Hernandez v Marquez 2012 NY Slip Op 31112(U) April 20, 2012 Supreme Court, New York County Docket Number: /11 Judge: Joan A. Madden Republished

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1 Hernandez v Marquez 2012 NY Slip Op 31112(U) April 20, 2012 Supreme Court, New York County Docket Number: /11 Judge: Joan A. Madden Republished from New York State Unified Court System's E-Courts Service. Search E-Courts ( for any additional information on this case. This opinion is uncorrected and not selected for official publication.

2 [* 1] SCANNED ON Y SUPREME COURT OF THE STATE OF NEW YORK - NEW YORK COUNTY PRESENT: HON. JOAN A. MADDEN Justice PART fl -v - Plaintiff, MOTION DATE: MOTION 8EQ. NO.: The following papers, numbered 1 to Defendant. were read on this motion t o/b MOTION CAL. NO.: ~ L 5 r n t i ma ~ ~ mehw t c l ~ d. PAPERS NUMBERED Notice of Motion/ Order to Show Causa -Affidavits - Exhibits Answering Affidavits - Exhibits Replying Affidavits I- Cross-Motion: W e s [ ] No a-i J.S.C. FILED

3 [* 2], -against- SERGIO MARQUEZ, Plaintiff, FILED Defendant. NEW YORK OUNTY CLERK S OFFICE In this action involving a dispute between a client and her former attorney, defendant Sergio Marquez (( Marquez ) moves to dismiss the complaint against him. Plaintiff Josefina Hernandez ( Hernandez ) cross moves for leave to amend the complaint pursuant to CPLR 3025(b), and Marquez opposes the cross-motion. BACKGRQUW This action arises out of Marquez s legal representation of Hernandez in or about October 2007, in connection with Hernandez s purchase of a restaurant and the attempted acquisition of a liquor license. The original complaint, which was filed in March of 2011, asserted causes of action for breach of contract and breach of fiduciary duty. Marquez moves to dismiss the complaint, asserting that as the claims essentially seek recovery for legal malpractice, and they are barred by the three year statute of limitations applicable to legal malpractice claims. Hernandez opposes the motion to the extent of seeking to amend the original complaint to assert a new claim for breach of contract and fraud claim. I Unless otherwise noted, the following facts are based on the allegations in the proposed amended complaint and the documentary evidence submitted on the motion. 1

4 [* 3] In October 2007, Hernandez retained Marquez, an attorney, who represented to her that he was competent to handle all aspects of the purchase of a restaurant and the acquisition of a liquor license. (Amended Complaint, 7 3). Hernandez made it very clear to [Marquez] that she had never purchased a business before this particular purchase transaction, that she had no experience purchasing a business and that she had to rely on him completely for all aspects of the purchase of the restaurant with a liquor license. (u 7 4). Marquez promised that he would perform in the manner required by [Hernandez] and that she had nothing to worry about [if] she contracted with him (a 7 5). In consideration for these promises to properly handle the purchase of the restaurant and the acquisition of the liquor license, Hernandez paid Marquez $3,000 (Id. 7 6). In reliance of Marquez s advice, including representations that the liquor license could be transferred from the seller, so long as Hernandez was not convicted of any crimes, Hernandez contracted with the seller to purchase the business. (Ig 7 8). The purchase was accomplished through a Stock Transfer Agreement entered into on October 2,2007, a copy of which is annexed to the proposed amended complaint. The Agreement made the obtaining of a liquor license for the Restaurant a condition of the purchase. As soon as she told Marquez that she was not convicted of any crimes, Marquez had her sign a waiver, which states in pertinent part: Parties represent and state that notwithstanding anything to the contrary in documents for the above purchase, fhat [Hernanezj Is irrevocably purchasing said sfore and waives condition of approval by the Stute of New York Liquor Authority and Beverage Control Board, and further states that helshe is qualified for an off-premises beer license, See Marquez Aff., Ex. C (emphasis supplied). Marquez did not explain to Hernandez the meaning or significance of the waiver. (u 7 13). In addition, before signing the contract of sale, Hernandez did not have an understanding of 2

5 [* 4] the process of securing a beer or liquor license, and also never told Marquez that she was qualified for an off-premises beer license. (u 7 12). However, although she did not completely understand the waiver, Hernandez signed it due to the assurances and representations by Marquez that a liquor license would be obtained (J& 7 13). After signing the waiver, Hernandez paid the seller $30,000 as a down payment for the business, at which time Marquez advised Hernandez to pay for the seller s landlord $10,000 rent arrears due and owing from the seller, and instructed Hernandez to execute a new lease with the landlord, which required $5,250 as a security deposit and as monthly rent ( 7 19). There may have been a conflict of interest that caused Marquez to have Hernandez sign the waiver, since Marquez now represents the landlord in an action to evict Hernandez from her apartment 18). If Marquez had told Hernandez the truth about the waiver, Hernandez would not have gone through with the purchase of the restaurant until she had secured a liquor license. 7 20). However, [s]olely due to assurances, representations, advice and direction of the Marquez, Hernandez was caused... to close the transaction with no approval from the State Liquor Authority. (Id ). Due to Marquez s misrepresentations and omissions, includ[ing] his directing Hernandez to execute a lease and pay rent of $5,250 a month, which she paid for over a year, for a premises which she believed that she would have a restaurant and liquor license, Hernandez suffered damages (Id, 7 27). As a result of her reliance on Marquez s representations, Hernandez alleges that she had become indebted to the seller for $91,350,000. (u 7 22). In addition, contrary to Marquez s representations, the liquor license for the restaurant could not be secured (Id. 128). 7 3

6 [* 5]? DISCUSSION Leave to amend a pleading should be freely given (CPLR 3025(b)) as a matter of discretion in the absence of prejudice and surprise. Zaid Theatre Corp. v, Sona Re ah Co a, 18 A.D.3d 352, (let Dept 2005) (internal citation and quotations omitted). That being said,. however, in order to conserve judicial resources, an examination of the underlying merits of the proposed cause of action is warranted. Eighth Ave. Garage Corp, v. J3,K.L. Realtv Corn 7 60 A.D.3d 404, 405 (l DDept, dismissed, 12 N.Y.3d 880 (2009). At the same time, leave to amend will be granted as long as the proponent submits sufficient support to show that the proposed amendment is not palpably insufficient or clearly devoid of merit. DxA Ins. Corn. v. Greystone & Co. Inc., 74 A.D.3d 499 (3rd Dept 2010) (citation omitted). In addition, [olnce a prima facie basis for the amendment has been established, that should end the inquiry, even in the face of a rebuttal that might provide a subsequent basis for a motion for summary judgment. Pier 59 Studios, L.P. v, Chelsea Piers. L.P,, 40 A.D.3d 363,365 (lat Dept 2007).2 Here, as Marquez does not argue that he was prejudiced or surprised by the proposed amended complaint, the only issue is whether the proposed pleading is of sufficient merit. The proposed breach of contract claim is based on allegations that Marquez breached his promises to competently represent Hernandez and to provide her legal services in connection with the purchase of the restaurant and obtaining a liquor license. Marquez argues Hernandez s proposed claim for breach of contract is insufficient as it essentially pleads a legal malpractice claim that is barred by the applicable three-year statute of limitations under CPLR 214(6). &g a 6645 Owners Corn. v. GMO Realty Corn -., 306 A.D.2d 97 (1 st Dept 2003) (holding that Since Hernandez responded to the motion to dismiss by seeking to amend the complaint, the court will consider the proposed pleading under the standard for a motion to amend. 4

7 [* 6] claims against the defendant law fm for legal malpractice, breach of fiduciary duty, and breach of contract, all arose from the defendant s representation of the plaintiffs in connection with certain real estate matters and thus were barred by the three-year statute of limitations for professional malpractice). In particular, Marquez asserts that since Marquez s representation of Hernandez ended in October 2007, this action which was commenced in is ~ntirnely.~ While a breach of contract claim need not be based on an express promise to the client...a breach of contract claim premised on the attorney s failure to exercise due care or. abide by professional standards is nothing but redundant pleading a legal malpractice claim. Saw Reality Corn, v. Proskauer Rose LLP, 251 A.D,2d 35,38 (la* Dept 1998) (citations omitted). Here, as the gravamen of the proposed breach of contract claim is that Marquez breached his promise to competently represent Hernandez, it is based on the same facts that would underlie a legal malpractice claim and therefore does not provide the basis for separate claim for breach of contract Owners CQmL, 306 A.D.2d at 97; See also Tsafathos v, J,ee David Auerbach. P.C., 80 A.D.3d 749 (2d Dept 201 1) (dismissing plaintiffs cause of action sounding in breach of contract as it was based on the same facts underlying their legal malpractice cause of action and did not allege distinct damages). The next issue is whether the proposed claim for fraud is of sufficient merit. Here, the fraud claim is based on allegations that Marquez intentionally misled Hernandez to enter into an agreement to purchase the restaurant and to sign a waiver conditioning such purchase on Marquez alternatively argues that legal malpractice claim, is barred by documentary evidence pursuant to CPLR (a) (l), based on the signed waiver agreement, in which Hernandez expressly waived the condition of n liquor license, and thus any harm was not caused by Marquez s conduct. As the court finds that the breach of contract claim is untimely, it need not consider this argument. 5

8 [* 7] obtaining a liquor license. It is also alleged that Marquez had a conflict of interest as he represented the landlord of the building where the restaurant is located and that in reliance on Marquez s advice, Hernandez paid the landlord the seller s arrears in rent and signed a lease with the landlord. Marquez argues Hernandez s claim for fraud is duplicative of a legal malpractice claim and is therefore time-bmed. This argument is unavailing. A fraud claim is duplicative of a legal malpractice claim when it is not based on an allegation of independent, intentionally tortious conduct. Carl v. Cohan, 55 A.D.3d 478 (1 Dept 2008). Here, the proposed fraud claim is not based on Marquez s alleged failure to exercise due care, but rather on allegations that he made material misrepresentations and omissions to Hernandez regarding her ability to get a liquor license, including whether such license transferred with the restaurant and the significance of the waiver. In addition, the proposed fraud claim alleges that Marquez had a potential undisclosed conflict of interest as he represented the landlord who stood to benefit from Hernandez s purchase of the restaurant and assumption of the seller s lease and payment of the seller s arrears. Under these circumstances, it cannot be said that the fraud claim is insufficient or duplicative of a time-barred legal malpractice claim. See Mitscbele v. Schultz, 36 A.D.3d 249 ( lut Dept 2006)(complaint stated cause of action for fraud distinct from professional malpractice claim based on allegations that defendantlaccounting firm concealed its errors based on undisclosed concerns for protecting another entity); Vici Vidi Vini, Iac, v. Ruchanan Intze rsoll, a, 2008 WL ,2008 N.Y. Slip Op (U), (Sup. Ct. N.Y. Co. 2008)(granting motion to amend to add fraud claim against defendant law firm based on allegations,that the law firm made misrepresentations to a client regarding the execution of an agreement that affected the client s interests); x, 2007 WL (Sup. Ct. 6

9 [* 8] I - f N.Y. Co. 2007)(finding that fraud claim against accounting firm was not duplicative of malpractice cause of action where the complaint alleged that the firm concealed direct knowledge of overvaluation of certain funds and issued a clean audit). Accordingly, the motion to amend is granted to the extent of permitting Hernandez to amend the complaint to include the fraud claim. In view of the above, it is ORDERED that Marquez's motion to dismiss is denied as moot; and it is further ORDERED that the cross motion by Hernandez to amend her complaint is granted only to the extent of permitting her to file and serve the amended complaint containing the proposed fraud claim within 20 days of the date of this decision and order; and it is further ORDERED that Marquez shall answer the amended complaint within 20 days of its service; and it is further ORDERED that the parties shall appear for a preliminary conference on Julyl2,2012 at 9:30 A.M. in Part 11, Room 351. Dated: Aprild2012 NEW YORK COUNTY CLERK'S OFFICE 7