NY: Underlying negligent negotiation of a contract for real estate
Facts: Plaintiff Malik, as purchaser, entered into a contract with the seller to purchase certain multiuse commercial real property and improvements. The plaintiff retained the defendant attorney to negotiate the terms and conditions of the contract. The executed contract contained a provision that "[a]t closing, the Seller shall deliver copies of all existing Certificates of Occupancy for the premises." Subsequently, the Seller refused to produce certificates for all of the buildings and improvements on the premises, asserting that they did not exist and that he had no obligation under the language of the contract to procure and deliver them. As a result, the plaintiff was unable to obtain financing for the acquisition, and the seller declared the plaintiff in breach of the contract and retained the plaintiff’s down payment of $173,000. The plaintiff then commenced a legal malpractice claim against the defendant attorney (as well as a breach of contract against the Seller). The defendant attorney moved to dismiss the claim of malpractice against him, or in the alternative, stay the proceeding to determine whether the plaintiff would prevail on the breach of contract action against the Seller first. Supreme Court denied the motion completely.
Issue:Has the plaintiff adequately pled a cause of action for legal malpractice?
Ruling: Yes. The defendant attorney here claims that the plaintiff cannot state a cause of action to recover damages for legal malpractice because he cannot establish the "but for" element. However, the court disagreed. In his complaint, the plaintiff alleges that the defendant attorney negotiated the terms and conditions of the contract of sale, thereby permitting the Seller to refuse to procure and deliver the necessary certificates of occupancy for the improvements on the subject premises so that he could obtain financing for the sale. As a result, the complaint alleges that the plaintiff has been damaged by Seller’s retention of the $173,000 down payment. The court held that this certainly was enough to establish the “but for” causation of the defendant attorney’s negligence.
Lesson: While the facts here are similar to those of Savings Bank v. Ward, here we have the privity of contract between the attorney and the plaintiff that we lacked in that case. Defendant’s negligence in this case was the direct “but for” cause of the plaintiff’s actual damages in the underlying real estate transaction. Therefore, there is a cognizable cause of action to be made against the defendant attorney here.