Estate of Louise Nevelson v. Carro, Spanbock, Kaster & Cuiffo

• Decision Date: 04 March 1999
• Citation: 259 A.D.2d 282,686 N.Y.S.2d 404
• Court: New York Supreme Court — Appellate Division
• Parties: ESTATE OF LOUISE NEVELSON, Deceased, et al., Appellants,<BR>v.<BR>CARRO, SPANBOCK, KASTER & CUIFFO et al., Respondents.

259 A.D.2d 282

686 N.Y.S.2d 404

ESTATE OF LOUISE NEVELSON, Deceased, et al., Appellants,

v.CARRO, SPANBOCK, KASTER & CUIFFO et al., Respondents.

Decided March 4, 1999.

Concur €” Nardelli, J. P., Lerner, Mazzarelli and Saxe, JJ.

This legal malpractice action against the defendant law firm Carro, Spanbock, Kaster & Cuiffo (CSK&C), and the individual partners thereof, was commenced after the Internal Revenue Service (IRS) assessed millions of dollars in estate taxes against the estate of deceased sculptor Louise Nevelson, as well as gift taxes against her son and the executor of her estate, Mike Nevelson.

Plaintiff Sculptotek, Inc. (Sculptotek), a corporation wholly owned by Mike Nevelson, was created upon the advice of CSK&C for the purpose of organizing the financial affairs of Louise Nevelson, and in an attempt to cause her artwork and the income from it to pass outside of her taxable estate. After Ms. Nevelson's death in 1988, the IRS determined that the corporate entity Sculptotek should be disregarded, as it was a sham corporation used to gift the decedent's income and assets to her son, and that all of the assets of Sculptotek should have been included in the sculptor's gross estate. It further determined that all of the salary paid by Sculptotek to her son, Mike Nevelson, between 1977 and 1988 constituted taxable gifts. This IRS determination was based primarily upon a finding that Sculptotek failed to adequately compensate the decedent artist, whose works generated the bulk of the assets held by the corporation. In addition to the estate and gift taxes themselves, substantial interest and penalties were assessed.

Plaintiffs' complaint asserted three causes of action, one for attorney malpractice, the second for breach of fiduciary duty, and a third for breach of contract. The crux of plaintiffs' claim was that the estate plan that CSK&C recommended and plaintiffs implemented could not survive IRS scrutiny, and that CSK&C never advised plaintiffs of any risks of potential gift or estate tax liability that could arise based upon the level of compensation that Sculptotek paid to Louise. Plaintiffs also asserted that CSK&C negligently prepared the estate tax "Form 706" upon the decedent's death, and negligently advised them in connection with an action brought against them by the decedent's companion of 25 years, Diane MacKown.

An action to recover damages for legal malpractice requires proof that: (1) the attorney was negligent; (2) the negligence was the proximate cause of the loss sustained; and (3) the plaintiff sustained actual damages as a result of the attorney's negligence (Khadem v Fischer & Kagan, 215 AD2d 441; Franklin v Winard, 199 AD2d 220). Negligence or malpractice exists where the attorney failed to exercise that degree of skill commonly exercised by an ordinary member of the legal community (Thaler & Thaler v Gupta, 208 AD2d 1130; Marshall v Nacht, 172 AD2d 727).

Generally, plaintiffs in professional malpractice actions proffer expert opinion evidence on the duty of care to meet their burden of proof in opposition to a properly supported summary judgment motion (see, e.g., Thaler & Thaler v Gupta, 208 AD2d 1130, supra; Brown v Samalin & Bock, 168 AD2d 531). However, the requirement that plaintiff come forward with expert evidence on the professional's duty of care may be dispensed with where "ordinary experience of the fact finder provides sufficient basis for judging the adequacy of the professional service" (S & D Petroleum Co. v Tamsett, 144 AD2d 849, 850, citing Kulak v Nationwide Mut. Ins. Co., 40 NY2d 140, 148). In this case, contrary to the conclusion reached by the IAS Court, the issue is not whether CSK&C could have come up with a better plan but whether CSK&C departed from the requisite standard of care in failing to adequately advise the Nevelsons and Sculptotek that their failure to substantially compensate the decedent could...