 295 A.D.2d 261, 744 NYS2.&. 644 [1st Dept., 2002]). Moreover, a claim for legal malpractice is not ripe where the matter upon which the malpractice rests is the subject of an ongoing litigation.: In Whitney Lane Holdings LLC v. Scrambettera & Associates, P.C., 2010 WL 4259797 [E.D.N.Y. 2010] the plaintiff sought to purchase property from sellers. The defendants represented the sellers and a contract was signed. The sellers did not inform the plaintiff the municipality sought to acquire the property through eminent domain and the plaintiff closed upon the...