Montero Rivera v. Ruiz, SR et al

Filing 77

OPINION & ORDER re: 70 MOTION to Dismiss Second Amended Complaint filed by Joseph Carofano, Law Office of Joseph A. Carofano PC. For the reasons stated above, Defendants' motion to dismiss is GRANTED. The Clerk of Co urt is respectfully directed to dismiss the Law Office of Joseph A. Carofano PC, and Joseph Carofano from this case and to terminate the motion, Doc. 70. Joseph Carofano and Law Office of Joseph A. Carofano PC terminated. (Signed by Judge Edgardo Ramos on 3/30/2020) (mro)

Case 1:16-cv-07328-ER Document 77 Filed 03/30/20 Page 1 of 9

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
HILDA MONTERO RIVERA,
Plaintiff,
– against –
THE ESTATE OF HECTOR M. RUIZ,
SR., HECTOR M. RUIZ, JR., ROSA
RUIZ ARROYO, VICTORIA RUIZ, LAW
OFFICES OF JOSEPH A. CAROFANO,
PC, and JOSEPH CAROFANO,

OPINION & ORDER
16 Civ. 7328 (ER)

Defendants.
RAMOS, D.J.:
Hilda Montero Rivera (“Rivera”) filed a complaint against the Estate of Hector
Ruiz, Sr.; Hector M. Ruiz, Jr. (“Hector”), Rosa Ruiz Arroyo (“Rosa”), Victoria Ruiz
(“Victoria”); and the Law Office of Joseph A. Carofano PC, and Joseph Carofano
(collectively, the “Carofano Defendants”) to recover her portion of the proceeds from the
sale of real property in the Bronx, New York. Rivera owned the building in conjunction
with, Hector, Rosa and Victoria (collectively, the “Seller Defendants”). Doc. 69 (“Sec.
Am. Compl.”). Rivera brings seven claims against defendants for: breach of fiduciary
duty, constructive trust, conversion, civil conspiracy, aiding and abetting breach of
fiduciary duty, unjust enrichment, and professional negligence. Id. Before the Court is
the Carofano Defendants’ motion to dismiss the professional negligence claim against
them pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Doc. 70. For the
reasons discussed below, the Carofano Defendants’ motion is GRANTED.
I.

BACKGROUND
A. Factual Background
Rivera is an elderly woman who lives in Mayaguez, Puerto Rico. Sec. Am.

Compl. ¶ 2. Rivera and the three Seller Defendants are cousins. Id. ¶ 12. Each of the
four owned a 25% interest in a building in the Bronx, located at 1828 Gleason Avenue

Case 1:16-cv-07328-ER Document 77 Filed 03/30/20 Page 2 of 9

(the “Property”). Id. ¶ 10. In February of 2016, the Property was sold to a third party,
and the closing was set to take place in New York, New York. Id. ¶¶ 11, 13. je Plaintiff
and the Seller Defendants jointly hired Carofano to be their closing attorney. Id. ¶ 15.
Carofano was in charge of receiving and distributing the funds from the sale. Id. ¶ 16.
Due to Rivera’s age and inability to travel, she gave her cousin, Hector Ruiz, Sr.
(“Ruiz, Sr.”) a statutory short form power of attorney (the “POA”) to represent her at the
closing. Id. ¶ 13. Ruiz, Sr. did not have an interest in the Property. Id. ¶ 12. It is
uncontested that the POA granted Ruiz, Sr. with general authority to act as Rivera’s agent
for purposes of the sale of the Property. Id. ¶ 13. At the closing, Ruiz Sr. and the Seller
Defendants instructed Carofano to pay Rivera 6% of the sale proceeds, and to distribute
the remaining 94% equally among the Seller Defendants. Id. ¶ 19.
Following the sale, Rivera received a check for $35,000, but upon learning of the
unequal distribution decided not to deposit the check and instead returned it. Id. ¶ 21.
Rivera maintains that this distribution was unauthorized. Id. Ruiz, Sr. passed away
during the course of this litigation. Doc. 15. Subsequently, Ruiz, Sr. was replaced in the
current litigation by his estate. Second Am. Comp.
B. Procedural History
Rivera commenced this action on September 21, 2016, alleging six claims against
Ruiz, Sr. and the Seller Defendants. Doc. 5. All of the claims asserted in the original
complaint dealt with the sale and distribution of proceeds of the Property. Id. On
January 19, 2017, Defendants filed a suggestion of death as to Ruiz, Sr. Doc. 15. Rivera
then filed a motion to amend the original complaint, substituting Ruiz, Sr. with his estate
and adding one count of professional negligence against the Carofano Defendants. Doc.
21. je motion was granted with respect to adding the claim against the Carofano
Defendants but denied on procedural grounds with respect to substituting Ruiz, Sr. with
his estate. See Doc. 27. Subsequently, Rivera filed a motion for leave to file a Second
Amended Complaint substituting the estate, which was agreed to by the defendants,
2

Case 1:16-cv-07328-ER Document 77 Filed 03/30/20 Page 3 of 9

subject to no further amendments to the complaint until after the Court decided the
anticipated motion to dismiss. Doc. 67. Rivera filed her Second Amended Complaint on
February 14, 2019. Doc. 69. On March 1, 2019, the Carofano Defendants filed a motion
to dismiss the one claim against them pursuant to Rule 12(b)(6), on the grounds that
Rivera failed to adequately allege that they had departed from the applicable standard of
care or that any such departure caused her harm. Doc. 70.
II.

LEGAL STANDARD
Under Rule 12(b)(6), a complaint may be dismissed for “failure to state a claim

upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). When ruling on a motion to
dismiss pursuant to Rule 12(b)(6), the Court must accept all factual allegations in the
complaint as true and draw all reasonable inferences in the plaintiff’s favor. Koch v.
Christie’s Int’l, PLC, 699 F.3d 141, 145 (2d Cir. 2012). However, the Court is not
required to credit “mere conclusory statements” or “threadbare recitals of the elements of
a cause of action.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007)).
“To survive a motion to dismiss, a complaint must contain sufficient factual
matter . . . to ‘state a claim to relief that is plausible on its face.’” Id. (quoting Twombly,
550 U.S. at 570). A claim is facially plausible “when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). If the plaintiff has not
“nudged [her] claims across the line from conceivable to plausible, [the] complaint must
be dismissed.” Twombly, 550 U.S. at 570.
On a motion to dismiss, the Court may consider a document that is attached to the
complaint, incorporated by reference, or integral to the complaint, provided there is no
dispute regarding its authenticity, accuracy, or relevance. DiFolco v. MSNBC Cable
L.L.C., 622 F.3d 104, 111 (2d Cir. 2010) (citations omitted). “To be incorporated by
reference, the [c]omplaint must make a clear, definite and substantial reference to the
3

Case 1:16-cv-07328-ER Document 77 Filed 03/30/20 Page 4 of 9

documents.” Mosdos Chofetz Chaim, Inc. v. Vill. of Wesley Hills, 815 F. Supp. 2d 679,
691 (S.D.N.Y. 2011) (internal quotation marks and citation omitted). Although the POA
is not attached to the Second Amended Complaint, it is clearly referenced multiple times
in connection with the claims brought against the Carofano Defendants. je POA is
relevant to the issue of whether the Carofano Defendants breached their duty of care and
is therefore incorporated by reference. jus, the Court will consider the POA in deciding
the present motion.
III.

DISCUSSION
je Plaintiff argues that the Carofano Defendants committed professional

negligence. “Under New York law, ‘[l]egal malpractice, as opposed to ordinary
negligence, is the appropriate cause of action to bring against an attorney who allegedly
performed his/her professional duties negligently.’” Lemon v. Hollinger, No. 17 Civ.
4725 (RA), 2017 WL 6547741, at *2 (S.D.N.Y. Dec. 19, 2017) (quoting Calcutti v. SBU,
Inc., 224 F. Supp. 2d 691, 700 (S.D.N.Y. 2002)); see also Case v. Clivilles, 216 F. Supp.
3d 367, 378–79 (S.D.N.Y. 2016) (construing a claim for professional negligence as a
claim for legal malpractice under New York law). Accordingly, the Court will construe
the professional negligence claim as a claim for legal malpractice. To state a claim for
legal malpractice, the plaintiff must show that
(1) the attorney departed from the exercise of that degree of care,
skill, and diligence commonly possessed and exercised by a member
of the legal community, (2) the attorney’s departure from the standard of care was the proximate cause of the loss sustained by the
plaintiff, and (3) the plaintiff incurred damages as a direct result of
the attorney’s actions.
Friedman v. Kuczkir, 272 F. Supp. 3d 613, 635 (S.D.N.Y. 2017) (citing Edwards v. Haas,
Greenstein, Samson, Cohen & Gerstein P.C., 793 N.Y.S.2d 167, 169 (2005)).
Rivera alleges that the Carofano Defendants departed from the standard of care in
three ways. First, she alleges that the Carofano Defendants breached the standard of care
when they relied on Ruiz, Sr.’s instructions with regard to the distribution of the sale

4

Case 1:16-cv-07328-ER Document 77 Filed 03/30/20 Page 5 of 9

proceeds. Second, Rivera alleges that the Carofano Defendants violated Rule 1.7 of the
New York State Rules of Professional Conduct by failing to assess whether there were
differing interests before agreeing to jointly represent the parties. Because there was a
conflict of interest between Rivera and the Seller Defendants, the Carofano Defendants
were allegedly professionally negligent in simultaneously representing antagonistic
interests. Additionally, Rivera alleges that Carofano failed to inform her of the risks
associated with simultaneous representation and failed to obtain written consent waiving
the conflict of interest, and that these failures were the direct cause of her damages.
Rird, she alleges that the Carofano Defendants breached their duty of care by not
advising Rivera of the risks associated with the POA and how to limit its authority.
Second Am. Compl. ¶¶ 50– 51. As discussed further below, the Court finds that the
complaint fails to allege that the Carofano Defendants were professionally negligent in
their representation of Rivera.
Reliance on Ruiz, Sr.’s Instructions
“je broad authority given through the power of attorney is codified in New York
General Obligations Law sections 5–1501 through 5–1602 which specifically grants
attorneys-in-fact broad authority, more authority than a mere agent.” Heine v. Newman,
Tannenbaum, Helpern, Syracuse & Hirschtritt, 856 F. Supp. 190, 194 (S.D.N.Y. 1994).
Specifically, § 5–1502A of the statute states:
In a statutory short form power of attorney, the language conferring
general authority with respect to “real estate transactions,” must be
construed to mean that the principal authorizes the agent: . . . [t]o
sell, to exchange, to convey either with or without covenants, to quit
claim, to release, to surrender, to mortgage, to incumber, to partition
or to consent to the partitioning, to create, modify or revoke a trust
unless such creation, modification or revocation is a gift transaction
governed by section 5- 1514 of this title, to grant options concerning, to lease or to sublet, or otherwise to dispose of, any estate or
interest in land.
Neither party objects to the validity of the POA, and nothing in the Complaint suggests
that Carofano was asked to prepare the POA. See Second Am. Comp. je POA was a
5

Case 1:16-cv-07328-ER Document 77 Filed 03/30/20 Page 6 of 9

New York statutory short form that the Plaintiff signed, authorizing her cousin Ruiz, Sr. to
“execute any and all documents necessary to effectuate the sale of the premises.” Doc.
71, Ex. B at 3. jerefore, Ruiz, Sr. was vested with the authority under the POA to
dispose of any interest that Rivera had in the Property. jere is nothing to suggest that
the Carofano Defendants were negligent in relying on the valid POA and in following the
instructions of Rivera’s designee in distributing the proceeds of the sale.
je facts of this case are similar to those of Hein v. Newman, where the plaintiff
was selling a condominium and executed a power of attorney to a third party, as his
designee, to help assist the plaintiff in the sale. Heine, 856 F. Supp. at 191–93. Under the
power of attorney, the designee hired the defendant attorneys to represent the plaintiff and
handle the closing. Id. At the closing, in accordance with the specific instructions of the
designee, the defendants disbursed four checks payable to the designee and one check
payable to the plaintiff. Id. je plaintiff maintained that this disbursement of the
proceeds was unauthorized, and that despite the execution of the power of attorney, the
defendant attorneys committed malpractice by disbursing the checks in this manner
without first consulting the plaintiff. Id. je court found that the defendant attorneys
were not negligent in relying on the instruction of the designee, and, in doing so, acted
with reasonable skill and care. Id. at 195–96.
Similarly, here, the Carofano Defendants were not negligent in following Ruiz,
Sr.’s specific instructions as to the distribution of the sale proceeds. As the Carofano
Defendants suggest, clothed with the authority of the POA, when Ruiz, Sr. instructed
Carofano as to how to distribute the proceeds, it was as though Rivera herself gave the
instruction. jere was, accordingly, no need to look behind the instruction.
Malpractice for Failure to Assess Potential Conflict
a. Standard of Care
In an action for legal malpractice where a plaintiff alleges that her attorney had a
conflict of interest, “the client must demonstrate that (1) a conflict existed and (2) that

6

Case 1:16-cv-07328-ER Document 77 Filed 03/30/20 Page 7 of 9

[she] was damaged thereby.” Flycell, Inc v. Schlossberg LLC, No. 11 Civ. 915 (CM),
2011 WL 5130159, at *4 (S.D.N.Y. Oct. 28, 2011) (internal quotation marks and citation
omitted). Rule 1.7(a) of the New York State Rules of Professional Conduct provides that,
“a lawyer shall not represent a client if a reasonable lawyer would conclude that . . . the
representation will involve the lawyer in representing differing interests.” If such a
conflict exists, Rule 1.7(b) states that, in order to represent parties with conflicting
interests, a lawyer must “reasonably believe[] that [he] will be able to provide competent
and diligent representation to each . . . client”; “the representation [must] not [be]
prohibited by law”; “the representation [must] not involve the assertion of a claim by one
client against another client represented by the lawyer in the same litigation or other
proceeding before a tribunal”; and “each affected client” must give “informed consent,
confirmed in writing.”
je first question before the Court is whether, under the circumstances alleged in
the complaint, a reasonable lawyer would conclude that the mutual representation of the
Rivera and the Seller Defendants involved differing interests. jere is no dispute that at
the start of Carofano’s representation, Rivera and the Seller Defendants each owned 25%
of the Property. Second Am. Compl. ¶ 10. Carofano was hired to complete the sale of
the Property, create the closing documents, and distribute the proceeds of the sale. Id.
¶ 16. Rivera alleges that the Carofano Defendants breached their duty of care and
violated Rule 1.7 of the New York Rules of Professional Conduct by simultaneously
representing differing interests with respect to the distribution of the sale proceeds. Id.
¶ 49. However, the complaint does not adequately allege that Carofano was told about
the allegedly conflicting interests or how the Carofano Defendants could otherwise have
been aware of the purported conflict. Under the facts alleged in the Complaint, the
Carofano Defendants were retained to prepare the closing documents for the sale and to
distribute the sale proceeds with the knowledge that each owner had a 25% interest in the
Property. je Complaint fails to support the conclusion that at the onset of the Carofano
7

Case 1:16-cv-07328-ER Document 77 Filed 03/30/20 Page 8 of 9

Defendants’ representation of Rivera and the Seller Defendants, a reasonable lawyer
would have concluded that the representation involved conflicting interests with respect
to the sale proceeds. jerefore, the Court finds that the Carofano Defendants did not
violate Rule 1.7 of the New York State Rules of Professional Conduct.
b. Proximate Cause
Furthermore, even if the Carofano Defendants had a duty to inform Rivera of a
potential conflict with the Seller Defendants, it is well settled that this “does not by itself
support a legal malpractice cause of action.” Sumo Container Station, Inc., v. Evans, Orr,
Pacelli, Norton & Laffan, P.C., 278 A.D.2d 169, 170 (N.Y. App. Div. 2000). In order to
prevail on a claim of legal malpractice a plaintiff “must still establish that such a conflict
caused an actual injury.” Stonewell Corp. v. Conestoga Title Ins. Co., 678 F. Supp. 2d
203, 211 (S.D.N.Y. 2010) (finding that a violation of the Code of Professional
Responsibility establishes the conflict prong of a malpractice claim, but not the damages
prong of the claim).
Here, Rivera’s share of the sale proceeds was not a result of Carofano’s purported
breach of the Code of Professional Conduct. Instead, Rivera’s damages were the result of
Ruiz, Sr.’s fraud, if such it was, acting as Rivera’s agent. It is well “established . . . that a
principal is liable to third parties for the acts of an agent operating within the scope of his
real or apparent authority.” Citibank, N.A. v. Nyland (CF8) Ltd., 878 F.2d 620, 624 (2d
Cir. 1989) (citation omitted). And that “a principal is liable for an agent’s fraud though
the agent acts solely to benefit [herself], if the agent acts with apparent authority.” Id.
(internal quotation marks and citation omitted); see Sec. Pacific Mortg. v. Herald Ctr.
Ltd., 891 F.2d 447, 448 (2d Cir. 1989). jerefore, it would be unsound to find the
Carofano Defendants negligent for relying on Ruiz, Sr.’s instructions.
Carofano’s failure to assess any potential conflict between the parties and their
reliance on a valid POA, then, cannot give rise to a claim for legal malpractice.

8

Case 1:16-cv-07328-ER Document 77 Filed 03/30/20 Page 9 of 9

Malpractice for Failure to Advise on the POA
Finally, Rivera argues that Carofano should have advised her of the risks
associated with the POA and how to limit the POA to better protect her interests. jere
are no facts to support this argument. In particular, Rivera does not allege that Carofano
was hired for the purpose of advising or creating the POA. On these facts, Carofano did
not have a duty to inform Rivera about the POA at all. See Friedman, 272 F. Supp. 3d at
635 (finding that a claim for legal malpractice cannot lie where there is no showing that
“the attorney departed from the exercise of that degree of care, skill, and diligence
commonly possessed and exercised by a member of the legal community”). Because
Rivera has failed to allege that the Carofano Defendants had any duty of care with respect
to the POA, this theory for finding legal malpractice is also insufficient.
IV.

CONCLUSION
For the reasons stated above, Defendants’ motion to dismiss is GRANTED. je

Clerk of Court is respectfully directed to dismiss the Law Office of Joseph A. Carofano
PC, and Joseph Carofano from this case and to terminate the motion, Doc. 70.
It is SO ORDERED.
Dated:

March 30, 2020
New York, New York
EDGARDO RAMOS, U.S.D.J.

9