Harm caused by professional negligence

In Betz v Blatt, 211 AD3d 1004 [2d Dept 2022], the court held:

Although an attorney representing the executor of an estate, generally, is not liable to the beneficiaries of the estate (see Kramer v. Belfi, 106 A.D.2d 615, 616, 482 N.Y.S.2d 898), as the attorney does not represent the estate itself (see Betz v. Blatt, 116 A.D.3d at 816, 984 N.Y.S.2d 378; Matter of Hof, 102 A.D.2d 591, 593, 478 N.Y.S.2d 39), when fraud, collusion, malicious acts, or other special circumstances exist, an attorney may be liable to those third parties, even though not in privity with them, for harm caused by professional negligence (see Davis v. Farrell Fritz, P.C., 201 A.D.3d 869, 871, 163 N.Y.S.3d 82; Betz v. Blatt, 160 A.D.3d at 698, 74 N.Y.S.3d 75).


Richard A. Klass, Esq.
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#CourtStreetLawyer #estate #harm

Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn, New York. He may be reached at (718) COURT●ST or RichKlass@courtstreetlaw.comcreate new email with any questions.

Prior results do not guarantee a similar outcome.

© 2023 Richard A. Klass

Continuous representation doctrine toll only applies to the particular matter.

In Pace v Horowitz, 190 AD3d 619 [1st Dept 2021], the court held that the continuous representation doctrine toll only applies to the particular matter, not general representation. The court held:

The court correctly determined that plaintiffs failed to show that there is an issue of fact as to whether the legal malpractice claim was timely filed based on the application of the continuous representation doctrine toll (see Marzario v Snitow Kanfer Holzer & Millus, LLP, 178 AD3d 527, 528 [1st Dept 2019]). The continuous representation doctrine toll does not apply based merely on the existence of an ongoing professional relationship, but only where the particular course of representation giving rise to the particular problems resulting in the alleged malpractice is ongoing (see Matter of Lawrence, 24 NY3d 320, 341 [2014]; Williamson v PricewaterhouseCoopers LLP, 9 NY3d 1 [2007]). Here, while plaintiffs allege that defendant law firm provided continuing estate administration work as part of an ongoing professional relationship of estate administration, they do not adequately allege that the particular course of representation regarding the sale of estate assets in 2007, which gave rise to the malpractice allegations, continued through February 2015, so as to make the instant malpractice claim timely filed.

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#CourtStreetLawyer #LegalMalpractice

Scales of justice illustrating article about legal malpractice.

Stone Cold

The business idea was a good one: one partner, we’ll call him “Salesman,” was experienced in the stone business. He would bring his knowledge and talents. The other partner, we’ll call him “Moneybags,” would bring his cash. Together, they would launch a business to import and distribute stone material from China. The plan was for Moneybags to invest money into the newly-formed corporation to be used to purchase the stone material, and Salesman was going to make profitable deals, moving the product to market through wholesalers.

In anticipation of launching the business, and in order to buy the stone material, Moneybags gave Salesman more than $250,000, a bit at a time. Every time Moneybags invested a chunk of money, Salesman gave him an “IOU” for the money. After a while, and after a series of exchanges which raised his suspicions, Moneybags became convinced that Salesman was diverting the seed money from the stone business and was using it instead for personal purposes. Thinking he had been defrauded, Moneybags began an action to recoup whatever he could of his original investment. The situation was dire and complicated, but it got worse. During this period, Salesman went on a business trip to Africa and died.

Substitution of wife/administrator as defendant

Before learning that Salesman had died, Moneybags had already brought a lawsuit against Salesman, through counsel other than Richard A. Klass, Your Court Street Lawyer, for breach of contract and embezzlement. After Salesman died, Moneybags’ lawsuit was “stayed” or stopped from proceeding. According to law, when a defendant dies, there is a stay of the legal proceeding until someone is appointed to represent the estate of the deceased. CPLR 1015 (“If a party dies and the claim for or against him is not thereby extinguished the court shall order substitution of the proper parties.”). Salesman’s widow was appointed as the administrator of his estate. At this point, Moneybags sought help from Richard A. Klass. The first step was to substitute the wife/administrator as the defendant in place of her deceased husband.

Elements of Fraud and Conversion

The next, important, step was to amend the Complaint in the action to include various causes of action, including fraud and conversion against the estate of the defendant. To allege fraud, the Complaint contained the essential elements that (a) Salesman made representations to Moneybags about investing the money into buying stone material; (b) those representations were false and misleading; (c) that Salesman made those representations knowingly and with the intent and purpose of inducing Moneybags to invest the money; (d) that Moneybags justifiably relied on those representations to his detriment; and (e) he sustained damages. The Complaint also alleged that Salesman wrongfully took and converted the investment moneys for his own purposes and in derogation of Moneybags’ rights.

Rights as a Shareholder in the Corporation

Aside from alleging that Salesman was a fraudster who diverted his investment moneys into his own pocket, Moneybags also pursued rights afforded to him as a shareholder in a New York State corporation. New York Business Corporation Law Section 717 states that “A director shall perform his duties as a director, including his duties as a member of any committee of the board upon which he may serve, in good faith and with that degree of care which an ordinarily prudent person in a like position would use under similar circumstances.” (Similarly, Business Corporation Law Section 715(h) provides “An officer shall perform his duties as an officer in good faith and with that degree of care which an ordinarily prudent person in a like position would use under similar circumstances.”)

Aiding and Abetting Breach of Fiduciary Duty

Unless some “bite” could be put into the Complaint to allege that the wife and son may have some personal liability, Moneybags realized he was nearly certain to lose his entire $250,000 investment. Richard A. Klass amended the Complaint to allege numerous causes of action against not only the estate of Salesman but also his wife/administrator of the estate and son, including fraud, conversion, constructive trust, accounting, breach of fiduciary duties, aiding and abetting breach of duties, and unjust enrichment. Under New York law, a claim for aiding and abetting breach of fiduciary duty consists of the following elements: (1) a breach of fiduciary duty, (2) that the defendant knowingly induced or participated in the breach, and (3) that the plaintiff suffered damages as a result of the breach. See, S&K Sales Co. v. Nike, Inc., 816 F2d 843 [2 Cir. 1987]. In this case, Moneybags alleged that the wife and son should be held liable to him, and not only Salesman’s estate.

The amendment of the Complaint to include numerous allegations against the several defendants pushed them to immediately settle the case for a substantial percentage of Moneybag’s initial investment.

copyr. 2013 Richard A. Klass, Esq.
The firm’s website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation in Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.comcreate new email with any questions.
Prior results do not guarantee a similar outcome.

R. A. Klass
Your Court Street Lawyer

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An Extra $1,500,000 for the Aged

More than fifty years ago, a charitable woman executed her Last Will and Testament, bequeathing all of her assets to two Catholic charities in the event that her siblings did not survive her. The two Catholic charities named in the Will were the Columbus Hospital and St. Joseph Rest Home for the Aged, each to get 50% of her estate. Both of these institutions were founded or operated by Italian American Catholic Orders.

In March 2008, the woman passed away, leaving more than $3,000,000 worth of assets in her estate. Since her siblings predeceased her, the Will left everything to the two Catholic charities.

Demise of Columbus/Cabrini Hospital

Columbus Hospital was founded in 1892 and operated a hospital in Manhattan. It was opened by a mission of the Missionary Sisters of the Sacred Heart of Jesus to address the needs of Italian immigrants. In 1973, Columbus Hospital and Italian Hospital merged to form Cabrini Medical Center. Cabrini Medical Center operated as a hospital on the same site as Columbus Hospital on East 19th Street until it filed for bankruptcy on July 9, 2009. Through the bankruptcy proceedings, Memorial Sloan Kettering Cancer Center purchased the buildings in which Cabrini Medical Center was formerly located.

Charitable mission of St. Joseph Rest Home for the Aged

Similarly to Cabrini, St. Joseph Rest Home for the Aged was founded by Nuns whose lives are committed, without compensation, solely to their charitable and religious convictions. Both charitable organizations — Cabrini and St. Joseph — were founded and operated by Nuns of Italian heritage. The Order of St. Joseph’s was founded in Rome by Italian Nuns and still has a mother house located in the Vatican. St. Joseph’s Rest Home for the Aged, which operates a licensed nursing home facility that accommodates forty women, was founded by the Catholic Sisters of The Order of St. Joseph’s and is located in Paterson, New Jersey.

Accounting proceeding

Because Columbus Hospital had ceased to exist, the executor of the deceased woman’s estate filed a judicial accounting with the Surrogate’s Court, requesting that the Surrogate give the 50% share originally meant for Cabrini Hospital to Memorial Sloan Kettering. The executor indicated that the bequest originally meant for Cabrini should be given to Memorial Sloan Kettering because the deceased had been treated there.
The Chairman of the Board of Directors of St. Joseph contacted Richard A. Klass, Your Court Street Lawyer, about objecting to the bequest to Memorial Sloan Kettering and, instead, requesting that the Surrogate pay the entire net estate to St. Joseph Rest Home for the Aged.

Cy Pres doctrine

There is a centuries’ old doctrine of cy pres (pronounced “sigh – pray”), which is a rule that when literal compliance with a Will or trust is impossible, the intention of a donor or testator should be carried out as nearly as possible. This is especially true when a bequest to a charity has “lapsed” as the result of the charity no longer existing to receive the bequest; then the Surrogate may designate another charity in its place.
In the seminal case of In re Brundrett’s Estate [1940], a percentage of the remainder of the estate was left to St. Mark’s Hospital, but the hospital was bankrupt in 1931 and ceased to operate as a hospital and perform the functions for which it was originally incorporated. The court held that the gift to the hospital was, therefore, ineffectual. The court then applied the doctrine of cy pres and paid over that charity’s portion to the other charitable ‘remaindermen’ named in the Will (the term ‘remaindermen’ refers to others who receive the residuary or balance of an estate).
Following the holding in In re Brundrett’s Estate, the court in In re Shelton’s Estate [1942] was faced with a similar issue as presented here. In that case, the decedent left moneys to a charitable institution located in Italy that was maintained by a New York religious corporation. After the death of the decedent, the New York religious corporation relinquished its maintenance of the Italian institution and discontinued all of its religious and charitable activities. Although its officers continued to function, it was a “charity in name only.” The court held that the discontinuance of the charitable and religious functions precluded authorization of payment of the legacy to the entity. However, the court recognized that the decedent had charitable intentions to provide a gift for religious purposes and invoked the doctrine of cy pres. In granting the legacy originally left to the Italian charity to the other charitable legatee, the court in In re Shelton’s Estate held: “By the application of that doctrine [cy pres] the surrogate holds that the legacy did not lapse and may be paid to The Cathedral Church of St. John the Divine in the City and Diocese of New York, the other charitable legatees named in the will and object of the generous bounty of the testatrix.”
After the objection to the judicial accounting by St. Joseph, with sufficient case law being presented in support of the request to pay the bequest of Cabrini Hospital over to St. Joseph, the executor agreed to pay 100% of the residuary estate to St. Joseph, roughly $3 million in total. The nursing home needs a new roof — now they’ll be able to afford it!
Richard A. Klass, Esq.

Credits:

Photo of Richard Klass by Robert Matson, copyr. Richard A. Klass, 2011.
Newsletter marketing by The Innovation Works, Inc.
Image on page one: Salzgitter, Städtisches Altenheim, 1961, Maria retirement home in Tann, in a hospital room with a Dutch nun. Licensed under the Creative Commons Attribution-Share Alike 3.0 Germany license. Attribution: Bundesarchiv, B 145 Bild-F010160-0001 / Steiner, Egon / CC-BY-SA.

copyr. 2012 Richard A. Klass, Esq.
The firm’s website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.comcreate new email with any questions.
Prior results do not guarantee a similar outcome.

R. A. Klass
Your Court Street Lawyer

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Don’t Give Me a Black Russian!

IN 2006, the executor of the estate of a woman who owned a cooperative apartment in Brooklyn attempted to sell the apartment. She first made a contract with a black woman who had two children to sell the apartment for $160,000. The contract of sale provided (as almost all do in cooperative apartment sales) that the buyer had to apply to the coop board for approval of the sale. She applied to the coop board for approval; then, dissention came about between the resident board members and the sponsor-management company. Despite supposedly being “approved” by the residents on the board, the management company claimed that the board was not legally constituted; accordingly, no closing of title would be scheduled.

The buyer elected to file a complaint with the New York State Division of Human Rights, charging that the coop engaged in discriminatory housing practices against her based upon her race. The NYS Division of Human Rights made a determination after investigation that there was “probable cause” to believe that the respondents engaged in discriminatory practices.The executor then attempted to sell the apartment to another person, a young Russian woman whom the board declined to even interview. It started to appear to the executor that a cooperative apartment owner’s fear of having every potential buyer denied, like a revolving door, was happening here.Faced with the possibility of the estate being left with a “dead asset”—an apartment that cannot be disposed of by the estate and continues to incur monthly maintenance charges, the estate turned to Richard A. Klass, Your Court Street Lawyer, for legal assistance to sue the coop board for breach of fiduciary duty, breach of the proprietary lease and housing discrimination.

Breach of Fiduciary Duty:

According to New York State law, the directors of a corporation owe its shareholders a fiduciary duty. The fiduciary duty of a director of a corporation consists of the obligation to perform his duties in good faith, without discriminatory practice, and with the degree of care which an ordinary prudent person in a like position would use under similar circumstances. See, Bernheim v. 136 East 64th Street Corp.,128 AD2d 434 [1 Dept. 1987]. In the Complaint against the coop, it was alleged that the coop board breached its fiduciary duty to the estate as the owner of shares of stock in the corporation and the proprietary lease to the apartment.In a similar case, in which the owner of a cooperative unit sued the board members for rejecting applicants for various reasons, including discriminatory ones, the court noted that the general deference granted to decisions of a cooperative corporation’s board of directors is not unlimited. If those board members act in a manner which is contrary to their duty to act fairly and impartially, courts may review claims of misconduct. Further, upon review, those claims of misconduct may prove actionable against the board members. See, Axelrod v. 400 Owners Corp., 189 Misc.2d 461 [Sup.Ct., NY Co. 2001].

The Estate was “Personally Affected” by Discrimination:

Both New York Executive Law §296 and New York City Administrative Code §8-107 provide that it is an unlawful discriminatory practice for a cooperative housing corporation to discriminate against an applicant based upon his age, race, familial status or religion. Those statutes also provide that it is an unlawful discriminatory practice for any person to aid, abet, incite, or compel the doing of any acts forbidden under those statutes. In Dunn v. Fishbein, 123 AD2d 659 [2 Dept. 1986], the court permitted a Caucasian person to maintain a claim that he was denied an apartment because his roommate was African-American. As was held in Axelrod v. 400 Owners Corp.,189 Misc.2d 461 [Sup.Ct., NY Co. 2001], if the plaintiff can show that she was adversely affected by reason of discrimination perpetrated against the prospective purchasers, she has a cognizable claim for discrimination. The Complaint alleged that the estate was personally affected by the unlawful discriminatory practices of the coop board and coop corporation.

“ Reverse Holdover ”:

The Complaint suggested the creation of a new cause of action under New York law—the concept of a “reverse holdover.” In this case, the estate claimed that the defendants effectively prevented the estate from exercising its right to sell the apartment to another party. Accordingly, it was urged that the defendants should be deemed to have effectively “purchased” the estate’s shares and leasehold interest in the apartment. By their alleged actions, it was claimed that the defendants had rendered this asset of the estate a “dead” asset—it could not be disposed of or sold!Generally, a tenant may be subject to eviction because of a substantial violation of the terms of the tenancy. In this situation, the reverse had occurred—the Complaint claimed that the defendants have committed a substantial violation of the estate’s tenancy. It is axiomatic that in every cooperative corporation, the right to sell a cooperator’s apartment is a valuable right, which ought not be irrationally or arbitrarily taken away. It is safe to say that the whim and caprice of coop boards is one of the prime reasons that people prefer to buy condominiums.In upholding the estate’s Complaint, the judge held that the estate had stated “ cognizable causes of action.” Estate of Cameron v. United Management, Sup. Ct., Kings Co. Index No. 2671/2008. During the pendency of the litigation, the estate found another buyer for the apartment, albeit at a lower price than originally negotiated with the first buyer. The estate, coop board, and management company settled the litigation—the estate sold the apartment for $139,000 and the defendants paid $35,000 to the estate.

by Richard A. Klass, Esq.
 

©2009 Richard A. Klass. Art credits: page one, Man in uniform beside building, yurt in background (1905-1915). Photographer: Prokudin-Gorskii, Sergei Mikhailovich, 1863-1944. Digital color composite made for the Library of Congress by Blaise Agüera y Arcas, 2004. Newsletter marketing by The Innovation Works, Inc.


copyr. 2011 Richard A. Klass, Esq.
The firm’s website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.comcreate new email with any questions.
Prior results do not guarantee a similar outcome.

R. A. Klass
Your Court Street Lawyer

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