Legal Malpractice

A Very Complicated Real Estate Legal Malpractice Case

By (Andrew Lavoott Bluestone)

One of the problems in figuring out a legal malpractice case by reading an appellate decision, is that even when the court gives a detailed set of facts, thee are many connections either not apparent or missing.  Here in Ito v. Suzuki, 2008 NY Slip Op 9437, Decided December 2, 2008, Appellate Division, 1st Department, the shenanigans of this real estate deal are dizzying.

"Plaintiff, who does not speak English, was induced to make an investment of $1 million to acquire a two-thirds interest in Keystone International LLC and to sign an operation agreement that gave defendant Sam Suzuki permanent managing control of its affairs. Keystone took title to a property consisting of 41 condominium units owned by an entity controlled by Hiroyoshi Hasegawa. The transaction was in derogation of "a clear and unequivocal court order" enjoining transfer of the property due to the pendency of divorce proceedings (Hasegawa v Hasegawa, 281 [*2]AD2d 594, 595 [2001]). The complaint adequately pleads a cause of action for fraud, alleging that Sam Suzuki used plaintiff's funds to obtain property with a cloud on its title (because of the injunction against transfer and the filing of a lis pendens), for an inflated price and under financing terms onerous to plaintiff. It further asserts that Suzuki diverted funds from Keystone to satisfy personal obligations, which included payment of a $1.7 million settlement of a fraudulent conveyance claim brought by Hiroyoshi Hasegawa's wife.

The complaint alleges that Suzuki, represented by Rich, defrauded plaintiff, who maintains that she was represented by Roshco during that period. A fair reading of the allegations against the attorney defendants is that they failed to disclose the extent to which the transaction was detrimental to plaintiff. Lacking, however, is the assertion of any misrepresentation by either Roshco or Rich that was calculated to induce plaintiff's detrimental reliance so as to support a claim of fraud (cf. Houbigant, Inc. v Deloitte & Touche, 303 AD2d 92, 100 [2003]) and, absent any underlying tort, the conspiracy claim is likewise without foundation

Given that the detailed facts concerning the extent of the attorney defendants' involvement in the fraudulent scheme are peculiarly within the knowledge of other parties (see Jered Contr. Corp. v New York City Tr. Auth., 22 NY2d 187, 194 [1968]) and the substance of the alleged wrongdoing is set forth in the affidavits of plaintiff and her brother, the circumstances surrounding the proposed cause of action are sufficiently stated to support amendment of the complaint (Zaid Theatre Corp. v Sona Realty Co., 18 AD3d 352, 354-355 [2005]; cf. Non-Linear Trading Co. v Braddis Assoc., 243 AD2d 107, 116 [1998])."

Full post as published by New York Attorney Malpractice Blog on December 04, 2008 (boomark / email).