Russo v. Rozenholc

• Decision Date: 09 July 2015
• Docket Number: 14208, 650457/12
• Citation: 13 N.Y.S.3d 391,2015 N.Y. Slip Op. 06029,130 A.D.3d 492
• Parties: Louis A. RUSSO, as Executor of the Estate of Ronald E. Pecunies, Plaintiff–Respondent–Appellant, v. David ROZENHOLC, et al., Defendants–Appellants–Respondents, Lucille Petino, Defendant.
• Court: New York Supreme Court — Appellate Division

130 A.D.3d 492

13 N.Y.S.3d 391

2015 N.Y. Slip Op. 06029

Louis A. RUSSO, as Executor of the Estate of Ronald E. Pecunies, Plaintiff–Respondent–Appellant

v. David ROZENHOLC, et al., Defendants–Appellants–RespondentsLucille Petino, Defendant.

14208, 650457/12

Supreme Court, Appellate Division, First Department, New York.

July 9, 2015.

Furman Kornfeld & Brennan LLP, New York (Andrew S. Kowlowitz of counsel), for David Rozenholc and David Rozenholc & Associates, appellants-respondents.

Roberts & Roberts, New York (Michael J. Roberts of counsel), for Mahesh Agashiwala, Loma Agashiwala, John C. Alexander, Theodore Baer, Bertina Baer Nolan Baer, Judy Becker, Johanna Bennett, Mariel Bennett, Jack Biderman, Isabel Barnard Biderman, Barbara E. Bishop, Terry Chabrowe, Paula Chabrowe, Amy R. Cousins, Cathy Marshall, Lori Metz, Brigid O'Connor, Debra Lyn Schinasi, Hyman Schinasi, Jean Schinasi, Kalia Shalleck and Jean Schimotake, appellants-respondents.

Nicholas J. Damadeo, P.C., Huntington (Nicholas J. Damadeo of counsel), for respondent-appellant.

SWEENY, J.P., RENWICK, MOSKOWITZ, FEINMAN, KAPNICK, JJ.

Opinion

Order, Supreme Court, New York County (Joan A. Madden, J.), entered October 22, 2013, which denied defendants-appellants' motions to dismiss the complaint as against them, and denied plaintiff's cross motion for partial summary judgment on his cause of action for breach of contract, unanimously affirmed, without costs.

In May 2006, the nonparty building owner filed an application with the Department of Housing and Community Renewal (DHCR) seeking to demolish the building located at 220 Central Park South in Manhattan and evict the tenants. As a result, a group of rent-stabilized tenants formed a tenants' association to rebuff the building owner's efforts. One of those tenants was plaintiff's decedent Ronald E. Pecunies (the decedent), who lived with his girlfriend Emel Dilek in apartment 16AB—a large unit created by converting two apartments into one.

The tenants retained defendants David Rozenholc and David Rozenholc and Associates (collectively, DR & A) to represent them in the DHCR proceeding and to negotiate with the building owner. In the retainer agreement, dated April 3, 2009, the tenants represented and warranted that they had “agreed to share equally in any settlement offer made by [the owner].” The retainer agreement also stated that each apartment represented a single share, but specifically stated, “it is further agreed that [decedent], who occupies combined apartment 16 AB[,] will receive two (2) shares and agrees to pay two (2) shares of any legal fees owed.”

In April 2009, DHCR issued an order permitting the building owner to evict the tenants. In February 2010, after unsuccessfully challenging the order, DR & A commenced an article 78 proceeding on behalf of the tenants, including decedent. However, decedent died on May 22, 2010, after the commencement of the article 78 proceeding but before any settlement could be reached with the building owner. On September 24, 2010, counsel for decedent's estate wrote to DR & A, authorizing it to continue to represent the estate's interest. According to the estate's counsel, this authority came from plaintiff, who was the executor of decedent's estate.

A dispute later apparently arose between plaintiff and Dilek as to Dilek's rights with respect to the apartment. Plaintiff and Dilek each had counsel, both of whom remained in communication with DR & A. According to attorney Rozenholc, the building owner refused to offer any money to either Dilek or to the estate, taking the position that no one had any succession rights to the apartment under the Rent Stabilization Code.

The tenants and the building owner ultimately settled the article 78 proceeding for more than $33 million. At approximately the same time, plaintiff, Dilek, and the building owner, entered into an agreement, dated December 2, 2010 (the Dilek Buyout Agreement), in which the plaintiff recited that as executor of the estate, he had no claim to apartment 16AB after decedent died on May 22, 2010. Plaintiff also recited that Dilek had occupied apartment 16AB before decedent's death “and succeeded to his tenancy.” The signatories to the Dilek Buyout Agreement agreed that in exchange for Dilek's vacating apartment 16AB, the building owner would pay her a single share's worth of the $33 million settlement—namely, $1,562,500 ($1,700,000 less $187,500 in counsel fees). The Dilek Buyout Agreement further stated that DR & A represented plaintiff and Dilek in connection with that agreement.

In February 2012, plaintiff, on behalf of decedent's estate, commenced this action against the DR & A defendants and the defendants-tenants,¹ asserting two causes of action—namely, legal malpractice (against the DR & A defendants) and breach of contract (against the DR & A defendants and the defendants-tenants).

As to the legal malpractice claim, the complaint alleged that DR & A breached its duty to the estate when it failed to inform the estate that there was a retainer agreement and that the retainer agreement contained an express agreement among the tenants to “share equally” in any settlement proceeds. Likewise, the complaint alleged that DR & A breached its duty to the estate by failing to inform it that the retainer agreement explicitly recognized decedent's right to receive the two shares of the settlement proceeds based on his occupancy of two apartments. Thus, plaintiff concluded, DR & A committed legal malpractice when it failed to advise plaintiff of the estate's rights under the retainer and instead advised plaintiff to sign the settlement documents, thus forfeiting its right to settlement proceeds.

As to the breach of contract claim, the complaint alleged that the two settlement shares owed to decedent had wrongly been distributed to defendants-tenants, and that all defendants breached the retainer agreement by failing to pay the estate the value of those shares.

In May 2012, DR & A moved under CPLR 3211(a)(7) to dismiss the complaint. On the motion, DR & A stated that plaintiff had actually suffered no damages because in fact, estates cannot succeed to rent-stabilized tenancies. Thus, DR & A concluded, because the estate was never entitled to a portion of the settlement, plaintiff had no legal right to decedent's apartment under the Rent Stabilization Code. DR & A also argued that plaintiff's relinquishment of any rights to the apartment had nothing to do with any malfeasance by DR & A or attorney Rozenholc, but resulted solely from the fact that plaintiff recognized that, in fact, he had no legal basis to assert any claim under the Rent Stabilization Code.

In July 2012, defendants-tenants cross-moved under CPLR 3211(a)(7) to dismiss the breach of contract cause of action as against them. In their cross motion, defendant-tenants argued that the estate relinquished all rights to decedent's leasehold because none of decedent's family members had statutory succession rights under the Rent Stabilization Code. Similarly, defendants-tenants argued that decedent's death extinguished his buyout rights as a matter of law.

Plaintiff then cross-moved in August 2012 for partial summary judgment under CPLR 3212 on its second cause of action for breach of contract. On the cross motion, plaintiff argued that DR & A breached the retainer agreement by failing to collect and distribute the settlement proceeds in accordance with the agreement's terms. Likewise, plaintiff asserted that defendants-tenants breached the agreement when they failed to “pool” the settlement and pay two shares to decedent. Plaintiff also argued that defendants-tenants were unjustly enriched by receiving amounts exceeding their rightful shares.

In an affidavit in opposition to defendants' motions and in support of plaintiff's cross motion, plaintiff stated that had attorney Rozenholc “informed [plain...