Santulli v. Englert, Reilly & McHugh, P. C.

OPINION OF THE COURT

In this action for legal malpractice and breach of contract, plaintiff Martin Santulli and defendant law firm Englert, Reilly & McHugh, P. C. each appeal, by leave of the Appellate Division, from an order of that court. The Appellate Division modified Supreme Court’s order by granting defendant’s motion for summary judgment and dismissing plaintiff’s breach of contract cause of action as legally insufficient and affirming that court’s denial of defendant’s motion, addressed to plaintiff’s malpractice claim, for summary judgment based on Statute of Limitations grounds. We agree that the malpractice claim is not barred by the Statute of Limitations, but conclude that the contract cause of action should not have been dismissed.

I

In October 1980, plaintiff retained defendant law firm to represent him in the sale of his hardware business. Plaintiff had agreed with one Daniel White to sell the business for the total sum of $75,000, $35,000 of which was to be secured by a first mortgage on property owned by Samuel White, Daniel White’s father. These terms and conditions, among others, were contained in the contract of sale negotiated by defendant on plaintiff’s behalf. According to plaintiff’s allegations, defendant was to prepare a mortgage covering the entirety of the property owned by Samuel White and have it recorded. It

Daniel White made approximately 20 payments to plaintiff on the mortgage debt but ultimately defaulted. In May 1983, plaintiff sought defendant’s assistance in collecting amounts due on the mortgage. Shortly thereafter, plaintiff discovered that although the description of the property intended to be encumbered purported to cover the entire property owned by Samuel White, only a portion of that real property was in fact encumbered because the easterly 50% of the described property was excepted from the mortgage. This was the portion of the property on which a house was located — the remaining portion which was actually pledged contained only two vacant lots and a shed which were only of minimal value. Thus, the most valuable portion of the property — the easterly portion upon which the house was located — was excepted as security for the debt.

Plaintiff informed defendant of the defective mortgage and they discussed the possibility of a foreclosure proceeding. Defendant advised plaintiff in August of that year, however, that it could not represent him in any foreclosure proceedings because of a potential conflict of interest — the partner who was actually involved in the transaction would probably have to testify.

Plaintiff retained other counsel and in September 1985 commenced this action against defendant asserting causes of action for legal malpractice and breach of contract and seeking treble damages pursuant to Judiciary Law § 487. Defendant interposed a general denial and asserted various defenses including the Statute of Limitations and failure to state a cause of action. Following discovery, defendant moved for summary judgment dismissing the complaint on those two grounds. In opposition, plaintiff contended that the doctrine of continuous representation operated to toll the Statute of Limitations and argued that a breach of contract cause of action was sufficiently stated.

The Appellate Division dismissed the contract cause of action, however, because there was no express promise to obtain a specific result. That court relied on Badik v Murphy ( 160 AD2d 1199 ) and Pacesetter Communications Corp. v Solin & Breindel ( 150 AD2d 232 , lv dismissed 74 NY2d 892 ). Pacesetter is distinguishable, however; there the parties had executed a written retainer agreement which not only, explicated the attorney’s undertaking but expressly disavowed any specific promises to the client stating that "[w]e have made no representations or guarantees to you that any result can or will be obtained, or is likely to be obtained, in this matter” (id., at 236). The court’s reliance here on its prior decision in Badik is puzzling, especially since Badik, citing only to the court’s prior determination in Albany Sav. Bank v Caffry, Pontiff, Stewart, Rhodes & Judge ( 95 AD2d 918 , supra), which was expressly overruled in this case, summarily stated that plaintiff’s proof "established only a cause of action in negligence and not one for breach of contract” (Badik v Murphy, supra, at 1201 ). In any event, we conclude that to the extent Badik can be read to support the proposition that an express promise to obtain a specific result is required to sustain a contract cause of action in the context of an attorney-client relationship, it should not be followed.

Defendant argues that a cause of action for breach of contract in the context of an attorney-client relationship may be sustained only where there is either a specific promise by the attorney to perform and there is a complete failure of any performance or where the attorney has undertaken a specific task and has failed to perform that task. This argument accords with the holding of the Third Department in Brainard v Brown ( 91 AD2d 287 , supra) and Albany Sav. Bank v Caffry, Pontiff, Stewart, Rhodes & Judge ( 95 AD2d 918 , supra) both of which that court expressly overruled in the case at bar. In any event, Brainard is of doubtful vitality since it relied on the majority opinion at the Appellate Division, First Department, in Video Corp. v Flatto Assocs. ( 85 AD2d 448 ), which was subsequently modified by this Court ( 58 NY2d 1026 , supra) to reinstate the complaint in its entirety and where we concluded that Justice Sandler’s analysis in his dissenting in

Turning then to the legal malpractice cause of action, we reject, as did the Appellate Division, defendant’s argument that the three-year Statute of Limitations provided in CPLR 214 (6) applies and because this action was commenced more than four years after the cause of action arose, the action is time barred.

We have been called upon on prior occasions to respond to the question of the appropriate Statute of Limitations to be applied in actions for professional malpractice (other than medical, dental or podiatric) and concluded that "the choice of applicable Statute of Limitations is properly related to the remedy rather than to the theory of liability” (Sears, Roebuck & Co. v Enco Assocs., 43 NY2d 389 , 394-395, supra; see also, Video Corp. v Flatto Assocs., 58 NY2d 1026 , supra; Matter of Paver & Wildfoerster [Catholic High School Assn.], 38 NY2d 669 ). We noted in Sears that the liability of the defendants there, "whether verbalized as in tort for professional malpractice or as in contract for nonperformance of particular provisions of the contract, arose out of the contractual relationship of the parties — i.e., absent the contract between them, no services would have been performed and thus there would have been no claims” (Sears, Roebuck & Co. v Enco Assocs., 43 NY2d 389 , 396, supra). So too in the case at bar, all potential liability of the defendant arises out of the agreement retaining the firm as attorneys for the plaintiff in respect to the sale of his business. Here, as in Sears, we perceive no significant difference flowing from the manner in which the liability is classified or described, for in any event, "an agreement to exercise due care in the performance of the agreed services is to be implied” (id., at 396).

Thus, an "action for failure to exercise due care in the performance of a contract insofar as it seeks recovery for damages to property or pecuniary interests recoverable in a contract action is governed by the six-year contract Statute of Limitations (CPLR 213, subd 2)” (Video Corp. v Flatto Assocs., 58 NY2d 1026 , 1028, supra; see also, Sager v DeRiggi, 161 AD2d 571 ; Sinopoli v Cocozza, 105 AD2d 743 ; Baratta v Kozlowski, 94 AD2d 454 ; see generally, Farrell, 1983 Survey of New York Law, 35 Syracuse L Rev 59 , 60-63; Siegel, NY Prac, § 37, at 45 [2d ed]).

Defendant contends, however, that because the malpractice

The choice of the applicable Statute of Limitations does indeed properly relate to the remedy sought rather than to the theory of liability (see, Matter of Paver & Wildfoerster [Catholic High School Assn.], 38 NY2d 669 , 672, supra). Language used in many of our earlier cases indicated, however, that in applying the Statute of Limitations, the "reality” or "essence” of the action should be examined, not its form (id., at 674). Defendant would apply the language of those earlier cases here, arguing that the "essence” of the malpractice action is negligence. Many of these cases in which that language was used were decided in the context of causes of action to recover damages for direct or underlying personal injury and therefore involved policy considerations significantly different from those policy considerations involved where the action seeks to recover damages to property or pecuniary interests only (Sears, Roebuck & Co. v Enco Assocs., 43 NY2d 389 , 395, supra).

Nevertheless, defendant argues that the rule of Sears, Roebuck and Video Corp. should not be applied in the legal malpractice circumstance because the relationship between attorney and client is "much more than a contractual relationship”; it is a relationship "founded in principle upon the elements of trust and confidence” and therefore is "unique.” Defendant cites to our recent decision in Campagnola v Mulholland, Minion & Roe ( 76 NY2d 38 ) in support of the contention that traditional contract principles should not be applied

Chief Judge Wachtler and Judges Simons, Kaye, Titone, Hancock, Jr., and Bellacosa concur.

Order modified, etc.