Legal Malpractice

Will This be the Future of Legal Malpractice?

By (Andrew Lavoott Bluestone)

Right now the legal press centers around attorney lay-offs and the general economic situation.  In this case homeowners were completely unable to either pay the mortgage or obtain new financing.  Eventually they went to a lender whose interest rate exceeded 25%.  Will we be seeing more of this type of case as the mortgage market continues to fester?

In Abir v Malky, Inc. ;2009 NY Slip Op 01432 ; Decided on February 24, 2009 ;Appellate Division, Second Department  we see that even while battling with the lenders over usury, they have also sued the attorney.  For the moment, he seems to have dropped out, but the decision does not say that his action has been terminated.  In the meantime we see:
 

"In an action, inter alia, to recover damages for legal malpractice, the plaintiffs appeal, as limited by their brief, from so much of a judgment of the Supreme Court, Nassau County (Winslow, J.), entered September 12, 2007, as, upon an order of the same court entered August 15, 2007, which, upon reargument, among other things, adhered to a determination in an order entered May 10, 2007, denying those branches of their cross motion which were for summary judgment declaring that a certain judgment of foreclosure and sale entered August 10, 2000, is null and void.

In 1995 the plaintiffs, Fereydoon Abir and Flora Abir (hereinafter together the Abirs) stopped repaying the mortgage loan referable to their home. Their mortgagee, Bank of America (hereinafter the Bank) sought, and in 2000 obtained, a judgment of foreclosure and sale against them, which included a deficiency judgment in the approximate sum of $2,100,000. Subsequently, the Abirs negotiated a settlement in which the Bank agreed, inter alia, to accept the sum of $1,300,000 from the Abirs, or their designee, in full satisfaction of the judgment. The Abirs then sought a bridge loan from Hamerkaz, a not-for-profit entity, in the principal sum of $1,300,000, and thereafter attempted to secure a conventional loan. However, after entering into a contract with the plaintiffs, Hamerkaz was unable to provide the necessary funding and, sometime in mid-December 2001, the plaintiffs received notice that the Bank had scheduled a foreclosure sale of their home for December 18, 2001. The Abirs then contacted the defendant Malky, Inc. (hereinafter Malky), which agreed to provide them with the necessary funds for the bridge loan.

On December 18, 2001, Malky entered into an agreement with the Abirs (hereinafter the Abir/Malky agreement) which, inter alia, provided that the Abirs had 8 to 10 months to repay the debt, at an annual interest rate, including assorted charges, that ranged from 25.6% to 28.5%. The Abir/Malky agreement also provided that if the Abirs did not repay this obligation at the end of that 10-month period, Malky would have the right to enforce the judgment of foreclosure and sale, and take possession of the Abirs' house. The Abirs entered into the Abir/Malky agreement despite the fact that the Bank had yet to sell the judgment of foreclosure and sale to Malky since the Abirs understood that the sale of the judgment of foreclosure and sale was imminent. Moreover, the Abirs never designated Malky as their agent for the purpose of repaying their obligation to the Bank. "

Full post as published by New York Attorney Malpractice Blog on March 06, 2009 (boomark / email).