Rosner v. Paley

• Decision Date: 06 June 1985
• Citation: 65 N.Y.2d 736,481 N.E.2d 553,492 N.Y.S.2d 13
• Parties: , 481 N.E.2d 553 June ROSNER, Plaintiff, v. Louis J. PALEY et al., Defendants. Louis J. PALEY et al., Plaintiffs, v. June ROSNER, Defendant. Louis J. PALEY et al., Third-Party Plaintiffs-Respondents, v. Philip R. FORLENZA et al., Third-Party Defendants-Appellants.
• Court: New York Court of Appeals Court of Appeals

Page 13

492 N.Y.S.2d 13

65 N.Y.2d 736, 481 N.E.2d 553

June ROSNER, Plaintiff, v. Louis J. PALEY et al., Defendants.

Louis J. PALEY et al., Plaintiffs, v. June ROSNER, Defendant.

Louis J. PALEY et al., Third-Party Plaintiffs-Respondents, v. Philip R. FORLENZA et al., Third-Party Defendants-Appellants.

Court of Appeals of New York.

June 6, 1985.

Roy L. Reardon and Robert A. Bourque, New York City, for appellants.

Martin I. Shelton, Mark E. Davidson and Peter C. Neger, New York City, for respondents.

OPINION OF THE COURT MEMORANDUM

The order of the Appellate Division, 99 A.D.2d 1018, 473 N.Y.S.2d 808, should be reversed, with costs, and the order of the Supreme Court, 116 Misc.2d 454, 455 N.Y.S.2d 959, which dismissed the third-party complaint, reinstated.

This action was commenced by plaintiff against her former attorneys, defendants and third-party plaintiffs, Sharretts, Paley, Carter & Blauvelt, P.C. ("Paley"), to recover damages as a result of legal malpractice in advising her to enter into a 1978 agreement in settlement of a dispute over the alleged mismanagement of the family trust. The agreement had designated plaintiff a cotrustee with her mother and sister, provided her with a salary as an officer with the Century Paramount Hotel, one of the principal assets of the trust, and gave her the right to an informal accounting to determine if she had received equal treatment with her sister in distributions. Additionally, the mother agreed to exercise a power of appointment in a marital deduction trust in her favor. In return, plaintiff waived any right to a judicial accounting and agreed not to proceed against the trustees for mismanagement.

Subsequently, plaintiff retained the third-party defendants, Hawkins Delafield & Wood ("Hawkins"), as her attorneys, and they advised her that there were serious legal questions, not only with regard to her appointment as cotrustee, but also as to the original appointment of her mother and sister. They also stated that, since, at the time of her appointment, plaintiff had knowledge of possible mismanagement by the trustees, she had potential liability for failing to seek a judicial accounting, especially since the settlement agreement had been entered into without any proper authorization on behalf of her niece, a contingent remainderman, who was then an infant. As a result, Hawkins advised her to petition the court for instructions and directions as to her status and duties as trustee, for a ruling as to the appointment of her mother, sister and herself as cotrustees and for a judicial accounting.

The special proceeding for instructions and this malpractice action against Paley were commenced in June 1979. Paley thereafter served a third-party complaint, alleging that Hawkins had "failed to exercise due care and sound professional judgment in advising Rosner" and, inter alia, that "should petition the Court for instructions and directions with respect to her status and duties as a co-Trustee." Special Term granted a motion to dismiss the third-party complaint, pursuant to CPLR 3211(a)(7), holding that it failed to state a cause of action for malpractice. The Appellate Division, with two Justices dissenting, reversed.

We disagree. Contrary to the holding of the majority in the Appellate Division, whether the pleading was sufficient to state a cause of action for legal malpractice posed a question of law which could be determined on a motion to dismiss. Under the circumstances of this case, when Hawkins advised plaintiff to seek judicial instruction, there was a distinct possibility of potential liability, especially in view of the high standard imposed upon a fiduciary. (See, Meinhard v. Salmon, 249 N.Y. 458, 464, 164 N.E. 545; Matter of Rothko, 43 N.Y.2d 305, 320, 401 N.Y.S.2d 449, 372 N.E.2d 291; see also, Rosner v. Caplow, 105 Misc.2d 592, 432 N.Y.S.2d 577, mod. 90 A.D.2d 44, 456 N.Y.S.2d 50, affd. 60 N.Y.2d 880, 470 N.Y.S.2d 367, 458 N.E.2d 826.) Therefore, as a matter of law, the legal advice was not malpractice.

Construing the third-party complaint liberally in favor of the third-party plaintiffs, it...